<PAGE>
FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ________________
COMMISSION FILE NUMBER 0-13111
Analytical Surveys, Inc.
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(Exact name of registrant as specified in its charter)
Colorado 84-0846389
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1935 Jamboree Drive, Colorado Springs, CO 80920
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(Address or principal executive offices) (Zip Code)
Registrant's telephone number, including area code (719) 593-0093
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Securities registered pursuant to section 12(g) of the Act:
Common Stock
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting and non-voting common equity held
by non-affiliates of the registrant is $147,532,000, based on the closing price
of the Common Stock on December 22, 1997.
The number of shares outstanding of the registrant's Common Stock, as of
December 22, 1997, was 6,127,390.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference into Part III of this
Report: the definitive proxy statement dated January 6, 1998.
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TABLE OF CONTENTS
Page
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PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Item 6. Selected Financial Data
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 7. Financial Statements
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
PART III
Item 9. Directors and Executive Officers of the Registrant
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and Management
Item 12. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
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PART I
ITEM 1. BUSINESS.
General
Analytical Surveys, Inc. ("ASI" or the "Company") is a Colorado corporation
incorporated in 1981.
ASI's primary business is the production of precise computerized maps that are
integrated with computerized information files or databases and are used in
geographic information systems ("Geographic Information Systems" or "GIS").
Geographic Information Systems are used by federal, state and local governmental
agencies, utilities, and businesses to store, retrieve, analyze and display
information about the physical, technical, financial, and other characteristics
of such diverse assets as utilities systems, natural resources properties,
transportation networks, and residential and commercial communities. A GIS
typically is created by converting a high resolution aerial photograph or paper
map into a computerized base map, and then integrating various data with the
base map. A distinguishing characteristic of GIS is that it allows the user to
pinpoint a desired location on a computer screen that contains a highly accurate
visual representation or map of the desired location and then to retrieve large
amounts of stored data relating to that location. With computer technology,
various types of information can be layered onto the map so as to enable the
user to see the interrelationships of such types of data on a two- or three-
dimensional basis.
The Company also conducts a civil engineering practice through a division of
MSE Corporation, a subsidiary of the Company.
The Company completed two acquisitions during the fiscal year ended September
30, 1996 and another in fiscal 1997 in order to expand its capacity and to
broaden its market exposure and expertise in various facets of the GIS data
conversion business.
Services Provided by ASI
A Geographic Information System consists of four components: computer
hardware, applications software, computerized maps, and computerized information
(database) files. ASI produces the last two components of the GIS. ASI does
not manufacture the computer hardware or applications software required by GIS
end users but increasingly is purchasing and reselling hardware and software as
a part of its services to customers.
ASI produces maps for use on GIS computers from aerial photography through the
use of analytical stereoplotters, computer equipment, and internally developed
proprietary software. The Company also converts existing printed maps and other
information into
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computerized maps and computer information files. The final product can be
delivered either as a computer data file or as a printed image.
ASI employs subcontractors for tasks outside its expertise, such as aerial
photography and ground survey. The Company also uses subcontractors for work
similar to that performed by ASI employees in order to expand capacity, to meet
deadlines, to reduce production costs, to manage work load and to encourage
businesses owned by women and minorities.
ASI conducts business in four facets of the GIS industry--facilities
conversion, photogrammetric mapping, cadastral mapping, and digital
orthophotography.
Facilities conversion typically involves the detailed mapping of a physical
plant, such as the power generation facility or electric distribution system of
a utilities company. Large amounts of data can be input into a computer and
tied to a particular location within the system that is being mapped. The user
then can view a replica of the system on a computer screen and obtain selected
data concerning any location on the screen. With facilities conversion, data
can be stored and retrieved on a multi-dimensional basis so that, for example,
data relating to one network can be viewed while superimposed on another
network, or can be viewed separately. Most of ASI's customers in this area are
investor-owned utilities and, to a lesser degree, municipal-owned utilities.
Photogrammetric mapping involves the creation of a land-based map viewed as if
from the air. The process of photogrammetric mapping typically starts with
aerial photographs and, with an analytical stereoplotter (a three-dimensional
viewing and data recording device) and proprietary software owned by ASI,
involves the deletion of distortions that are inherent with aerial photographs
so that the map becomes a highly precise replica of what exists on the ground.
Photogrammetric mapping also can include contour maps and elevation models in
order to create additional uses. The principal customers of ASI in this facet
of the GIS industry are utilities companies (both investor and municipal-owned),
and municipal entities who wish to use photogrammetric maps for such things as
land use planning, tax assessments, management of public rights-of-way, and
water and sewer facilities. In addition, ASI performs photogrammetric mapping
services for engineering companies, the federal government, and mining
companies.
Cadastral mapping involves the creation of maps that show property lines,
zoning of property, use restrictions relating to property, and other
characteristics. Cadastral maps generally are prepared by digitizing existing
paper maps or converting the legal descriptions of properties into map
coordinates. The principal users of cadastral maps are local governments.
Finally, digital orthophotography involves the creation of richly detailed
maps that have the appearance of, and are based on, aerial photographs. Aerial
photographs are scanned into a computer and then are corrected (orthorectified)
to delete the distortions
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inherent in all aerial photographs in order to arrive at a highly precise map.
Through the GIS process, vector lines can be superimposed so as to enable the
user to determine the precise location of a feature. Digital orthophotography
can be considered a subset of photogrammetric mapping but is different in that
its primary value is to create a highly precise map which looks like a
photograph, without the ability to attach data to the map and to retrieve data
through the computer process.
The Company engages in research and development activities to develop new
production process software and to improve existing process software. Research
and development expenditures were $274,905 in fiscal year 1997 and $283,872 in
fiscal year 1996. In addition, the Company often receives reimbursement from
customers for software enhancements that are used for the customer's project but
also may be used on other projects. Certain activities (principally ongoing
software refinement) that previously were performed by the research and
development group were transferred to operations staff in 1996.
The GIS industry has grown dramatically over the last several years, as
technical and price improvements in GIS hardware and software have made GIS
systems more cost-effective and versatile.
Marketing and Sales
Virtually all of ASI's revenues are earned under fixed price contracts that
cover a specific scope of work. The contracts typically are terminable by the
customer on relatively short notice; however, the Company's experience is that a
termination in the midst of a contract is rare. Slowdowns in the rate of new
delivery orders and cuts in the scope of a project in order to satisfy the
customer's own budget or cash flow requirements sometimes occur but are
relatively uncommon. The Company is dependent upon its ability to secure new
contracts from new as well as existing customers.
The Company employs twelve sales representatives to market and sell its
products and services throughout the United States and internationally. The
Company maintains memberships in professional and trade associations and
participates in industry conferences by presenting exhibits and technical
papers. Contracts are awarded by customers through direct negotiation,
competitive technical evaluation, competitive bid or a combination of such
methods.
ASI has directed its marketing efforts towards a clientele that requires high-
quality digital mapping. ASI's customers include cities, counties, engineering
companies, utility companies and federal governmental agencies. Historically,
approximately half of ASI's revenues have been derived from state and local
government contracts. These contracts may contain termination provisions for
the convenience of the customer, lack of appropriated funds or default by the
Company. Contracts with the United States government, which represent less than
10% of ASI's revenues, also may be subject to
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renegotiation or termination. The Company expects that an increasing percentage
of its new customers will be industrial and municipal GIS users.
ASI receives a portion of its business from consultants who provide GIS
consulting services to customers on a "turnkey" basis. These consultants
typically identify the needs of their customer and then contract with the
customer to find solutions for those needs. The consulting firms will acquire
hardware and applications software for the project then will bid for GIS
services from GIS production companies such as ASI. Consulting firms of this
sort are a valuable source of business for ASI, and the Company's ability to
operate profitably is dependent in part on the continuation of projects for such
consulting firms.
From time to time, the revenues earned on a specific contract may exceed ten
percent of total Company revenues earned in a year. The only customer that
accounted for more than 10% of the Company's revenues in the last two fiscal
years was Southern New England Telephone, which accounted for 10% of revenues in
1996. The Company is unable to state whether any customer will account for more
than 10% of revenues in 1998.
Backlog represents the value of revenue not yet earned on contracts awarded to
the Company; backlog increases when new contracts are awarded and decreases as
revenue is earned. The Company's backlog was approximately $97,000,000 at
September 30, 1997, up from $40,000,000 at September 30, 1996. The Company's
current backlog includes several large projects that will extend over one to
four years. Contracts for larger projects generally increase the Company's risk
due to inflation (as well as due to changes in customer expectations and funding
availability), but the Company receives the benefit of efficiencies in the
utilization of staff due to the larger amount of work involved.
ASI is required to furnish performance bonds to customers on some of its
contracts. The percentage of the Company's work requiring bonds varies between
10% and 30%, depending on the mix of work in progress. Performance bonds are
issued by a limited number of insurance companies. For the Company to continue
to be able to obtain performance bonds, the Company must continue to be able to
meet the underwriting standards of potential issuers and surety market
conditions.
Competition
The GIS industry is highly fragmented, and ASI faces competition in all facets
of the GIS data conversion business, from several relatively large companies and
from numerous smaller companies. Competition may intensify in the future, both
from existing companies that seek to expand their customer base and
capabilities, and from new entrants to the industry. The Company also may face
competition from commercial satellite companies, as improvements in the
resolution of satellite photography are made. Management of the Company
believes that the most significant form of competition would occur if a new
entrant (or a group of regional companies that banded together) obtained large
amounts of capital and consolidated the GIS data conversion business through
acquisitions. Many of
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the companies that now compete with the Company or that may compete with the
Company in the future may have greater financial, technical and personnel
resources than the Company.
ASI seeks to compete on the basis of the quality of its products and the
efficiency with which it can provide digital mapping services to customers. The
Company uses its internally-developed proprietary software as well as
commercially available software to automate much of the production process. The
Company believes that its systematic approach enables it to achieve more
consistent quality than it could if it used more manually-intensive methods.
The performance of GIS services is labor intensive, and ASI's ability to
operate competitively and on a profitable basis is dependent in part upon its
ability to hire, train, and retain skilled employees in order to input the large
amounts of data that are necessary for ASI's projects. As with many of its
competitors, ASI utilizes the services of overseas independent contractors to
perform certain data capture tasks at lower costs than could be achieved in the
United States. In 1995, ASI obtained an option to purchase the business of an
independent contractor in India that has been providing services to the Company;
ASI exercised the option in 1997 and the closing is expected to occur in the
near future, pending governmental approval from India. While management of the
Company believes that it could replace the personnel in India and while the
amounts paid overseas for the performance of services is not material, the
ability of the Company to perform services under some existing contracts on a
profitable basis is dependent upon the continued availability of lower-cost
overseas contractors.
Management of the Company believes that it is critical to the ability of the
Company to compete in the GIS data conversion industry for it to retain highly
qualified managers and executive officers.
Recent Acquisitions
The Company has acquired three GIS data conversion companies in the last two
fiscal years. The acquisitions have expanded and diversified the Company's
customer base, significantly increased backlog, and diversified the Company's
geographical presence and market mix. ASI also has gained benefits from the
acquisitions in the form of economies of scale and opportunities to utilize the
"best practices" of all of the companies acquired.
The most recent and largest of the three acquisitions was MSE Corporation
("MSE") which was acquired in July 1997. MSE, based in Indianapolis, Indiana,
has focused on the utilities facilities data conversion business and offered ASI
a significant inroad to markets in the Midwest. The acquisition also resulted
in a doubling of the Company's backlog and added approximately 335 employees to
the Company's work force.
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The acquisition of Westinghouse Landmark GIS (now ASI Landmark) in July 1996
strengthened the Company's participation in the parcel mapping and deeds
research mapping aspects of the cadastral mapping business, and gives the
Company greater presence in the Southeast. Approximately 100 GIS professionals
were added to the work force as a result of this acquisition.
The first of the three acquisitions was Intelligraphics, Inc., which occurred
in December 1995. This acquisition gave the Company a stronger presence in the
utilities facilities data conversion business and a significant presence in the
Midwest, added approximately 200 employees to ASI's work force, and gave the
Company exposure to an international client base.
Management of the Company believes that the ability of the Company to
assimilate these three businesses (and other businesses that the Company may
acquire) is critical to the success of the Company.
Employees
At September 30, 1997, ASI had approximately 800 employees, virtually all of
whom are full-time.
ASI offers its employees a typical benefits package including health, life,
disability, and dental insurance; a 401-K tax deferred retirement savings plan;
vacations and holidays. The Company does not provide any other retirement plan
to its employees. ASI does not have a collective-bargaining agreement with any
of its employees and generally considers relations with its employees to be
good.
ITEM 2. PROPERTIES
The Company leases its office and production facilities under leases described
in the table below.
<TABLE>
<CAPTION>
Location Square Footage Lease Termination
- -------- -------------- -----------------
<S> <C> <C>
Colorado Springs, Colorado 32,000 2004
Cary, North Carolina 23,400 2000
Waukesha, Wisconsin 25,300 1999
Indianapolis, Indiana 100,000 2001 (with two five-year
options available to ASI)
</TABLE>
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Management of the Company believes that these facilities are in generally good
condition and adequate for the foreseeable needs of the Company. ASI also
operates sales offices in Sterling, Virginia (near Washington, D.C.), Mt.
Laurel, New Jersey, and West Palm Beach, Florida.
The Company develops and uses proprietary software and production
techniques in its business. These production tools are generally not sold to
customers, but the Company relies on them for competitive advantages in quality
and productivity.
ITEM 3. LEGAL PROCEEDINGS.
Neither the Company nor any of its properties is the subject of any
material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of the Company's shareholders
during the fourth quarter of the year ended September 30, 1997.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Common Stock is traded over-the-counter in the NASDAQ National Market
System under the symbol ANLT. The trading volume in the Common Stock has ranged
from 378,000 shares per month to 1,647,000 shares per month in the year ended
September 30, 1997. This range of trading volume may contribute to stock price
volatility and limited trading liquidity.
The Company's Board of Directors authorized a three for two stock split of
the Common Stock for all shareholders of record on June 27, 1996. All share,
option and per share amounts included in this Report have been adjusted for the
effects of the stock split.
The table below sets forth the range of high and low prices per share of
Common Stock for each quarterly period for the fiscal years ended September 30,
1996, and 1997, as reported by the National Association of Securities Dealers
Automated Quotations System (NASDAQ). These prices reflect inter-dealer
quotations without adjustments for retail markup, markdown or commission, and do
not necessarily represent actual transactions.
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<TABLE>
<CAPTION>
Fiscal Year Ended September 30, 1996 High Low
<S> <C> <C>
First Quarter $ 6.83 $ 4.59
Second Quarter $10.33 $ 6.00
Third Quarter $16.00 $ 8.08
Fourth Quarter $17.50 $ 8.75
Fiscal Year Ended September 30, 1997
First Quarter $13.00 $ 8.62
Second Quarter $13.38 $ 9.50
Third Quarter $14.25 $10.25
Fourth Quarter $24.62 $13.75
</TABLE>
American Securities Transfer, Inc., the transfer agent for the Common
Stock, has reported that there were approximately 400 shareholders of record as
of September 30, 1997. This does not include the number of investors holding
stock in "street name," which the Company estimates at 3,500 investors.
Holders of the Common Stock are entitled to receive dividends as and when
they may be declared by the Company's Board of Directors. No dividends have
ever been paid with respect to the Common Stock, and the Company does not
anticipate paying dividends in the foreseeable future. Under its present bank
loan agreement, the Company must obtain the bank's consent if the Company wishes
to pay a dividend; the bank has agreed not to withhold such consent
unreasonably, but there is no assurance that the Company would receive the
bank's consent to pay a dividend if the Company were to desire to do so.
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Item 6. Selected Financial Data.
Year ended September 30,
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(In thousands except per share amounts)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data (1)
Sales $40,799 $22,669 $13,538 $11,176 $9,107
Costs and expenses 34,586 19,264 11,519 9,696 8,124
Other expenses, net 770 339 119 184 200
Income tax expense 2,112 1,153 716 492 298
------- ------- ------- ------- ------
Net earnings (2) $ 3,331 $ 1,913 $ 1,184 $ 804 $ 485
======= ======= ======= ======= ======
Weighted average shares
outstanding 5,562 5,033 4,408 4,010 4,004
Earnings per share (2) (3) $0.60 $0.38 $0.27 $0.20 $0.12
======= ======= ======= ======= ======
Balance Sheet Data September 30,
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(In thousands)
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Current assets $32,844 $16,452 $ 8,554 $ 6,443 $5,012
Current liabilities 11,759 6,466 2,816 2,749 2,133
------- ------- ------- ------- ------
Working Capital $21,085 $ 9,986 $ 5,738 $ 3,693 $2,879
======= ======= ======= ======= ======
Total assets $50,146 $21,988 $10,048 $ 8,016 $7,158
Long-term debt
less current portion (4) $14,145 $ 4,528 $ 408 $ 391 $ 907
Stockholders' equity $23,831 $10,926 $ 6,654 $ 4,597 $3,738
</TABLE>
Notes to Selected Financial Data
(1) See note 2 to the Consolidated Financial Statements describing the
Company's three business combinations.
(2) All from continuing operations.
(3) All per share amounts have been adjusted to reflect the 3 for 2 stock
split that occurred on July 1, 1996.
(4) Includes capital leases.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
OPERATIONS.
THE DISCUSSION BELOW OF ASI'S RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO. WITH THE EXCEPTION OF HISTORICAL MATTERS AND
STATEMENTS OF CURRENT STATUS, CERTAIN MATTERS DISCUSSED BELOW AND ELSEWHERE IN
THIS REPORT ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM TARGETS
OR PROJECTED RESULTS. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY INCLUDE, AMONG OTHERS, GROWTH THROUGH BUSINESS COMBINATIONS AND
INTERNAL EXPANSION, THE ABILITY TO ATTRACT AND RETAIN QUALIFIED EMPLOYEES AND
CONSULTANTS, DEPENDENCE ON ASI'S ABILITY TO CONTINUE TO OBTAIN NEW CONTRACTS FOR
ITS SERVICES, MANAGEMENT OF A LARGE AND RAPIDLY GROWING BUSINESS, ASSIMILATION
OF RECENTLY ACQUIRED BUSINESSES, PROJECT RISKS ASSOCIATED WITH HIGHER THAN
EXPECTED COSTS TO PERFORM UNDER CONTRACTS, PRICING AND MARGIN PRESSURE, AND
COMPETITION. GENERAL MARKET CONDITIONS ALSO MAY AFFECT FUTURE RESULTS,
INCLUDING THE ECONOMIC HEALTH OF THE UTILITIES MARKET, INTERNATIONAL ECONOMIC
CONDITIONS, LOCAL TAX COLLECTIONS AND OTHER BUDGETARY CONSTRAINTS APPLICABLE TO
MUNICIPALITIES, MUNICIPALITIES, AND FEDERAL GOVERNMENT SPENDING LEVELS. MANY OF
THESE FACTORS ARE BEYOND THE COMPANY'S ABILITY TO PREDICT OR CONTROL. AS A
RESULT OF THESE AND OTHER FACTORS, THE COMPANY'S PAST FINANCIAL PERFORMANCE
SHOULD NOT BE RELIED ON AS AN INDICATION OF FUTURE PERFORMANCE.
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Results of Operations
The table below summarizes the changes in several key operating indicators.
The percentages on the left show the relationship of various income and expense
items to net revenues. The percentages on the right measure year-to-year
changes.
<TABLE>
<CAPTION>
Percentage of Sales*
Year Ended September 30 Percentage Change*
- ----------------------- ---------------------------
1997 1996 1995 1996 to 1997 1995 to 1996
- ---- ---- ---- ------------- ------------
<S> <C> <C> <C> <C> <C>
100 100 100 Sales 80 67
Costs and expenses:
Salaries, Wages and
49 46 39 Related Benefits 88 100
14 17 24 Subcontractor Costs 51 20
17 16 16 General and Administrative 93 64
5 6 6 Depreciation and Amortization 50 51
15 15 15 Earnings from Operations 82 69
(2) (2) (1) Interest Expense 120 195
- - - Other Expense
13 13 14 Earnings before Income Taxes 78 61
5 5 5 Income Tax Expense 83 61
-- -- --
8 8 9 Net Earnings 74 62
== == ==
</TABLE>
*Rounded to the nearest whole percent.
1997 Compared to 1996
The Company continued its strategy of acquiring key participants in the GIS
data conversion service industry through its acquisition of MSE Corporation
("MSE") in July 1997. MSE's primary focus has been to provide data conversion
services to utilities, so that the acquisition has further increased the
Company's penetration of that market. MSE also performs photogrammetric mapping
and digital orthophotography for utilities and municipal clients. Approximately
20% of MSE's revenues are earned from its civil engineering practice.
The MSE acquisition, combined with the two acquisitions made in fiscal year
1996 and internal growth, were the principal cause of the 80% increase in sales
and the 82% increase in earnings from operations from 1996 to 1997. Total costs
and expenses, including the amortization of goodwill recorded in the
acquisitions, also increased 80 percent, matching the growth in sales. The
combination of salaries plus subcontractor costs remained at 63% of sales, while
salaries increased as a percentage of sales from 46% to 49% and subcontractor
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costs decreased from 17% to 14%. This shift from subcontractors to salaries
enables the Company to perform more tasks internally and reduce its use of
external subcontractors.
Interest expense, which increased by 120% from 1996 to 1997, represents
virtually the entire amount of other expenses. Most of the increase in interest
expense was attributable to term debt undertaken to fund the acquisitions.
Earnings per share increased by 58% in 1997 over 1996. The increase in net
earnings of 74% was partially offset by the 11% increase in average common
shares outstanding. Common shares outstanding increased primarily due to the
issuance of 925,000 shares in July 1997 in connection with the acquisition of
MSE and the issuance of shares from the exercise of stock options.
The Company's backlog of signed contracts increased to approximately
$97,000,000, up 142% from 1996. The Company's expansion strategy has enabled it
to obtain significant contracts with utilities customers, as well as municipal
customers and commercial companies. Some of these projects are large, multiple-
year contracts that offer the Company the benefit of increased work but also
subject the Company to increased risks due to possible inflation and changing
customer expectations. The Company continues to seek and perform both larger
and smaller projects for future work.
1996 Compared to 1995
The Company acquired Intelligraphics Inc. ("Intelligraphics") in December
1995 in order to implement a strategy to enter the utilities facilities data
conversion market. The acquisition allowed the Company to enter the utilities
data conversion market more quickly and at a lower cost than would have been the
case under a strategy of developing the technology and market presence
internally. The utilities data conversion market is highly competitive, and
margins are generally lower than those earned by the Company in its other
markets, but the lower margins are usually mitigated by the larger contract size
and term and the expected greater volume of conversion work to be done in this
market.
A second acquisition in July 1996, Westinghouse Landmark GIS, also
contributed to the Company's growth strategy and provided the capability to
perform deeds research tax mapping, which the Company had conducted through
outside subcontractors. This acquisition also provided additional capacity in
the Company's photogrammetry and cadastral mapping markets, as well as an
enhanced regional presence in the east and southeast regions of the United
States.
The two acquisitions, combined with the Company's original Colorado-based
business, caused net income from continuing operations (net earnings) to
increase by 62% from 1995 to 1996, on a sales increase of 67%. Total costs and
expenses remained at 85% of sales, with salaries, wages and benefits increasing
to 46% from 39% of sales, while subcontractor costs decreased to 17% of sales
from 24% for 1995. The combination of
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salaries plus subcontractor costs remained at 63% of sales. This shift towards a
greater salaries component reflected the higher labor input required at the two
acquired production facilities and a lower use of outside subcontractors in
those locations. The two acquisitions have permitted the Company to complete a
greater proportion of its production work using internal resources as opposed to
outside subcontractors.
Interest expense increased by 195% from 1995 to 1996, due to the increased
debt undertaken to complete the two acquisitions.
Earnings per share increased by 41% over the previous year. This increase
reflects the 62% increase in net earnings (all from operations) and the 14%
increase in average common shares outstanding in 1996 over 1995. Approximately
40% of the increase in average shares outstanding is the result of 345,000
shares issued in connection with the Intelligraphics acquisition, and the
balance is due to the issuance of shares for stock option exercises.
Liquidity and Capital Resources
Cash flows from operating activities increased by 252% in 1997 over 1996.
Net earnings plus depreciation and amortization increased by 65% in 1997 over
1996. The tax benefit relating to the exercise of stock options increased by
$422,000 to $1,307,000 from 1996 to 1997. These increases were partially offset
by the increased investment in the net current assets of the Company (caused
principally by revenues in excess of billings).
Cash flows from operating activities increased by 30% in 1996 over 1995.
Net earnings plus depreciation and amortization increased by 57% from $1,969,000
in 1995 to $3,097,000 in 1996. Cash flows from operations were also favorably
affected by the 103% increase in tax benefit relating to exercise of employee
stock options. Cash flows from operations were reduced by increased investment
in the net current assets of the Company, principally due to accounts receivable
and revenues in excess of billings. These contract-related balances fluctuate
due to the aggregate effect of the progress on specific projects and billing and
payment terms of the contracts for such projects.
Cash flows used in investing activities are comprised of the cash component
of the cost of the net assets acquired in the MSE acquisition and routine
capital equipment additions.
Cash flows from financing activities are comprised of the proceeds of term
debt used for the cash component of the cost of the net assets acquired in
acquisitions, routine use of the Company's bank line of credit, scheduled debt
repayments, and the proceeds of stock option exercises.
Short-term liquidity requirements are met primarily through operating
receipts supplemented by a bank line of credit with a $4,850,000 limit. At
September 30, 1997, the Company's balance on the line of credit was $1,473,000.
The cost of capital equipment is
-13-
<PAGE>
usually financed through term debt or capitalized leases with terms of from
three to five years. The Company has up to $1,000,000 available under its line
of credit for equipment acquisitions through the end of February 1998. The
Company has not committed to any material capital purchases.
Management expects to meet long-term liquidity requirements through cash
flows generated by operations supplemented from time to time by short-term
borrowings on a bank line of credit. Routine capital expenditures will usually
be financed with a combination of term debt and capital leases.
Management believes that the line of credit combined with cash flows from
operations are adequate to finance ongoing operations. Management also believes
that the Company will be able to finance any required capital expenditures from
a combination of operating cash flows and new term debt or lease arrangements.
Recent Accounting Pronouncements
For the quarter ended December 31, 1997, the Company will be required to
adopt Statement of Financial Accounting Standards No. 128 "Earnings Per Share"
("SFAS 128"). SFAS 128 requires the restatement of all prior-period earnings
per share ("EPS") data. SFAS 128 replaces the presentation of the primary EPS,
with a presentation of "basic EPS" and "diluted EPS." Under SFAS 128, basic EPS
excludes dilution for common stock equivalents and is computed by dividing
income available to common shareholders by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. Upon adopting SFAS 128,
the Company's diluted EPS will be the same as the income per share as currently
reported by the Company, while the Company's basic EPS will be greater than the
income per share as currently reported.
-14-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Independent Auditors' Report
Financial Statements:
Consolidated Balance Sheets September 30, 1997 and 1996
Consolidated Statements of Operations, Years Ended September 30,
1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity, Years Ended
September 30, 1997, 1996 and 1995
Consolidated Statements of Cash Flows, Years
Ended September 30, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
-15-
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
THE BOARD OF DIRECTORS AND STOCKHOLDERS
ANALYTICAL SURVEYS, INC.:
We have audited the accompanying consolidated balance sheets of Analytical
Surveys, Inc. and subsidiaries as of September 30, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the three-year period ended September 30, 1997.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Analytical Surveys,
Inc. and subsidiaries as of September 30, 1997 and 1996, and the results of
their operations and their cash flows for each of the years in the three-year
period ended September 30, 1997 in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
October 31, 1997
16
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
Assets (note 4) 1997 1996
- --------------- ---- ----
(In thousands)
<S> <C> <C>
Current assets:
Cash $ 1,559 1,022
Accounts receivable, net of allowance for doubtful
accounts of $164 and $60 in 1997 and
1996, respectively (notes 3 and 10) 8,991 5,781
Revenue in excess of billings (note 3) 21,613 9,329
Deferred income taxes (note 6) 136 105
Prepaid expenses and other 545 215
------- ------
Total current assets 32,844 16,452
------- ------
Equipment and leasehold improvements, at cost:
Equipment 7,983 7,544
Furniture and fixtures 1,151 957
Leasehold improvements 499 162
------- ------
9,633 8,663
Less accumulated depreciation and amortization (5,483) (6,049)
------- ------
4,150 2,614
------- ------
Deferred income taxes 41
Goodwill, net of accumulated amortization of $368 and
$141 in 1997 and 1996, respectively (note 2) 12,353 2,881
Other assets, net of accumulated amortization of $130 in
1997 758 41
------- ------
Total assets $50,146 21,988
======= ======
(Continued)
</TABLE>
17
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity 1997 1996
- ------------------------------------ ---- ----
(In thousands)
<S> <C> <C>
Current liabilities:
Lines-of-credit with banks (note 4) $ 1,473 500
Current portion of long-term debt (note 4) 3,051 1,247
Billings in excess of revenue (note 3) 789 1,091
Accounts payable and other accrued liabilities 3,693 2,288
Accrued payroll and related benefits 2,753 1,340
------- ------
Total current liabilities 11,759 6,466
Long-term debt, less current portion (note 4) 14,145 4,528
Deferred compensation payable 411 68
------- ------
Total liabilities 26,315 11,062
------- ------
Stockholders' equity (note 7):
Preferred stock, no par value. Authorized 2,500 shares;
none issued or outstanding -- --
Common stock, no par value. Authorized 100,000
shares; 6,114 and 4,887 shares issued and outstanding
in 1997 and 1996, respectively 15,269 5,695
Retained earnings 8,562 5,231
------- ------
Total stockholders' equity 23,831 10,926
------- ------
Commitments and contingencies (notes 5 and 7)
Total liabilities and stockholders' equity $50,146 21,988
======= ======
</TABLE>
See accompanying notes to consolidated financial statements.
18
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(In thousands, except per share amounts)
<S> <C> <C> <C>
Sales $40,799 22,669 13,538
------- ------ ------
Costs and expenses:
Salaries, wages and related benefits 19,792 10,501 5,247
Subcontractor costs 5,899 3,898 3,244
Other general and administrative 7,115 3,681 2,243
Depreciation and amortization 1,780 1,184 785
------- ------ ------
34,586 19,264 11,519
------- ------ ------
Earnings from operations 6,213 3,405 2,019
------- ------ ------
Other income (expense):
Interest expense, net (772) (351) (119)
Other 2 12
------- ------ ------
(770) (339) (119)
------- ------ ------
Earnings before income taxes 5,443 3,066 1,900
Income tax expense (note 6) 2,112 1,153 716
------- ------ ------
Net earnings $ 3,331 1,913 1,184
======= ====== ======
Earnings per common and common
equivalent share $ .60 .38 .27
======= ====== ======
Weighted average outstanding common and
common equivalent shares 5,562 5,033 4,408
======= ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
19
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,331 1,913 1,184
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization 1,780 1,184 785
Gain on sale of assets (2) (12)
Deferred income tax benefit (55) (163) (108)
Tax benefit relating to exercise of stock options 1,307 885 437
Changes in operating assets and liabilities, net of effect
of business combinations:
Accounts receivable, net 951 (481) (1,226)
Revenue in excess of billings (4,746) (2,820) (717)
Prepaid expenses and other 9 (18) (67)
Billings in excess of revenue (302) 163 (243)
Accounts payable and other accrued liabilities (111) (9) 466
Accrued payroll and related benefits 555 130 83
-------- ------ ------
Net cash provided by operating activities 2,717 772 594
-------- ------ ------
Cash flows from investing activities:
Purchase of equipment and leasehold improvements (1,596) (919) (704)
Proceeds from sale of equipment 159 12 --
Payments for net assets acquired in business combinations, net
of cash acquired (11,092) (5,541) --
-------- ------ ------
Net cash used by investing activities (12,529) (6,448) (704)
-------- ------ ------
Cash flows from financing activities:
Net borrowings (payments) under lines-of-credit with bank (2,027) 500
Proceeds from issuance of long-term debt 12,714 5,765 521
Principal payments on long-term debt (1,292) (815) (735)
Proceeds from exercise of stock options 954 583 562
Purchase and retirement of common shares -- -- (125)
-------- ------ ------
Net cash provided by financing activities 10,349 6,033 223
-------- ------ ------
Net increase in cash 537 357 113
Cash at beginning of year 1,022 665 552
-------- ------ ------
Cash at end of year $ 1,559 1,022 665
======== ====== ======
Supplemental disclosures of cash flow information:
Cash paid for interest $ 815 344 112
======== ====== ======
Cash paid for income taxes $ 888 376 765
======== ====== ======
Common stock issued for net assets acquired in business
combinations $ 7,313 891 --
======== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
20
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Common stock
----------------------- Retained
Shares Amount earnings Total
------ ------ -------- -----
<S> <C> <C> <C> <C>
(In thousands)
BALANCES AT OCTOBER 1, 1994 3,835 $ 2,462 2,134 4,596
Exercise of stock options 447 562 -- 562
Tax benefit relating to exercise of
stock options -- 437 -- 437
Purchase and retirement of common
stock (35) (125) -- (125)
Net earnings -- -- 1,184 1,184
------ ------- ----- ------
BALANCES AT SEPTEMBER 30, 1995 4,247 3,336 3,318 6,654
Common stock issued in connection
with business combination (note 2) 345 891 -- 891
Exercise of stock options 295 583 -- 583
Tax benefit relating to exercise of
stock options -- 885 -- 885
Net earnings -- -- 1,913 1,913
------ ------- ----- ------
BALANCES AT SEPTEMBER 30, 1996 4,887 5,695 5,231 10,926
Common stock issued in connection
with business combination (note 2) 925 7,313 -- 7,313
Exercise of stock options 302 954 -- 954
Tax benefit relating to exercise of
stock options -- 1,307 -- 1,307
Net earnings -- -- 3,331 3,331
------ ------- ----- ------
BALANCES AT SEPTEMBER 30, 1997 6,114 $15,269 8,562 23,831
====== ======= ===== ======
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997, 1996 AND 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BUSINESS AND BASIS OF FINANCIAL STATEMENT PRESENTATION
Analytical Surveys, Inc. (ASI or the Company) is a Colorado corporation
formed in 1981. ASI's primary business is the production of precision
computerized maps and information files used in Geographic Information
Systems (GIS). Federal, state and local government agencies and
commercial companies use GIS to manage information relating to
utilities, natural resources, streets, land use and property taxation.
The consolidated financial statements include the accounts of the
Company and its wholly and majority owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(b) EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements are recorded at cost. Depreciation
and amortization are provided using the straight-line method over the
following estimated useful lives:
Equipment 3 to 10 years
Furniture and fixtures 5 to 10 years
Leasehold improvements 5 to 10 years
Maintenance, repairs and renewals which do not add to the value of an
asset or extend its useful life are charged to expense as incurred.
(c) REVENUE RECOGNITION
The Company recognizes revenue using percentage of completion accounting
based on the cost-to-cost method, whereby the percentage complete is
based on costs incurred in relation to total estimated costs. Costs
associated with obtaining contracts are expensed as incurred. The
Company does not combine contracts for purposes of recognizing revenue
and, generally, does not segment contracts.
22
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue in excess of billings represents revenue related to services
completed but not billed. The Company bills customers based upon the
terms included in the contract, which is generally upon delivery. When
billed, such amounts are recorded as accounts receivable. Billings in
excess of revenue represent billings in advance of services performed.
The Company recognizes losses on contracts in the period such losses
are determined. The Company does not believe warranty obligations on
completed contracts are significant.
(d) GOODWILL
Goodwill represents the excess of the purchase price over net assets
acquired in business combinations and is being amortized over a
fifteen-year period using the straight-line method.
(e) INCOME TAXES
The Company accounts for income taxes under the provisions of Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes
(SFAS 109). SFAS 109 requires the use of the asset and liability method
of accounting for income taxes. Under the asset and liability method of
SFAS 109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled. Under SFAS 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(f) STOCK-BASED COMPENSATION
The Company accounts for its stock-based employee compensation plans
using the intrinsic value based method prescribed by Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations (APB 25). The Company has
provided pro forma disclosures of net income as if the fair value based
method of accounting for the plans, as prescribed by Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation (SFAS 123), had been applied. Pro forma disclosures
include the effects of employee stock options granted during the years
ended September 30, 1997 and 1996.
23
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(g) IMPAIRMENT OF LONG-LIVED ASSETS
Effective October 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of (SFAS 121)
which requires that long-lived assets and certain identifiable
intangibles held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
value of an asset may not be recoverable. An impairment loss is
recognized when estimated undiscounted future cash flows expected to be
generated by an asset are less than its carrying value. Measurement of
the impairment loss is based on the fair value of the asset, which is
generally determined using valuation techniques such as the discounted
present value of expected future cash flows or independent appraisal.
The adoption of SFAS 121 on October 1, 1996 had no effect on the
consolidated financial statements of the Company.
(h) RESEARCH AND DEVELOPMENT COSTS
The Company expenses research and development costs as they are
incurred. Research and development costs, which are included in general
and administrative expenses in the consolidated statements of
operations, totaled $274,905, $283,872 and $347,321 for the years ended
September 30, 1997, 1996 and 1995, respectively.
(i) EARNINGS PER SHARE
The computation of earnings per common share is based on the weighted
average number of common shares outstanding plus the effect of common
stock equivalents, consisting of stock options, determined using the
treasury stock method.
(j) FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments at
September 30, 1997 and 1996 approximate estimated fair values. The fair
value of a financial instrument is the amount at which the instrument
could be exchanged in a current transaction between willing parties.
The carrying amounts of cash and cash equivalents, receivables,
accounts payable and accrued liabilities approximate fair value due to
the short maturity of these instruments. The carrying amounts of debt
approximate fair value due to the variable nature of the interest rates
of these instruments.
(k) RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the
1997 presentation.
24
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
- --------------------------------------------------------------------------------
(2) BUSINESS COMBINATIONS
In July 1997, the Company acquired all of the issued and outstanding common
stock of MSE Corporation for cash of $12,500,000 and 925,000 shares of
restricted common stock valued at $7,313,000, for total consideration of
$19,813,000.
In July 1996, the Company, through its wholly owned subsidiary, ASI Landmark,
Inc., acquired substantially all of the assets and assumed certain
liabilities of Westinghouse Landmark GIS, Inc. which provides photogrammetic
mapping and data conversion services to the municipal and county markets for
cash of $1,992,598.
In December 1995, the Company acquired substantially all of the assets and
assumed certain liabilities of Intelligraphics, Inc. which provides data
conversion services primarily to the utilities market, for $3,548,019 cash
and 345,000 shares of restricted common stock valued at $891,250, for total
consideration of $4,439,269.
All of the acquisitions were accounted for using the purchase method of
accounting and, accordingly, the accompanying consolidated financial
statements include the results of operations of the acquired businesses since
the date of acquisition. The aggregate purchase prices of the acquisitions
were allocated based on fair values as follows (amounts in thousands):
Year ended September 30,
------------------------
1997 1996
-------- --------
Current Assets $13,463 4,286
Equipment 1,500 1,245
Other assets, including Goodwill 10,996 3,022
Current liabilities (5,526) (2,121)
Non-current liabilities (620) --
------- ------
$19,813 6,432
======= ======
The following unaudited pro forma information presents the results of
operations of the Company as if the acquisitions of MSE Corporation,
Intelligraphics, Inc. and Westinghouse Landmark GIS, Inc. had occurred on
October 1, 1995 (in thousands, except per share amounts):
Year ended September 30,
------------------------
1997 1996
------- -------
Sales $58,861 50,256
======= ======
Net earnings $ 4,342 1,044
======= ======
Earnings per share $ .69 .18
======= ======
25
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
The pro forma information is based on historical results and does not
necessarily reflect the actual operating results that would have occurred
nor is it necessarily indicative of future results of operations of the
combined enterprises.
(3) ACCOUNTS RECEIVABLE, REVENUE IN EXCESS OF BILLINGS AND BILLINGS IN EXCESS
OF REVENUE
At September 30, 1996, the estimated period to complete contracts in
process ranges from one to twenty-one months, and the Company expects to
collect substantially all related accounts receivable and revenue in excess
of billings within one year.
The following summarizes contracts in process at September 30 (in
thousands):
1997 1996
-------- -------
Costs incurred on uncompleted contracts $ 73,344 39,007
Estimated earnings 30,911 19,464
-------- -------
104,255 58,471
Less billings to date (83,431) (50,233)
-------- -------
$ 20,824 8,238
======== =======
Included in the accompanying balance
sheets as follows:
Revenue in excess of billings $ 21,613 9,329
Billings in excess of revenue (789) (1,091)
-------- -------
$ 20,824 8,238
======== =======
(4) DEBT
The Company has two revolving lines-of-credit with banks which provide for
total borrowings of $4,850,000, expire in February 1998, and bear interest
at .25% over the prime rate (8.75% at September 30, 1997) and the prime
rate (8.5% at September 30, 1997). The lines-of-credit are collateralized
by substantially all of the assets of the Company. Borrowings of $1,473,000
and $500,000 were outstanding under the lines-of-credit as of September 30,
1997 and 1996, respectively.
In February 1997 the Company entered into an additional $1,000,000
revolving line-of-credit with a bank bearing interest at 8.25%. The line-
of-credit is collateralized by all equipment and general intangibles and
expires February 2003. No borrowings were outstanding under the line-of-
credit as of September 30, 1997.
26
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
(4) DEBT (CONTINUED)
Long-term debt consists of the following at September 30:
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Note payable to a bank payable in monthly installments with
interest at 8.09% through June 1998, and based on LIBOR or the
prime rate plus applicable margins ranging from .25% to 2.5%
thereafter (8.09% at September 30, 1997), final payment in June
2002, secured by substantially all assets of the Company (a) $12,109 -
Note payable to a bank payable in monthly installments ranging
from $74,028 to $88,834 at .5% over the base rate (9% at
September 30, 1997), final payment in November 2001, secured by
accounts receivable and work-in-process 4,117 4,962
Notes payable to a bank under a $1,250,000 equipment draw-down
term loan, bearing interest at effective rates ranging from
8.15% to 11.83% at September 30, 1997, payable in monthly
installments through August 1999, secured by certain equipment
(a) 595 810
Other 375 3
------- ------
17,196 5,775
Less current portion (3,051) (1,247)
------- ------
$14,145 4,528
======= ======
</TABLE>
Maturities of long-term debt as of September 30, 1997, are as follows (in
thousands):
Years ending September 30:
1998 $ 3,051
1999 2,953
2000 3,189
2001 3,566
2002 4,437
--------
$ 17,196
========
(a) These loan agreements contain restrictive covenants which require, among
other things, the maintenance of certain financial ratios and include
certain limitations on capital expenditures and dividend payments.
27
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(5) LEASES
The Company leases its facilities and certain equipment under operating
leases. Amounts due under noncancelable operating leases with terms of one
year or more at September 30, 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
Years ending September 30:
<S> <C>
1998 $ 3,028
1999 2,550
2000 2,138
2001 1,703
2002 1,394
Thereafter 791
-------
Total minimum operating lease payments $11,604
=======
</TABLE>
Rent expense totaled $1,345,310, $535,203 and $302,303 for the years ended
September 30, 1997, 1996 and 1995, respectively.
(6) INCOME TAXES
Income tax expense (benefit) for the years ended September 30 is as
follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $1,847 1,148 713
State and local 320 168 111
------ ----- ----
2,167 1,316 824
------ ----- ----
Deferred:
Federal (42) (141) (94)
State and local (13) (22) (14)
------ ----- ----
(55) (163) (108)
------ ----- ----
$2,112 1,153 716
====== ===== ====
</TABLE>
The exercise of non-qualified stock options results in state and federal
income tax deductions to the Company related to the difference between the
market price at the date of exercise and the option exercise price. The
benefit of such deductions is recorded as an increase to stockholders'
equity and totaled $1,306,536, $884,459 and $437,242 in 1997, 1996 and
1995, respectively.
28
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Actual income tax expense differs from the amount computed using the federal
statutory rate of 34% for the years ended September 30 as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Computed "expected" income tax
expense $1,851 1,042 646
State income taxes, net of federal
tax effect 203 96 63
Other 58 15 7
------ ----- ----
Actual income tax expense $2,112 1,153 716
====== ===== ====
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at September 30, are
presented below (in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Current deferred tax assets and liabilities:
Accounts receivable, primarily due to allowance for
doubtful accounts $ 22 22
Accrued liabilities, primarily due to accrued
compensated absences for financial statement
purposes 143 99
Prepaid expenses, primarily due to marketing
commissions expensed for income tax purposes (34) (21)
Other 5 5
----- ----
</TABLE>
<TABLE>
<S> <C> <C>
Total net current deferred tax asset $ 136 105
===== ====
NONCURRENT DEFERRED TAX ASSETS AND LIABILITIES:
DEFERRED COMPENSATION ACCRUED FOR FINANCIAL
STATEMENT PURPOSES ONLY $ 24 24
Equipment and leasehold improvements, primarily
due to differences in depreciation 17 (24)
----- ----
Total net noncurrent deferred tax asset $ 41 -
===== ====
</TABLE>
Management believes that it is more likely than not that future operations
will generate sufficient taxable income to realize the deferred tax assets.
(7) STOCKHOLDERS' EQUITY AND STOCK OPTIONS
The Board of Directors may issue preferred stock with rates of dividends,
voting rights, redemption prices, liquidation prices, liquidation premiums,
conversion rights and other requirements without a vote of the
shareholders.
29
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(7) STOCKHOLDERS' EQUITY AND STOCK OPTIONS (CONTINUED)
The Company currently has six nonqualified stock option plans under which
the Board of Directors may grant options to purchase approximately 267,000
shares of the Company's common stock to officers, directors and key
employees. The exercise price of the options is established by the Board of
Directors on the date of grant. Employees may vest in their options either
100% on date of grant or 25% six months from date of grant and 25% on the
anniversary of date of grant thereafter, as determined by the Board of
Directors. The options are exercisable in whole or in part for a period of
up to ten years from date of grant.
As discussed in note 1, the Company applies APB Opinion 25 and related
interpretations in accounting for its stock option plans. Accordingly,
because the Company grants its options at or above market value at date of
grant, no compensation cost has been recognized under the plans. Had
compensation cost for the Company's stock-based compensation plans been
determined based upon the fair value of options on the grant dates,
consistent with the provisions of SFAS 123, the Company's 1997 and 1996 pro
forma net income and earnings per share would have been approximately $2.8
million and $1.8 million and $.50 and $.35, respectively. The weighted
average fair value of options granted during 1997 and 1996 was $5.49 and
$4.99 per share, respectively. The weighted average remaining contractual
life of all options at September 30, 1997 was approximately three years.
The fair value of each option grant was estimated at the date of grant
using the Black-Scholes option-pricing model with the following
assumptions: no expected dividends, expected life of the options of three
years, 60% volatility and a risk-free interest rate of 6.00%.
Stock option activity for the plans for the years ended September 30 are
summarized as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Weighted
average
Number of exercise price
Options per share
--------- --------------
<S> <C> <C>
Balance, October 1, 1994 1,117 $ 1.51
Granted 426 4.39
Exercised (447) 1.26
Canceled (29) 2.52
----- ------
Balance, September 30, 1995 1,067 2.73
Granted 238 11.07
Exercised (295) 1.99
Canceled (21) 3.17
----- ------
</TABLE>
(continued)
30
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Weighted average
Number of exercise price
Options per share
--------- ----------------
Balance, September 30, 1996 989 $ 4.95
Granted 641 13.06
Exercised (302) 3.16
Canceled (40) 10.64
--------- ---------
Balance, September 30, 1997 1,288 9.23
========= =========
Options exercisable at September 30, 1997 466 4.67
========= =========
(8) EMPLOYEE BENEFIT PLAN
The Company sponsors a qualified tax deferred savings plan in accordance
with the provisions of section 401(k) of the Internal Revenue Code.
Employees may defer up to 15% of their compensation, subject to certain
limitations. The Company matches 50% of the employee contributions up to 4%
of their compensation. The Company contributed $185,602, $65,756 and
$60,494 to the plan in 1997, 1996 and 1995, respectively.
(9) MAJOR CUSTOMERS
Sales to individual customers amounting to more than 10% of total sales were
as follows:
Year ended September 30:
1996 Customer A 10%
1995 Customer B 12%
There were no sales to individual customers amounting to more than 10% of
total sales for the year ended September 30, 1997.
(10) CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially expose the Company to
concentrations of credit risk, as defined by Financial Accounting
Standards Board's Statement No. 105, Disclosure of Information about
Financial Instruments with Off-Balance-Sheet Risk and Financial
Instruments with Concentration of Credit Risk, consist primarily of
accounts receivable with the Company's various customers.
Historically, the Company's customers have included cities, counties,
engineering companies, utility companies and federal government agencies.
Substantially more than 50% of revenues have historically been derived
from state and local government contracts. In addition, a significant
portion of the Company's revenues are generated from utility clients, both
commercial and municipal.
31
<PAGE>
ANALYTICAL SURVEYS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(10) CONCENTRATIONS OF CREDIT RISK (CONTINUED)
The Company's accounts receivable are due from a variety of organizations
throughout the United States. The Company provides for uncollectible
amounts upon recognition of revenue and when specific credit and collection
issues arise. Management's estimates of uncollectible amounts have been
adequate in prior years, and management believes that all significant credit
and collection risks have been identified and adequately provided for at
September 30, 1997.
32
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The Company's independent accountants have neither resigned nor been
dismissed during the Company's two most recent fiscal years or through the date
of this Report.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information required by this item is contained in the Company's definitive
proxy statement for its 1998 Annual Meeting of Shareholders, which is to be
filed on or before January 20, 1998. Such information is incorporated into this
Report by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information required by this item is contained in the Company's definitive
proxy statement for its 1998 Annual Meeting of Shareholders, which is to be
filed on or before January 20, 1998. Such information is incorporated into this
Report by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required by this item is contained in the Company's definitive
proxy statement for its 1998 Annual Meeting of Shareholders, which is to be
filed on or before January 20, 1998. Such information is incorporated into this
Report by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required by this item is contained in the Company's definitive
proxy statement for its 1998 Annual Meeting of Shareholders, which is to be
filed on or before January 20, 1998. Such information is incorporated into this
Report by reference.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as exhibits as a part of this report.
(1) The financial statements listed in response to Item 8 of this report.
(2) The financial statement schedules listed in response to Item 8 of this
report.
(3) The exhibits described below.
2. Plan of acquisition, reorganization, arrangement, liquidation or
succession:
2.1 Purchase Agreement dated July 2, 1997 between Analytical Surveys, Inc.
(buyer) and Sol C. Miller (seller) (filed with Report on Form 8-K
dated July 16, 1997, as amended on September 9, 1997, and hereby
incorporated by reference).
2.2 Registration Rights Agreement dated July 2, 1997, between Analytical
Surveys, Inc. and Sol C. Miller (filed with Report on Form 8-K dated
July 16, 1997, as amended on September 9, 1997, and hereby
incorporated by reference).
2.3 Consulting and Non-Competition Agreement dated July 2, 1997, between
Analytical Surveys, Inc. and Sol C. Miller (filed with Report on Form
8-K dated July 16, 1997, as amended on September 9, 1997, and hereby
incorporated by reference).
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<PAGE>
3. Articles of Incorporation and By-Laws
3.1 Articles of incorporation (as amended) are incorporated by
reference to the Exhibits to the Company's Registration Statement on
Form S-18, Registration No. 2-93108-D.
3.2 By-laws are incorporated by reference to the Exhibits to the
Company's Registration Statement on Form S-18, Registration
No. 2-93108-D.
4. Instruments defining the rights of Security Holders including Indentures
Form of Stock Certificate (filed with Registration Statement
No. 2-93108-D and hereby incorporated by reference).
9. Voting Trust Agreement
9.1 Voting Trust Agreement dated as of December 22, 1995, between the
Company, various selling shareholders of Intelligraphics, Inc. and the
members of the Board of Directors of the Company (as voting trustees),
incorporated by reference from the registrant's report on Form 8-K
dated January 9, 1996, as amended on February 16, 1996.
10. Material Contracts
10.1 Employment agreement dated June 27, 1994 between ASI and Sidney
V. Corder, Chief Executive Officer and President, incorporated herein
by reference to registrant's Quarterly Report on Form 10-QSB for June
30, 1994.
10.2 Stock Option Plan dated December 17, 1987 and amended on August
31, 1992 incorporated herein by reference to registrant's Annual
Report on Form 10-K for Fiscal Year ended September 30, 1992.
10.3 1990 Non-Qualified Stock Option Plan dated September 21, 1990
and amended and restated on December 17, 1990 and further amended on
August 31, 1992 incorporated herein by reference to registrant's
Annual Report on Form 10-K for Fiscal Year ended September 30, 1992.
10.4 1991 Non-Qualified Stock Option Plan dated December 17, 1990 and
amended on August 31, 1992 incorporated herein by reference to
registrant's Annual Report on Form 10-K for Fiscal Year ended
September 30, 1992.
-34-
<PAGE>
10.5 1993 Non-Qualified Stock Option Plan dated December 11, 1992
incorporated herein by reference to registrant's Proxy Statement dated
January 11, 1993.
10.6 Analytical Surveys, Inc. 401-K Plan dated October 1, 1988 and
amended and restated May 22, 1992 incorporated herein by reference to
registrant's Annual Report on Form 10-K for Fiscal Year ended
September 30, 1992.
10.7 Analytical Surveys, Inc. Incentive Bonus Plan incorporated
herein by reference to registrant's Annual Report on Form 10-K for
Fiscal Year ended September 30, 1992.
10.8 Building lease dated August 1, 1994 incorporated herein by
reference to registrant's Annual Report on Form 10-KSB for the Fiscal
Year ended September 39, 1994.
10.9 Employment agreement dated September 20, 1995 between ASI and
Scott C. Benger, Senior Vice President, Finance and
Secretary/Treasurer incorporated herein by reference to registrant's
Annual Report on Form 10-KSB for the fiscal year ended September 30,
1995.
10.10 1995 Non-Qualified Stock Option Plan dated August 22, 1995
incorporated herein by reference to registrant's Annual Report on Form
10-KSB for the fiscal year ended September 30, 1995.
10.11 Employment agreement dated December 22, 1995 between ASI and
William D. Nantell, Senior Vice President incorporated herein by
reference to registrant's report on Form 10-KSB for the Fiscal Year
ended September 30, 1996.
10.12 Real Estate Lease between MSE Realty, LLC and MSE Corporation,
dated July 2, 1997.
10.13 Employment Agreement dated July 2, 1997 between Analytical
Surveys, Inc. and Randal J. Sage.
10.14 Employment Agreement dated July 2, 1997 between Analytical
Surveys, Inc. and John J. Dillon III.
10.15 Consulting Agreement between Analytical Surveys and John A.
Thorpe, dated June 27, 1997.
10.16 Analytical Surveys, Inc. 1997 Incentive Stock Option Plan.
-35-
<PAGE>
23. Consent of Experts:
Consent of KPMG Peat Marwick LLP (included in the exhibits section).
27. Financial Data Schedule
(b) The registrant filed a Form 8-K on July 16, 1997, as amended on September
9, 1997 which described the Company's acquisition of MSE Corporation. The
following financial statements were filed as a part of such Report:
Proforma balance sheet of MSE Corporation for June 30, 1997.
Proforma income statement of MSE Corporation:
year ended September 30, 1996; and
9 months ended June 30, 1997.
-36-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Analytical Surveys, Inc.
By: /s/ Sidney V. Corder Date: December 26, 1997
---------------------
Sidney V. Corder, Chairman of the Board,
President,Chief Executive Officer,
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated and on the dates indicated.
Signature Date:
--------- -----
By: /s/ Sidney V. Corder December 26, 1997
---------------------
Sidney V. Corder, Director, Chairman
of the Board, President, Chief Executive
Officer, and Director
By: /s/ Scott C. Benger December 26, 1997
-------------------
Scott C. Benger, Sr. Vice President
Finance and Secretary/
Treasurer (principal financial
officer and principal accounting officer)
By: /s/ William Howell December 26, 1997
------------------
William Howell, Controller
By: /s/ Richard P. MacLeod December 26, 1997
----------------------
Richard P. MacLeod, Director
By: /s/ James T. Rothe December 26, 1997
------------------
James T. Rothe, Director
By: /s/ Robert H. Keeley December 26, 1997
-------------------------
Robert H. Keeley, Director
-37-
<PAGE>
By: /s/ John A. Thorpe December 26, 1997
-------------------------
John A. Thorpe, Director
By: /s/ Willem H. J. Andersen December 26, 1997
-------------------------
Willem H. J. Andersen, Director
By: /s/ Sol C. Miller December 26,1997
-------------------------
Sol C. Miller, Director
-38-
<PAGE>
EXHIBIT INDEX
The following exhibits are filed with the Report on Form 10-K of Analytical
Surveys, Inc. for the Fiscal Year ended September 30, 1997:
Financial Statements
Consolidated Balance Sheets September 30, 1997 and 1996
Consolidated Statements of Operations, Years Ended September 30,
1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity, Years Ended
September 30, 1997, 1996 and 1995
Consolidated Statements of Cash Flows, Years
Ended September 30, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
Real Estate Lease between MSE Realty, LLC and MSE Corporation, dated July 2,
1997.
Employment Agreement dated July 2, 1997 between Analytical Surveys, Inc. and
Randal J. Sage.
Employment Agreement dated July 2, 1997 between Analytical Surveys, Inc. and
John J. Dillon III.
Consulting Agreement between Analytical Surveys and John A. Thorpe, dated June
27, 1997.
Analytical Surveys, Inc. 1997 Incentive Stock Option Plan.
Consent of KPMG Peat Marwick LLP.
Financial Data Schedule.
-39-
<PAGE>
EXHIBIT 10.12
REAL ESTATE LEASE
THIS LEASE ("Lease") is made by and between MSE REALTY, LLC, an Indiana,
limited liability company ("Lessor"), and MSE CORPORATION, an Indiana
corporation, ("Lessee"), as of the 2nd day of July, 1997.
ARTICLE 1
LEASED PREMISES
The Lessor hereby leases to the Lessee and the Lessee hereby leases from
the Lessor, certain real estate, together with all improvements thereon, located
in the City of Indianapolis, Marion County, Indiana, and more particularly
described in Exhibit "A" attached hereto and made a part hereof; consisting of
Tract I having a common street address of 941 N. Meridian Street and consisting
of four buildings of approximately 99,416 rentable square feet and a surface
parking area of approximately .988 acres, more or less, and Tract II having a
common street address of 930-946 N. Meridian Street and consisting of one
building of approximately 14,868 rentable square feet and two surface parking
areas on the north and south. The real estate shall include all buildings,
structures, and other improvements located or erected thereon either permanently
installed, or which belong to or are used in connection with the real estate,
wherever located, including all fixtures of whatsoever kind or nature attached
thereto together with all tenements, hereditaments, rights, privileges,
interests, easements, and other appurtenances belonging or otherwise related or
appertaining to the real estate or improvements thereto, any and all tangible
personal property and equipment of every kind and nature owned by Lessor and
installed, located or situated in, on or about the real estate or improvements,
or used in connection with the operation or maintenance of the real estate or
the improvements. The foregoing real estate, improvements, fixtures,
appurtenances and personal property shall be referred to herein as the "Leased
Premises."
ARTICLE 2
TERM
The term of this Lease shall be for an initial period of approximately five
(5) years commencing on July 2, 1997, and continuing until midnight, June 30,
2002, unless earlier terminated as provided for herein. If Lessee is not in
default of any of the terms and conditions of this Lease beyond any applicable
notice and cure period, then Lessee may elect to extend this Lease for two (2)
additional terms of five (5) years each, subject to the adjustment of the rent
due hereunder as provided for in Article 3 below, and written notice of Lessee's
election delivered to Lessor not less than six (6) months prior to the
expiration of the current term.
ARTICLE 3
RENT
<PAGE>
Section 3.01 Base Rent. Lessee shall pay the sum of One Hundred Eleven
---------
Thousand One Hundred Eighty Dollars ($111,180.00) per month, except as may be
abated pursuant to specific provisions of this Lease, without setoff or
deduction, as rent for the Leased Premises without relief from valuation or
appraisement laws to the Lessor at the address specified in Article 1 8. Such
monthly rental payments to be paid in advance commencing on the first day of
August, 1997, and continuing on the first day of each calendar month thereafter
for the term of this Lease. To the extent that this Lease commences on a day
other than the first of day of a calendar month or any portion of the term of
this Lease is for less than a full calendar month, the rent for such partial
month(s) shall be prorated accordingly and shall be paid upon the commencement
of this Lease or upon the first day of the partial month upon expiration or
termination of this Lease. Any and all other sums due and payable hereunder by
the Lessee, whether designated as rent or additional rent, shall at all times be
considered as rent hereunder.
Section 3.02 Adjustment in Base Rent. In the event that Lessee elects to
-----------------------
extend the term of this Lease as provided under Article 2 above, the Base Rent
due hereunder shall be adjusted and changed by the increase, if any, in the
Consumer Price Index for all Urban Consumers, U.S. City average, all items,
(1982-1984 = 100) as issued by the Department of Labor, Bureau of Labor
Statistics (the "CPI") as follows:
(a) The average CPI for the twelve calendar months of 1997, (the "Base
CPI") shall be compared to the CPI for the month of January immediately
preceding the commencement date of the renewal term (the "Adjustment CPI").
If the Adjustment CPI has increased over the Base CPI, Lessor shall
determine the percentage increase in the CPI as being the equal to the
fraction, the numerator of which is the Adjustment CPI minus the Base CPI,
and the denominator of which is the Base CPI.
(b) The current annual Base Rent for the current term shall be multiplied
by the percentage increase in the CPI to determine the increase in the Base
Rent for the renewal term.
(c) The amount of the increase in the annual Base Rent shall be added to
the annual Base Rent in effect in the expiring term and this new amount
shall be the new Base Rent for the renewal term, payable in monthly
installments pursuant to the terms and conditions of this Lease.
In no event shall the annual Base Rent during any renewal term of this Lease be
less than the annual Base Rent payable during the immediately preceding term. If
the CPI is discontinued or revised, the parties shall agree on a reliable
governmental or financial authority which evaluates the purchasing power of the
consumer dollar to replace it in order to obtain substantially the same result
as would be obtained if the CPI had not been discontinued or revised.
Section 3.03 Additional Rent. The actual "Operating Expenses" (as defined
---------------
below) incurred or accrued for the Leased Premises for calendar year 1997 shall
be the Base Year
-2-
<PAGE>
Operating Expenses. Lessee shall pay to Lessor any increase in the Operating
Expenses above the Base Year Operating Expenses incurred in subsequent calendar
years of the term as additional Rent. Lessor will notify Lessee of any increase
in actual Operating Expenses above the Base Year Operating Expenses, together
with a detailed written explanation of the increase, after the conclusion of the
calendar year in which such Operating Expenses were incurred. Within thirty (30)
days after receipt of such notice, Lessee will pay the increased amount to
Lessor, subject to Lessee's right of audit set forth below. If Lessor projects
Operating Expenses for any coming calendar year after 1997 to be in excess of
the Base Year Operating Expenses, Lessor may notify Lessee of its projections,
with a detailed explanation of the increase, and Lessee will pay the estimated
projected excess in advance in equal monthly installments. If Lessor exercises
its right to project estimated Operating Expense increases over the Base Year
Operating Expenses and collect for such projected increases over the calendar
year in which the expenses are incurred, Lessor shall provide Lessee with a
detailed written statement of the actual Operating Expenses paid for such year,
within sixty (60) days of the end of the such year. Any overpayment by Lessee
based on the projections will be credited to Lessee's account for the coming
year or if paid during the last year of the Lease term, refunded upon
termination of this Lease. Lessee shall have the right to conduct an audit of
Operating Expenses pertaining to a particular calendar year at any time until
the 90th day following Lessee's receipt of a written statement from Landlord
setting forth the actual Operating Expenses incurred or paid for such calendar
year. Lessee shall give Lessor ten (10) days prior written notice to conduct an
audit of the Operating Expenses. If the results of such audit show that the
Lessee's charges have been overstated, Lessor shall refund immediately any
balance due Lessee and, if the audit determines that the amount charged to
Lessee was overstated by three percent (3%) or more, Lessor shall reimburse
Lessee for the cost of the audit. If the term hereunder does not terminate on
the last day of a calendar year, the Operating Expenses shall be pro rated based
upon Lessee's occupancy during the final calendar year on a per diem basis. It
is acknowledged and agreed that if Lessee files a timely objection to any excess
in Operating Expenses as a result of an audit, Lessee shall not be in default
hereunder for failure to pay such excess.
(a) "Operating Expenses" shall mean all reasonable and customary expenses,
costs, and amounts of every kind and nature which Lessor pays or incurs in
any calendar year in connection with the ownership, management, repair,
maintenance and operation of the Leased Premises, including, but not
limited to, all utility costs, professional services, tools and supplies,
insurance, janitorial services, rubbish and trash removal, snow removal,
Real Estate Taxes (as defined below), and all other costs and expenses
incurred or paid by Lessor in connection with the Leased Premises provided
such costs are of type typically incurred or paid in the ownership,
management, repair, maintenance and operation of similar office building
located in the downtown Indianapolis area. Operating Expenses shall
specifically exclude those items which Lessee pays for itself or which
Lessee reimburses Lessor for under the terms of this Lease and shall also
exclude:
(i) any ground lease rental and payments on any financing;
(ii) depreciation, amortization and other non-cash expenditures;
-3-
<PAGE>
(iii) costs incurred for repairs or other items to the extent Lessor
is reimbursed by insurance proceeds or third parties;
(iv) costs of capital improvements and repairs;
(v) the cost of any service performed by an affiliate of Lessor or a
manager of the Leased Premises to the extent such cost is in
excess of the cost that would be paid to an unaffiliated, third
party provider of similar service;
(vi) the cost of any management fee or administrative fee or Lessor's
overhead;
(vii) any costs, including, without limitation, fines and penalties,
incurred by Lessor due to the violation or alleged violation of
the Leased Premises caused solely by the acts or omissions of
the Lessor of any law or regulation and any cost to bring the
Leased Premises into compliance with any law or regulations
following such a violation or alleged violation.
(b) "Real Estate Taxes" shall mean all ad valorem real property taxes and
currently due installments of assessments levied upon or with respect to
the Leased Premises, including all land and improvements, and all taxes,
levies and charges which may levied or imposed by any governmental
authority in replacement of, in lieu of, or in addition to ad valorem real
property taxes, in whole or in part, including, but not limited to a state
or local option tax designed for property tax relief purposes, or a license
or franchise fee measured by rents received for the Leased Premises, or
otherwise measured or based upon Lessor's interest in the Leased Premises.
It does not include any federal or state income tax.
ARTICLE 4
SECURITY DEPOSIT
Upon any assignment of this Lease, Lessor specifically reserves the right
to require Lessee to pay to Lessor the sum of One Hundred Eleven Thousand One
Hundred Eighty Dollars ($111,180.00) ("Security Deposit") as security for the
performance of such assignee's obligations as Lessee under this Lease,
including, but not limited to, the payment of rent and all other sums due
hereunder and the procurement and maintenance of insurance. In the event of a
default by the assignee, Lessor may apply all or such part of the Security
Deposit as may be necessary to cure the default and immediately upon demand
assignee shall redeposit with Lessor an amount equal to the sum applied to cure
the default. It is understood, acknowledged and agreed that the full security
deposit shall be on hand and on deposit with Lessor during the term of this
Lease. Lessor shall hold the deposit for the benefit of assignee but shall not
be required to segregate it from Lessor's other funds or to pay interest on it.
Upon the termination of the Lease (provided that assignee is not in default and
is in full compliance with all of the terms and conditions of the Lease), Lessor
shall refund to assignee any balance of the Security Deposit remaining after
application of any funds necessary to meet assignee's obligations hereunder upon
termination or expiration of this Lease. In the event of a sale, lease or other
transfer of Lessor's interest in the Leased Premises, Lessor shall have to the
right to transfer the Security Deposit to its purchaser, lessee, transferee or
successor in interest. Lessee agrees to look solely
-4-
<PAGE>
to the new lessor hereunder for the return of the Security Deposit following
such transfer and agrees that the provisions of this Article 4 shall apply to
every transfer or assignment made of the Security Deposit to new lessor.
ARTICLE 5
SERVICES AND REPAIRS
Section 5.01 Services. If Lessee is not in Default hereunder and subject
--------
to the provisions elsewhere contained in this Lease, Lessor shall furnish to the
Leased Premises, as reasonably required, all utilities (including heat and air
conditioning from 8:00 a.m to 6:00 p.m. on Monday through Friday and 9:00 a.m.
to 1:00 p.m. on Saturday and all generally recognized business days, except New
Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day), and such other services as are customarily provided to tenants
occupying similar office buildings in the downtown Indianapolis area. Lessor
shall provide cleaning and janitorial service, including the supplying and
installing of paper towels, toilet tissue and soap in the restroom facilities.
Lessor shall not provide carpet cleaning services other than routine vacuuming.
Washing of windows will be at intervals reasonably established by the Lessor,
Lessor will replace all lamps, bulbs, starter and ballasts in the Leased
Premises and in the outdoor lighting fixtures using standard office lighting
supplies and equipment as required from time to time as a result of normal
usage.
Lessor will maintain the current landscaping and will remove rubbish and snow
from all parking, pedestrian and loading areas located on the Leased Premises.
Lessee shall have the right to request any other utilities or services in
addition to those set forth above or any of the above utilities or building
services in frequency, scope, quality or quantity substantially greater than
those which Lessor determines are normally required for general office uses, and
in such event Lessor shall use reasonable efforts to attempt to furnish the
Lessee with such additional utilities or services. The costs for these
additional utilities and services shall be passed through to Lessee as Operating
Expenses. Lessor shall have no liability to Lessee, including, without
limitation, liability for consequential damages arising out of, resulting from
or related to any such interruption of utility services or other services beyond
Lessor's reasonable control; however, the rent shall be abated in an equitable
amount based upon the portion of the Leased Premises that are untenantable or
which are not usable or used by Lessee for a period of three (3) business days
or more due to the interruption of any utilities or services.
Section 5.02 Lessor's Reserved Rights. Lessor reserves the right to
------------------------
suspend service of the heating, plumbing, electrical, air conditioning or other
mechanical systems when necessary by reason of governmental regulations, civil
commotion or riot, accident or emergency, or for repairs, alterations or
improvements which are in the reasonable judgment of Lessor desirable or
necessary, or for any other reasons beyond the power or control of Lessor
(including, without limitation, the unavailability of fuel or energy or
compliance by Lessor with any applicable laws, rules or regulations relating
thereto), without liability in damages therefor. The exercise of such right by
Lessor shall not constitute an actual or constructive eviction in whole or in
part, or
-5-
<PAGE>
entitle Lessee to any abatement or diminution of rent (except as otherwise
provided in this Lease), or relieve Lessee from any of Lessee's obligations
under this Lease, or impose any liability upon Lessor or its agents by reason of
inconvenience or annoyance to Lessee or injury to or interruption of Lessee's
business or otherwise. Lessor will use reasonable efforts to minimize disruption
to Lessee's business resulting from the suspension of utilities or other
services for purposes of making repairs, alterations or improvements.
Section 5.03 Repairs. Lessor shall at all times during the term keep the
-------
Leased Premises in good condition and repair, except for (i) improvements to the
Leased Premises made by Lessee after the date of this Lease ("Lessee
Improvements"), and (ii) damage caused by Lessee, its employees, licensees,
agents, contractors or invitees after the date of this Lease in excess of
ordinary wear and tear and not covered by Lessor's or Lessee's insurance. Lessee
shall, at Lessee's sole cost and expense, repair and maintain all Lessee
Improvements in good order, condition and repair, ordinary wear and tear
excepted, and shall be responsible to Lessor and reimburse Lessor for all
damages to the Leased Premises caused by Lessee, its employees, licensees,
agents, contractors or invitees in excess of ordinary wear and tear and not
covered by or in excess of the proceeds from Lessor's or Lessee's insurance.
ARTICLE 6
PERSONAL PROPERTY TAXES
Lessee shall be responsible for and shall pay for any and all personal
property or other taxes or assessments that may from time to time be assessed or
charged against the equipment, trade fixtures or other personal property
belonging to Lessee located on or used in connection with the Leased Premises.
ARTICLE 7
INSURANCE, INDEMNIFICATION AND WAIVER OF SUBROGATION
Section 7.01 Waiver, Indemnity and Insurance. With respect to the
-------------------------------
Lessee's obligations under this section of the Lease, it is understood and
agreed that the Lessee's obligations shall relate solely to occurrences and
events occurring on or after the date of this Lease.
(a) Lessor, its officers, members, agents and employees shall have no
liability to Lessee for any injury or damages to Lessee, its officers, agents,
employees, licensees, contractors or invitees or to any property of Lessee, or
such other third parties, regardless of the cause, excluding Lessor's negligence
or willful acts or omissions. Except as herein provided in this Lease, Lessee
hereby waives all claims for recovery from and releases Lessor, its officers,
members, agents and employees, from any loss or damage to the property of
Lessee. No such occurrence shall be deemed to be an actual or constructive
eviction from the Leased Premises.
(b) Lessor shall not be liable for damage to any person or property,
including consequential damages arising therefrom, due to any condition of the
Leased Premises caused
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by the Lessee or by reason of the occurrence of any accident in or about the
Leased Premises or due to any act or neglect of the Lessee, or any other
occupant of the Leased Premises or of any other person.
(c) Lessee shall indemnify and hold harmless Lessor, and its agents and
employees from and against any and all liability, damages, expenses, fees,
penalties, actions, causes of action, suits, costs, claims and judgments,
including reasonable attorneys' fees, arising from injury to any persons or
property in or about the Leased Premises from any cause whatsoever, other than
Lessor's negligence or willful acts or omissions.
(d) Lessee shall procure and maintain during the term commercial general
liability and property damage insurance, written by an insurance company
reasonably acceptable to Lessor, insuring Lessee against any and all losses,
claims, demands or actions or injury to or death of any one or more persons and
for damages to property arising from Lessee's use of and its conduct and
operation of its business on the Leased Premises with contractual liability
endorsements to a combined single limit of not less than One Million Dollars
($1,000,000). Lessor and any mortgagee of the Leased Premises identified by
Lessor to Lessee shall be named as additional insureds on Lessee's liability
insurance policies. If Lessee fails to procure such insurance, Lessor may, at
its option, procure the same for Lessee, and the cost thereof shall be paid to
Lessor by Lessee as Additional Rent as billed.
(e) Lessee shall procure and maintain during the term fire and extended
coverage insurance on the Leased Premises, written by an insurance company and
for such amounts as shall be reasonably acceptable to Lessor, insuring Lessee,
and with loss payee endorsements, Lessor and any mortgagees of Lessor identified
to Lessee against any loss or damage from fire, windstorm, tornado, hail, water
damage, lightning, vandalism, malicious mischief, earthquake and against loss or
damage by such further and additional risks as now are or hereafter may be
embraced by the standard "all risk forms" or endorsements. All proceeds from
such policies shall be payable to the Lessor. If Lessee fails to procure such
insurance, Lessor may, at its option, procure the same for Lessee, and the cost
thereof shall be paid to Lessor by Lessee as Additional Rent as billed.
(f) All such insurance policies shall contain a clause that the insurer
will give the Lessor thirty (30) days prior written notice of any cancellation,
termination or modification of such insurance. Lessee shall furnish the Lessor
with certificates of insurance for all such insurance coverage.
Section 7.02 Waiver of Subrogation. Anything in this Lease to the contrary
---------------------
notwithstanding, Lessor and Lessee hereby waive and release each other of and
from any and all rights of recovery, claim, action or cause of action, against
each other, their members, agents, officers and employees, for any loss or
damage that may occur to the Leased Premises and the improvements to the Leased
Premises, or personal property (building contents) within the Leased Premises,
by reason of fire, the elements or any other cause which could be insured
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against under the terms of standard fire and extended coverage insurance
policies, with vandalism, malicious mischief and "all risk" endorsements,
regardless of cause or origin, including the negligence of Lessor or Lessee, and
their members, agents, officers and employees. Because this paragraph will
preclude the assignment of any claim mentioned in it by way of subrogation (or
otherwise) to an insurance company (or any other person), each party to this
Lease agrees immediately to give to each insurance company which has issued to
it policies of fire and extended coverage insurance, written notice of the terms
of the mutual waivers contained in this paragraph, and to have the insurance
policies properly endorsed, if necessary, to prevent the invalidation of the
insurance coverage by reason of the mutual waivers contained in this paragraph.
ARTICLE 8
USE OF LEASED PREMISES
Lessee shall use the Leased Premises solely for the purpose of general
office and storage use ancillary to the operation of a full service engineering
firm. Lessee shall not use the Leased Premises in any manner constituting a
violation of any ordinance, statute, regulation or order of any governmental
authority, including, but not limited, to zoning ordinances, building
construction standards, and health and environmental laws. Lessee covenants and
agrees that Lessee will use, maintain and occupy the Leased Premisses in a
careful, safe and proper manner, will not commit waste thereon. Lessee shall not
cause or permit any Hazardous Material to be brought upon, kept or used in or
about the Leased Premises by Lessee, its agents, employees, contractors or
invitees, without the prior written consent of the Lessor other than Hazardous
Material necessary to or useful in the operation of Lessee's business and if
such permitted Hazardous Materials are used, kept and stored in compliance with
all laws regulating Hazardous Materials. The term "Hazardous Material" means any
hazardous or toxic substance, material or waste which is or becomes regulated by
any local governmental authority, the State of Indiana or the United States
Government. If the Lessee breaches the obligations stated in this Article 8, or
if the presence of Hazardous Material on the Leased Premises caused or permitted
by the Lessee results in the contamination of the Leased Premises, or if
contamination of the Leased Premises by Hazardous Material otherwise occurs for
which the Lessee is legally liable to the Lessor for damage resulting therefrom,
then the Lessee shall indemnify, defend and hold the Lessor harmless from any
and all claims, judgments, damages, penalties, fines, costs, liabilities or
losses (including, without limitation, the diminution in value of the Leased
Premises, damages for the loss or restriction on use of rentable or useable
space or of any amenity of the Leased Premises, damages arising from any adverse
impact on marketing of the Leased Premises and sums paid in settlement of
claims, attorneys' fees, consulting fees and expert fees) which arise during or
after the term of this Lease as a result of such contamination. This
indemnification of the Lessor by the Lessee shall survive the termination of
this Lease and includes, without limitation, costs incurred in connection with
any investigation of site condition or any cleanup, remedial, removal or
restoration work required by any federal, state or local governmental agency or
political subdivision because of the Hazardous Material present in the soil or
groundwater on or under the Leased Premises. Without limiting the foregoing, if
the
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presence of any Hazardous Material on the Leased Premises caused or permitted by
the Lessee results in any contamination of the Leased Premises, the Lessee shalt
promptly notify the Lessor and take all actions at its sole expense as are
necessary to return the Leased Premises to the condition existing prior to the
introduction of any such Hazardous Material to the Leased Premises or to
otherwise appropriately (as is reasonably determined by Lessor) remediate the
condition of the Leased Premises; provided, that Lessor's approval of such
action shall first be obtained, which approval shall not be unreasonably
withheld or delayed so long as such actions would not potentially have any
material adverse long-term or short-term effect on the Leased Premises.
Notwithstanding anything to the contrary contained in this Article 8, Lessee
shall have no liability or other obligation to Lessor under Article 8 of this
Lease with respect to any act or omission of Lessee relating to Hazardous
Materials which occurred prior to the date of this Lease.
ARTICLE 9
ALTERATIONS
Lessee shall not make or permit any material alterations, installations or
additions to or upon any part of the Leased Premises without first obtaining the
Lessor's consent which consent shall not be unreasonably withheld or delayed.
All contractors, mechanics, suppliers and laborers used in the performance of
any such work for or on behalf of the Lessee shall be subject to the reasonable
prior written approval of the Lessor. All alterations to the Leased Premises
shall be made under no- lien contracts in compliance with I.C. (S) 32-8-3-1, as
presently written and as may be amended in the future, and in accordance with
all applicable laws. All improvements and alterations shall remain for the
benefit of the Lessor unless at the expiration of the Lease, Lessee can remove
such alterations, installations, and additions and restore the Leased Premises
to their original condition; provided, however, that the Lessee shall indemnify
and hold harmless the Lessor from all costs, loss or expense in connection with
any construction, repair, installation or alteration made by Lessee. Lessee
shall, at its sole cost and expense, be entitled to remove or relocate work
stations or partitions between work stations or to make any non-structural
alterations to the Leased Premises involving a cost of less than $10,000,
without Lessor's consent. Lessee shall contractually provide to the fullest
extent permitted by law and take any and all other action necessary to avoid the
filing and maintaining of any mechanic's, materialmen's or similar liens against
the Leased Premises or any action against the Lessor. Lessee shall in any case
remove within thirty (30) days of the date Lessee is notified of the filing, or
bond or otherwise provide adequate security for the removal of any such lien
resulting from work contracted for by Lessee that may be filed against the
Leased Premises or for the dismissal of any action filed against the Lessor. No
person shall be entitled to any lien directly or indirectly derived through or
under the Lessee or through or by virtue of any act or omission of the Lessee
upon the Leased Premises for: any improvements or fixtures made thereon or
installed therein; or for, or on account of, any labor or material furnished to
the Leased Premises; or for, on account of, any matter or thing whatsoever.
Nothing contained in this Lease shall be construed to constitute a consent by
the Lessor to the creation of any lien against the Leased Premises. Lessee
shall, at the termination of the Lease Term, remove all of
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Lessee's trade fixtures and equipment. The Lessee shall also repair any damage
to the Leased Premises resulting from such removal.
ARTICLE 10
LIENS
Lessee shall keep the Leased Premises free from any liens, including but
not limited to mechanics' liens, arising from any act or failure to act on the
part of Lessee. If Lessee fails to remove any such lien or to provide a bond or
other adequate security therefor within 30 days of the date Lessee is notified
of the filing of the lien, Lessor shall have the right, but not the obligation,
to pay the amount of such lien to cause its release, and such amount shall be
paid by Lessee to Lessor on demand with interest at twelve percent (12%) per
annum from the date the lien attached. All such amounts due by Lessee to Lessor
shall be considered Additional Rent hereunder. All liens and encumbrances
created or suffered by Lessee shall attach to Lessee's interest only.
ARTICLE 11
RIGHTS ON TERMINATION
Section 11.01 Surrender of Leased Premises. Upon the expiration or
----------------------------
other termination of this Lease, Lessee shall peaceably surrender to Lessor the
Leased Premises, together with all improvements or additions upon or belonging
to the Leased Premises, by whomsoever made, except as provided below, in the
same condition as received or first installed, ordinary wear and tear,
condemnation, and damage by Casualty (as defined in Article 16) excepted. Upon
the termination of this Lease, Lessee shall, at Lessee's sole cost, remove all
counters, trade fixtures, signs, office furniture and equipment installed by
Lessee, unless otherwise agreed to in writing by Lessor. Any such property not
so removed shall be deemed abandoned by Lessee at the termination of this Lease,
and title to such property shall thereupon pass to Lessor. Any damage caused to
the Leased Premises by the removal of such property shall be promptly repaired
by Lessee to the satisfaction of Lessor. Lessee shall indemnify Lessor against
any loss or liability resulting from delay by Lessee in so surrendering the
Leased Premises, including, without limitation, any claims made by any
succeeding tenant arising by reason of such delay. The obligations of Lessee
under this article shall survive the expiration or other termination of this
Lease.
Section 11.02 Holding Over. If Lessee should remain in possession of the
------------
Leased Premises after expiration of the term of this Lease without execution by
Lessor and Lessee of a new lease, Lessee shall be deemed to be occupying the
Leased Premises as a tenant at sufferance subject to all of the covenants and
obligations of this Lease, and Lessee shall pay to Lessor at a daily rental of
one hundred twenty-five percent (125%) of the per diem rental rate provided
hereunder for the immediately prior period computed on the basis of a thirty
(30)-day month, together with all damages sustained by Lessor by reason of such
retention, and the acceptance by Lessor of rent after such termination shall not
constitute a renewal or extension and shall not be
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deemed to waive Lessor's right to re-entry or any other right hereunder or at
law. However, Lessor may elect, by giving written notice of such election to
Lessee, to deem the continuing occupancy of Lessee to constitute the creation of
a month-to-month tenancy at the monthly rental for the last period prior to the
date of such termination, which month-to-month tenancy shall continue until
either party shall have given the other party thirty (30) days prior written
notice of an intention to terminate such month-to-month tenancy. If the Lessee
surrenders one but not both of the buildings, commonly known as 941 N. Meridian
Street and 930 N. Meridian Street respectively, included in the Leased Premises,
Base Rent at the holdover rate shall be apportioned based upon the ratio of the
rentable square footage of the building that Lessee continues to occupy (either
99,416 or 14,868 as the case may be) to 114,284 square feet.
ARTICLE 12
SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE
Section 12.01 Subordination. This Lease, and the rights of Lessee
-------------
hereunder, shall be subject and subordinate to any ground lease relating to the
Leased Premises and the lien or liens of any mortgage or mortgages, now in force
against the Leased Premises, and upon the execution a non-disturbance agreement
between the Lessee and any future mortgage holder or ground lessor, as to such
future mortgages or ground leases, and to all advances made or hereafter to be
made upon the security thereof, all without the necessity of having further
instruments executed on the part of Lessee to effectuate such subordination. If
requested by the lessor under any such ground lease or the holder of any such
mortgage or mortgages, Lessee shall execute and deliver to such holder an
instrument, in form and substance reasonably satisfactory to such lessor or
holder and to Lessee, specifically subordinating this Lease to the lien of such
ground lease, mortgage and mortgages. However, the holder of any such mortgage
shall have the right at any time to declare this Lease to be superior in
priority to the lien of said mortgage notwithstanding the dates of execution or
recording of such mortgage.
Section 12.02 Attornment. If by reason of any default on the part of
----------
Lessor as mortgagor under any mortgage or mortgages to which this Lease is
subordinate, any such mortgage is foreclosed by legal proceedings or
extinguished by conveyance in lieu of foreclosure or otherwise, Lessee, upon the
election of the holder of any such mortgage, but not otherwise, shall attorn to
and recognize such mortgage holder and its successors and assigns, including any
purchaser in foreclosure or grantee of a deed in leu thereof, as landlord under
this Lease. Lessee shall execute and deliver at any time, upon request of Lessor
or any holder of a mortgage to which this Lease is subordinate, an instrument to
evidence such attornment and containing the agreement of Lessee that no action
taken to enforce any such mortgage by reason of default thereunder shall
terminate this Lease or invalidate or constitute a breach of any of the terms
hereof. The attornment provisions of this article are entirely independent of
and not contingent upon the subordination provisions of this article. If several
requests by mortgagees having security interests with different priorities are
made of Lessee, Lessee shall attorn to the mortgagees in the order of their
priority.
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Section 12.03 Non-Disturbance. Notwithstanding anything to the contrary
---------------
contained in this Article 12, Lessee's subordination of this Lease to any
existing or future mortgage or ground lease or attornment to any mortgagee or
ground lessor shall be conditioned upon such mortgagee's or ground lessor's
entry into a non-disturbance agreement, in a form reasonably satisfactory to
Lessee, in which the mortgagee or ground lessor, as the case may be, covenants
and agrees not to disturb Lessee in its possession of the Leased Premises so
long as Lessee is not in default under the terms of this Lease beyond any
applicable notice and cure periods, and to assume and perform the obligations of
Lessor under the Lease from and after the date such mortgagee or ground lessor
takes possession of or title to the Leased Premises or any part thereof. In
addition, Lessor shall use all reasonable commercial efforts to obtain a non-
disturbance agreement in a form reasonably satisfactory to Lessee from the
existing mortgage holders and ground lessor within six (6) months following the
date of this Lease. If Lessor fails to obtain any such non-disturbance agreement
within the six month period, Lessee shall be entitled to terminate this Lease.
In connection with any future mortgage or ground lease, Lessee may condition its
consent to subordination of this Lease under Section 12.01 above on obtaining a
non-disturbance agreement from the mortgage holder or ground lessor in a form
reasonably acceptable to the Lessee.
ARTICLE 13
DEFAULT AND REMEDIES UPON DEFAULT
Section 13.01 Default. The occurrence of one or more of the following
-------
events constitutes a default ("Default") by the Lessee under this Lease:
(a) Failure to pay the Base Rent or any Additional Rent as herein
provided within ten (10) days of the date due and such failure
continues for five (5) days following notice from Lessor, it being
understood and agreed that Lessor shall not be required to give notice
to Lessee more than two (2) times in any calendar year;
(b) Failure to pay any other moneys or amounts of money as herein
provided within ten (10) days of the date of notice of demand
therefor;
(c) Failure by Lessee to observe or perform any of the covenants in
respect to assignment and subletting set forth herein;
(d) Failure by Lessee to cure forthwith, promptly after receipt of
notice from Lessor, any hazardous condition which Lessee has created
in violation of law or of this Lease;
(e) Failure by Lessee to observe or perform any other covenant,
agreement, condition or provision of this Lease to be observed or
performed by Lessee if such failure continues for thirty (30) days
after notice to Lessee by Lessor, unless
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the nonobservance or performance is of a nature that it cannot be
corrected in thirty (30) days and Lessee has commenced the cure or
observance or performance and is pursuing it with diligence, provided
in all events that such curative action is successfully concluded
within sixty (60) days after the initial written notice or demand from
Lessor;
(f) The levy upon under execution or the attachment by legal
process of the Leased Premises or the leasehold interest of Lessee, or
the filing or creation of a lien in respect of the Leased Premises or
such leasehold interest which Lessee does not discharge or bond over
in thirty (30) days;
(g) Lessee vacates or abandons the Leased Premises;
(h) Lessee becomes insolvent or admits in writing its inability to
pay its debts as they mature, or makes a general assignment for the
benefit of creditors, or applies for or consents in writing to the
appointment of a trustee or receiver for Lessee or for the major part
of its property;
(i) A trustee or receiver is appointed for Lessee or for the major
part of its property and is not discharged within thirty (30) days
after such appointment; or
(j) Any proceedings for reorganization, liquidation, dissolution
or relief under any bankruptcy law, or similar law for the relief of
debtors, are instituted by or against Lessee, and, if instituted
against Lessee, are consented to by it, or are not dismissed within
sixty (60) days after such institution.
Section 13.02 Remedies. Upon the occurrence of any Default, Lessor may:
--------
(a) terminate this Lease by notice thereof to Lessee, in which event
the term shall end, and all right, title and interest of Lessee
hereunder shall expire on the date stated in such notice;
(b) terminate the right of Lessee to possession of the Leased Premises
without terminating this Lease by giving notice to Lessee that Lessee's
right of possession shall end on the date stated in such notice,
whereupon the right of Lessee to possession of the Leased Premises or
any part thereof shall cease on the date stated in such notice; and
(c) force the provisions of this Lease and enforce and protect the
rights of Lessor hereunder by a suit or suits in equity or at law for
the specific performance of any covenant or agreement contained herein,
or for the enforcement of any other appropriate legal or equitable
remedy, including recovery of all moneys due or to become due from
Lessee under any of the provisions of this Lease.
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Section 13.03 Surrender. If Lessor exercises either of the remedies
---------
provided for in paragraphs (a) or (b) of Section 13.02 above, Lessee shall
surrender possession of and vacate the Leased Premises immediately and deliver
possession thereof to Lessor, and Lessor may then or at any time thereafter re-
enter and take complete and peaceful possession of the Leased Premises, with or
without process of law, and Lessor may remove all occupants and property
therefrom, using such force as may be necessary, without being deemed in any
manner guilty of trespass, eviction or forcible entry and detainer, and without
relinquishing Lessor's right to rental or any other right given to Lessor
hereunder or by operation of law.
Section 13.04 Termination of Possession. If Lessor terminates the right
-------------------------
of Lessee to possession of the Leased Premises without terminating this Lease
pursuant to paragraph (b) of Section 13.02, such termination of possession shall
not release Lessee, in whole or in part, from Lessee's obligation to pay the
rental hereunder for the full term, and the present value of the excess of the
aggregate amount of the Base Rent over the amount of rent Lessor reasonably
could receive by reletting the Leased Premises for the period from the date
stated in the notice terminating possession to the end of the term shall at once
mature and be immediately due and payable by Lessee to Lessor, together with any
and all other moneys due hereunder, and Lessor shall have the right to immediate
recovery of all such amounts. In addition, Lessor shall have the right, from
time to time, to recover from Lessee, and Lessee shall remain liable for, all
Additional Rent and any other sums thereafter accruing as they become due under
this Lease during the period from the date of such notice of termination of
possession to the stated end of the term. In any such case, Lessor may make
repairs, alterations and additions to the Leased Premises, change the locks to
the Leased Premises, and redecorate the Leased Premises to the extent deemed by
Lessor as necessary or desirable to relet the Leased Premises, and Lessee shall
upon demand pay to Lessor all costs and expenses thereof. In the event that
Lessor should relet the Leased Premises or some portion thereof during the
balance of the term, the proceeds of such reletting, after deduction of all
reasonable costs and expenses in connection with the repossession and reletting
of the Leased Premises (including, without limitation, all reasonable attorneys'
fees, leasing commissions, expenses of repairs, alterations and redecoration and
similar expenses), shall be applied to the payment of rentals and the
satisfaction of other obligations of Lessee hereunder.
Section 13.05 Termination of Lease. If this Lease is terminated by
--------------------
Lessor pursuant to paragraph (a) of Section 13.02, Lessor shall be entitled to
recover from Lessee all the fixed dollar amounts of rentals accrued and unpaid
for the period up to and including such termination date, as well as all other
additional sums payable by Lessee, or for which Lessee is liable or in respect
of which Lessee has agreed to indemnify Lessor under any of the provisions of
this Lease, which may be then owing and unpaid, and all reasonable costs and
expenses, including court costs and attorneys' fees incurred by Lessor in the
enforcement of its rights and remedies hereunder. In addition, Lessor shall be
entitled to recover as damages for loss of bargain and not as a penalty: (i) the
aggregate sum which at the time of such termination shall be equal to the
present value of the excess of the aggregate rentals for the remainder of the
term over the aggregate fair rental value of the Leased Premises for the balance
of the term, and (ii) any
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damages, including reasonable attorneys' fees and court costs, which Lessor
shall have sustained by reason of a breach of any of the covenants of this Lease
other than for the payment of rent.
Section 13.06 Property. All property removed from the Leased Premises by
--------
Lessor pursuant to any provisions of this Lease or of law may be handled,
removed or stored by Lessor at the cost and expense of Lessee, and Lessor shall
in no event be responsible for the value, preservation, or safekeeping thereof.
Lessee shall pay Lessor for all expenses incurred by Lessor in such removal and
storage charges against such property so long as it is in Lessor's possession or
under Lessor's control. All property not removed from the Leased Premises or
retaken from storage by Lessee within thirty (30) days after the end of the
Lease term, however terminated, may be sold with the proceeds thereof applied to
the rentals owed by Lessee.
Section 13.07 Suit on Installments. Lessor shall have the right at any
--------------------
time to file suit to recover any sums which have fallen due under this Lease
from time to time on one or more occasions without being obligated to wait until
the expiration of the term of this Lease, including, without limitation, past
due Base Rent or Additional Rent, interest, late payment charges, advances, and
attorneys' fees.
Section 13.08 No Waiver: Remedies Cumulative. The failure of Lessor to
------------------------------
exercise any remedy herein provided in the event of a Default shall not
constitute a waiver of such Default or any subsequent Default. The rights and
remedies of Lessor in this Lease are distinct, separate and cumulative remedies,
and shall not operate to exclude or deprive Lessor of any other right or remedy
provided by law or equity.
ARTICLE 14
LESSOR'S RESERVED RIGHTS
Lessor shall have the following rights, exercisable without notice and
without liability to Lessee for damage or injury to property, person or business
(all claims for damage being hereby released, except for damages or injury
resulting from Lessor's negligence or willful acts or omissions), and without
effecting an eviction or disturbance of Lessee's use or possession or giving
rise to any claim for off-sets or abatement of rent, except as otherwise
expressly provided in this Lease:
(a) To enter the Leased Premises to make inspections, repairs, alterations
or additions in or to the Leased Premises or to exhibit the Leased Premises
to prospective tenants, purchasers or others, at reasonable hours and upon
prior notice to Lessee and at any time without notice in the event of an
emergency, and to perform any acts related to the safety, protection,
preservation, reletting, sale or improvement of the Leased Premises;
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(b) To decorate, alter, repair or improve the Leased Premises at any time,
including the right of Lessor and its representatives to enter on and about
the Leased Premises with such materials as Lessor may deem necessary, erect
scaffolding and all other necessary structures on or about the Leased
Premises and close or temporarily suspend operations of entrances, doors,
corridors and other facilities, provided that in the exercise of its rights
under this paragraph, Lessor shall not unreasonably interfere with the
conduct of Lessee's business and shall provide Lessee with at least three
business days prior notice of such activities; and
(c) To do or permit to be done any work in or about the Leased Premises or
any adjacent or nearby building, land, street or alley; provided that such
work does not unreasonably interfere with the conduct of Lessee's business
or Lessee's access to the Leased Premises and Lessee is given at least
three days prior notice.
ARTICLE 15
EMINENT DOMAIN
If all or any substantial part of the buildings constituting the Leased
Premises shall be condemned by any public or quasi-public or other competent
authority, or conveyed or transferred in lieu of condemnation, this Lease shall
end on the date when the possession of the part so taken shall be required by
such authority, without apportionment of the award to or for the benefit of
Lessee. If any condemnation proceeding shall be instituted in which it is sought
to take or damage any part of the buildings, or if any part of the buildings is
conveyed or transferred in lieu of condemnation, and such partial taking makes
it necessary or desirable to remodel the buildings to conform to the taking,
either Lessor or Lessee may cancel this Lease upon not less than sixty (60)
days' prior written notice to the other party. If this Lease is terminated as
hereinabove provided, the rentals at the then current rate shall be apportioned
as of the date of termination. No money or other consideration shall be payable
by Lessor to Lessee for the right of termination of this Lease pursuant to this
article. All condemnation awards and other sums awarded shall be agreed upon by
Lessor and the condemning authority for the taking of the interest of Lessor and
Lessee, whether as damages or as compensation, and shall be the property of
Lessor, free of any claim of Lessee, except that Lessor shall not be entitled to
any award or compensation paid to Lessee for its moving expenses, business
interruption damages or for any personal property of Lessee that may be taken in
any such proceeding. If all or any portion of the Leased Premises which
constitutes a parking area shall be taken, then Lessor shall use all reasonable
efforts to make available to Lessee reasonably comparable replacement parking.
ARTICLE 16
FIRE AND OTHER CASUALTY
If the Leased Premises, including the buildings and improvements, are
substantially damaged by fire or other casualty, cause, condition or thing
whatsoever (the "Casualty"), and
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Lessor elects not to restore the Leased Premises, then Lessor may terminate this
Lease by notice to Lessee given within ninety (90) days after the date of such
Casualty (the "Casualty Date"). Such termination shall become effective as of
the Casualty Date if the Leased Premises are untenantable, or as of a date
ninety (90) days following the service of such notice of lease termination if
the Leased Premises are not untenantable. Unless the Lease is terminated as
hereinabove provided, Lessor shall restore all damaged portions of the Leased
Premises within 1 80 days following the Casualty Date unless the Lessee
exercises it right to terminate, provided below, except for Lessee Improvements,
which shall be restored by and at the expense of Lessee. If the Leased Premises
are made partially or wholly untenantable as a result of Casualty, and if Lessor
fails, within one hundred eighty (180) days after the Casualty Date, to
substantially restore the Leased Premises, either Lessor or Lessee may terminate
this Lease as of the end of said one hundred eighty (180) days by notice to the
other given not later than thirty (30) days after the expiration of said one
hundred eighty (180)-day period. In the event of termination of this Lease
pursuant to this article, rental at the then current rate shall be pro-rated on
a per diem basis and paid only to the effective date of such termination. If all
of the Leased Premises are untenantable but this Lease is not terminated, all
rent shall abate from the Casualty Date until the Leased Premises are
substantially restored and reasonably accessible for occupancy by Lessee. If
part of the Leased Premises are untenantable, rent shall abated on a per diem
basis in proportion to the percentage of the building and other improvements of
the Leased Premises (excluding all parking, pedestrian or loading areas) which
are rendered unusable by Lessee until the damaged part is ready for Lessee's
occupancy. In all cases, due allowance shall be made for reasonable delay caused
by adjustment of insurance loss, strikes, labor difficulties or any cause beyond
Lessor's reasonable control. Lessor shall have no duty to repair, restore or
replace Lessee Improvements. If at any time during the term of this Lease 50% or
more of the rentable area of the Leased Premises is rendered untenantable by a
Casualty, or if, during the last twelve months of the term of this Lease, 10% or
more of the rentable area of the Leased Premises is rendered untenantable by
Casualty, Lessee shall have the right to terminate this Lease upon written
notice to Lessor given within thirty (30) days following the Casualty Date.
ARTICLE 17
LESSOR'S LIABILITY
The Lessee shall be responsible for and liable to the Lessor for any and
all damage to the Leased Premises, any person or other property on the Leased
Premises and for any act done thereon by the Lessee, its employees, agents or
any other person coming on the Leased Premises by the invitation or license of
the Lessee, expressed or implied, and Lessee shall fully indemnify and save
Lessor harmless from any or all liability to any person for all such damage and
from any other damage to any person or property resulting from use of the Leased
Premises. Lessee's liability, if any to Lessor under this Article 17 shall
extend only to actions and events which occur from and after the date of this
Lease The term "Lessor" as used in this Lease, as far as covenants or agreements
on the part of Lessor are concerned, shall be limited to mean and include only
the owner or owners of Lessor's interest in this Lease at the time in question,
and in the event of any transfer or transfers of such interest (except a
transfer by way of security),
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Lessor herein named (and in the case of any subsequent transfer, the then
transferor) shall be automatically freed and relieved from and after the date of
such transfer of all liability as respects the performance of any covenants or
agreements on the part of Lessor contained in this Lease to be performed after
such transfer. Any funds in which Lessee has an interest and which are in the
hands of Lessor or the then transferor at the time of such transfer shall be
turned over to the transferee, and any amount then due and payable to Lessee by
Lessor or the then transferor under any provisions of this Lease shall be paid
to Lessee. Upon any such transfer, provided the transferee shall have assumed,
in writing, the obligations of Lessor under this Lease, subject to the
limitations of this Section, all the covenants, agreements and conditions in
this Lease contained to be performed on the part of Lessor, it being intended
hereby that the covenants and agreements contained in this Lease on the part of
Lessor shall, subject as aforesaid, be binding on Lessor, its successors and
assigns, only during and in respect of their respective successive periods of
ownership. In any event and notwithstanding any other provisions of this Lease,
no officer, director, agent, partner, beneficiary, trustee or employee of Lessor
or of any subsequent owner of the Leased Premises shall be responsible or liable
in his individual or personal capacity for the performance or nonperformance of
any agreement, covenant or obligation of Lessor contained in this Lease.
ARTICLE 18
NOTICE
Any notice required or permitted to be given or served by either party to
this Lease shall be in writing and shall be served personally or sent by
certified or registered mail, return receipt requested, first class postage
prepaid, or by courier, telecopy or facsimile and addressed to the intended
recipient as follows:
LESSOR: MSE REALTY, LLC
941 N. Meridian Street
Indianapolis, Indiana 46204-1061
Attn: Sol C. Miller
Telecopy: (317) 634-3576
with a copy: LOCKE REYNOLDS BOYD & WEISELL
1000 Capital Center South
201 N. Illinois Street
Indianapolis, Indiana 46204
Attn: Michael J. Schneider
Telecopy: (317) 237-3900
LESSEE: MSE CORPORATION
941 N. Meridian Street
Indianapolis, Indiana 46204-1061
Attn: ___________________________
Telecopy: (317) 634-3576
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<PAGE>
with a copy to: ANALYTICAL SURVEYS, INC.
1935 Jamboree Drive, Suite 100
Colorado Springs, Colorado 80920
Attn: Sidney V. Corder
Telecopy: (719) 598-9626
with another copy to: SHERMAN & HOWARD L.L.C.
633 Seventeenth Street, Suite 3000
Denver, Colorado 80202
Attn: James F. Wood, Esq.
Telecopy: (303) 298-0940
All rental payments and other sums due Lessor hereunder shall be made to
the Lessor at the above address. The addresses may be changed from time to time
by either party by serving notice as above provided. Any such notice shall be
deemed to have been given as of the earlier of (i) the date of the actual
receipt of such notice, or (ii) the third business day following the date on
which the piece of mail containing such notices posted if sent by certified or
registered United States mail.
ARTICLE 19
MISCELLANEOUS PROVISIONS
Section 19.01 Assignment and Subletting. Lessee shall not assign this
-------------------------
Lease or sublet the Leased Premises in whole or in part without the prior
written consent of Lessor which consent shall not be unreasonably withheld or
delayed. Notwithstanding any of the foregoing, Lessee shall be permitted,
without Lessor's consent, to assign or sublet any or all of the Leased Premises
to any entity which directly or indirectly controls, is controlled by or is
under common control with, Lessee, or in connection with a sale of all or
substantially all of Lessee's assets. In addition, no assignment of this Lease
shall be binding upon Lessor unless the assignee shall have executed and
delivered to Lessor a written assumption of Lessee's obligations under this
Lease. In the event of any assignment of this Lease or any subletting of the
Leased Premises, whether with or without the consent of Lessor, Lessee shall
remain fully liable for the performance all of the covenants, conditions and
provisions in this Lease, including, without limitation, the payment of Base
Rent and Additional Rent as provided herein.
Section 19.02 Quiet Environment. Lessor agrees and covenants that if the
-----------------
Lessee shall perform all of the covenants and agreements herein provided to be
performed on the Lessee's part, the Lessee shall, at all times during the term,
have the peaceful and quiet enjoyment of possession of the Leased Premises
without any manner of hindrance from the Lessor or any persons or entities
lawfully claiming under the Lessor
Section 19.03 Lessee Certificates. From time to time upon not less than
-------------------
fifteen (15) days' prior request by Lessor, Lessee shall execute and deliver to
Lessor, or any mortgagee or
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prospective mortgagee of Lessor's interest in the Leased Premises, or any
purchaser or prospective purchaser of Lessor's interest in the Leased Premises,
a statement in writing certifying: (i) that this Lease is unmodified and in full
force and effect (or if there have been any modifications that the Lease as
modified is in full force and effect); (ii) the dates to which the rental and
other charges have been paid, (iii) the date of commencement and expiration of
the Lease term; (iv) that, to the knowledge of Lessee, Lessor is not in default
under any provision of this Lease, or, if in default, the nature thereof in
detail; and (v) such other matters as Lessor may reasonably request. Lessor
agrees to provide a similar estoppel certificate to Lessee within 15 days
following Lessee's request therefor.
Section 19.04 Waiver by Lessor. No covenant, condition or provision of
----------------
this Lease shall be deemed to have been waived by Lessor unless executed in
writing by Lessor. No waiver by Lessor of any covenant, condition or provision
of this Lease shall be deemed, or shall constitute, a waiver of such covenant,
condition or provision in the future, or a waiver of any subsequent breach of
such covenant, condition or provision, or a waiver of any other covenants,
conditions or provisions of this Lease, whether or not similar. The subsequent
acceptance or payment of rent or other performance hereunder by Lessor shall not
be deemed to be a waiver of any preceding breach by Lessee of any covenant,
condition or provision of this Lease, regardless of Lessor's knowledge of such
preceding breach at the time of acceptance or payment of such rental or other
performance, unless Lessor shall expressly so state in writing.
Section 19.05 Air and Light. This Lease does not grant or guarantee
-------------
Lessee a continuance of light and air over any property adjoining the Leased
Premises.
Section 19.06 No Option. The submission of this Lease for examination or
---------
signature by Lessee does not constitute a reservation of or option for the
Leased Premises. This instrument shall become effective as a Lease only upon
execution and delivery by both Lessor and Lessee.
Section 19.07 Right to Cure Lessee Breaches. If Lessee shall fail to
-----------------------------
perform any of Lessee's covenants or obligations under this Lease, and such
failure shall continue after the expiration of any cure period or grace period
provided in this Lease with respect to such covenants or obligations, Lessor
shall have the right, but not the obligation, to perform such covenants or
obligations for the account and at the expense of Lessee, without notice to
Lessee. All monies spent and costs and expenses incurred by Lessor in performing
such covenants or obligations shall become Additional Rent hereunder and shall
be due and payable by Lessee on demand by Lessor and shall bear interest at the
rate of twelve percent (12%) per annum from the date due until paid in full.
Section 19.08 Expenses of Enforcement. Lessee shall pay or reimburse Lessor
-----------------------
for all costs and expenses, including court costs and reasonable attorneys'
fees, incurred by Lessor in enforcing, or attempting to enforce, any of its
rights and remedies under this Lease, whether or not litigation is commenced to
enforce such rights or remedies, including, without limitation, any negotiations
or transactions relating to, or arising out of, this Lease in which Lessor
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becomes involved or concerned. All such costs and expenses incurred by Lessor,
together with interest at the rate of twelve percent (12%) per annum, shall
become Additional Rent due hereunder and shall be due and payable by Lessee on
demand by Lessor. In the event that either party defaults in the performance or
observance of any of the terms and conditions, covenants or obligations
contained in this Lease after the expiration of all applicable notice and cure
periods, and the other party employs attorneys to enforce all or any part of
this Lease, (or in the case of the Lessor) to collect any rent due or to recover
possession of the Leased Premises, the prevailing party agrees to reimburse the
other party for the reasonable attorneys' fees incurred thereby, whether or not
suit is filed.
Section 19.09 Memorandum of Lease. At the request of either party, the
-------------------
parties shall execute and record a memorandum of this Lease.
Section 19.10 Severability. If any provision of this Lease is held to
------------
be unenforceable, invalid or void, such provision shall be deemed to be
severable from the remaining provisions of this Lease, and such holding shall in
no way impair or affect the validly or enforceability of the remaining
provisions of this Lease, which shall then be construed as if such invalid or
unenforceable provision were omitted.
Section 19.11 Successors and Assigns. Except as herein limited, this
----------------------
Lease shall be binding upon, and inure to the benefit of, the parties hereto and
their respective heirs, personal or legal representatives, successors and
assigns.
Section 19.12 Entire Lease. This Lease, together with any and all
------------
exhibits and schedules attached hereto, constitutes the entire agreement between
the parties hereto with respect to the subject matter hereof and supersedes all
prior and contemporaneous agreements, representations, and understandings of the
parties, written or oral.
Section 19.13 Amendments. No supplement, modification or amendment of
----------
any provision of this Lease shall be binding unless executed in writing by all
of the parties to this Lease.
Section 19.14 Controlling Law. This Lease and the rights and obligations
---------------
of the parties hereto shall be construed in accordance with the laws of the
State of Indiana, without giving effect to the choice of law provisions thereof.
All parties to this Lease hereby agree that any legal action against them in
connection with this Lease, or any transaction contemplated by this Lease, may
be commenced against them in any state or federal court of competent
jurisdiction located in Marion County, Indiana.
Section 19.15 Mediation. Notwithstanding Section 19.14 above, if a
---------
dispute arises under or in connection with this Lease, including, without
limitation, those involving claims for specific performance or other equitable
relief, notice must be given pursuant to the Article 18. After such notice has
been given by one party to the other, the parties in good faith will attempt
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to negotiate or mediate a resolution of the dispute with the aid of a mediator
who has been mutually agreed upon by the parties.
Section 19.16 Arbitration. If such efforts provided for in Section
-----------
19.15 do not within 30 days resolve the dispute, upon demand of any party,
whether made before or after the institution of any judicial proceeding, the
dispute will be resolved by binding arbitration under the Commercial Arbitration
Rules of the American Arbitration Association. Institution of a judicial
proceeding by a party does not waive the right of that party to demand
arbitration under this Lease, provided that arbitration is commenced within 70
days after such judicial proceedings are commenced. The American Arbitration
Association will choose one arbitrator to hear the parties and settle any
dispute. All arbitration hearings will be conducted in Kansas City, Missouri.
All applicable statutes of limitation will apply to any dispute. The arbitrator
will have no power to award punitive or exemplary damages, to ignore or vary the
terms of this Lease, and will be bound to apply controlling law. The Lessor and
the Lessee each will pay for one-half of the arbitrator's fees and expenses and
each such party will bear its own costs and expenses incurred in connection with
the arbitration, except that the arbitrator will award either party
reimbursement of its share of the costs and expenses of arbitration, such
party's costs and expenses (including attorneys' fees and expenses), and any
special or extraordinary fees or costs incurred in connection with any such
arbitration or dispute, if the other party commences or conducts the arbitration
in bad faith. A judgment upon the award may be entered in any court having
jurisdiction. Notwithstanding anything to the contrary contained in this Section
19.16, the parties preserve, without diminution, certain remedies that any of
them may employ or exercise freely, either alone, in conjunction with, or during
a dispute. The parties to this Lease have the right to proceed in any court of
proper jurisdiction or by self-help to exercise or prosecute the following
remedies, as applicable: (i) all rights of self-help including peaceful
occupation of the Leased Premises and collection of rents, set off and peaceful
possession of personal property; and (ii) obtaining provisional or ancillary
remedies including injunctive relief, requestration, garnishment, attachment,
appointment of a receiver and filing an involuntary bankruptcy proceeding.
Preservation of these remedies does not limit the power of an arbitrator to
grant similar remedies that may be requested by a party in a dispute. It is
further understood and agreed that notwithstanding these provisions requiring
arbitration and mediation, the Lessor shall retain the right to obtain
preliminary injunctive relief or other temporary relief from any court of
competent jurisdiction in the case of an emergency or in other circumstances
where the rights and interests of the Lessor in the Leased Premises would be
unreasonably and materially adversely affected by such mediation and/or
arbitration procedures, pending resolution of the merits of the dispute by
arbitration.
Section 19.17 Construction. The headings of Articles, Sections and
------------
paragraphs in this Lease are for descriptive purposes only and shall not
control, alter or otherwise affect the meaning, scope or intent of any
provisions of this Lease. Except as expressly provided otherwise in this Lease,
any reference to an Article or Section shall mean and refer to an Article or
Section of this Lease. Except where the context of their use clearly requires a
different interpretation, singular terms shall include the plural, and masculine
terms shall include the feminine or neuter,
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and vice versa, to the extent necessary to give the defined terms or other terms
used in this Lease their proper meanings. The locative adverbs, "herein,"
"hereof," "hereunder," "hereto," "hereinafter," "hereinbefore," and similar
words, wherever they appear in this Lease, shall mean and refer to this Lease in
its entirety and not to any specific Article, Section or paragraph of this
Lease, unless the context of their use clearly requires a different
interpretation.
Section 19.18 Incorporation by Reference. All Exhibits identified
--------------------------
herein, and any amendments, riders and addenda attached hereto and signed by
both Lessor and Lessee, are hereby incorporated herein by this reference and
made a part hereof.
Section 19.19 Counterparts. This Lease may be executed concurrently in
------------
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Lease, or
multiple counterparts thereof, each of which is deemed an original, as of the
date first written above.
"LESSOR" MSE REALTY, LLC
By: ________________________________
Sol C. Miller Printed Signature
___________________________________
Printed Signature
Title Member
----------------------------
"LESSEE" MSE CORPORATION "LESSEE"
By: _______________________________
Sidney V. Corder
___________________________________
Printed Signature Title
Chairman/Chief Executive Officer
--------------------------------
GUARANTY
The undersigned, Analytical Surveys, Inc., a Colorado corporation,
unconditionally, irrevocably and absolutely guarantees to Lessor the prompt
payment and performance when due and at all times thereafter (and not merely the
ultimate collectibility) of all existing and future agreements, obligations,
liabilities and indebtedness of Lessee under and with respect to this Lease,
including without limitation, the prompt payment when due of all Base Rent,
Additional
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Rent and other sums due under this Lease. The undersigned also agrees to pay all
costs and expenses, including without limitation, court costs and reasonable
attorneys' fees, incurred by Lessor in connection with the enforcement or
attempted enforcement of this Lease (including this Guaranty), whether in or out
of court (including bankruptcy court).
The undersigned agrees that, without affecting or impairing its liability
and obligations under this Guaranty, the Lease can be amended and Lessor can
agree to extend, modify, waive and otherwise change the time and terms of
payment and performance of this Lease, without notice to or consent of the
undersigned. The undersigned also waives, to the fullest extent permitted by
law, all defenses that might otherwise be available to the undersigned to limit
the undersigned's liability under this Guaranty relating to the discharge of a
surety.
Regardless of whether the undersigned has notice thereof or has consented
thereto, the validity and enforceability of this Guaranty shall not be impaired
or affected by any act or omission of Lessor that might otherwise constitute a
discharge of the obligations of the undersigned under this Guaranty, including
without limitation, (i) any failure or omission to enforce any right, power or
remedy, (ii) any waiver of any right, power or remedy against Lessee or of any
default by Lessee, and (iii) any release, surrender, compromise, settlement,
subordination or modification in favor of Lessee, with or without consideration.
Without limiting the generality of the foregoing, the undersigned will not
assert, plead or enforce against Lessor any defense of waiver, release,
discharge in bankruptcy, anti-deficiency statute, incapacity, usury, ultra
vires, or lack of authorization that may be available to Lessee or any other
obligor with respect to the Lease.
The undersigned will not exercise or enforce, and hereby waives, any right
of contribution, reimbursement, recourse or subrogation available to the
undersigned against Lessee or any other person liable for all or any part of
Lessee's Lease obligations, or as to any security therefor, unless and until all
agreements, obligations, liabilities and indebtedness under and with respect to
the Lease have been fully paid and performed without possibility of
disgorgement, return or rescission.
If any payment applied by Lessor to the Lease is set aside, recovered,
rescinded or required to be returned for any reason (including, without
limitation, the 27 bankruptcy, reorganization or insolvency of Lessee), the
Lease obligation to which the payment was applied shall for the purposes of this
Guaranty be deemed to have continued in existence, notwithstanding the
application, and this Guaranty shall be enforceable with respect to such Lease
obligation as fully as if Lessor had not made the application. This Guaranty is
a continuing guaranty, is binding upon the undersigned and its successors and
assigns, and will inure to the benefit of Lessor and its successors and assigns.
This Guaranty is governed exclusively by Indiana law, without regard to conflict
of laws principles. All claims under this Guaranty will be resolved by
arbitration in a manner consistent with Section 19.16 of the Lease.
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<PAGE>
Date: July ___, 1997 ANALYTICAL SURVEYS, INC.,
a Colorado corporation
By: __________________________________
Sidney V. Corder
______________________________________
Printed Signature
Title Chairman/Chief Executive Officer
---------------------------------
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TRACT I
-------
LAND DESCRIPTION
----------------
941 BUILDING
------------
Lots 1, 2, 3,4, and 5 in George D. Staat's Subdivision of Lots 26, 27, and
28 of the Joseph R. Praff's Subdivision of a part of Outlot 172 of the Donation
Lands of the City of Indianapolis, the plat of which is recorded in Plat Book 1
page 309, in the Office of the Recorder of Marion County, Indiana, together with
the West Half of the first alley East of Meridian Street from Sahm Street to St.
Joseph Street vacated by Declaratory Resolution 17579, recorded January 7, 1958
in Deed Record 1690, Instrument No.1179, in the Office of the Recorder of Marion
County, Indiana. Except 5 feet off the West side taken for the widening of
Meridian Street.
ALSO; Lots 29, 30 and 31 in Joseph R. Prall's Subdivision of the North part
of Outlot 172 of the Donation Lands of the City of Indianapolis, the plat of
which is recorded in Plat Book 1, pages 79 and 80, in the Office of the Recorder
of Marion County, Indiana. Except 5 feet off the west side, taken for the
widening of Meridian Street. Also, excepting that portion conveyed to the City
of Indianapolis for public right of way, dated July 15,1985 and recorded August
26, 1985, as Instrument No.85-72273.
ALSO: Lots 6, 7, and 8 in George D. Staat's Subdivision of Lots 26, 27, and
28 of J. R.Pratt's Subdivision of Outlot 172 in the City of Indianapolis, Marion
County, Indiana, the plat of which is recorded in Plat Book 1, page 309, in the
Office of the Recorder of Marion County, Indiana, together with the East Half of
the first alley East of Meridian Street from Sahm Street to St. Joseph Street,
vacated by Declaratory Resolution 17579, recorded January 7,1958 in Deed Record
1690, Instrument No.1179, in the Office of the Recorder of Marion County,
Indiana.
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<PAGE>
TRACT II
--------
LAND DESCRIPTION
----------------
GOODRICH
--------
Part of Outlot 171 of the Donation Lands of the City of Indianapolis as per
plat thereof recorded in Plat Book 1 page 97, in the Office of the Recorder of
Marion County, Indiana, more particularly described as follows:
Lot 4, and 22 feet 6 inches by parallel lines off the entire North side of
Lot 5 in Joseph R. Pratt's Subdivision of Outlot 171, of the Donation Lands of
the City of Indianapolis, as per plat thereof recorded in Plat Book 1, page 97,
in the Office of the Recorder of Marion County, Indiana.
Also, the strip of land 2.7 feet in width, North of and adjoining Lot 4
herein being part of St. Joseph Street, vacated, as described in Declaratory
Resolution No. 17025, and recorded in Deed Record 1488, page 447, in the Office
of the Recorder of Marion County, Indiana.
Except 5 feet taken off the entire East side of the above realty for
widening of Meridian Street. Subject to highways, rights-of-way, and easements.
LAND DESCRIPTION
----------------
930 BUILDING
------------
Lot 6 and 40 feet off the South side of Lot 5 in Joseph R. Pratt's
Subdivision of Outlot 171 of the Donation Lands of the City of Indianapolis, the
plat of said Pratt's Subdivision is recorded in Plat Book 1, page 97, in the
Office of the Recorder of Marion County, Indiana. Except 5 feet off the East
side taken for the widening of Meridian Street.
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<PAGE>
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made effective for all purposes and in all
respects as of the 2nd day of July, 1997, by and between ANALYTICAL SURVEYS,
INC., a Colorado corporation (hereinafter referred to as the "Employer" or the
"Corporation"), and RANDAL J. SAGE (hereinafter referred to as the "Employee").
WITNESSETH THAT:
WHEREAS, Employee has been employed by MSE Corporation, an Indiana
corporation (hereinafter referred to as "MSE"); and
WHEREAS, Employer wishes to retain the services of Employee, and Employer
and Employee wish to. formalize the terms and conditions of their agreements and
understandings, and to continue the term of Employee's employment hereunder;
NOW, THEREFORE, in consideration of the foregoing of the mutual promises
herein contained, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, intending legally to
be bound, agree as follows:
1. Term of Employment.
------------------
This employment agreement shall supersede all prior employment agreements
written or verbal. The term shall commence on July 2, 1997, and shall continue
until June 30, 1999, unless sooner terminated in accordance with the provisions
of Paragraph 6, and shall be reviewed annually after the initial term referenced
above.
2. Duties of Employee:
------------------
2.1 It is understood and agreed that Employee's principal duties on
behalf of Employer at the date of execution hereof are and shall be as Chief
Operations Officer of the Corporation. In accepting employment by Employer,
Employee shall undertake and assume the responsibility of performing for and on
behalf of Employer whatever duties are necessary and required in his position as
Chief Operations Officer of the Corporation. The Chief Operations Officer will
report to the Chief Executive Officer. Employer agrees that it will not relocate
Employee from his current employment in Indianapolis, Indiana, without
Employee's prior consent.
2.2 Employee covenants and agrees that at all times during the term of
this Agreement, Employee shall devote his full-time efforts to his duties as an
employee of the Employer. Employee further covenants and agrees that he will
not, directly or indirectly, engage
<PAGE>
or participate in any activities at any time during the term of this Agreement
in conflict with the best interests of Employer.
3. Compensation.
3.1 Salary. As compensation for the services to be rendered by Employee
------
for Employer under this Agreement, Employee shall be paid not less than the
following base annual salary, during the term hereof: $170,000, plus annual
increases and bonuses, if any, voted him by the Board of Directors of Employer.
3.2 Bonus. Employee shall be a participant in the Analytical Surveys,
-----
Inc. bonus plans in effect and on substantially the same basis as other
executive officers of the corporation as approved by the Board of Directors;
provided, that required accounting principles shall not negatively impact the
amount of Employee's bonus.
3.3 Salary Review. Employee's salary will be reviewed annually in
-------------
January, commencing January, 1998.
4. Additional Benefits.
-------------------
In addition to, and not in limitation of, the compensation referred to in
Paragraph 3, Employee shall be paid the following additional benefits during the
term hereof:
4.1 Reimbursement. Reimbursement of all reasonable expenses incurred by
-------------
him in connection with performance of his duties shall be made upon submission
of vouchers in accordance with the corporation policies in effect from time to
time. Reasonable expenses shall include, but not limited to all out-of-pocket
expenses for entertainment, travel, meals, lodging, automobile expense,
professional fees, professional dues and the like incurred by him in the
interest of the Employer.
4.2 Participation in Benefit Plans. Employee shall be a participant, to
------------------------------
the extent he meets all eligibility requirements of general application to
senior executives of the Corporation, in any and all plans maintained by the
Corporation to provide benefits for its employees, at least to the extent
specified in the MSE Corporation's Flexible Benefits Workbook, amended November,
1996, a copy of which has been given to Employee. Benefits shall include, but
not limited to, group term life insurance, health care insurance, short-term
disability, long-term disability, 401K plan, and health care and dependent care
expense accounts which allow the use of pre-tax dollars for payment of those
expenses. However, while reasonable Employee contributions may be required and
reasonable increases may be made in deductible amounts, the maximum insurable
benefits under such plans shall at no time be materially less than those in
effect for all other officers of the Corporation.
Changes in the Corporation Benefit Plan may affect the level of participation by
the employee and will be reviewed in accordance with the annual review specified
in Paragraph 1 "Term of
-2-
<PAGE>
Employment." At no time will such benefit participation be less than those in
effect for all other officers of the Corporation.
4.3 Vacations. Employee shall be entitled to vacations of not less than
---------
four (4) weeks per year, in accordance with the Corporation's regular vacation
policies established for senior executives; provided, that Employee may accrue
any unused vacation time from year to year, and upon termination of employment
will be compensated for any unused vacation time. Unused vacation time may be
deferred to the following year up to a maximum of two years accrual. Any
specific vacation of more than two (2) weeks duration shall be approved in
advance by the Chief Executive Officer.
4.4 Other Perquisites. Employee shall be entitled to such additional
-----------------
perquisites as may be customarily granted by the Corporation to senior
executives, as set forth by the Corporation's Employee Handbook. In addition,
Corporation will continue to provide Employee with the use of an automobile of
similar nature to the one currently provided at the commencement of the term of
this Agreement, and Employer will maintain payments of dues and business related
expenses associated Employee's country club membership. Employer shall also pay,
on behalf of Employee, a sum of $15,000, for Employee's conversion of his
country club membership status from "CH" to "A", at the time when such
conversion becomes possible. Said additional perquisites shall be reviewed at
the conclusion of the initial term defined in Paragraph 1 "Term of Employment".
4.5 Disability Payments. In the event of the Employee's disability,
-------------------
Employee's salary in effect at the time of his disability shall continue to be
paid to the Employee, or to his designee, in accordance with existing
Corporation executive benefit plans, or from the date of Employee' termination
by reason of disability. For the purposes of this Employment agreement, the
obligations of the Employer to make the payments upon the disability of Employee
shall not become effective, unless and until all of the following conditions are
met, as determined by an independent physician selected by the Board of
Directors and subject to reasonable consent by Employee: (1) Employee shall
become physically or mentally incapable (excluding infrequent and temporary
absences due to ordinary illnesses) of properly performing the services required
of him in accordance with his obligations under Paragraph 2 hereof or similar
provisions of any renewal agreement; (2) such incapacities shall exist or be
reasonably expected to exist for more than ninety (90) days in the aggregate
during the period of twelve (12) consecutive months; (3) either Employee or
Employer shall have given the other thirty (30) days' written notice of his or
its intention to terminate the active employment of Employee because of such
disability; and, (4) Employee shall have exhausted his Short Term Disability
Benefits pursuant to Paragraph 4.2 above. The benefits payable hereunder shall
be in addition to, and shall not be offset against, any amounts paid to Employee
or his designee by reason of insurance benefits pursuant to Paragraph 4.2 above.
-3-
<PAGE>
4.6 Life Insurance. At Employee option, Employee shall be provided with a
life insurance policy in the amount of $250,000 (provided he can meet the
medical conditions for such coverage), payable to such beneficiaries as he shall
designate, with an additional $250,000 of accidental death coverage, with the
cost of such policies borne by Employer. Should the Employee fail to meet
expected medical rating for insurance resulting in higher cost, then Employee
will pay for the excess charge above and beyond reasonable expectations. Such
coverage shall be in addition to Life Insurance coverage maintained by Employee
pursuant to Paragraph 4.2 above.
Should the Employee cease to be employed by the corporation, the Employee may
assume the entire cost of the premium. Further, the Employee has assignability
under the policy.
4.7 Liability Coverage. Employee will be covered under liability policies
maintained by the Corporation for Directors and Officers, or if such coverage is
not maintained, Employee will continue to be covered by the Umbrella Liability
Policy coverage in existence at the time of the commencement of this agreement,
to the extent covered in these existing policies.
5. Disclosure of Information.
-------------------------
Employee acknowledges that in and as a result of his employment hereunder,
he will be making use of, acquiring, and/or adding to confidential information
of a special and unique nature and value relating to such matters as Employer's
trade secrets, systems, procedures, manuals, confidential reports, and lists of
clients. As a material inducement to Employer to enter into this Agreement and
to pay to Employee the compensation stated in Paragraph 3' as well as any
additional benefits stated Paragraph 4' Employee covenants and agrees that he
shall not, other than in the ordinary course of business, at any time during or
following the term of his employment, directly or indirectly divulge or disclose
for any purpose whatsoever or appropriate to his own use or to the use of others
any confidential information that has been obtained by, or disclosed to him, as
a result of his employment by Employer, unless required to do so by court order
or other similar circumstances, or unless authorized by the Board of Directors.
6. Termination.
-----------
6.1 Termination By Either Party Without Cause. At any time during the
-----------------------------------------
term hereof, this Employment Agreement may be terminated "without cause" by
either Employer or Employee upon written notice to the other party.
(A) In the event of such termination "without cause" by Employee,
Employer shall have the option either (a) to accept Employee's resignation,
effective immediately on receipt of such notice; or (b) to require Employee to
continue to perform his duties hereunder, for a period not to exceed six (6)
months from the date of receipt of such written notice. In either event, the
Employee' 5 compensation and benefits hereunder shall continue only until the
effective date of termination, as defined in Paragraph 6.4 below.
-4-
<PAGE>
(B) In the event of such termination "without cause" by Employer,
Employee shall be continued on the payroll for twenty-four (24) months, and
shall receive bonuses equal to those received by him during the twenty-four (24)
months prior to termination. Such severance pay shall be paid to him in twenty-
four (24) equal, successive monthly payments, beginning on the first day of the
month immediately following the effective date of termination. Employee shall
also be continued under all group benefit plans for a period of twenty-four (24)
months from the effective date of termination, as defined in paragraph 6.4 (A)
below.
6.2 Termination by Employer for Cause. Notwithstanding any other
---------------------------------
provision hereof, Employer may terminate Employee's employment under this
Agreement at any time for cause. The termination shall be effective by written
notice thereof to the Employee, which shall specify the cause for termination.
For purposes hereof, the term "cause" shall mean the failure of Employee for any
reason, within thirty (30) days after receipt by Employer of written notice from
Employee, to correct, cease, or otherwise alter any action or omission to act
that constitutes a material and willful breach of Agreement likely to result in
material damage to the Corporation, or willful gross misconduct likely to result
in material damage to the Corporation.
Upon such termination for cause by Employer, Employee shall not receive
termination pay or benefits beyond the effective date of termination, as defined
in Paragraph 6.4(B) below.
6.3 Termination by Employee for Cause. Notwithstanding any other
---------------------------------
provision hereof, Employee may resign his employment under this Agreement at any
time for cause. The termination may be by written notice thereof to Employer,
which shall mean the failure of Employer for any reason, within thirty (30) days
after receipt by Employer of written notice from Employee, to correct, cease or
otherwise alter any adverse change in the conditions of Employee's employment
caused by (a) a change in ownership of the corporation; to include but not
exclusively the corporation sells all or a portion of MSE effecting, the
Employee, the corporation ceases to be a public company, or the corporation is
purchased by another public or private company or (b) any other breach of this
Agreement by Employer.
Upon such termination for cause by Employee, Employee shall be continued on
the payroll for twenty-four (24) months from the effective date of termination
(as defined in Paragraph 6.4 (b) below) at his then current salary without
further responsibilities to the Corporation. Employee shall also be continued
under all group benefit plans for a period of twenty-four (24) months from the
effective date of termination.
6.4 Effective Date of Termination.
-----------------------------
(A) The effective date of termination, as used in Paragraph 6.1 with
respect to termination "without cause", shall be the date on which Employee
actually ceases to perform his duties hereunder.
-5-
<PAGE>
(B) The effective date of termination, as used in Paragraph 6.2 and
6.3 with respect to termination "for cause", shall be thirty (30) calendar days
after the date on which Employee receives or gives written notice of
termination.
6.5 Limitation on Severance Compensation. Notwithstanding any other
------------------------------------
provision of the Agreement, solely in the event of a Termination Upon a Change
In Control, the aggregate of the amount of severance compensation paid to the
Employee under the Agreement or otherwise, but exclusive of any payments to the
Employee by virtue of the Employee's exercise of any right or payment of any
kind under any incentive or benefit plan upon a change in control, shall not
include any amount that the Employer is prohibited from deducting for federal
income tax purposes; by virtue of Section 280G of the Internal Revenue Code or
any successor provision.
6.6 Covenant Not to Compete. During any applicable period specified in
-----------------------
Paragraph 6 (and for six months if a termination under Paragraph 6.2 occurs),
the Employee shall not directly or indirectly own, control, operate, manage,
consult, own shares in, be employed by, or otherwise participate in any sole
proprietorship, corporation, partnership or entity whose primary business is the
same or similar to the business of the Corporation.
This covenant of non-competition has been negotiated and agreed to by and
between the Employer and Employee with full knowledge of, and pursuant to the
requirements of applicable law, and is deemed by both parties to be fair and
reasonable under terms of that statue.
7. Other Business Activities.
-------------------------
During the period of his employment under this Agreement, the Employee
shall not be employed by or otherwise engage or be interested in any business
whether or not in competition with the Corporation, or with any of its
subsidiaries or affiliates, with the following exceptions:
(A) Employee's investments in any business shall not be considered a
violation of this paragraph, provided that such business is not in competition
with the Corporation and the Employee does not render controlling management or
other personal services to such business;
(B) Employee may consult with other businesses not in competition with
the Corporation, provided that each such consulting job shall be expressly
considered and approved or disapproved in advance by the audit committee of the
Board of Directors.
8. Indemnification.
---------------
Employer will not amend its articles or bylaws or the articles or bylaws of
MSE in such a manner as to adversely affect any right to indemnification of
Employee that exists as of the date of this Agreement.
9. Burden and Benefit.
------------------
-6-
<PAGE>
This Agreement shall be binding upon, and shall inure to the benefit of,
Employer and employee, and their respective heirs, personal and legal
representatives, successors, and assigns and shall be expressly binding upon and
inure to the benefit of any person or entity assuring the Corporation, by
merger, consolidation, purchase of assets or stock or otherwise.
10. Governing Law.
--------------
It is understood and agreed that the construction and interpretation of
this Agreement shall at all times and in all respects be governed by the laws of
the State of Indiana.
11. Severability.
------------
The provisions of this Agreement, including particularly but not solely,
the provisions of Paragraphs 5 and 6, shall be deemed severable, and the
invalidity or unenforceability of any one of more of the provisions of this
Agreement shall not affect the validity and enforceability of the other
provisions.
12. Notice.
------
Any notice required to be given shall be sufficient if it is in writing and
sent by certified or registered mail, return receipt requested, first-class
postage prepaid, to the residence in the case of Employee, and to its principal
office in the case of Employer.
13. Entire Agreement.
----------------
This Agreement contains the entire agreement and understanding by and
between Employer and Employee with respect to the employment of Employee, and no
representations, promises, agreements, or understandings, written or oral, not
contained herein shall be of any force or effect. No change or modification of
this Agreement shall be valid or binding unless it is in writing and signed by
the party against whom the waiver is sought to be enforced. No valid waiver of
any provision of this Agreement at any time shall be deemed a waiver of any
other provision of this Agreement at such time or at any other time.
14. Counterparts.
------------
The Agreement may be executed in two or more counterparts, any one of
which shall be deemed the original without reference to the others.
-7-
<PAGE>
IN WITNESS WHEREOF, Employer and Employee have duly executed this
Agreement as of the day and year first above written.
EMPLOYER:
ATTEST: ANALYTICAL SURVEYS, INC.
a Colorado corporation
__________________________ by: __________________________________
President
EMPLOYEE:
______________________________________
-8-
<PAGE>
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made effective for all purposes and in all
respects as of the 2nd day of July, 1997, by and between ANALYTICAL SURVEYS,
INC., a Colorado corporation (hereinafter referred to as the "Employer" or the
"Corporation"), and John J. Dillon, III (hereinafter referred to as the
"Employee")
WITNESSETH THAT:
WHEREAS, Employee has been employed by MSE Corporation, an Indiana
corporation (hereinafter referred to as "MSE"); and
WHEREAS, Employer wishes to retain the services of Employee, and Employer
and Employee wish to formalize the terms and conditions of their agreements and
understandings, and to continue the term of Employee's employment hereunder;
NOW, THEREFORE, in consideration of the foregoing of the mutual promises
herein contained, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, intending legally to
be bound, agree as follows:
1. Term of Employment.
------------------
This employment agreement shall supersede all prior employment agreements
written or verbal. The term shall commence on July 2, 1997, and shall continue
until June 30, 1999, unless sooner terminated in accordance with the provisions
of Paragraph 6, and shall be reviewed annually after the initial term referenced
above.
2. Duties of Employee.
-------------------
2.1 It is understood and agreed that Employee's principal duties on
behalf of Employer at the date of execution hereof are and shall be as Chief
Administrative Officer of the Corporation. In accepting employment by Employer,
Employee shall undertake and assume the responsibility of performing for and on
behalf of Employer whatever duties are necessary and required in his position as
Senior Vice President, Chief Administrative Officer. The Employee will report
directly to the Chief Executive Officer. Employer agrees that it will not
relocate Employee from his current employment in Indianapolis, Indiana, without
Employee's prior consent.
2.2 Employee covenants and agrees that at all times during the term of
this Agreement, Employee shall devote his full-time efforts to his duties as an
employee of the Employer. Employee further covenants and agrees that he will
not, directly or indirectly, engage or
<PAGE>
participate in any activities at any time during the term of this Agreement in
conflict with the best interests of Employer.
3. Compensation
------------
3.1 Salary. As compensation for the services to be rendered by Employee
------
for Employer under this Agreement, Employee shall be paid not less than the
following base annual salary, during the term hereof: $125,000, plus annual
increases and bonuses, if any, voted him by the Board of Directors of Employer.
3.2 Bonus. Employee shall be a participant in the Analytical Surveys,
-----
Inc. bonus plans in effect and on substantially the same basis as other
executive officers of the corporation as approved by the Board of Directors;
provided, that required accounting principles shall not negatively impact the
amount of Employee's bonus.
3.3 Salary Review. Employee's salary will be reviewed annually in
-------------
January, commencing January, 1998.
4. Additional Benefits.
-------------------
In addition to, and not in limitation of, the compensation referred to in
Paragraph 3, Employee shall be paid the following additional benefits during
the term hereof:
4.1 Reimbursement. Reimbursement of all reasonable expenses incurred by
-------------
him in connection with performance of his duties shall be made upon submission
of vouchers in accordance with the corporation policies in effect from time to
time. Reasonable expenses shall include, but not limited to all out-of-pocket
expenses for entertainment, travel, meals, lodging, automobile expense,
professional fees, professional dues and the like incurred by him in the
interest of the Employer.
4.2 Participation in Benefit Plans. Employee shall be a participant, to
------------------------------
the extent he meets all eligibility requirements of general application to
senior executives of the Corporation, in any and all plans maintained by the
Corporation to provide benefits for its employees, at least to the extent
specified in the MSE Corporation's Flexible Benefits Workbook, amended November,
1996, a copy of which has been given to Employee. Benefits shall include, but
not limited to, group term life insurance, health care insurance, short-term
disability, long-term disability, 401K plan, and health care and dependent care
expense accounts which allow the use of pre-tax dollars for payment of those
expenses. However, while reasonable Employee contributions may be required and
reasonable increases may be made in deductible amounts, the maximum insurable
benefits under such plans shall at no time be materially less than those in
effect for all other officers of the Corporation.
Changes in the Corporation Benefit Plan may affect the level of participation
by the employee and will be reviewed in accordance with the annual review
specified in Paragraph 1 "Term of
-2-
<PAGE>
Employment." At no time will such benefit participation be less than those in
effect for all other officers of the Corporation.
4.3 Vacations. Employee shall be entitled to vacations of not less than
---------
four (4) weeks per year, in accordance with the Corporation's regular vacation
policies established for senior executives; provided, that Employee may accrue
any unused vacation time from year to year, and upon termination of employment
will be compensated for any unused vacation time. Unused vacation time may be
deferred to the following year up to a maximum of two years accrual. Any
specific vacation of more than two (2) weeks duration shall be approved in
advance by the Chief Executive Officer.
4.4 Other Perquisites. Employee shall be entitled to such additional
-----------------
perquisites as may be customarily granted by the Corporation to senior
executives, as set forth by the Corporation's Employee Handbook. In addition,
Corporation will continue to provide Employee with the use of an automobile of
similar nature to the one currently provided at the commencement of the term of
this Agreement, and Employer will maintain payments of dues and business related
expenses associated Employee's country club membership. Employer will also
reimburse Employee for the purchase of season tickets to Indiana Pacers
basketball games, most of which are used for corporate marketing purposes.
4.5 Disability Payments. In the event of the Employee's disability,
-------------------
Employee's salary in effect at the time of his disability shall continue to be
paid to the Employee, or to his designee, in accordance with existing
Corporation executive benefit plans, or from the date of Employee' termination
by reason of disability. For the purposes of this Employment agreement, the
obligations of the Employer to make the payments upon the disability of Employee
shall not become effective, unless and until all of the following conditions are
met, as determined by an independent physician selected by the Board of
Directors and subject to reasonable consent by Employee: (1) Employee shall
become physically or mentally incapable (excluding infrequent and temporary
absences due to ordinary illnesses) of properly performing the services required
of him in accordance with his obligations under Paragraph 2 hereof or similar
provisions of any renewal agreement; (2) such incapacities shall exist or be
reasonably expected to exist for more than ninety (90) days in the aggregate
during the period of twelve (12) consecutive months; (3) either Employee or
Employer shall have given the other thirty (30) days' written notice of his or
its intention to terminate the active employment of Employee because of such
disability; and, (4) Employee shall have exhausted his Short Term Disability
Benefits pursuant to Paragraph 4.2 above. The benefits payable hereunder shall
be in addition to, and shall not be offset against, any amounts paid to Employee
or his designee by reason of insurance benefits pursuant to Paragraph 4.2 above.
4.6 Life Insurance. At Employee option, Employee shall be provided with a
--------------
life insurance policy in the amount of $150,000 (provided he can meet the
medical conditions for such coverage), payable to such beneficiaries as he shall
designate, with an additional $150,000 of accidental death coverage, with the
cost of such policies borne by Employer. Should the
-3-
<PAGE>
Employee fail to meet medical ratings for insurance resulting in higher cost
then Employee will pay for the excess charge above and beyond reasonable
expectations. Such coverage shall be in addition to Life Insurance coverage
maintained by Employee pursuant to Paragraph 4.2 above.
Should the Employee cease to be employed by the corporation, the Employee may
assume the entire cost of the premium. Further, the Employee has assignability
under the policy.
5. Disclosure of Information.
-------------------------
Employee acknowledges that in and as a result of his employment hereunder,
he will be making use of, acquiring, and/or adding to confidential information
of a special and unique nature and value relating to such matters as Employer's
trade secrets, systems, procedures, manuals, confidential reports, and lists of
clients. As a material inducement to Employer to enter into this Agreement and
to pay to Employee the compensation stated in Paragraph 3, as well as any
additional benefits stated Paragraph 4, Employee covenants and agrees that he
shall not, other than in the ordinary course of business, at any time during or
following the term of his employment, directly or indirectly divulge or disclose
for any purpose whatsoever or appropriate to his own use or to the use of others
any confidential information that has been obtained by, or disclosed to him, as
a result of his employment by Employer, unless required to do so by court order
or other similar circumstances, or unless authorized by the Board of Directors.
6. Termination.
-----------
6.1 Termination by Either Party Without Cause. At any time during the
-----------------------------------------
term hereof, this Employment Agreement may be terminated "without cause" by
either Employer or Employee upon written notice to the other party.
(A) In the event of such termination "without cause" by Employee,
Employer shall have the option either (a) to accept Employee's resignation,
effective immediately on receipt of such notice; or (b) to require Employee to
continue to perform his duties hereunder, for a period not to exceed six (6)
months from the date of receipt of such written notice. In either event, the
Employee' 5 compensation and benefits hereunder shall continue only until the
effective date of termination, as defined in Paragraph 6.4 below.
(B) In the event of such termination "without cause" by Employer,
Employee shall be continued on the payroll for twenty-four (24) months, and
shall receive bonuses equal to those received by him during the twenty-four (24)
months prior to termination. Such severance pay shall be paid to him in twenty-
four (24) equal, successive monthly payments, beginning on the first day of the
month immediately following the effective date of termination. Employee shall
also be continued under all group benefit plans for a period of twenty-four (24)
months from the effective date of termination, as defined in paragraph 6.4 (A)
below.
6.2 Termination by Employer for Cause. Notwithstanding any other provision
---------------------------------
hereof, Employer may terminate Employee's employment under this Agreement at any
time for cause.
-4-
<PAGE>
The termination shall be effective by written notice thereof to the Employee,
which shall specify the cause for termination. For purposes hereof, the term
"cause" shall mean the failure of Employee for any reason, within thirty (30)
days after receipt by Employer of written notice from Employee, to correct,
cease, or otherwise alter any action or omission to act that constitutes a
material and willful breach of Agreement likely to result in material damage to
the Corporation, or willful gross misconduct likely to result in material damage
to the Corporation.
Upon such termination for cause by Employer, Employee shall not receive
termination pay or benefits beyond the effective date of termination, as defined
in Paragraph 6.4(B) below.
6.3 Termination by Employee for Cause. Notwithstanding any other
---------------------------------
provision hereof, Employee may resign his employment under this Agreement at any
time for cause. The termination may be by written notice thereof to Employer,
which shall mean the failure of Employer for any reason, within thirty (30) days
after receipt by Employer of written notice from Employee, to correct, cease or
otherwise alter any adverse change in the conditions of Employee's employment
caused by (a) a change in ownership of the corporation; to include but not
exclusively the corporation sells all or a portion of MSE effecting the
Employee, the corporation ceases to be a public company, or the corporation is
purchased by another public or private company, or (b) any other breach of this
Agreement by Employer.
Upon such termination for cause by Employee, Employee shall be continued on
the payroll for twenty-four (24) months from the effective date of termination
(as defined in Paragraph 6.4 (b) below) at his then current salary without
further responsibilities to the Corporation. Employee shall also be continued
under all group benefit plans for a period of twenty-four (24) months from the
effective date of termination.
6.4 Effective Date of Termination.
-----------------------------
(A) The effective date of termination, as used in Paragraph 6.1 with
respect to termination "without cause", shall be the date on which Employee
actually ceases to perform his duties hereunder.
(B) The effective date of termination, as used in Paragraph 6.2 and
6.3 with respect to termination "for cause", shall be thirty (30) calendar days
after the date on which Employee receives or gives written notice of
termination.
6.5 Limitation on Severance Compensation. Notwithstanding any other
------------------------------------
provision of the Agreement, solely in the event of a Termination Upon a Change
In Control, the aggregate of the amount of severance compensation paid to the
Employee under the Agreement or otherwise, but exclusive of any payments to the
Employee by virtue of the Employee's exercise of any right or payment of any
kind under any incentive or benefit plan upon a change in control, shall not
include any amount that the Employer is prohibited from deducting for federal
income tax purposes; by virtue of Section 280G of the Internal Revenue Code or
any successor provision.
-5-
<PAGE>
6.6 Covenant Not to Compete. During any applicable period specified in
-----------------------
Paragraph 6 (and for six months if a termination under Paragraph 6.2 occurs),
the Employee shall not directly or indirectly own, control, operate, manage,
consult, own shares in, be employed by, or otherwise participate in any sole
proprietorship, corporation, partnership or entity whose primary business is the
same or similar to the business of the Corporation.
This covenant of non-competition has been negotiated and agreed to by and
between the Employer and Employee with full knowledge of, and pursuant to the
requirements of applicable law, and is deemed by both parties to be fair and
reasonable under terms of that statue.
7. Other Business Activities.
-------------------------
During the period of his employment under this Agreement, the Employee
shall not be employed by or otherwise engage or be interested in any business
whether or not in competition with the Corporation, or with any of its
subsidiaries or affiliates, with the following exceptions:
(A) Employee's investments in any business shall not be considered a
violation of this paragraph, provided that such business is not in competition
with the Corporation and the Employee does not render controlling management or
other personal services to such business;
(B) Employee may consult with other businesses not in competition with the
Corporation, provided that each such consulting job shall be expressly
considered and approved or disapproved in advance by the audit committee of the
Board of Directors.
8. Indemnification.
---------------
Employer will not amend its articles or bylaws or the articles or bylaws of
MSE in such a manner as to adversely affect any right to indemnification of
Employee that exists as of the date of this Agreement.
9. Burden and Benefit.
------------------
This Agreement shall be binding upon, and shall inure to the benefit of,
Employer and employee, and their respective heirs, personal and legal
representatives, successors, and assigns and shall be expressly binding upon and
inure to the benefit of any person or entity assuring the Corporation, by
merger, consolidation, purchase of assets or stock or otherwise.
10. Governing Law.
-------------
It is understood and agreed that the construction and interpretation of
this Agreement shall at all times and in all respects be governed by the laws of
the State of Indiana.
11. Severability.
------------
-6-
<PAGE>
The provisions of this Agreement, including particularly but not solely,
the provisions of Paragraphs 5 and 6, shall be deemed severable, and the
invalidity or unenforceability of any one of more of the provisions of this
Agreement shall not affect the validity and enforceability of the other
provisions.
12. Notice. Any notice required to be given shall be sufficient if it is in
------
writing and sent by certified or registered mail, return receipt requested,
first-class postage prepaid, to the residence in the case of Employee, and to
its principal office in the case of Employer.
13. Entire Agreement.
----------------
This Agreement contains the entire agreement and understanding by and
between Employer and Employee with respect to the employment of Employee, and no
representations, promises, agreements, or understandings, written or oral, not
contained herein shall be of any force or effect. No change or modification of
this Agreement shall be valid or binding unless it is in writing and signed by
the party against whom the waiver is sought to be enforced. No valid waiver of
any provision of this Agreement at any time shall be deemed a waiver of any
other provision of this Agreement at such time or at any other time.
14. Counterparts. The Agreement may be executed in two or more counterparts,
------------
any one of which shall be deemed the original without reference to the others.
IN WITNESS WHEREOF, Employer and Employee have duly executed this
Agreement as of the day and year first above written.
EMPLOYER
ATTEST: ANALYTICAL SURVEYS, INC.
a Colorado corporation
_____________________________ by: ____________________________
President
EMPLOYEE:
________________________________
-7-
<PAGE>
EXHIBIT 10.15
AGREEMENT
THIS AGREEMENT is signed as of the 27th day of June 1997, by and between
ANALYTICAL SURVEYS, INC., a Colorado corporation (hereinafter referred to as
"ASI"), and John A. Thorpe (hereinafter referred to as "Thorpe").
WITNESSETH THAT:
WHEREAS, Thorpe has been employed by ASI as a full-time employee, and as
Chief Technical Officer of ASI; and
WHEREAS, Thorpe's full-time employment will be terminated on May 31, 1997,
by reason of Thorpe's desire to semi-retire; and
WHEREAS, ASI wants to hire Thorpe on a part-time basis, and ASI and Thorpe
desire to state in writing the terms and conditions of their agreements and
understandings, and to continue the term of Thorpe's employment on a part-time
basis hereunder;
NOW, THEREFORE, in consideration of the foregoing, of the mutual promises
herein contained, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, intending legally to
be bound, agree as follows:
1. Term of Employment.
------------------
The term shall commence on June 1, 1997, and shall continue through
September 30, 1999, unless sooner terminated in accordance with the provisions
of Paragraph 4.2 below.
2. Duties.
------
2.1 It is understood and agreed that Thorpe's principal duties on behalf
of ASI are and shall be as technological consultant and member of the Board of
Directors, or such additional responsibilities as may be mutually agreed by
Thorpe and the Chief Executive Officer ("CEO") of ASI.
2.2 Thorpe covenants and agrees that at all times during the term of this
Agreement, he shall devote his best efforts to his duties as an employee of ASI;
provided that he shall not be required to work on any set schedule or for any
set number of hours.
3. Compensation.
------------
As compensation for the services to be rendered by Thorpe for ASI under
this Agreement, including services as a director of ASI, Thorpe shall be paid
$38,250 annual salary, on the same basis (biweekly) as ASI's payroll, during the
term hereof.
4. Additional Benefits.
-------------------
<PAGE>
In addition to, and not in limitation of, the compensation referred to in
Paragraph 3, Thorpe shall be paid the following additional benefits during the
term hereof:
4.1 Reimbursement. Reimbursement of all reasonable expenses incurred by
--------------
Thorpe in connection with performance of his duties, upon submission of
vouchers. Reasonable expenses shall include, but not limited to all reasonable
out of pocket expenses for entertainment, automobile expenses, travel, meals,
lodging, professional dues and the like incurred by Thorpe in the interest of
ASI, subject to such guidelines and policies as may be promulgated by ASI for
senior executives.
4.2 Death or Disability Payments. In the event of Thorpe's disability or
----------------------------
death, prior to September 30, 1999, Thorpe's salary in effect at the time of his
death or disability shall continue to be paid to Thorpe, or to his designee, for
a period of six (6) calendar months from the date of death or from the date of
his termination by reason of disability. For the purposes of this Agreement, the
obligations of ASI to make the payments upon the disability of Thorpe shall not
become effective unless and until all of the following conditions are met, as
determined by an independent physician selected by the CEO of ASI and agreed to
by Thorpe: (1) Thorpe shall become physically or mentally incapable (excluding
infrequent and temporary absences due to ordinary illness) of properly
performing the services required of him in accordance with his obligations under
paragraph 2 hereof or similar provisions of any renewal agreement; (2) such
incapacities shall exist or be reasonably expected to exist for more than ninety
(90) days in the aggregate during the period of twelve (12) consecutive months;
and (3) either Thorpe or ASI shall have given the other thirty (30) days'
written notice of his or its intention to terminate the active employment of
Thorpe because of such disability.
4.3 Life Insurance. Thorpe shall continue to be provided with the
--------------
existing $500,000 split-dollar insurance policy (the "Policy") during the term
of this Agreement. At the termination of this Agreement, Thorpe shall have the
right, at his option, to take over full payments on the Policy, and ownership of
the Policy.
4.4 Comparable Benefits. Thorpe shall also be provided with the same
-------------------
additional benefits comparable to other senior management Employees of ASI,
including but not limited to health, dental, and disability insurance, Section
401(K) plan, and stock options, but shall not be included in the ASI bonus
incentive plan, or receive any holiday, sick leave, or vacation benefits. Thorpe
shall be eligible for Stock Options on the same basis as other directors of ASI.
5. Disclosure of Information.
-------------------------
Thorpe acknowledges that in and as a result of his employment hereunder, he
will be making use of, acquiring, and/or adding to confidential information of a
special and unique nature and value relating to such matters as ASI's trade
secrets, systems, procedures, manuals, confidential reports, and lists of
clients. As a material inducement to ASI to enter into this Agreement and to
pay to Thorpe the compensation stated in Paragraph 3, as well as any additional
benefits stated in Paragraph 4, Thorpe convenants and agrees that he shall not,
other than in the ordinary course of business conducted for ASI, at any time
during or following the term of his employment, directly or indirectly divulge
or disclose for any purpose whatsoever or appropriate to his own use or the use
of others any confidential information that has been obtained by, or disclosed
to him, as a result of his employment by ASI.
<PAGE>
6. Covenant Not To Compete.
-----------------------
Thorpe agrees that he shall not directly or indirectly own, control,
operate, manage, consult, own shares in, be employed by, or otherwise
participate in any sole proprietorship, corporation, partnership or entity whose
primary business is the same or similar to the business of ASI during the term
of his employment hereunder, nor for a period of ten (10) years after his
termination of employment, anywhere within the territory in which ASI does
business; provided, that the Chief Executive Officer or the Board of Directors
shall have the right (but not be required) to waive this covenant not to compete
in writing, with respect to any specific situation presented to them in advance,
in writing by Thorpe, where the CEO or the Board, at their sole and absolute
discretion, deem Thorpe's intended participation not to be adverse to ASI's
interests.
The parties hereto recognize that Thorpe has been retained as a member of
the senior executive management of ASI, and that in said position he is
considered to be part of the professional, management and executive staff of the
Corporation.
In the event Thorpe violates this covenant of non-competition, both parties
acknowledge and agree that ASI shall have the right to bring a lawsuit to
enforce this covenant against Thorpe, and to obtain equitable relief in the form
of an injunction and, where applicable, damages at law; that the District Court
for El Paso County, Colorado shall have venue, and exclusive jurisdiction in
such lawsuit; and that Colorado law shall apply.
In the event ASI must bring such a lawsuit by reason of Thorpe's breach of
this covenant of non-competition, ASI shall be entitled to recover its
reasonable attorneys fees, costs, and expenses of litigation, in the event it
prevails in such lawsuit.
This covenant of non-competition has been negotiated and agreed to by and
between ASI and Thorpe with full knowledge of, and pursuant to the requirements
of Section 8-2-113 (2) Colorado Revised Statutes, as amended from time to time,
and is deemed by both parties to be fair and reasonable under the terms of that
statute.
7. Option to Extend.
----------------
At Thorpe's option, upon thirty (30) days prior written notice to ASI, the
term of this Agreement will be extended for a period of one (1) additional year,
from September 30, 1999 through September 30, 2000, on the same terms and
conditions as contained herein.
8. Indemnification.
---------------
So long as Thorpe is not found by a court of law to be guilty of a willful
and material breach of this Agreement, or to be guilty of willful gross
misconduct, he shall be indemnified from and against any and all losses,
liability, claims and expenses, damages, or causes of action, proceedings or
investigations, or threats thereof (including reasonable attorney fees and
expenses of counsel satisfactory to and approved by Thorpe) incurred by Thorpe,
arising out of, in connection with, or based upon Thorpe's services and the
performance of his duties pursuant to this Agreement, or any other matter
contemplated by this Agreement, whether or not resulting in any such liability;
and Thorpe shall be reimbursed by ASI as and when incurred for any reasonable
legal or other expenses incurred by Thorpe in connection with investigating or
<PAGE>
defending against any such loss, claim, damage, liability, action, proceeding,
investigation or threat thereof, or producing evidence, producing documents or
taking any other action in respect thereto (whether or not Thorpe is a defendant
in or target of such action, proceeding or investigation).
9. Governing Law.
-------------
It is understood and agreed that the construction and interpretation of
this Agreement shall at all times and in all respects be governed by the laws of
the State of Colorado.
10. Severability.
------------
The provisions of this Agreement shall be deemed severable, and the
invalidity or unenforceability of any one or more of the provisions of this
Agreement shall not affect the validity and enforceability of the other
provisions.
11. Notice.
------
Any notice required to be given shall be sufficient if it is in writing and
sent by certified or registered mail, return receipt requested, first-class
postage prepaid, to his residence in the case of Thorpe, and to its principal
office in the case of ASI.
12. Entire Agreement; Cancellation of Prior Agreements.
--------------------------------------------------
12.1 This Agreement contains the entire agreement and understanding by
and between ASI and Thorpe with respect to the employment of Thorpe, and no
representations, promises, agreements, or understandings, written or oral, not
contained herein shall be of any force or effect. No change or modification of
this Agreement shall be valid or binding unless it is in writing and signed by
the party intended to be bound.
12.2 This Agreement replaces in its entirety Thorpe's prior Employment
Agreement with ASI; provided, however, that the Deferred Compensation which has
accrued to date under his previous Employment Agreement (s), in the amount of
$85,000.00, will be paid to Thorpe as follows:
Paid during regular payroll periods (bi-weekly), in equal amounts of
$1,089.74 over a three year period.
12.3 As of June 1, 1997, the existing Stock Redemption Agreement, between
ASI and Thorpe, will be canceled and terminated together with the life insurance
policy on Thorpe's life pursuant to the Stock Redemption Agreement, and ASI may
thereupon, at its option, cancel the "key man" insurance on Thorpe's life.
12.4 No waiver of any provision of this Agreement shall be valid unless it
is in writing and signed by the party against whom the waiver is sought to be
enforced. No valid waiver of any provision of this Agreement at any time shall
be deemed a waiver of any other provision of this Agreement at such time or at
any other time.
<PAGE>
13. Burden and Benefit.
------------------
This Agreement (together with Thorpe's stock options pursuant to ASI's
stock option plans) shall be binding upon, and shall inure to the benefit of,
ASI and Thorpe, and their respective heirs, personal and legal representatives,
successors, and assigns and shall be expressly binding upon and inure to the
benefit of any person or entity acquiring ASI, by merger, consolidation,
purchase of assets or stock, or otherwise.
The duties of Thorpe hereunder are not assignable by Thorpe without the
prior written consent of ASI, and the interests of Thorpe hereunder are not
subject to the claims of his creditors, and may not be voluntarily or
involuntarily assigned, alienated or encumbered.
14. Termination.
-----------
14.1 By Thorpe. In the event ASI is acquired by a third party, Thorpe may
---------
at his sole option, terminate this Agreement, upon thirty (30) days written
notice to ASI. Upon such termination by Thorpe, ASI shall have no further
liabilities or obligations to Thorpe hereunder; except under Section 8
(Indemnification), and 12.2 (Deferred Compensation), and Thorpe's only further
liabilities to ASI shall be his covenants under Section 5 (Disclosure of
Information), and Section 6 (Covenant not to Compete), which Sections shall
survive termination of this Agreement.
14.2 By ASI. ASI may terminate Thorpe's employment hereunder only (1) in
-------
the event of Thorpe's death or disability, subject to the provisions of Section
4.2 above; or (b) "for cause," which shall be defined as "the failure of Thorpe
for any reason, within thirty (30) days after receipt by Thorpe of written
notice thereof from ASI, to correct, cease, or otherwise alter any action or
omission to act that constitutes a material and willful breach of this Agreement
likely to result in material damage to the ASI, or willful gross misconduct
likely to result in material damage to the ASI." Upon such termination "for
cause" under Section 14.2(b), ASI shall have no further liabilities to Thorpe,
except under Section 8 (Indemnification), and 12.2 (Deferred Compensation), and
Thorpe's only further liabilities to ASI shall be his covenants under Section 5
(Disclosure of Information), and Section 6 (Covenant not to Compete), which
Sections shall survive termination of this Agreement.
15. Counterparts.
------------
The Agreement may be executed in two or more counterparts, any one of which
shall be deemed the original without reference to the others.
IN WITNESS WHEREOF, ASI and Thorpe have duly executed this Agreement as of
the day and year first above written.
ASI:
ATTEST: ANALYTICAL SURVEYS, INC.,
a Colorado corporation
<PAGE>
/s/ Scott C. Benger
____________________________
Secretary By: /s/ Sidney V. Corde
________________________________
CEO
THORPE:
/s/ John A. Thorpe
_____________________________________
JOHN A. THORPE
<PAGE>
EXHIBIT 10.16
-------------
ANALYTICAL SURVEYS, INC.
1997 INCENTIVE STOCK OPTION PLAN
SECTION 1
INTRODUCTION
1.1 Establishment. Analytical Surveys, Inc. a Colorado corporation,
hereby establishes the Analytical Surveys, Inc. 1997 Incentive Stock Option Plan
(the "Plan") for certain key employees of Analytical Surveys, Inc. and its
Affiliated Corporations (collectively, the "Company").
1.2 Purposes. The purposes of the Plan are to provide certain key
management employees with added incentives to continue in the service of the
Company and to create in such employees a more direct interest in the future
success of the operations of the Company by relating incentive compensation to
increases in stockholder value, so that the income of the key management
employees is more closely aligned with the income of the Company's stockholders.
SECTION 2
DEFINITIONS
2.1 Definitions. The following terms shall have the meanings set forth
below:
(a) "Affiliated Corporation" means any corporation or other entity
(including, but not limited to, a partnership) which is affiliated with the
Issuer through stock ownership or otherwise and is treated as a common employer
under the provisions of Code Sections 414(b) and (c).
(b) "Approved Transaction" means any transaction in which the Board
(or, if approval of the Board is not required as a matter of law, the
stockholders of the Issuer) shall approve (i) any consolidation or merger of the
Issuer, or binding share exchange, pursuant to which shares of Stock would be
changed or converted into or exchanged for cash, securities or other property,
other than any such transaction in which the holders of the Stock immediately
prior to such transaction have the same proportionate ownership of the common
stock of, and voting power with respect to, the surviving corporation
immediately after such transaction, (ii) any merger, consolidation or binding
share exchange to which the Issuer is a party as a result of which the persons
who are holders of the Stock immediately prior thereto have less than a majority
of the combined voting power of the outstanding capital stock of the Issuer
ordinarily (and apart from the rights accruing under special circumstances)
having the right to vote in the election of directors immediately following such
merger, consolidation or binding share exchange, (iii) the adoption of any plan
or proposal for the liquidation or dissolution of the Issuer, or (iv) any sale,
lease, exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Issuer, but not
a pledge of assets in the context of a bona fide loan.
(c) "Board" means the Board of Directors of the Issuer.
(d) "Code" means the Internal Revenue Code of 1986, as it may be
amended from time to time.
<PAGE>
(e) "Disabled" or "Disability" means a disability for which the Option
Holder is entitled to disability payments under the Option Holder's Employment
Agreement. For purposes of this Plan, such Disability will be deemed to have
commenced on the first date on which the Option Holder is absent from work with
the Company due to such Disability.
(f) "Effective Date" means the effective date of the Plan, which will
July 2, 1997.
(g) "Eligible Employees" means Scott Benger, David Coates, Sidney
Corder, John J. Dillon III, William M. Howell, Steve Jenkins, Mark Klimiuk,
David Lewis, Jeffrey A. Meyerrose, Robert J. Montgomery, William Nantell and
Randal J. Sage. No other employee of the Company will be considered an Eligible
Employee for purposes of this Plan.
(h) "Employment Agreement" means the employment contract or
employment agreement between the Eligible Employee and the Company, as it may be
amended and in effect at the time such contract or agreement is subject to
reference under this Plan. If no such contract or agreement is in effect at the
time of reference under this Plan, "Employment Agreement" will mean the
Employment Agreement most recently in effect prior to the time of reference
under this Plan.
(i) "Fair Market Value" means the officially quoted closing price of
the Stock on the NASDAQ National Market System on a particular date. If there
are no Stock transactions on such date, the Fair Market Value shall be
determined as of the immediately preceding date on which there were Stock
transactions. If no such prices are reported on the NASDAQ National Market
System, then Fair Market Value shall mean the average of the high and low sale
prices for the Stock (or if no sales prices are reported, the average of the
high and low bid prices) as reported by the principal regional stock exchange,
or if not so reported, as reported by NASDAQ or a quotation system of general
circulation to brokers and dealers. If the Stock is not publicly traded, the
Fair Market Value of the Stock on any date shall be determined in good faith by
the Incentive Plan Committee after such consultation with outside legal,
accounting and other experts as the Incentive Plan Committee may deem advisable.
(j) "Incentive Plan Committee" means a committee consisting of all of
the members of the Board.
(k) "Issuer" means Analytical Surveys, Inc.
(l) "Option" means a right to purchase Stock at a stated price for a
specified period of time. All Options granted under this Plan well be non-
statutory stock options which are not intended to qualify as incentive stock
options under Code Section 422.
(m) "Option Price" means the price at which shares of Stock subject to
an Option may be purchased, determined in accordance with section 6.2(b).
(n) "Option Holder" means each Eligible Employee who is granted
Options under the Plan.
(o) "Plan Year" means each 12-month period beginning January 1 and
ending the following December 31, except that for the first year of the Plan the
Plan Year shall begin on the Effective Date and extend to the first December 31
following the Effective Date.
-2-
<PAGE>
(p) "Share" or "Shares" means a share or shares of Stock.
(q) "Stock" means the common stock of the Issuer.
2.2 Gender and Number. Except where otherwise indicated by the context,
the masculine gender also shall include the feminine gender, and the definition
of any term herein in the singular also shall include the plural.
SECTION 3
PLAN ADMINISTRATION
The Plan shall be administered by the Incentive Plan Committee. In
accordance with the provisions of the Plan, the Incentive Plan Committee may
from time to time adopt such rules and regulations for carrying out the purposes
of the Plan as it may deem proper and in the best interests of the Company. The
Incentive Plan Committee may correct any defect, supply any omission or
reconcile any inconsistency in the Plan or in any agreement entered into
hereunder in the manner and to the extent it shall deem expedient and it shall
be the sole and final judge of such expediency. No member of the Incentive Plan
Committee shall be liable for any action or determination made in good faith,
and all members of the Committee shall, in addition to their rights as
directors, be fully protected by the Company with respect to any such action,
determination or interpretation. The determinations, interpretations, and other
actions of the Incentive Plan Committee pursuant to the provisions of the Plan
shall be binding and conclusive for all purposes and on all persons.
SECTION 4
ADJUSTMENTS TO STOCK SUBJECT TO THE PLAN
4.1 Adjustments for Stock Split, Stock Dividend, Etc. If the Company
shall at any time increase or decrease the number of its outstanding Shares of
Stock, or change in any way the rights and privileges of such Shares by means of
the payment of a stock dividend or any other distribution upon such Shares
payable in Stock, or through a stock split, subdivision, consolidation,
combination, reclassification or recapitalization involving the Stock, then in
relation to the Stock that is affected by one or more of the above events, the
numbers, rights and privileges of the following shall be increased, decreased or
changed in like manner as if such Shares had been issued and outstanding, fully
paid and nonassessable at the time of such occurrence: (i) the shares of Stock
as to which Options may be granted under the Plan; and (ii) the Shares of Stock
then included in each outstanding Option granted hereunder.
4.2 General Adjustment Rules. If any adjustment or substitution provided
for in this Section 4 shall result in the creation of a fractional Share under
any Option, the Company shall, in lieu of issuing such fractional Share, pay to
the Option Holder a cash sum in an amount equal to the product of such fraction
multiplied by the Fair Market Value of a Share on the date the fractional Share
otherwise would have been issued.
4.3 Determination by Incentive Plan Committee, Etc. Adjustments under
this Section 4 shall be made by the Incentive Plan Committee, whose
determinations with regard thereto shall be final and binding upon all parties.
-3-
<PAGE>
SECTION 5
STOCK OPTIONS
5.1 Grant of Options. The Eligible Employees hereby are granted Options
as follows:
Jeff Armstrong 10,000 Shares
Scott Benger 20,000 Shares
David Coates 10,000 Shares
Sidney Corder 20,000 Shares
John J. Dillon III 21,750 Shares
William M. Howell 40,730 Shares
Steve Jenkins 10,000 Shares
Mark Klimiuk 10,000 Shares
David Lewis 10,000 Shares
Jeffrey A. Meyerrose 35,480 Shares
Robert J. Montgomery 57,730 Shares
William Nantell 10,000 Shares
Randal J. Sage 89,310 Shares
5.2 Provisions Applicable to Options. Each Option granted under the Plan
shall be subject to all of the terms and conditions of this Plan, including the
following:
(a) Price. The price at which each Share covered by an Option may be
purchased shall be $13.75 per Share.
(b) Date of Grant. Each Option shall be considered as having been
granted on July 2, 1997 (the "Grant Date").
(c) Duration of Options. Each Option must be exercised within ten
(10) years from the Grant Date (the "Option Period").
(d) Vesting of Options. Subject to the exercise and termination
provisions set forth in Section 5.2(e) below, the Options will vest in
accordance with the following schedule:
Vesting Date Percentage of Original Options Vested
------------ -------------------------------------
Six months from Grant Date 25%
One year from Grant Date 50%
Two years from Grant Date 75%
Three years from Grant Date 100%
(e) Exercise and Termination of Options. Notwithstanding any other
provision of this Plan, an Option will be subject to the exercise and
termination provisions set forth below:
(i) Option Holder's Voluntary Termination of Employment. If the
employment of the Option Holder is terminated voluntarily by the Option Holder
within the Option Period for any reason (other than for cause, as determined
under the Option Holder's Employment Agreement), all Options held by the Option
Holder, whether or not vested, thereafter shall be terminated and shall be void
for all purposes.
(ii) Option Holder's Termination of Own Employment For Cause. If the
employment of the Option Holder is terminated by the Option Holder within the
Option Period for cause, as determined under the Option Holder's Employment
Agreement, all Options held by the Option Holder shall become immediately 100%
vested as of such termination of employment, and the Options shall be
exercisable for a period of ninety (90) days after such termination of
employment. Upon the expiration of the 90-day exercise period, all unexercised
Options held by the Option Holder thereafter shall be terminated and shall be
void for all purposes.
-4-
<PAGE>
(iii) Option Holder's Death. If the Option Holder dies while
employed by the Company (or if the Option Holder dies after termination of
employment but during any exercise period set forth in paragraphs (ii), (iv),
(v), (vi), or (vii)), and such death occurs within the Option Period, all
unvested Options held by the Option Holder at his death thereafter shall be
terminated and shall be void for all purposes. All Options vested as of the
Option Holder's death may be exercised by the person so entitled to exercise
such Option for a period of 180 days after such death. Upon the expiration of
the 180-day exercise period, all unexercised Options thereafter shall be
terminated and shall be void for all purposes.
(iv) Option Holder's Disability. If the Option Holder becomes
Disabled while employed by the Company and within the Option Period, all
unvested Options held by the Option Holder at his Disability will continue to
vest in accordance with paragraph (i) for a period of 36 months from the date of
such Disability; provided that the Option Holder survives for the 36-month
Disability vesting period. All Options vested as of the Option Holder's
Disability, and all Options which become vested during the 36-month period
following such Disability, may be exercised by the Option Holder during the 36-
month period following the Disability. Upon the expiration of the 36-month
exercise period, all unexercised Options thereafter shall be terminated and
shall be void for all purposes.
(v) Option Holder's Retirement After Age 65. If the Option Holder
retires after attaining age 65 while employed by the Company and within the
Option Period, all unvested Options held by the Option Holder at his retirement
will continue to vest in accordance with Section 5.2(d) for a period of 36
months from the date of such retirement; provided that the Option Holder
survives for the 36-month retirement vesting period. All Options vested as of
the Option Holder's retirement, and all Options which become vested during the
36-month period following such retirement, may be exercised by the Option Holder
during the 36-month period following the retirement. Upon the expiration of the
36-month exercise period, all unexercised Options thereafter shall be terminated
and shall be void for all purposes.
(vi) Termination of Option Holder's Employment by Company Without
Cause. If the Company terminates the employment of the Option Holder within the
Option Period for any reason other than for cause (as determined under the
Option Holder's Employment Agreement), all unvested Options held by the Option
Holder at the date of such termination of employment shall become immediately
100% vested as of such termination of employment, and the Options shall be
exercisable for a period of ninety (90) days after such termination of
employment. Upon the expiration of the 90-day exercise period, all unexercised
Options held by the Option Holder thereafter shall be terminated and shall be
void for all purposes.
(vii) Termination of Option Holder's Employment by Company For Cause.
If the Company terminates the employment of the Option Holder within the Option
Period for cause, as determined under the Option Holder's Employment Agreement,
all unvested Options thereafter shall be terminated and shall be void for all
purposes. All Options vested as of the Option Holder's termination of
employment may be exercised by the Option Holder for a period of 15 days after
such termination of employment. Upon the expiration of the 15-day exercise
period, all unexercised Options thereafter shall be terminated and shall be void
for all purposes.
(viii) Vesting and Exercise Upon Occurrence of Approved Transaction.
In the event of an Approved Transaction, then all outstanding Options shall
become 100% vested at the date determined by the Incentive Plan Committee, which
date shall be at least thirty (30) days prior to the occurrence of the Approved
Transaction. Such vested Options shall be exercisable for a period of thirty
(30) days after such vesting date. Upon the expiration of the 30-day exercise
period, all unexercised Options held by the
-5-
<PAGE>
Option Holder thereafter shall be terminated and shall be void for all purposes.
Notwithstanding the above, if any agreement or plan relating to the Approved
Transaction provides for the assumption, exchange, or conversion of the Options
for options for securities in the surviving corporation, all Options outstanding
under this Plan shall be subject to such assumption, exchange, or conversion,
and no accelerated vesting or exercisability shall apply to such Options.
(f) Manner of Exercise of Option.
(i) An Option may be exercised by delivery to the Corporate
Secretary of the Company of written notice specifying the particular Option (or
portion thereof) which is being exercised, the number of Shares with respect to
which such Option is exercised and including payment of the Option Price. Such
notice shall be in a form satisfactory to the Incentive Plan Committee. The
exercise of the Option shall be deemed effective upon receipt of such notice by
the Corporate Secretary and payment to the Company of the Option Price. The
purchase of such Stock shall take place at the principal offices of the Company
upon delivery of such notice, at which time the purchase price of the Stock
shall be paid in full by any of the methods or any combination of the methods
set forth in (ii) below. A properly executed certificate or certificates
representing the Stock shall be issued by the Company and delivered to the
Option Holder.
(ii) The exercise price shall be paid by any of the following
methods or any combination of the following methods:
(A) in cash;
(B) by cashier's check payable to the order of the Company;
(C) by delivery to the Company of certificates representing
the number of Shares then owned by the Option Holder, the Fair Market Value of
which equals the purchase price of the Stock purchased pursuant to the Option,
properly endorsed for transfer to the Company. The Fair Market Value of any
Shares delivered in payment of the purchase price upon exercise of the Option
shall be the Fair Market Value as of the exercise date and the exercise date
shall be the day of the delivery of the certificates for the Stock used as
payment of the Option Price; or
(D) by delivery to the Company of a properly executed notice
of exercise together with irrevocable instructions to a broker to deliver to the
Company promptly the amount of the proceeds of the sale of all or a portion of
the Stock or of a loan from the broker to the Option Holder necessary to pay the
exercise price.
5.3 Stockholder Privileges. Prior to the exercise of the Option and the
transfer of Shares to the Option Holder, an Option Holder shall have no rights
as a stockholder with respect to any Shares subject to any Option granted to
such person under this Plan, and until the Option Holder becomes the holder of
record of such Stock, no adjustments shall be made for dividends or other
distributions or other rights as to which there is a record date preceding the
date such Option Holder becomes the holder of record of such Stock, except as
provided in Section 4.
-6-
<PAGE>
SECTION 6
GENERAL PROVISIONS
6.1 Employment. Nothing contained in the Plan or in any Option shall
confer upon any Eligible Employee any right with respect to the continuation of
his or her employment by the Company, or interfere in any way with the right of
the Company, subject to the terms of any separate employment agreement to the
contrary, at any time to terminate such employment or to increase or decrease
the compensation of such Employee from the rate in existence at the time of the
grant of an Option. Whether an authorized leave of absence, or absence in
military or government service, shall constitute a termination of employment
shall be determined by the Incentive Plan Committee at the time.
6.2 Nontransferability. No right or interest of any Option Holder in an
Option granted pursuant to the Plan shall be assignable or transferable during
the lifetime of the Option Holder, either voluntarily or involuntarily, or be
subjected to any lien, directly or indirectly, by operation of law, or
otherwise, including execution, levy, garnishment, attachment, pledge or
bankruptcy. In the event or an Option Holder's death, an Option Holder's rights
and interests in Options shall, to the extent provided in Section 5 be
transferable by testamentary will or the laws of decent and distribution. In
the opinion of the Incentive Plan Committee, if an Option Holder is disabled
from caring for his affairs because of mental condition, physical condition or
age, such Option Holder's Options shall be exercised by such person's guardian,
conservator or other legal personal representative upon furnishing the Incentive
Plan Committee with evidence satisfactory to the Incentive Plan Committee of
such status.
6.3 Compliance with Securities Laws. Each Option shall be subject to the
requirement that, if at any time counsel to the Company shall determine that the
listing, registration or qualification of the Shares subject to such Option upon
any securities exchange or under any state or federal law, or the consent or
approval of any governmental or regulatory body, is necessary as a condition of,
or in connection with, the issuance or purchase of Shares thereunder, such
Option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained on conditions acceptable to the Incentive Plan Committee. Nothing
herein shall be deemed to require the Company to apply for or to obtain such
listing, registration or qualification.
6.4 Other Employee Benefits. The amount of any compensation deemed to be
received by an Option Holder as a result of the exercise of an Option shall not
constitute "earnings" with respect to which any other employee benefits of such
Option Holder are determined, including without limitation benefits under any
pension, profit sharing, life insurance or salary continuation plan.
6.5 Nonexclusivity of Plan. The adoption of the Plan by the Board shall
not be construed as creating any limitations on the power or authority of the
Board to adopt such other or additional incentive or other compensation
arrangements of whatever nature as the Board may deem necessary or desirable or
preclude or limit the continuation of any other plan, practice or arrangement
for the payment of compensation or fringe benefits to employees generally, or to
any class or group of employees, which the Company now has lawfully put into
effect, including, without limitation, any retirement, pension, savings and
stock purchase plan, insurance, death and disability benefits and executive
short-term incentive plans.
6.6 Plan Amendment, Modification, and Termination. The Board may at any
time terminate, and from time-to-time may amend or modify, the Plan; provided,
however, that no amendment, modification or
-7-
<PAGE>
termination of the Plan shall in any manner adversely affect any Options
theretofore granted under the Plan, without the consent of the Option Holder
holding such Options.
6.7 Duration of Plan. The Plan shall fully cease and expire at midnight
on the date that is ten years from the Effective Date of the Plan. Options
outstanding at the time of the Plan termination may continue to be exercised in
accordance with their terms.
6.8 Withholding Requirement. The Company's obligations to deliver Shares
upon the exercise of an Option shall be subject to the Option Holder's
satisfaction of all applicable federal, state and local income and other tax
withholding requirements. At the time an Option is exercised by the Option
Holder, the Committee, in its sole discretion, may permit the Option Holder to
pay all such amounts of tax withholding, or any part thereof, by transferring to
the Company, or directing the Company to withhold from Shares otherwise issuable
to such Option Holder, Shares having a value equal to the amount required to be
withheld or such lesser amount as may be determined by the Committee at such
time. The value of Shares to be withheld shall be based on the Fair Market
Value of the Stock on the date that the amount of tax to be withheld is to be
determined.
SECTION 7
REQUIREMENTS OF LAW
7.1 Requirements of Law. The issuance of Stock and the payment of cash
pursuant to the Plan shall be subject to all applicable laws, rules and
regulations.
7.2 Federal Securities Law Requirements. With respect to persons subject
to Section 16 of the 1934 Act, transactions under this Plan are intended to
comply with all applicable conditions of Rule 16b-3 or its successors under the
1934 Act. To the extent any provision of the Plan or action by the Committee
fails to so comply, it shall be deemed null and void, to the extent permitted by
law and deemed advisable by the Committee.
7.3 Governing Law. The Plan shall be construed in accordance with and
governed by the laws of the State of Colorado.
-8-
<PAGE>
IN WITNESS THEREOF, the Company and the Option Holders hereby agree to the
provisions set forth herein, and have signed their names as of the dates set
forth below.
ANALYTICAL SURVEYS, INC.
By: _________________________________
Title: ______________________________
Date: _______________________________
OPTION HOLDERS:
_____________________________________
Jeff Armstrong
Date: _______________________________
_____________________________________
Scott Benger
Date: _______________________________
_____________________________________
David Coates
Date: _______________________________
_____________________________________
Sidney Corder
Date: _______________________________
_____________________________________
John J. Dillon III
Date: _______________________________
_____________________________________
William M. Howell
Date: _______________________________
_____________________________________
Steve Jenkins
Date: _______________________________
_____________________________________
Mark Klimiuk
Date: _______________________________
_____________________________________
David Lewis
Date: _______________________________
_____________________________________
Jeffrey A. Meyerrose
Date: _______________________________
_____________________________________
Robert J. Montgomery
Date: _______________________________
_____________________________________
William Nantell
Date: _______________________________
_____________________________________
Randal J. Sage
Date: _______________________________
-9-
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
THE BOARD OF DIRECTORS
ANALYTICAL SURVEYS, INC.:
We consent to incorporation by reference in the registration statements (No. 33-
24142, No. 33-33948, No. 33-53950 and No. 33-59940) on Form S-8 of Analytical
Surveys, Inc. of our report dated October 31, 1997, relating to the consolidated
balance sheets of Analytical Surveys, Inc. and subsidiaries as of September 30,
1997 and 1996, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended September 30, 1997, which report appears in the September 30, 1997
Annual Report on Form 10-K of Analytical Surveys, Inc.
KPMG PEAT MARWICK LLP
Denver, Colorado
December 24, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-K and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000753048
<NAME> ANALYTICAL SURVEYS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,559
<SECURITIES> 0
<RECEIVABLES> 30,768
<ALLOWANCES> 164
<INVENTORY> 0
<CURRENT-ASSETS> 32,844
<PP&E> 9,633
<DEPRECIATION> 5,483
<TOTAL-ASSETS> 50,146
<CURRENT-LIABILITIES> 11,759
<BONDS> 0
0
0
<COMMON> 15,269
<OTHER-SE> 8,562
<TOTAL-LIABILITY-AND-EQUITY> 50,146
<SALES> 0
<TOTAL-REVENUES> 40,799
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<OTHER-EXPENSES> (2)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 772
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<INCOME-TAX> 2,112
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<EPS-PRIMARY> .60
<EPS-DILUTED> .60
</TABLE>
