CONFORMED COPY
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 28, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from _________ to _________
Commission File Number 1-13628
INTELLIGENT CONTROLS, INC.
(Exact name of small business issuer as specified in its charter)
Maine 01-0354107
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
74 Industrial Park Road, Saco, Maine 04072
(Address of principal executive offices)
(207) 283-0156
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes [X] No [ ]
There were 4,944,837 shares of Common Stock of the issuer outstanding as
of April 30, 1998.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
PART I
ITEM 1. FINANCIAL STATEMENTS.
Unaudited financial statements of the Company appear beginning at page F-1
below, and are incorporated herein by reference. These financial
statements include all adjustments which, in the opinion of management,
are necessary in order to make the financial statements not misleading.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations For Three Months Ended March 28, 1998:
For the three months ended March 28, 1998, sales increased 16% to $3.54
million compared to sales in the first quarter of 1997 of $3.03 million.
Sales in the petroleum market grew by 21% due to continued strong EPA
compliance demand as well as strong new construction activity. In March
1998 and February 1997 the Company made large partial shipments of a $1.8
million order from Chinese Petroleum in Taiwan. Approximately $590,000 of
shipments were included in both the first quarter 1998 and 1997
respectively. The March 1998 shipment was the final shipment to Chinese
Petroleum. Sales to a single OEM customer of a digital probe were $180,000
lower than the first quarter of 1997. Shipments have been deferred to permit
for a design enhancement that will improve the product's reliability and
ease of installation. Shipments are expected resume in the near future.
Sales of Power Utilities products were down 22% in the first quarter of
1998 as compared to the first quarter of 1997. Deferred shipments of the
Optimizer are the primary reason for this downturn. The Optimizer circuit
breaker monitoring product has been recalled for software upgrades and
resulting new orders have not shipped pending the completion of this change.
A newer version model, the Optimizer Plus, is in final design testing and
should be introduced in the later part of 1998.
Gross margins improved significantly, increasing from 35.1% in the first
quarter of 1997 to 43.7% for the same period of 1998. This improvement in
margins was due to reduced warranty costs, improved manufacturing efficiency
resulting from higher volume, and lower material costs. Margins in both
quarters were adversely affected by shipments of the Chinese Petroleum
order. Due to its size and commercial importance for long term position in
Asia, the Chinese Petroleum order was negotiated at special pricing levels.
Operating expenses were up 36% in the first three months of 1998 over the
same months in 1997. This increase was primarily due to additional
investment in the sales and marketing area, as well as, several one time
legal and administrative expenses, and increased R & D expenses.
Net income for the first quarter of 1998 was $36,972 as compared to a net
loss of ($30,804) for the same period in 1997. The turnaround in
profitability was primarily due to higher sales volume and the resulting
higher margins.
Liquidity and Capital Resources at March 28, 1998:
As of March 28, 1998 the Company had $2.6 million available to be borrowed
on its $3.5 million dollar line of credit. The Company expects that
current resources will be sufficient to finance the Company's operating
needs through the end of 1998.
Subsequent Events:
The Company has recently completed a series of transactions that resulted
in a substantial increase in its capital. Capital was increased on May 1,
1998 through a $5,325,001 purchase of Common Stock at $3.25 per share by
two investment funds affiliated with Ampersand Ventures, in Wellesley,
Massachusetts. Capital was further increased on May 6, 1998 by a $250,000
purchase of Common Stock at $3.25 per share by Roger E. Brooks, the
Company's new President and Chief Executive Officer, as part of a
restricted stock arrangement with him.
The Company intends to apply this capital to (i) fund the Company's recent
tender offer to repurchase 475,000 shares of Common Stock from existing
shareholders at $3.25 per share ($1,543,750), (ii) pay costs associated
with the Ampersand transaction and the tender offer (estimated at
$250,000), (iii) repay approximately $1 million of existing indebtedness,
(iv) fund $650,000 of litigation expense in settling a certain lawsuit by
a former executive, of which all but $40,000 will be paid to repurchase
Common Stock and options from the executive at a price equivalent to the
recent tender offer price (see "Legal Proceedings," below), and (v) fund
plans for expanding its business, through increased marketing efforts,
continued development of new products, and other means.
PART II
ITEM 1. LEGAL PROCEEDINGS
As previously reported, the Company is a defendant in a wrongful
termination action brought against it in July 1996 by John D. Knight, a
former executive. In April 1998 the Company reached a tentative
settlement by which it has agreed to (i) pay Mr. Knight $40,000 of
additional severance compensation, (ii) repurchase 100,000 option shares
from him at a net price of $3.25 per share minus the underlying option
exercise price of $1.25 per share, and (iii) cancel additional stock
options for 148,240 shares at a net price of $3.25 per share minus the
underlying option exercise price of $.50 per share. Mr. Knight originally
received the stock options from the Company in 1987. The per share price
to be paid to Mr. Knight equals the price of the Company's recent tender
offer to repurchase 475,000 shares of Common Stock from existing
shareholders. See "Management's Discussion and Analysis -- Subsequent
Events," above.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders was held April 30, 1998. At the
meeting the following matters were voted upon by shareholders. All
matters were approved as indicated:
1. To fix the number of directors at five and to elect Alan Lukas, George
E. Hissong, Paul F. Walsh, Charles D. Yie, and Roger E. Brooks to the
Board of Directors.
<TABLE>
<CAPTION>
Withheld
Authority
For For Total
--------- --------- ---------
<S> <C> <C> <C>
Alan Lukas 2,791,165 2,446 2,793,611
George E. Hissong 2,791,165 2,446 2,793,611
Paul F. Walsh 2,783,065 10,546 2,793,611
Charles D. Yie 2,783,065 10,546 2,793,611
Roger E. Brooks 2,791,165 2,446 2,793,611
</TABLE>
2. To ratify the appointment of Coopers & Lybrand as independent
accountants to the Company for the year ending December 26, 1998.
For Against Abstain Broker non-vote
--------- ------- ------- ---------------
2,730,061 61,750 1,800 0
3. To amend the Articles of Incorporation to increase the authorized
common stock from 5,000,000 shares to 8,000,000 shares.
For Against Abstain Broker non-vote
--------- ------- ------- ---------------
2,777,865 13,346 2,400 0
4. To amend the Articles of Incorporation to provide that Section 910 of
the Maine Business Corporation Act shall not apply to the Company.
Section 910 provides special appraisal and sale rights to minority
shareholders of publicly held Maine corporations in which a person or
group acquires more than 25% voting power. By its terms, Section 910
allows the corporation to opt out of the statute through a shareholder
vote.
For Against Abstain Broker non-vote
--------- ------- ------- ---------------
2,282,671 15,786 6,125 489,029
5. To amend the Articles of Incorporation to permit the Company to
repurchase shares from unreserved and unrestricted capital surplus.
For Against Abstain Broker non-vote
--------- ------- ------- ---------------
2,292,292 4,426 800 496,093
6. To approve the proposed 1998 Employee Stock Option Plan.
For Against Abstain Broker non-vote
--------- ------- ------- ---------------
2,281,292 12,526 3,700 496,793
7. To approve a proposed restricted stock arrangement with Roger E.
Brooks.
For Against Abstain Broker non-vote
--------- ------- ------- ---------------
2,763,711 18,156 4,680 7,064
ITEM 5. OTHER INFORMATION
On May 1, 1998, the Company consummated a sale of 1,638,462 shares of
Common Stock at $3.25 per share to two investment funds affiliated with
Ampersand Ventures. The stock purchase was $325,000 greater than
originally reported, reflecting an amendment of the Investment Agreement
at the time of closing.
On May 6, 1998, the Company consummated a sale of 486,923 shares of Common
Stock at $3.25 per share to Roger E. Brooks, pursuant to a restricted
stock arrangement approved by vote of the shareholders at the Annual
Meeting of Shareholders on April 30, 1998. The consideration for this
stock was paid in the form a $1,332,500 promissory note and $250,000 in
cash from Mr. Brooks.
On March 30, 1998, the Company commenced a tender offer to repurchase up
to 475,000 shares of Common Stock at $3.25 per share from existing
shareholders. A total of 967,028 shares were tendered to the Company
prior to expiration of the tender offered on May 1, 1998. Payment for
475,000 shares was made by the Company commencing on May 11, 1998; the
balance of the tendered shares are being returned to shareholders.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
An index of the exhibits filed with this report appears beginning at page
E-1 below, and is incorporated herein by reference.
No reports on Form 8-K were filed by the Company during the fiscal quarter
ended March 28, 1998.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Company
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
INTELLIGENT CONTROLS, INC.
By: /s/ ANDREW B. CLEMENT
-----------------------------------
Andrew B. Clement, Controller
(on behalf of the Company and as
principal financial officer)
Date: May 12, 1998
Index to Exhibits
Exhibit No. Description
- - ----------- -----------
10.1 Investment Agreement, dated March 26, 1998 among the Company,
Ampersand Specialty Materials and Chemicals III Limited
Partnership, Ampersand Specialty Materials and Chemicals
III Companion Fund Limited Partnership, and Roger E.
Brooks; incorporated by reference to Exhibit 99.c(1) to the
Company's Schedule 13E-4 Issuer Tender Offer Statement
filed on March 30, 1998
10.1A Amendment No. 1 to Investment Agreement, dated as of May 1,
1998, among the Company, Ampersand Specialty Materials and
Chemicals III Limited Partnership, Ampersand Specialty
Materials and Chemicals III Companion Fund Limited
Partnership, and Roger E. Brooks
10.2 Stockholders Agreement, dated as of May 1, 1998, among the
Company, Ampersand Specialty Materials and Chemicals III
Limited Partnership, Ampersand Specialty Materials and
Chemicals III Companion Fund Limited Partnership, Roger E.
Brooks, Alan Lukas, Paul E. Lukas, and certain related
parties; incorporated by reference to Exhibit 99.c(2) to
the Company's Schedule 13E-4 Issuer Tender Offer Statement
filed on March 30, 1998
10.3 Employment Agreement between the Company and Roger E. Brooks
10.3A Employee Stock Restriction Agreement between the Company and
Roger E. Brooks and related promissory note, pledge
agreement and form of 83(b) election
10.4 1998 Employee Stock Option Plan
10.5 Lease Extension Agreement, executed March 27, 1998 with Apollo
Development Corp.
10.6 Addendum to Lease, executed April 28, 1998 with BJB
Associates; Letter dated April 3, 1998 from BJB Associates
regarding reimbursement of utility cost by landlord
27 Financial Data Schedule
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
INTELLIGENT CONTROLS, INC.
We have reviewed the accompanying balance sheet of Intelligent Controls,
Inc., as of March 28, 1998 and the related statements of income and cash
flows for the three month periods ended March 28, 1998 and March 31, 1997.
These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding financial statements taken as a whole. Accordingly, we do not
express such an opinion. We previously audited and expressed an
unqualified opinion on the Company's consolidated financial statements for
the year ended December 27, 1997 (not presented herein). In our opinion,
the information set forth in the accompanying balance sheet as of December
27, 1997, is fairly stated in all materials respects, in relation to the
statement of financial position from which it has been derived.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
- - ----------------------------------
Portland, Maine
April 17, 1998
INTELLIGENT CONTROLS, INC.
BALANCE SHEETS
ASSETS
------
<TABLE>
<CAPTION>
(unaudited)
March 28 December 27
1998 1997
----------- -----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 300 $ 300
Accounts receivable, net of allowance for doubtful accounts
of $ 68,000 in 1998 and $60,000 in 1997 2,880,769 2,200,062
Inventories 1,605,832 1,854,328
Prepaid expenses and other 224,632 257,704
Income taxes receivable 94,449 119,099
Deferred income taxes 192,464 192,464
-------------------------
Total current assets 4,998,446 4,623,957
Property, Plant, and Equipment, net 846,864 856,581
Other assets 27,960 27,176
-------------------------
$5,873,270 $5,507,714
=========================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Non-interest bearing overdraft $ 369,352 $ 67,259
Note payable - bank 924,509 754,366
Accounts payable 396,016 769,097
Accrued expenses 769,014 520,709
Current portion of long-term debt 194,700 194,700
-------------------------
Total current liabilities 2,653,591 2,306,131
Long-term debt, net of current portion 324,003 372,401
Deferred taxes 67,295 67,295
Stockholders' Equity
Common stock, no par value; 5,000,000 shares authorized;
3,306,375 issued at March 28, 1998 and 3,274,306 at
December 27,1997 2,359,201 2,293,841
Retained earnings 505,018 468,046
Less:
Shareholder note receivable (23,338)
Treasury stock, 5,128 shares at cost (12,500)
-------------------------
2,828,381 2,761,887
-------------------------
$5,873,270 $5,507,714
=========================
</TABLE>
See accompanying notes.
INTELLIGENT CONTROLS, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
(unaudited) (unaudited)
March 28 March 31
1998 1997
----------- -----------
<S> <C> <C>
Net sales $ 3,537,314 $ 3,033,663
Cost of sales 1,992,464 1,967,482
--------------------------
1,544,850 1,066,181
Operating expenses:
Selling, general and administrative 1,191,186 833,583
Research and development 245,161 217,538
--------------------------
1,436,347 1,051,121
--------------------------
Operating income 108,503 15,060
Other expense:
Interest expense (17,024) (52,818)
Other expense (29,857) (13,006)
--------------------------
(46,881) (65,824)
--------------------------
Income (loss) before income tax 61,622 (50,764)
Income tax (expense) benefit (24,650) 19,960
--------------------------
Net income (loss) $ 36,972 $ (30,804)
==========================
Net income (loss) per share basic and diluted: $ .01 $ (.01)
==========================
Weighted average number of common shares outstanding 3,289,336 3,301,000
==========================
Weighted average common and common equivalent shares
outstanding 3,423,531 3,301,000
==========================
</TABLE>
See accompanying notes.
INTELLIGENT CONTROLS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
(unaudited) (unaudited)
March 28 March 31
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net Income $ 36,972 $ (30,804)
Adjustments to reconcile net income to net cash
(used by) provided by operating activities:
Depreciation and amortization 64,212 56,205
Deferred taxes -- (19,960)
Changes in assets and liabilities:
Accounts receivable (680,707) (200,229)
Inventories 248,496 558,177
Prepaid expenses and other 33,072 51,889
Income taxes receivable 24,650 --
Accounts payable and accrued expenses (124,776) (252,881)
Other (784) (1,178)
-------------------------
Net cash (used by) provided by operating activities (398,865) 161,219
Cash flows from investing activities:
Purchases of equipment and leasehold improvements, net (54,495) (47,615)
-------------------------
Net cash (used) by investing activities (54,495) (47,615)
Cash flows from financing activities:
Increase in non-interest bearing overdraft 302,093
Net borrowings on note payable - bank 170,143 124,384
Repayment of long-term debt (48,398) (47,660)
Issuance of common stock 65,360 --
Acquisition of treasury stock (12,500) --
Increase in shareholder note receivable (23,338)
Decrease In restricted cash -- (199,120)
Decrease in deposit from shareholder -- 199,120
-------------------------
Net cash provided (used) by financing activities 453,360 76,724
Net increase (decrease) in cash 0 190,328
Cash and cash equivalents at beginning of year 300 133,690
-------------------------
Cash and cash equivalents at end of period $ 300 $ 324,018
=========================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 29,857 $ 52,818
=========================
Income taxes $ -- $ --
=========================
</TABLE>
See accompanying notes.
INTELLIGENT CONTROLS, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. The consolidated financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the
information presented not to be misleading. In the opinion of management,
the amounts shown reflect all adjustments necessary to present fairly the
financial position and results of operations for the periods presented.
All such adjustments are of a normal recurring nature. The year-end
condensed balance sheet was derived from audited financial statements,
but does not include all disclosures required by generally accepted
accounting principles.
Certain reclassifications have been made to the December 27, 1997
financial statements to conform with the March 28, 1998 presentations.
It is suggested that the financial statements be read in conjunction with
the financial statements and notes thereto included in the Company's
10-KSB.
2. Earnings Per Common Share
-------------------------
Basic earnings per share of common stock have been determined by dividing
net earnings by the weighted average number of shares of common stock
outstanding during the periods presented. Diluted earnings per share
reflect the potential dilution that would occur if existing stock options
were exercised. Following is a reconciliation of the dual presentations
of earnings per share for the periods presented.
<TABLE>
<CAPTION>
Net Income Common Shares Earnings
(Numerator) (Denominator) Per Share
----------- ------------- ---------
<S> <C> <C> <C>
March 28, 1998
--------------
Basic earnings per share $ 36,972 3,289,336 $ 0.01
Dilutive potential shares -- 134,195 ======
-------------------------
Diluted earnings per share $ 36,972 3,423,531 $ 0.01
======================================
March 31, 1997
--------------
Basic earnings per share $(30,804) 3,301,000 $(0.01)
Dilutive potential shares -- -- ======
-------------------------
Diluted earnings per share $(30,804) 3,301,000 $(0.01)
======================================
</TABLE>
3. Property, Plant, and Equipment
------------------------------
Property, plant, and equipment, at cost,
<TABLE>
<CAPTION>
(Unaudited)
March 28 December 27
1998 1997
---------- -----------
<S> <C> <C>
Leasehold improvements $ 111,983 $ 111,983
Equipment 1,164,086 1,139,210
Computer software 184,179 154,560
Furniture and Fixtures 104,312 104,312
------------------------
1,564,560 1,510,065
Less accumulated depreciation and amortization (717,696) (653,484)
------------------------
$ 846,864 $ 856,581
========================
</TABLE>
4. Inventories consisted of the following at March 28, 1998 and December 27,
1997.
<TABLE>
<CAPTION>
(Unaudited) (Audited)
March 28 December 27
1998 1997
----------- -----------
<S> <C> <C>
Raw Material $ 978,509 $1,214,749
Work in Progress 240,806 229,824
Finished Goods 333,260 356,974
Other 53,257 52,781
-------------------------
$1,605,832 $1,854,328
=========================
</TABLE>
5. New Accounting Pronouncements
-----------------------------
In June 1997, the Financial Accounting Standards Board issue Statement of
Financial Accounting Standards (SFAS) No. 130 - Reporting Comprehensive
Income, which requires the separate reporting of all changes to
shareholders' equity, and SFAS No. 131 - Disclosures about Segments of an
Enterprise and Related Information, which revises existing guidelines
about the level of financial disclosure of a company's operations. Both
statements are effective for financial statements issued for fiscal years
beginning after December 15, 1997. The Company has determined that the
new standard will not necessitate any changes to existing financial
reporting.
6. Subsequent Events
-----------------
Subsequent to year end, the Company completed a series of transactions
that resulted in a substantial increase in its capital. On May 1, 1998,
the Company received $5,325,000 through the sale of stock to two
investment funds affiliated with Ampersand Ventures. In addition the
Company received $250,000 through the sale of stock to Roger Brooks on
May 6, 1998. Roger Brooks is the Company's new President and Chief
Executive Officer and the sale was part of a restricted stock arrangement
with him.
In April 1998, the Company reached a tentative settlement agreement with
John Knight, a former executive who has brought a wrongful termination
action against the Company. The agreement calls for the Company to pay
Mr. Knight $40,000 in additional severance compensation, to repurchase
100,000 options from him at a price of $3.25 per share less the
underlying exercise price of $1.25 per share, and cancel 148,240 stock
options at a net price of $3.25 per share less the underlying option
exercise price of $.50 per share.
Exhibit 10.1A
AMENDMENT NO. 1 TO INVESTMENT AGREEMENT
This Amendment No. 1 (the "Amendment") to that certain Investment
Agreement (the "Agreement") entered into as of the 26th day of March, 1998,
by and among Intelligent Controls, Inc., a Maine corporation (the
"Company"), Ampersand Specialty Materials and Chemicals III Limited
Partnership, a Delaware limited partnership ("ASMC-III Fund"), Ampersand
Specialty Materials and Chemicals III Companion Fund Limited Partnership, a
Delaware limited partnership ("ASMC-III Companion Fund"), and for purposes
of Article IX thereof only, Roger E. Brooks, an individual ("Brooks"), is
entered into as of this __ day of May 1998, by and among the Company, ASMC-
III Fund and ASMC-III Companion Fund. Capitalized terms used but not
defined herein shall have the meanings attributed to them in the Agreement.
INTRODUCTION
A. The Investors proposed in the Agreement to purchase from the
Company in accordance with the terms and conditions thereof an aggregate of
1,538,462 newly issued shares (the "Shares") of the Company's Common Stock,
at a price per share of $3.25.
B. The Investors now propose to purchase an additional 100,000
Shares, at a price per share of $3.25, on the same terms and conditions set
forth in the Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged the parties agree to amend the
Agreement as follows:
1. AMENDMENT TO INTRODUCTION. Paragraph A of the Introduction to the
Agreement is revised by deleting the number "1,538,462" and replacing it
with "1,638,462".
2. AMENDMENT TO SCHEDULE 1. Schedule 1 to the Agreement is hereby
replaced by the Schedule 1 attached hereto.
3. SURVIVAL. Except as specifically set forth herein, the Agreement
shall remain in full force and effect and each of the parties confirms all
of its obligations thereunder. This Amendment shall be deemed part of, and
be construed in accordance with, the Agreement.
4. MISCELLANEOUS. This Amendment may be executed in multiple
counterparts, each of which shall be deemed an original but all of which
taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
under seal as of the date first above written.
INTELLIGENT CONTROLS, INC.
By: /s/ Alan Lukas
Title: President & CEO
AMPERSAND SPECIALTY MATERIALS
AND CHEMICALS III LIMITED PARTNERSHIP
By: ASMC-III Management Company
Limited Partnership
By: ASMC-III MCLP LLP, its general partner
By /s/ Charles D. Yie
Charles D. Yie, General Partner
AMPERSAND SPECIALTY MATERIALS
AND CHEMICALS III COMPANION FUND
LIMITED PARTNERSHIP
By: ASMC-III Management Company
Limited Partnership
By: ASMC-III MCLP LLP, its general partner
By /s/ Charles D. Yie
Charles D. Yie, General Partner
SCHEDULE 1
<TABLE>
<CAPTION>
NAME OF INVESTOR NUMBER OF SHARES PURCHASE PRICE
<S> <C> <C>
Ampersand Specialty Materials and 1,612,247 $5,239,802.75
Chemicals III Limited Partnership
Ampersand Specialty Materials and 26,215 $ 85,198.75
Chemicals III Companion Limited
Partnership
Total 1,638,462 $5,325,001.50
</TABLE>
Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made as of the 1st day of
May, 1998, is entered into by Intelligent Controls, Inc., a Maine
corporation with its principal place of business at 74 Industrial Park Road,
Saco, Maine 04072 (the "Company"), and Roger E. Brooks, an individual
residing at 16 Deerfield Road, Sherborn, MA 01770 (the "Executive").
Recitals:
A. The Company desires to have the Executive serve as the President
and Chief Executive Officer of the Company upon the terms and conditions
hereinafter set forth.
B. The Executive desires to be employed in such capacities upon the
terms and conditions hereinafter set forth.
C. Concurrently with the execution of this Agreement, the Company is
completing the sale of 1,538,462 shares of its common stock to Ampersand
Specialty Materials and Chemicals III Limited Partnership, a Delaware
limited partnership, and Ampersand Specialty Materials and Chemicals III
Companion Fund Limited Partnership, a Delaware limited partnership (the
"Investors"), pursuant to an Investment Agreement dated as of March 26, 1998
by and among the Company, the Investors and the Executive (the "Investment
Agreement").
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the
parties agree as follows:
1. TERM OF EMPLOYMENT. Upon the other terms and conditions set forth
in this Agreement, the Company hereby agrees to employ the Executive, and
the Executive hereby accepts employment with the Company, commencing on May
1, 1998 (the "Commencement Date") and ending on June 30, 2000; provided,
however, that the term of the Executive's employment hereunder shall be
automatically extended for periods of one (1) year after such date, unless
and until the Company or the Executive shall have delivered to the other
written notice of its or his election to terminate this Agreement as of such
date or the end of any one-year extension period, such notice to be
delivered at least ninety (90) days prior to the date of termination. The
period of time during which the Executive is employed hereunder is hereafter
referred to as the "Employment Period".
2. TITLES; DUTIES. The Executive shall serve as the President and
Chief Executive Officer of the Company, subject to the general direction and
control of the board of directors of the Company (the "Board"). The
Executive hereby accepts such employment and agrees to undertake the duties
and responsibilities inherent in such positions and such other executive
duties and responsibilities as the board of directors shall from time to
time assign to him. The Executive agrees to devote his entire business
time, attention and energies to the business and interests of the Company
during the Employment Period; provided, however, that the Executive shall
have the right to continue serving on the advisory board of American MSI
Corporation and to serve as a director of up to one other company. The
Executive agrees to abide by the rules, regulations, instructions, personnel
practices and policies of the Company and any changes therein which may be
adopted from time to time by the Company.
3. COMPENSATION AND BENEFITS.
(a) SALARY; CAR ALLOWANCE. During the Employment Period, the Company
shall pay the Executive, in equal bi-weekly installments, a base salary at
the rate of $175,000 per year, subject to annual increases in the discretion
of the Board based on the Executive's performance. In addition, the Company
shall pay the Executive a car allowance at the rate of $600 per month.
(b) BONUSES. During the Employment Period, the Executive shall be
eligible to receive an annual bonus of up to 30% of the Executive's annual
base salary, the first of such bonuses to accrue beginning on the date as of
which the Investment Agreement is executed. The Executive's eligibility to
receive such bonus shall be dependent on the achievement of financial and
operating objectives determined by the Board.
(c) EXECUTIVE BENEFIT PLANS. During the Employment Period, the
Executive shall be eligible to participate in any life insurance, medical,
retirement, pension or profit-sharing or other benefit plans or arrangements
now or hereafter generally made available by the Company to executive
officers of the Company to the extent the Executive qualifies under the
provisions of any such plans (collectively, the "Benefits").
(d) VACATION. During the Employment Period, the Executive shall be
entitled to vacations (taken consecutively or in segments), not to exceed an
aggregate of four (4) weeks per year.
(e) APARTMENT. For a period ending on the earlier of (i) the first
anniversary of the Commencement Date and (ii) the date the Executive secures
a permanent residence in the State of Maine, the Company shall reimburse
Executive, or pay directly, all reasonable expenses associated with a
furnished apartment.
(f) EXPENSE REIMBURSEMENT. The Company shall reimburse the Executive
for all reasonable expenses properly incurred by him on behalf of the
Company in the performance of his duties hereunder and in accordance with
policies set by the Board; provided that proper vouchers are submitted to
the Company by the Executive evidencing such expenses and the purposes for
which the same were incurred.
(g) RESTRICTED STOCK. As additional consideration for his provision
of services hereunder, the Company will offer the Executive the opportunity
to purchase on, or within thirty (30) days following, the Commencement Date
486,923 shares of the Company's common stock, no par value (the "Common
Stock"), at $3.25 per share pursuant to a Restricted Stock Agreement in form
of Exhibit A hereto.
(h) LOAN. In connection with the purchase of Common Stock pursuant
to Section 3(g), the Company shall extend a loan to the Executive in the
original principal amount of $1,332,500 and bearing interest at the
applicable federal rate determined under Section 1274 of the Internal
Revenue Code of 1986, as amended (the "Loan"). The Loan shall be fully
recourse only with respect to $200,000 of the principal amount thereof and
the interest on such portion of the principal amount, and shall be evidenced
by a promissory note in the form of Exhibit B hereto. The Loan shall be
secured by a pledge of shares of Common Stock owned by the Executive
pursuant to a Pledge Agreement in the form of Exhibit C hereto.
4. EMPLOYMENT TERMINATION. The employment of the Executive pursuant
to this Agreement shall terminate upon the occurrence of any of the
following:
(a) At the election of the Company, for cause, immediately upon
written notice by the Company to the Executive. For purposes of this
Agreement, "cause" shall be deemed to exist upon a good faith finding by the
Board that the Executive has (i) committed an act constituting fraud,
embezzlement or other felony, (ii) breached his fiduciary duties to the
Company or (iii) willfully failed to perform his duties and responsibilities
hereunder.
(b) At the election of the Company, without cause, immediately upon
written notice by the Company to the Executive, subject to the provisions of
Section 5(b).
(c) The death or disability of the Executive. For purposes of this
Agreement, "disability" shall mean the degree of incapacitation as a result
of illness or accident and whether physical or mental which, in the opinion
of an independent medical expert selected by the Company and approved by the
Executive (which approval shall not be unreasonably withheld), makes it
reasonably unlikely that the Executive will be able to perform his normal
duties for a period of one hundred twenty (120) days, whether or not
consecutive, during any 360-day period.
(d) At the election of the Executive, for any reason, upon at least
ninety (90) days prior written notice to the Company.
5. EFFECT OF TERMINATION.
(a) TERMINATION BY THE COMPANY FOR CAUSE. In the event the
Executive's employment is terminated for cause pursuant to Section 4(a), the
Company shall pay or provide to the Executive the compensation and Benefits
otherwise payable to him under Section 3 through the last day of his actual
employment by the Company, but shall have no responsibility for any
compensation or benefits to the Executive for any time period subsequent to
such termination.
(b) TERMINATION BY THE COMPANY WITHOUT CAUSE. In the event the
Executive's employment is terminated without cause pursuant to Section 4(b),
the Company shall (i) continue to pay him, on a [bi-weekly] basis, his base
salary specified in Section 3(a), as in effect at the time of such
termination, for the twelve-month period commencing on the date of such
termination, and (ii) continue to provide him, for the twelve-month period
commencing on the date of such termination, with the Benefits to which he
would otherwise have been entitled hereunder had his employment not been
terminated; provided, however, that if pursuant to terms of any plan or
arrangement under which Benefits are provided the Company is unable to
continue to provide those Benefits to the Executive for all or a portion of
such twelve-month period at a cost comparable to that which would apply if
the Executive remained an employee of the Company, the Company shall have
the right to discontinue providing those Benefits to the Executive and in
lieu thereof to pay the Executive a cash amount equal to the cost to the
Company of continuing to provide those Benefits for the remainder of such
twelve-month period, assuming the Executive remained an employee of the
Company; and provided further, that in the event Executive has secured full
time employment in a comparable position, any such obligation on the part of
the Company shall cease upon the later of the date Executive has secured
such comparable employment, or six (6) months from the date of termination.
(c) TERMINATION DUE TO DEATH. In the event the Executive's
employment is terminated due to his death, the Company shall pay or provide
to the estate of the Executive the compensation and Benefits which would
otherwise be payable to the Executive under Section 3 through the date of
termination of his employment, but the Company shall have no responsibility
for any compensation or benefits to the Executive or his estate for any time
period subsequent to such termination.
(d) TERMINATION DUE TO DISABILITY. In the event the Executive's
employment is terminated due to his disability, the Company shall for the
twelve-month period commencing on the date of such termination (i) continue
to pay him, on a bi-weekly basis, an amount equal to the difference between
(A) his base salary specified in Section 3(a), as in effect at the time of
such termination, and (B) the pre-tax equivalent amount received by the
Executive pursuant to any disability insurance provided to the Executive by
the Company and (ii) continue to provide him with the Benefits to which he
would otherwise have been entitled hereunder had his employment not been
terminated; provided, however, that if pursuant to terms of any plan or
arrangement under which Benefits are provided the Company is unable to
continue to provide those Benefits to the Executive for all or a portion of
such twelve-month period at a cost comparable to that which would apply if
the Executive remained an Executive of the Company, the Company shall have
the right to discontinue providing those Benefits to the Executive and in
lieu thereof to pay the Executive a cash amount equal to the cost to the
Company of continuing to provide those Benefits for the remainder of such
twelve-month period, assuming the Executive remained an Executive of the
Company.
(e) VOLUNTARY TERMINATION BY THE EXECUTIVE. In the event the
Executive's employment is terminated by the Executive pursuant to Section
4(d), the Company shall pay or provide to the Executive the compensation and
Benefits otherwise payable to him under Section 3 through the last day of
his actual employment by the Company, but shall have no responsibility for
any compensation or benefits to the Executive for any time period subsequent
to such termination. Provided, however, that for all purposes of this
Agreement, the Executive's resignation of his employment following the
occurrence of any of the following shall constitute a termination of the
Executive's employment by the Company without cause pursuant to Section
4(b):
(i) any material reduction in the Executive's duties,
responsibilities, or authority, as described herein;
(ii) any modification or termination of, or adjustment of the
terms of the Executive's participation in, any bonus, incentive, or
other employee benefit plan unless such modification, termination, or
adjustment is applicable to employees or executives of the Company
generally or unless after taking into account all such modifications,
terminations, and adjustments not generally applicable to employees or
executives, the economic value to the Executive of all such plans in
the aggregate remains substantially equivalent, in the aggregate, to
their value as of the Commencement Date; or
(iii) any material failure of the Company to comply with the
terms of this Agreement.
(f) TERMINATION UPON NONRENEWAL. If the Executive's employment
terminates on or before June 30, 2001 because the Company (but not the
Executive) has given notice of nonrenewal in accordance with Section 1
above, then the Executive shall thereupon be entitled to the same severance
pay and Benefits as would be provided under Section 5(b) upon a termination
by the Company without cause.
6. CONFIDENTIAL INFORMATION.
(a) CONFIDENTIAL INFORMATION. The Executive acknowledges and
understands that in the performance of his service as an employee under this
Agreement, he will obtain knowledge of Confidential Information. The
Executive agrees that he shall not, either during the Employment Period or
at any time thereafter, except as required in the performance of his
services for the Company, (i) use or disclose any Confidential Information
outside the Company, or (ii) remove or aid in the removal from the premises
of the Company any Confidential Information or any property or material
relating thereto.
(b) DELIVERY OF MATERIAL. The Executive shall deliver promptly to
the Company on the termination of his employment, or at any other time the
Company may so request, all memoranda, notes, records, reports, manuals,
computer disks, videotapes, drawings, blueprints and other documents (and
all copies thereof) which, and to the extent they, embody Confidential
Information which he may then possess or have under his control.
(c) CUSTOMER LISTS. The Executive acknowledges that (i) all existing
lists of customers, vendors and advertisers of the Company developed during
the course of the Executive's employment by the Company are and shall be the
sole and exclusive property of the Company and that the Executive neither
has nor shall have any right, title or interest therein, (ii) such lists are
and must continue to be confidential, and (iii) such lists are not readily
accessible to competitors of the Company.
(d) DEFINITIONS. For the purposes of this Section 6, "Confidential
Information" shall mean any information, including, without limitation,
trade "know-how", trade secrets, subscriber, advertiser and customer lists,
pricing policies, operational methods, methods of doing business, technical
processes, formulae, designs and design projects, inventions, software
programs, business plans, projects, research projects, and other business
affairs of the Company which (i) is or is designed to be used in the
business of the Company or results from its research or development
activities, and (ii) is conceived, developed, discovered or received by, or
made available to, the Executive during the period that the Executive is
employed by the Company, in the course of his employment with the Company.
Confidential Information does not include, and no restriction of the
Executive contained in this Agreement shall apply to, any of the following
information: (i) that at or prior to the time of its availability,
disclosure to or development, conception or discovery by the Executive, was
generally known by the public; (ii) was available to the public on a non-
confidential basis prior to its availability, disclosure to or development,
conception or discovery by the Executive; or (iii) is now or subsequently
becomes rightfully known in the industry of which the Company is a part.
The phrase "business of the Company" in Sections 6 and 7 shall mean the
business in which the Company is now engaged or which may hereafter become
engaged during the course of the Executive's employment by the Company. The
term "Company" in Sections 6, 7 and 8 shall mean the Company and any
subsidiary of the Company.
7. NON-COMPETITION COVENANTS.
(a) NON-COMPETITION COVENANTS. The Executive agrees that he will
not, during the Non-Competition Period, compete directly or indirectly with
the business of the Company. The phrase "compete directly or indirectly
with the business of the Company" shall mean (1) engaging or having a
material interest, directly or indirectly, as owner, employee, officer,
director, partner, sales representative, stockholder, capital investor,
lessor, renderer of consultation services or advice, either alone or in
association with others, in the operation of any aspect of a business or
enterprise which is competitive with the business in which the Company is
engaged during the Employment Period; (2) soliciting any employee of the
Company to leave the employ of the Company; (3) soliciting any of the
employees of the Company to become employees of any other person or entity;
or (4) soliciting any customer of the Company with respect to the business
of the Company.
(b) NON-COMPETITION PERIOD. For the purposes of this Section 7,
"Non-Competition Period" shall mean the period during which the Executive is
employed by the Company and the one-year period commencing on the last day
of the Executive's employment by the Company.
8. INJUNCTIVE AND OTHER EQUITABLE RELIEF.
(a) The Executive acknowledges that the services to be rendered by
him under the terms of this Agreement are of a special, unique and
extraordinary character, which gives them a peculiar value, the loss of
which cannot be reasonably or adequately compensated in damages in any
action at law. By reason of this, the Executive consents and agrees that if
he violates any of the provisions of Section 6 and 7 hereof, the Company
shall be entitled, in addition to any other remedies it may have at law, to
the remedies of injunction, specific performance and other equitable relief
for a breach by the Executive of Sections 6 and 7 of this Agreement. This
Section 8 shall not, however, be construed as a waiver of any of the rights
which the Company may have for damages or otherwise.
(b) Any waiver by the Company of a breach of any provision of Section
6 and 7 hereof shall not operate or be construed as a waiver of any
subsequent breach of such provision or any other provision hereof.
(c) The Executive agrees that each provision of Section 6 and 7 shall
be treated as a separate and independent clause, and the unenforceability of
any one clause shall in no way impair the enforceability of the other
clauses herein. Moreover, if one or more of the provisions contained in
Section 6 and 7 shall for any reason be held to be excessively broad as to
scope, activity or subject so as to be unenforceable at law, such provision
or provisions shall be construed by the appropriate judicial body by
limiting and reducing it or them so as to be enforceable to the maximum
extent compatible with the applicable law as it shall then appear.
(d) The Executive's obligations under Section 6 and 7 shall survive
the termination of his employment regardless of the manner of such
termination and shall be binding upon his heirs, executors, administrators
and legal representatives.
9. OTHER AGREEMENTS. The Executive hereby represents and warrants
that he is not bound by the terms of any agreement with any previous
employer or other party to refrain from using or disclosing any trade secret
or confidential or proprietary information in the course of his employment
with the Company or to refrain from competing, directly or indirectly, with
the business of such previous employer or any other party. The Executive
further represents and warrants that his performance of all the terms of
this Agreement and as an Executive of the Company does not and will not
breach any agreement to keep in confidence proprietary information,
knowledge or data acquired by him in confidence or in trust prior to his
employment with the Company.
10. ENTIRE AGREEMENT; AMENDMENTS. This Agreement sets forth the
entire understanding of the parties with respect to the subject matter
hereof, and no statement, representation, warranty or covenant has been made
by any party except as expressly set forth herein. This Agreement
supersedes and cancels all prior agreements between the parties, whether
written or oral, relating to the employment of the Executive. No
alteration, amendment or modification of any of the terms and provisions
hereof shall be valid unless made pursuant to an instrument in writing
signed by all of the parties hereto.
11. APPLICABLE LAW. This Agreement shall be governed by, construed
and enforced in accordance with the laws of the State of Maine.
12. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally or mailed, first class, postage prepaid, certified
mail, return receipt requested, or sent by nationally recognized overnight
courier service, to each of the parties at its or his address as set forth
at the beginning of this Agreement or as any of the parties may designate in
conformity with the foregoing.
13. HEADINGS. The Section headings set forth in this Agreement are
for reference purposes only and shall not be considered as part of this
Agreement in any respect nor shall they in any way affect the substance of
any provisions contained in this Agreement.
14. SUCCESSOR AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the Company. In
addition, this Agreement shall be binding upon and inure to the benefit of
the Executive and his heirs, legal representatives and assigns; provided,
however, that the obligations of the Executive hereunder may not be assigned
without the prior written approval of the Board.
15. SEVERABILITY. If at any time subsequent to the date hereof, any
provision of this Agreement shall be held by any court of competent
jurisdiction to be illegal, void or unenforceable, such provision shall be
of no force and effect, but the illegality or unenforceability of such
provision shall have no effect upon and shall not impair the enforceability
of any other provision of this Agreement.
16. DISPUTE RESOLUTION. In the event of any controversy or claim
arising out of or relating to the Executive's employment, this Agreement or
any act or omission of a party hereunder (a "dispute"), either party (by
written notice to the other) may invoke the procedures of this Section.
Promptly after such notice is given, the Executive and one or more
disinterested representatives of the Company's Board of Directors will meet
to attempt to negotiate a settlement of all pending disputes. If for any
reason the Executive and the Company have not entered into a written
settlement of the dispute(s) within 30 days after the original notice,
either party may within one year of the original notice give notice
demanding arbitration. Thereafter all pending disputes shall be settled by
arbitration before a panel of three arbitrators, in accordance with the
rules of the American Arbitration Association pertaining to commercial
disputes (or such other rules and procedures as the parties may hereafter
consent to in writing). The arbitration shall occur in Portland, Maine, or
such other location as is mutually acceptable to the parties. Except as the
parties may hereafter consent in writing, the arbitrator(s) shall be
required to decide each claim in accordance with applicable law and to set
forth briefly in writing the award, the rationale of the decision, and those
facts considered by the arbitrator(s) to be material to such decision. The
arbitral award shall be deemed binding upon each party, and judgment on the
award may be entered in any court having jurisdiction thereof. This
agreement to arbitrate shall be enforceable under the Uniform Arbitration
Act.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
INTELLIGENT CONTROLS, INC.
By: /s/ Alan Lukas
Title: President
EXECUTIVE:
/s/ Roger E. Brooks
EXHIBIT A: Form of Restricted Stock Agreement
dated as of May 1, 1998
EXHIBIT B: Form of Promissory Note
of Brooks dated May 6, 1998
EXHIBIT C: Form of Pledge Agreement
Exhibit 10.3A
INTELLIGENT CONTROLS, INC.
EMPLOYEE RESTRICTED STOCK PURCHASE AGREEMENT
This Agreement is made as of the 1st day of May, 1998, by and between
Intelligent Controls, Inc., a Maine corporation (the "Company"), and Roger
E. Brooks ("Purchaser").
In consideration of the mutual covenants and representations herein
set forth, the Company and Purchaser agree as follows:
1. PURCHASE AND SALE OF STOCK. Subject to the terms and conditions
of this Agreement, the Company hereby agrees to sell to Purchaser and
Purchaser agrees to purchase from the Company on the Closing Date (as herein
defined), 486,923 shares (the "Shares") of the Company's common stock, no
par value (the "Common Stock"), at a price of $3.25 per share (the "Issue
Price"). The purchase price for the Shares shall be paid by Purchaser as
follows:
(i) $250,000 in cash; and
(ii) $1,332,500 by promissory note in the form attached hereto
as Exhibit A (the "Note"). As security for the payment of the Note
and any renewal or modification thereof, Purchaser hereby grants to
the Company a security interest in, and pledges and delivers to the
Company, the Shares, to be held in escrow pursuant to Section 7
hereof.
2. CLOSING. The purchase and sale of the Shares shall occur at a
closing (the "Closing") to be held at such time and place as designated by
the Company by written notice to Purchaser. The Closing shall take place at
the principal office of the Company or at such other place as shall be
designated by the Company. At the Closing, the Company will issue a
certificate representing the Shares registered in the name of Purchaser
against receipt of the Note and a certified check in the amount of $250,000.
3. (a) REPURCHASE OPTION. In the event Purchaser's employment with
the Company is terminated as provided in Section 4 of that certain
Employment Agreement between the Company and Purchaser dated as of May 1,
1998 (the "Employment Agreement"), the Company shall have the option to
repurchase up to all of the Unvested Shares (as defined below) at the Issue
Price. In the event the Company exercises its repurchase option as set
forth in this Section 3(a), the Company shall, within thirty (30) days after
Purchaser's termination of employment, give to Purchaser a written notice
specifying the number of Unvested Shares it is electing to repurchase and
the time for closing, which closing shall be held at the Company's principal
office and shall occur no earlier than 10 days and no later than 20 days
after the date such notice is given. Upon the date of any such notice from
the Company, the interest of Purchaser in the Unvested Shares specified in
such notice shall automatically terminate, except for Purchaser's right to
receive payment from the Company for such Unvested Shares. Payment for such
Unvested Shares may, at the option of the Company, be made by cancellation
of the corresponding amount due under the Note.
(b) VESTING. The repurchase option set forth in Section 3(a) with
respect to the Shares shall lapse and such Shares shall automatically become
vested (all Shares as to which such repurchase option shall have not lapsed
being referred to as "Unvested Shares"):
(i) with respect to 76,923 Shares at the time of the Closing;
(ii) with respect to 25,625 of the remaining number of Shares
upon the passage of every three months;
(iii) with respect to all of the remaining Shares upon the sale
of all or substantially all of the Company's assets or stock, or a
upon a "change of control" of the Company. A "change of control"
means:
(A) any person or entity, other than an existing Company
shareholder, becomes the beneficial owner of 50% or more of the
voting power of the Company;
(B) a change in the majority of the Company's directors,
other than a change approved by the Company's current
shareholders; or
(C) a sale of substantially all of the Company by sale of
assets, stock, merger, consolidation or other reorganization;
provided, however, that a reorganization or recapitalization of
the Company not constituting a sale to a purchaser for value
will not constitute a sale resulting in a lapse of such
repurchase option; and
(iv) with respect to 102,500 of the remaining number of Shares
in the event of termination of Purchaser's employment with the Company
pursuant to Sections 4(b) or 4(c) of the Employment Agreement (or upon
an event treated as a termination without "cause" pursuant to Section
5(e) or 5(f) of the Employment Agreement), in addition to any Shares
which have previously vested.
4. STOCK SPLITS, ETC. If from time to time during the term of this
Agreement:
(a) there is any stock dividend or liquidating dividend of cash
and/or property, stock split or other change in the character or
amount of any of the outstanding securities of the Company; or
(b) there is any consolidation, merger or sale of all or
substantially all of the assets of the Company;
then, in such event, any and all new, substituted or additional securities
or other property to which Purchaser is entitled by reason of his ownership
of the Shares shall be immediately subject to this Agreement and be included
in the word "Shares" for all purposes with the same force and effect as the
Shares presently subject to the terms of this Agreement. While the
aggregate purchase price shall remain the same after each such event, the
number of shares vesting thereafter under Section 3(b) of this Agreement and
the purchase price per share upon exercise of the repurchase option
described in Section 3 shall be appropriately adjusted.
5. LEGENDS. All certificates representing any of the Shares subject
to the provisions of this Agreement shall have endorsed thereon the
following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
REPURCHASE OPTION IN FAVOR OF THE COMPANY AS SET FORTH IN AN
AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER, A COPY
OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY."
(b) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED."
6. PURCHASER'S REPRESENTATIONS. In connection with his purchase of
the Shares, Purchaser hereby represents and warrants to the Company as
follows:
(a) INVESTMENT INTENT; CAPACITY TO PROTECT INTERESTS. Purchaser is
purchasing the Shares solely for his own account for investment and not with
a view to or for sale in connection with any distribution of the Shares or
any portion thereof and not with any present intention of selling, offering
to sell or otherwise disposing of or distributing the Shares or any portion
thereof in any transaction other than a transaction exempt from registration
under the Act. Purchaser also represents that the entire legal and
beneficial interest of the Shares is being purchased, and will be held, for
Purchaser's account only, and neither in whole or in part for any other
person. Purchaser either has a pre-existing business or personal
relationship with the Company or its officers, directors or controlling
persons or by reason of Purchaser's business or financial experience or the
business or financial experience of Purchaser's professional advisors who
are unaffiliated with and who are not compensated by the Company or any
affiliate or selling agent of the Company, directly or indirectly, could be
reasonably assumed to have the capacity to evaluate the merits and risks of
an investment in the Company and to protect Purchaser's own interests in
connection with this transaction.
(b) INFORMATION CONCERNING COMPANY. Purchaser has heretofore
discussed the Company and its plans, operations and financial condition with
the Company's officers and has heretofore received all such information as
Purchaser has deemed necessary and appropriate to enable Purchaser to
evaluate the financial risk inherent in making an investment in the Shares,
and Purchaser has received satisfactory and complete information concerning
the business and financial condition of the Company in response to all
inquiries in respect thereof.
(c) ECONOMIC RISK. Purchaser realizes that the purchase of the
Shares will be a highly speculative investment and involves a high degree of
risk, and Purchaser is able to hold the Shares for an indefinite period of
time and suffer a complete loss on his investment.
(d) RESTRICTED SECURITIES. Purchaser understands and acknowledges
that:
(i) the sale of the Shares has not been registered under the
Act, and the Shares must be held indefinitely unless subsequently
registered under the Act or an exemption from such registration is
available and the Company is under no obligation to register the
Shares;
(ii) the share certificate(s) representing the Shares will be
stamped with the legends specified in Section 7 hereof; and
(iii) the Company will make a notation in its records of the
aforementioned restrictions on transfer and legends.
(e) DISPOSITION UNDER RULE 144. Purchaser understands that the
Shares are restricted securities within the meaning of Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Act"); that the exemption
from registration under Rule 144 will not be available in any event for at
least one year from the date of purchase and payment for the Shares, and
even then will not be available unless (i) a public trading market then
exists for the Common Stock, (ii) adequate information concerning the
Company is then available to the public, and (iii) other terms and
conditions of Rule 144 are complied with; and that any sale of the Shares
may be made only in limited amounts in accordance with such terms and
conditions.
(f) FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
his representations set forth above, Purchaser further agrees that he shall
in no event make any disposition of all or any portion of the Shares unless
and until:
(i) there is then in effect a registration statement under the
Act covering such proposed disposition and such disposition is made in
accordance with said registration statement; or
(ii)(A) Purchaser shall have notified the Company of the
proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed
disposition, (B) Purchaser shall have furnished the Company with an
opinion of Purchaser's counsel to the effect that such disposition
will not require registration of such Shares under the Act, and (C)
such opinion of Purchaser's counsel shall have been concurred in by
counsel for the Company and the Company shall have advised Purchaser
of such concurrence.
7. ESCROW. As security for the faithful performance of the terms of
this Agreement and the Note and to ensure the availability for delivery of
the Shares upon exercise of the repurchase option of the Company herein
provided, Purchaser agrees to deliver to and deposit with the Secretary of
the Company, to be held in escrow by the Company as pledgee, two stock
assignments duly endorsed (with date and number of shares blank) with the
certificate or certificates evidencing the Shares. Such documents are to be
held by the Company pursuant to the terms of that certain Pledge Agreement
between the Company and Purchaser of even date herewith. After the Note has
been fully repaid, the Company shall deliver to Purchaser all vested Shares.
8. TRANSFERS NOT RECOGNIZED. The Company shall not be required (i)
to transfer on its books any of the Shares which shall have been transferred
in violation of any of the provisions of this Agreement, or (ii) to treat as
owner of such Shares or to accord the right to vote as such owner or to pay
dividends to any transferee to whom such Shares shall have been so
transferred.
9. RIGHTS AS STOCKHOLDER. Subject to the provisions of Section 3 and
Section 7, Purchaser shall, during the term of this Agreement, exercise all
rights and privileges of a stockholder of the Company with respect to the
Shares, including without limitation the right to vote and the right to
receive any dividends payable with respect thereto.
10. TAXES. Purchaser acknowledges that an amount equal to the fair
market value of the Shares, to the extent in excess of the Issue Price,
shall constitute income received by Purchaser for income tax purposes, and
that provision must be made for income taxes to be withheld by the Company
with respect to the Shares, whenever and to the extent that the Shares vest
pursuant to Section 3(b) of this Agreement, or upon the execution of this
Agreement if Purchaser makes an election pursuant to Section 83(b) of the
Internal Revenue Code. Purchaser agrees that Purchaser will make
appropriate provisions for the collection and payment of such withholding
taxes, in whatever manner is reasonably determined by the Company, including
without limitation payment by Purchaser to the Company of cash in the amount
of required withholding taxes or withholding from other compensation due
Purchaser. The parties believe that the fair market value of the Shares at
the Closing Date equals the Issue Price.
11. MISCELLANEOUS. (a) Any notice hereunder shall be in writing
personally delivered by courier or mailed by registered or certified mail,
postage prepaid, and addressed to Purchaser at the address appearing in the
records of the Company or to the Company at its principal executive offices,
or at such other address as may be specified by Purchaser or the Company to
the other party by notice given in the manner herein provided. A notice
shall be deemed to have been given and received upon the earlier of (i)
three business days after the date on which it is deposited in the U.S.
mails or (ii) receipt by the party to whom such notice is directed.
(b) No waiver by a party hereto of a breach of any provision of this
Agreement shall be deemed to be a waiver of any preceding or subsequent
breach of the same or any other provision thereof.
(c) Purchaser acknowledges that the remedy at law for any breach of
this Agreement will be inadequate, and agrees that the Company shall, in
addition to whatever other remedies it may have, be entitled to injunctive
relief.
(d) This Agreement shall be governed by the laws of the State of
Maine. This Agreement sets forth the entire agreement between the parties
concerning the subject matter hereof and supersedes any prior agreements and
understandings relating to the subject matter hereof. No amendment or
modification hereof will be effective unless it is in writing and signed by
the parties.
(e) The Company may assign its rights and delegate its duties under
this Agreement, including its rights under Section 3 hereof. If any such
assignment or delegation requires consent of any state securities
authorities, the parties agree to cooperate in requesting such consent.
This Agreement shall inure to the benefit of the successors and assigns of
the Company and, subject to the restrictions on transfer herein set forth,
be binding upon Purchaser, his heirs, executors, administrators, successors
and assigns.
(f) Nothing in this Agreement shall affect in any manner whatsoever
the right or power of the Company, or a parent or subsidiary of the Company,
to terminate Purchaser's employment, for any reason, with or without cause.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
INTELLIGENT CONTROLS, INC.
By: /s/ Alan Lukas
Title: President
PURCHASER:
/s/ Roger E. Brooks
PROMISSORY NOTE
$1,332,500.00 Saco, Maine
May 6, 1998
FOR VALUE RECEIVED, the undersigned, Roger E. Brooks, hereby promises
to pay to the order of Intelligent Controls, Inc. (the "Payee"), as
hereinafter provided, the principal sum of ONE MILLION THREE HUNDRED THIRTY
TWO THOUSAND FIVE HUNDRED DOLLARS, with interest on all unpaid principal,
from and including the date hereof, at the rate of 5.69% per annum,
compounded annually [the applicable federal rate as of the date hereof].
Interest shall be computed on the basis of a year of 360 days and actual
number of days elapsed.
Said principal sum and interest thereon shall be due and payable on
demand on or after May 6, 2003.
The undersigned shall have the right at any time or times, without
penalty, to prepay, up to the entire unpaid principal balance hereof,
provided that there is paid with each such payment all interest accrued and
unpaid on the amount thereof to the date of payment.
The amount of all principal and (to the extent permitted by then
applicable law) all interest which is not paid when due (whether on demand
or by acceleration) shall bear interest, until payment of such overdue
amount in full, at the rate of twelve percent (12%) per annum, or the
maximum rate of interest, if lower, permitted by applicable law.
All payments of interest and principal shall be made at the principal
office of the Payee, at 74 Industrial Park Road, Saco, Maine 04072, or at
such other place as the holder hereof may from time to time designate. All
payments hereunder shall first be applied to unpaid accrued interest and the
balance, if any, to principal. If, however, the holder has incurred costs
and expenses of collection in enforcing this note, as described below, such
payments shall first be applied thereto.
The occurrence of any of the following events shall constitute a
default under this note:
A. default in the payment of any principal or interest hereunder
when due;
B. assignment for the benefit of creditors by the undersigned;
C. commencement of any proceeding under any law of any
jurisdiction, now or hereafter in force, relating to bankruptcy,
insolvency or otherwise to the protection or relief of debtors
or the readjustment of indebtedness, by or against the
undersigned; or
D. termination of the undersigned's employment by the Payee for any
reason.
Upon any default described in paragraphs B and C above, this note
shall automatically become immediately due and payable. Upon any default
described in paragraph A above, this note, at the option of the holder,
shall become immediately due and payable. Upon any default described in
paragraph D above, this note, at the option of the holder, shall become due
and payable on or after the 90th day following the date the undersigned's
employment by the Payee is terminated, provided that if such termination of
employment is due to the undersigned's death or disability in accordance
with Section 4(c) of the Employment Agreement dated May 1, 1998 between the
undersigned and the Payee (the "Employment Agreement") or effected by the
Payee without "cause" in accordance with Section 4(b) of the Employment
Agreement [or upon an event treated as a termination without "cause"
pursuant to Section 5(e) or 5(f) thereof], then this note, at the option of
the holder, shall only become due and payable on or after the first
anniversary of the date the undersigned's employment by the Payee is so
terminated.
The undersigned hereby, to the fullest extent permitted by applicable
law, (a) waives presentment, demand, notice, protest and all other demands
and notices, in connection with delivery, acceptance, performance, default,
acceleration or enforcement of or under this note; and (b) agrees to pay to
the holder, on demand, all costs and expenses of collection, including,
without limitation, reasonable attorneys' fees and legal expenses, incurred
by the holder in enforcing this note, whether or not litigation is
commenced.
No failure by the holder to exercise, or delay by the holder in
exercising, any right or remedy hereunder shall operate as a waiver thereof
or of any other right or remedy and no single or partial exercise of any
right or remedy shall preclude any other or further exercise thereof or of
any other right or remedy. Acceptance by the holder of any payment after
the maturity of this note has been accelerated shall not constitute a waiver
of such acceleration.
This note shall be full recourse only with respect to $200,000 of the
principal amount hereof and the interest on such portion of the principal
amount (such principal and interest being herein referred to as the
"Recourse Amount"). All payments of principal and interest hereunder shall
be deemed to have been applied first to principal and interest due hereunder
which is not included in the Recourse Amount.
This note is secured by and entitled to the benefits of a Pledge
Agreement of even date between the Payee and the undersigned.
This note shall be assignable by the Payee. The word "holder", as
used herein, shall mean the Payee or any endorsee of this note who is in
possession of it, or the bearer if this note is at the time payable to
bearer.
A record of all payments of interest and principal shall be kept on
separate records of the holder and no such record need be made or kept on
this note.
This note shall take effect as an instrument under seal and shall be
governed by and construed in accordance with the law of the State of Maine.
Witness:
/s/ Sharon Binette /s/ Roger E. Brooks
Roger E. Brooks
Address: 16 Deerfield Road
Sherborn, MA 01770
PLEDGE AGREEMENT
The undersigned, Roger E. Brooks, an individual residing at 16
Deerfield Road, Sherborn, MA 01770 (the "Pledgor"), hereby agrees with
Intelligent Controls, Inc., a Maine corporation having its principal place
of business at 74 Industrial Park Road, Saco, Maine 04072 (the "Pledgee"),
as follows:
1. PLEDGE. For valuable consideration, the receipt whereof is hereby
acknowledged by the Pledgor, the Pledgor hereby pledges, assigns and
transfers to the Pledgee, and grants to the Pledgee a continuing security
interest in, the shares of stock listed on Schedule A hereto (the "Original
Stock") and all other Collateral (as hereinafter defined), to secure the due
and punctual payment and performance of all of the liabilities and
obligations of the Pledgor under that certain promissory note (the "Note")
of even date herewith made by the Pledgor and payable to the order of the
Pledgee in the original principal amount of $1,332,500, including principal,
interest and costs and expenses of collection, and all liabilities and
obligations of the Pledgor under this Agreement (collectively, the
"Obligations"). The Original Stock and all proceeds thereof, including,
without limitation, all stock dividends and "stock splits", if any, to which
the Pledgor may be entitled (collectively, with the Original Stock, the
"Stock"), all payments in lieu of fractional shares of Stock, all dividends,
distributions and other payments made on or in respect of any Stock and all
other property which the Pledgor may become entitled to receive on account
thereof, are sometimes referred to herein collectively as the "Collateral".
2. PAYMENT AND PERFORMANCE OF OBLIGATIONS. The Pledgor shall pay,
perform and observe each of the Obligations when due or required.
3. VOTING POWER. Prior to an event of default (as defined in the
Note), the Pledgor shall be entitled to exercise all voting powers
pertaining to the Stock for all purposes not inconsistent with the
provisions of this Agreement. The Pledgee shall have the right, in its
discretion, to cause the transfer to itself or its nominee of any or all
Collateral, at any time or times, upon and after the occurrence of any such
event of default and to exercise all voting powers pertaining to the Stock
for all purposes. Such transfer shall not constitute a sale or other
disposition of Collateral.
4. DISPOSITION OF COLLATERAL.
(a) Upon and after any event of default which is then continuing, the
Pledgee shall have, in addition to rights and remedies otherwise available
to it, all of the rights and remedies of a secured party on default under
the Uniform Commercial Code (the "Code") then in effect in the State of
Maine.
(b) If any notice to the Pledgor of the sale or other disposition of
Collateral is required by then applicable law, seven (7) days' prior notice
(or, if longer, the shortest period of time permitted by then applicable
law) to the Pledgor of the time and place of any public sale of Collateral
or of the time after which any private sale or any other intended
disposition is to be made shall constitute reasonable notification.
(c) The Pledgee is authorized, at any such date, if the Pledgee deems
it advisable to do so, in order to comply with any applicable securities
laws, to restrict (i) the prospective bidders or purchasers to persons who
will represent and agree, among other things, that they are purchasing the
Stock for their own account for investment, and not with a view to the
distribution or resale thereof, or (ii) the manner of such sale or other
disposition. Sales made subject to such restrictions shall be deemed to
have been made in a commercially reasonable manner.
(d) If all or any part of the Collateral is sold on credit or for
future delivery, the Collateral so sold may be retained by the Pledgee until
the purchase price is paid in full. The Pledgee shall incur no liability in
case of the failure of the purchaser to pay for the Collateral as so sold,
or of the failure of the Pledgee to make any sale of Collateral after giving
notice thereof, and in case of any such failure, such Collateral may again
be sold upon the same notice as in the case of an original sale.
(e) All moneys received by the Pledgee from any collection or any
sale or other enforcement or disposition of Collateral shall be applied to
Obligations as provided in paragraph 5 hereof.
(f) Upon payment in full of all Obligations, the Pledgor shall be
entitled to the return of all Collateral, including cash, which has not been
used or applied toward the payment of Obligations (unless another person is
legally entitled thereto). If there is a deficiency, the Pledgor shall be
responsible for the same, together with interest thereon at the rate of
twelve percent (12%) per annum, except as otherwise specifically provided in
the Note. Any return of Collateral by the Pledgee to the Pledgor shall be
without representation or warranty of any nature whatsoever and wholly
without recourse.
5. APPLICATION OF PROCEEDS. The Pledgee shall apply all moneys
received by it from any collection or any sale or other enforcement or
disposition of Collateral to Obligations in the following order: first, to
the payment of any costs and expenses of collection of the Note and any
costs and expenses incurred in enforcing its rights hereunder, including,
without limitation, reasonable attorneys' fees and legal expenses, next to
interest on the Note, and the balance, if any, to principal of the Note.
6. DUTY OF PLEDGEE. The Pledgee shall have no duty as to the
collection or protection of any Collateral (beyond reasonable care in the
custody and preservation of Collateral while actually in its possession) or
to preserve any rights with respect to any Collateral, including, without
limitation, rights against prior parties; and the sole duty of the Pledgee
shall be to receive payments and any Stock issued to the Pledgor, as and
when received by the Pledgee, and to apply any such payments against
Obligations as provided in paragraph 5.
7. RIGHTS OF PLEDGEE. The Pledgee, in its discretion, may apply any
and all proceeds of disposition of Collateral and other amounts collected or
received, pursuant to this Agreement or in the exercise of its rights,
remedies and powers hereunder, against Obligations, and may exercise said
rights, remedies and powers without regard to the existence of any other
security or sources of payment for any of the Obligations.
8. REPRESENTATIONS AND WARRANTIES. The Pledgor hereby represents and
warrants to the Pledgee as follows:
(a) The Pledgor is the sole owner, and (as to Collateral to be
acquired after the date hereof) shall be the sole owner, of the Collateral,
and has and shall have the right to transfer all Collateral and to grant a
security interest therein to the Pledgee as provided in this Agreement.
(b) All of the Collateral is and shall be genuine, free and clear of
any restriction on transfer (except under any applicable securities laws),
lien, security interest, option or other charge or encumbrance, except in
favor of the Pledgee.
(c) No other pledge or assignment of any Collateral has or shall have
been made.
9. DUTIES OF PLEDGOR. Until all of the Obligations have been paid
and performed in full, the Pledgor
(a) Shall furnish to the Pledgee such stock powers and other
instruments of transfer as may be required by the Pledgee to assure the
transferability of Collateral.
(b) Shall pay or cause to be paid, on or before the date when due,
all taxes and assessments heretofore or hereafter levied or assessed against
the Collateral, or any part thereof, or on this Agreement or on any of the
Obligations.
(c) Shall furnish to the Pledgee, promptly upon receipt thereof,
copies of all material notices, requests and other writings received by the
Pledgor relating to Collateral, and shall give prompt written notice to the
Pledgee of any claim which may be made attacking or questioning the validity
of this Agreement or of the security interest granted hereby, and of any
legal proceeding which may be instituted against the Pledgor with respect
thereto; and, at the cost and expense of the Pledgor, shall diligently
endeavor to cure any alleged defect and shall take all necessary action for
the defense of such legal proceeding; and the Pledgee (whether or not named
as a party to any such legal proceeding) is hereby authorized and empowered
to take such additional action, as, in its judgment, may be necessary for
the defense of any such legal proceeding or the perfection, preservation or
protection of this Agreement and of the security interest granted hereby.
(d) Shall promptly execute and deliver all notices and other writings
and take all such other action reasonably requested, at any time or times,
by the Pledgee to perfect, preserve and protect and continue perfected the
security interest granted hereby or to enable the Pledgee to exercise and
enforce its rights, remedies and powers hereunder with respect to
Collateral.
(e) Shall deliver, if received by the Pledgor, all Collateral,
immediately upon receipt thereof by the Pledgor (duly endorsed or assigned
to the Pledgee as appropriate), in the identical form received by the
Pledgor.
(f) Shall not sell, assign, transfer, encumber or otherwise dispose
of all or any part of the Collateral, or permit the Collateral to be sold,
assigned, transferred or otherwise disposed of or encumbered, except in
favor of the Pledgee, without the prior written consent of the Pledgee.
10. POWER OF ATTORNEY. The Pledgor hereby irrevocably constitutes
and appoints the Pledgee the true and lawful attorney of the Pledgor, with
full power of substitution, in the place and stead of the Pledgor and in the
name of the Pledgee or the Pledgor or otherwise, at any time or times, in
the discretion of the Pledgee, to take any action and to execute any
instrument or document which the Pledgee may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation,
(a) To receive, endorse and collect all checks and other orders or
instruments for the payment of money made payable to the Pledgor
representing any dividend payment or other distribution in respect of any or
all other Collateral and to give full discharge for the same.
(b) To execute endorsements, assignments or other instruments of
conveyance or transfer with respect to any or all Collateral.
(c) To demand, sue for, collect, receive and give acquittance for any
monies due and to become due under or in respect of any or all Collateral.
(d) To file any claims or take any action or institute any
proceedings which the Pledgee may deem necessary or advisable for the
collection of any or all Collateral or otherwise to enforce the rights of
the Pledgee with respect thereto.
This power of attorney shall not be affected by any subsequent disability or
incapacity of the Pledgor. No discretionary right, remedy or power granted
to the Pledgee in this Agreement shall be deemed to impose any obligation
whatsoever on the Pledgee with respect thereto (such rights, remedies and
powers being solely for the protection of the Pledgee). If, however, the
Pledgee elects to exercise any of such rights, remedies or powers, the
Pledgee shall not be accountable for more than it actually receives as a
result thereof, and it shall not be responsible to the Pledgor, except for
willful misconduct or bad faith.
11. WAIVERS. The Pledgor hereby waives presentment, demand, notice
and protest, notice of acceptance of this Agreement, and, except as
otherwise provided in paragraph 4, of all action by the Pledgee in reliance
hereon. No course of dealing by the Pledgee and no failure or delay by the
Pledgee in exercising any right, remedy or power hereunder shall operate as
a waiver thereof, and no single or partial exercise thereof shall preclude
any other or further exercise thereof or the exercise of any other right,
remedy or power of the Pledgee. No amendment, modification or waiver of any
provision of this Agreement shall in any event be effective unless contained
in a writing signed by the Pledgee, and then only to the extent specifically
set forth therein. The rights, remedies and powers of the Pledgee, not only
hereunder and under the Note, but also under the Employee Restricted Stock
Purchase Agreement of even date herewith between the Pledgor and the Pledgee
and under applicable law, are cumulative and may be exercised by the Pledgee
at such time or times as the Pledgee may elect.
12. NOTICES. No notice to or demand upon the Pledgor, in any
instance, shall entitle the Pledgor to any other or further notice or demand
under similar or other circumstances, unless expressly required by this
Agreement or applicable law. All demands, notices and other communications
from the Pledgee to the Pledgor hereunder shall be in writing and shall be
deemed effective when delivered in hand or when sent by certified or
registered mail, return receipt requested, or delivered to an express
courier service and addressed to the Pledgor at the address of the Pledgor
set forth in the introductory paragraph hereof, or such other address of
which notice hereafter becomes effective as provided in this paragraph. All
notices and other communications from the Pledgor to the Pledgee hereunder
shall be in writing and shall be deemed effective when actually received by
the Pledgee. Receipt shall be presumed if the Pledgor receives a return
receipt from the post office, indicating delivery of such notice or other
communication to the Pledgee at the address of the Pledgee set forth in the
introductory paragraph hereof, marked, "Att: Board of Directors" or such
other address of which notice hereafter becomes effective as provided in
this paragraph.
13. SEVERABILITY. If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid, such
invalidity shall not affect any other provision which can be given effect
without the invalid provision or application, and to this end the provisions
hereof shall be severable.
14. CAPTIONS. The captions in this Agreement have been included for
convenience of reference only, shall not define or limit the provisions
hereof and shall not have any legal or other significance whatsoever.
15. MISCELLANEOUS. This Agreement shall be governed by and construed
in accordance with the law of the State of Maine, shall be binding upon the
Pledgor and his heirs, legal representatives and assigns, and shall inure to
the benefit of the Pledgee and its successors and assigns. This Agreement
shall remain in full force and effect until all of the Obligations have been
paid and performed in full.
WITNESS the execution hereof under seal this 6th day of May, 1998.
Witness: Intelligent Controls, Inc.
/s/ Gregory S. Fryer By: /s/ Alan Lukas
Title: President
Witness:
/s/ Sharon L. Binette /s/ Roger E. Brooks
SCHEDULE A
PLEDGED STOCK
STOCK CERTIFICATE NO. NO. OF SHARES
Common Stock, no par
value, of Intelligent
Controls, Inc. IC 0667 76,923
Common Stock, no par
value, of Intelligent
Controls, Inc. IC 0668 410,000
ELECTION UNDER SECTION 83(B) OF THE INTERNAL REVENUE CODE
Pursuant to the provisions of Section 83(b) of the Internal Revenue
Code, the undersigned (the "Taxpayer") hereby elects to include in gross
income, for the taxable year set forth below, the excess, if any, of the
fair market value of the property described below (valued as of the time of
transfer) over the amount (if any) paid therefor. Pursuant to the
provisions of Section 1.83-2(e)(7) of the Treasury regulations, the Taxpayer
hereby states that copies of this election have been furnished to the
persons described in Section 1.83-2(d) of such regulations.
(1) Name of Taxpayer: Roger E. Brooks
(2) Address of Taxpayer: 16 Deerfield Road
Sherborn, Massachusetts 01770
(3) Social Security Number: [ ]
(4) Description of Property
Covered by Election: 486,923 shares (the "Shares") of
common stock, no par value, of
Intelligent Controls, Inc., a Maine
corporation (the "Company")
(5) Date Property
Transferred: May 6, 1998
(6) Taxable Year For Which
Election is Made: 1998
(7) Fair Market Value of
Property At Time of
Transfer:* $1,582,500
(8) Amount Paid for Property: $1,582,500
(9) Nature of Restrictions
to Which Property is
Subject: The Shares vest as follows:
(i)76,923 Shares on the date of
issuance; (ii) 25,625 of the
remaining number of Shares upon the
passage of every three months;
(iii) immediately with respect to
all of the remaining Shares, upon
the sale of all or substantially
all of the Company's assets or
stock, or a upon a change of
control of the Company. A change
of control means: (A) any person
or entity, other than an existing
Company shareholder, becomes the
beneficial owner of 50% or more of
the voting power of the Company;
(B) a change in the majority of the
Company's directors, other than a
change approved by the Company's
current shareholders; or (C) a sale
of substantially all of the Company
by sale of assets, stock, merger,
consolidation or other
reorganization; provided, however,
that the reorganization or
recapitalization of the Company not
constituting a sale to a purchaser
for value will not constitute a
sale resulting in vesting of such
Shares; and (iv) with respect to
102,500 of the remaining number of
Shares, upon the Purchaser's death
or disability, or upon any of
certain events deemed to constitute
a termination of Purchaser's
employment by the Company without
cause, in addition to any Shares
which have previously vested.
Unvested Shares are subject to
repurchase by the issuer upon
termination of the Taxpayer's
employment by the Company at the
amount paid therefor.
Dated: May 8, 1998 /s/ Roger E. Brooks
* (determined without regard to any restrictions other than
restrictions which by their terms will never lapse)
Exhibit 10.4
INTELLIGENT CONTROLS, INC.
1998 EMPLOYEE STOCK OPTION PLAN
1. PURPOSE. The purpose of the 1998 Employee Stock Option Plan is to
provide Employees of Intelligent Controls, Inc. with additional incentives
to contribute to the success of the Company and to attract, reward and
retain Employees of outstanding ability.
2. DEFINITIONS. As used in this Plan, the following words and phrases
wherever capitalized shall have the following meanings, unless the context
clearly indicates that a different meaning is intended:
(a) "Award" shall mean any Option or Stock Appreciation Right granted
pursuant to the Plan.
(b) "Award Agreement" shall mean an Option Agreement or SAR Agreement,
which specifies the terms, conditions and restrictions of an Award,
incorporates the applicable provisions of the Plan, and includes such
additional provisions not inconsistent therewith as the Committee shall
determine.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Code" shall mean the Internal Revenue Code of 1986, as from time
to time amended.
(e) "Committee" shall mean the committee described in Section 3, which
shall have the authority to control and manage the administration of the
Plan.
(f) "Common Stock" shall mean common stock, no par value, of the
Company.
(g) "Company" shall mean Intelligent Controls, Inc. and any Subsidiary
thereof.
(h) "Disability" shall mean an Employee's inability to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or
which has lasted or can be expected to last for a continuous period of not
less than twelve (12) months. An Employee shall not be considered disabled
unless he or she furnishes proof of the existence of such Disability in such
form and manner, and at such times, as the Committee may require.
(i) "Employee" shall mean any person who is employed by the Company or
any Parent or Subsidiary.
(j) "Fair Market Value" shall mean, with respect to Shares, the
closing price of the Shares (or the average of the last-quoted bid and ask
price, as the case may be) on the principal stock exchange or over-the-
counter market on which the Shares are traded; provided, however, that the
Committee in its discretion may instead use the average closing price (or
bid-ask price) over the past five (5) trading days as the Fair Market Value
on the last of such days; and provided further, however, that the Fair
Market Value of the Shares to be issued under any Incentive Stock Option
shall in any event be determined by the Committee in a manner that complies
with the applicable requirements of subsections 422(b)(4) and (c)(7) of the
Code and the regulations issued thereunder.
(k) "Incentive Stock Option" shall mean an option granted to an
individual for any reason connected with his or her employment by a
corporation, if granted by the employer corporation or its Parent or
Subsidiary corporation, to purchase stock of any of such corporations, but
only if such option meets the requirements of Section 422 of the Code.
(l) "Nonqualified Stock Option" shall mean an Option granted under the
Plan that is not an Incentive Stock Option.
(m) "Option" shall mean a right granted under the Plan to purchase
Shares.
(n) "Optionee" shall mean an Employee who is granted an Option.
(o) "Parent" shall mean, for purposes of the Incentive Stock Option
provisions of the Plan, a parent company within the meaning of subsections
424(e) and (g) of the Code.
(p) "Plan" shall mean the 1998 Employee Stock Option Plan.
(q) "Share" shall mean a share of Common Stock of the Company, as
adjusted in accordance with subsection 4(b).
(r) "Stock Appreciation Right" shall mean a right granted under
Section 8 to receive a payment, the amount of which shall be determined by
reference to the value of a Share.
(s) "Subsidiary" shall mean, for purposes of the Incentive Stock
Option provisions of the Plan, a subsidiary company within the meaning of
subsections 424(f) and (g) of the Code, and for all other purposes of the
Plan, a company of which Intelligent Controls, Inc. owns directly or
indirectly at least fifty percent (50%) of the total combined voting power
of all classes of stock entitled to vote.
3. ADMINISTRATION.
(a) COMMITTEE MEMBERS. The Plan shall be administered by the members
of the Compensation Committee of the Board. Although not a requirement of
the Plan, it is contemplated that the Committee will consist solely or
primarily of persons who are not employees of the Company or any Parent or
Subsidiary and who otherwise qualify as "non-employee directors" within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended,
and as "outside directors" within the meaning of Code Section 162(m), as
amended, and the regulations thereunder. A majority of the members of the
Committee shall constitute a quorum, and the action of a majority of the
members present at any meeting at which a quorum is present shall be deemed
the action of the Committee. Any member may participate in a meeting of the
Committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can
hear each other. Further, any action of the Committee may be taken without
a meeting if all of the members of the Committee sign written consents,
setting forth the action taken or to be taken, at any time before or after
the intended effective date of such action.
(b) POWERS. The Committee shall have the complete authority and
discretion to administer the Plan, including the following powers which
shall be exercised in accordance with the terms of the Plan:
(1) to determine the Employees to whom Awards shall be granted;
(2) to determine the time or times at which Awards shall be
granted;
(3) to determine the type or types of Awards to be granted;
(4) to determine the terms, conditions and restrictions of each
Award;
(5) to make adjustments in accordance with subsection 4(b);
(6) to prescribe, amend and rescind rules and regulations
relating to the Plan;
(7) to interpret the Plan and make all other determinations
deemed necessary or advisable for the administration of the Plan; and
(8) to delegate to any officer of the Company the authority to
act for the Committee in such matters as the Committee may specify.
Each determination, interpretation or other action taken pursuant to
the Plan by the Committee (or an officer of the Company acting under a
delegation of authority by the Committee) shall be final and conclusive for
all purposes and binding upon all persons, including the Company, the Board,
the Committee, the Employees and their respective successors in interest.
(c) SIGNATURES. The Committee may authorize any member thereof to
execute all instruments required in the administration of the Plan, and such
instruments may be executed by facsimile signature.
4. STOCK SUBJECT TO THE PLAN.
(a) LIMITATIONS. Subject to the provisions of subsection (b), a
maximum of 300,000 Shares will be available for grant under the Plan.
In the event that any Shares subject to an Award are forfeited, such
Shares shall, unless the Plan has been terminated, become available again
for grant and shall not be counted again for purposes of the foregoing share
limitation. In the event that any Option granted under the Plan expires or
terminates without the issuance of Shares or payment of other consideration
in lieu of such Shares, the unissued Shares subject to such Option shall,
unless the Plan has been terminated, become available for other Awards,
including other Options.
In the event that an Employee transfers stock issued by the Company in
full or partial payment of the option price of an Option granted under the
Plan, only the difference between (i) the number of Shares issued upon
exercise of the Option and (ii) the number of Shares transferred in payment
of the option price shall be counted for purposes of the foregoing
limitation on the maximum number of Shares available for grant under the
Plan. Notwithstanding the foregoing, in no event shall more than 300,000
Shares be issued pursuant to the exercise of Incentive Stock Options under
this Plan; Shares delivered in payment for Incentive Stock Options shall
not be credited against this special limitation on the number of Shares
issued pursuant to Incentive Stock Options.
(b) ADJUSTMENTS. If the number of Shares outstanding changes as a
result of a stock split or stock dividend, the Committee shall
proportionately adjust: (i) the maximum number of Shares available for
grant and the maximum aggregate number of Shares which may be issued under
Incentive Stock Options; (ii) the number of Shares to be issued under
Awards; (iii) the option price with respect to Shares subject to Options;
and (iv) the grant price with respect to Stock Appreciation Rights.
In the event of a merger or consolidation in which the Company is the
surviving company, or the acquisition by the Company of property or stock of
another company, or any reorganization, the Committee shall appropriately
adjust: (i) the number and class of Shares to be issued under Awards; (ii)
the option price of Shares subject to Options; and (iii) the grant price
with respect to Stock Appreciation Rights. Any adjustments under this
subsection (b) affecting Incentive Stock Options shall be made so as to
comply with the applicable provisions of Sections 422 and 424 of the Code.
5. ELIGIBILITY.
The Committee may, from time to time, designate Employees to whom
Options or Stock Appreciation Rights may be granted in accordance with the
terms of the Plan.
6. GRANTING OF AWARDS.
The Committee may grant more than one Award and more than one type of
Award to any Employee; provided that no Incentive Stock Option shall be
granted to any Employee who, at the time the Option is granted, owns stock
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary. For
purposes of applying the percentage limitation of the preceding sentence,
the ownership principles of subsection 424(d) of the Code shall apply. The
terms and conditions of Awards need not be the same with respect to each
Employee. An Employee who has been granted an Award may, if he or she is
otherwise eligible, be granted additional Awards before the exercising of
such prior Award.
The Committee may condition the grant of an Award and the exercise of
an Option or Stock Appreciation Right on the attainment of performance
goals. Performance goals may be expressed in terms of earnings per Share,
stock price, total shareholder return, return on equity, or any similar
quantifiable measures.
7. OPTIONS.
(a) OPTION AGREEMENT. Each Option granted by the Committee shall be
evidenced by an agreement (the "Option Agreement"), specifying the Option
price, the number of Shares subject to the Option and such other terms,
conditions and restrictions as the Committee shall determine. Each Option
shall be clearly identified as either an Incentive Stock Option or a
Nonqualified Stock Option.
(b) TERM OF OPTION. The term of each Option shall be set forth in the
Option Agreement, but in no event shall an Option be exercisable after the
expiration of ten (10) years from the date such Option is granted.
(c) OPTION PRICE. The option price for Shares to be issued under any
Option shall not be less than one hundred percent (100%) of the Fair Market
Value of such Shares on the date the Option is granted.
(d) NONTRANSFERABILITY OF OPTIONS. Options may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner, other than
by will or by the laws of descent and distribution, and may be exercised
during the lifetime of the Optionee only by such Optionee. Notwithstanding
the preceding sentence to the contrary, the Committee may permit the
transfer of Nonqualified Stock Options to family members or family trusts
(and exercise by the transferee) to the extent Rule 16b-3 under the
Securities Exchange Act of 1934 permits such transfers.
(e) MANNER OF EXERCISE. An Option granted under the Plan shall be
exercisable at such times and under such circumstances as shall be
permissible under the terms of the Plan and of the Option Agreement. An
Option shall be deemed to be exercised when the Optionee gives written
notice of such exercise to the Company in accordance with the terms of the
Option Agreement and the Company receives full payment for the Shares with
respect to which the Option is exercised. Payment shall be made by check
payable to the Company, delivery of stock issued by the Company or a
combination thereof, subject to the terms of the Option Agreement, or in
such other manner as the Committee shall approve.
Stock transferred to the Company in full or partial payment for Shares
shall be valued at Fair Market Value on the date that such transfer is
recorded upon the books of the Company, following actual or constructive
delivery of such stock to the Company in a form suitable for transfer.
(f) TERMINATION OF EMPLOYMENT. In the event an Optionee ceases to be
employed by the Company or any Parent or Subsidiary, and is no longer
employed by any of them, for any reason other than death or Disability, such
Optionee may, subject to the terms of the Option Agreement, exercise an
Option at any time prior to the expiration date of such Option (or, in the
case of an Incentive Stock Option, within three (3) months after the date
the Optionee's employment ceases, whichever is earlier), but only to the
extent the Optionee had the right to exercise such Option at the date his or
her employment ceased. An Optionee's employment with a Parent or Subsidiary
of the Company shall be deemed terminated on the date such Optionee's
employer ceases to be a Parent or Subsidiary.
(g) DISABLED OPTIONEE. In the event an Optionee who is disabled
ceases to be employed by the Company or any Parent or Subsidiary by reason
of such Disability, and is no longer employed by any of them, such Optionee
may, subject to the terms of the Option Agreement, exercise an Option at any
time prior to the expiration date of such Option (or, in the case of an
Incentive Stock Option, within one (1) year after the date such Optionee's
employment ceases, whichever is earlier), but only to the extent the
Optionee had the right to exercise such Option at the date his or her
employment ceased.
(h) DEATH OF OPTIONEE. In the event an Optionee dies while in the
employ of the Company or any Parent or Subsidiary, then to the extent that
the Optionee would have been entitled to exercise an Option immediately
prior to his or her death, such Option may be exercised by the estate of
such Optionee or by such person or persons to whom such Optionee's rights
pass by will or by the laws of descent and distribution at any time prior to
the expiration date of such Option or within one (1) year after the death of
the Optionee, whichever is earlier.
8. STOCK APPRECIATION RIGHTS.
(a) SAR AGREEMENT. Any Stock Appreciation Rights granted by the
Committee shall be evidenced by an agreement (the "SAR Agreement"),
specifying the grant price, the number of such rights, and such other terms,
conditions and restrictions as the Committee shall determine; provided,
however, that the terms of a Stock Appreciation Right that relates to an
Option may instead be set forth in the Option Agreement or any amendment
thereto.
(b) TERM. The term of each Stock Appreciation Right shall be set
forth in the SAR Agreement, but in no event shall a Stock Appreciation Right
be exercisable after the expiration of ten (10) years from the date such
right is granted.
(c) AMOUNT OF PAYMENT. An Employee to whom a Stock Appreciation Right
has been granted shall be entitled to receive payment of an amount equal to
the excess of (i) the Fair Market Value of one (1) Share on the date of
exercise of such right over (ii) the grant price of the right; provided that
the Fair Market Value of one (1) share with respect to a Stock Appreciation
Right that is not related to an Incentive Stock Option may be determined at
any time during a period before the date of exercise if so specified in the
SAR Agreement.
(d) GRANT PRICE. The grant price of a Stock Appreciation Right shall
not be less than one hundred percent (100%) of the Fair Market Value of one
(1) Share on the date that the Stock Appreciation Right is granted.
(e) NONTRANSFERABILITY OF RIGHTS. Stock Appreciation Rights may not
be sold, pledged, assigned, hypothecated, transferred or disposed of in any
manner, other than by will or by the laws of descent and distribution, and
may be exercised during the lifetime of the Employee only by such Employee.
(f) MANNER OF EXERCISE. A Stock Appreciation Right granted under the
Plan shall be exercisable at such times and under such circumstances as
shall be permissible under the terms of the Plan and of the SAR Agreement.
A Stock Appreciation Right shall be deemed exercised when an Employee gives
written notice of such exercise to the Company in accordance with the terms
of the SAR Agreement.
(g) FORM OF PAYMENT. Payment with respect to the exercise of a Stock
Appreciation Right may be made in cash, Shares or a combination thereof,
subject to the terms of the SAR Agreement, or in such other manner as the
Committee shall approve. To the extent that such payment is made in Shares,
the Shares shall be valued at Fair Market Value on the date of payment.
(h) RELATED OPTIONS. A Stock Appreciation Right may, but need not,
relate to an Option granted under Section 7. A Stock Appreciation Right
related to a Nonqualified Stock Option may be granted simultaneously with
the granting of such Option or at any time thereafter before the exercise or
termination of such Option. A Stock Appreciation Right related to an
Incentive Stock Option shall be granted at the same time such Option is
granted.
A Stock Appreciation Right related to the full number of Shares
subject to an Option shall terminate upon exercise or termination of the
Option to the extent such Option is exercised or terminated. A Stock
Appreciation Right related to less than the full number of Shares subject to
an Option shall not be affected by the exercise or termination of the Option
until such exercise or termination exceeds the number of Shares not related
to the Stock Appreciation Right; thereafter such right shall terminate to
the extent such Option is further exercised or terminated.
To the extent that a Stock Appreciation Right related to an Option has
been exercised, such Option shall no longer be exercisable.
9. DEFERRED SHARES. An Employee may elect, in such manner and subject to
such terms and conditions as the Committee may prescribe, to defer the
receipt of Profit Shares purchased by transferring previously acquired
Shares upon the exercise of a Nonqualified Stock Option. For purposes of
the Plan, "Profit Shares" shall mean Shares representing the difference
between the number of previously acquired Shares transferred and the number
of Shares purchased.
10. CANCELLATION OF AWARDS. Notwithstanding any provision of the Plan to
the contrary, the Committee may cancel any award, whether vested or not, if
at any time an Employee is not in compliance with the applicable terms of
the Award Agreement or in the event of a serious breach of conduct,
including but not limited to failure to comply with the terms of an
agreement not to compete with the Company or a failure to maintain the
confidentiality of Company trade secrets or proprietary or confidential
information.
11. AMENDMENT AND TERMINATION.
(a) AMENDMENT. The Committee, without further approval of the
shareholders of the Company, may amend the Plan from time to time in such
respects as the Committee deems advisable, provided that no amendment shall
become effective prior to ratification by the Board if such amendment:
(i) increases the maximum aggregate number of shares which may
be issued under the Plan or that may be issued hereunder pursuant to
Incentive Stock Options; or
(ii) expands the classes of persons eligible to receive Awards
under the Plan.
(b) TERMINATION. The Board, without further approval of the
shareholders of the Company, may at any time terminate the Plan.
(c) EFFECT OF AMENDMENT OR TERMINATION. Any amendment or termination
of the Plan shall not adversely affect Awards already granted without the
written consent of the affected individual, and such Awards shall remain in
full force and effect as if the Plan had not been amended or terminated.
13. EFFECTIVE DATE OF PLAN. The Plan shall be effective upon its approval
by the shareholders of the Company.
14. TERM OF PLAN. No Award shall be granted pursuant to the Plan after ten
(10) years from the date the Plan is approved by shareholders. Awards
granted prior to the end of such period may extend beyond such period,
except as otherwise provided herein or in the Award Agreement.
15. ARBITRATION. Arbitration as hereinafter provided shall be the
exclusive remedy for resolving any claim or dispute arising under the Plan.
(a) Any arbitration under the Plan, and any related judicial
proceeding, shall be initiated and shall proceed pursuant to the provisions
of the Maine Uniform Arbitration Act (the "Act") and, to the extent
consistent with the Act, the then prevailing rules of the American
Arbitration Association (the "Association") for labor and employment
contracts. To initiate arbitration, demand shall be given in writing to the
Association and the other party no later than one year after the claim
arises. Any claim for which such demand is not made in writing within one
year after the claim arises shall be barred and discharged absolutely.
(b) Any arbitration under the Plan shall occur in Portland, Maine (or
such other location as the parties consent to in writing) before a single
arbitrator. An award in such arbitration may include only damages that the
arbitrator determines to be due under the express provisions of the Plan and
applicable Award Agreement. The arbitrator shall have no authority to award
any other damages, including without limitation, consequential and exemplary
damages. Each award shall set forth briefly in writing the rationale of the
decision and those facts considered by the arbitrator to be material to such
decision. Any award in arbitration shall be subject to enforcement and
appeal pursuant to the Act.
(c) The Company and the Employee shall share equally all costs and
fees charged by the Association or the arbitrator.
16. MISCELLANEOUS.
(a) AWARD AGREEMENT. Upon executing an Award Agreement, an Employee
shall be bound by such Agreement and by the applicable provisions of the
Plan.
(b) EMPLOYMENT. The granting of an Award to an Employee shall not
give the Employee any right to be retained in the employ of the Company or
any Parent or Subsidiary, nor shall the existence of the Plan impair the
right of the Company or any Parent or Subsidiary to discharge or otherwise
deal with an Employee.
(c) TAX WITHHOLDING. The Company shall be authorized to withhold from
any Award granted, or payment due, under the Plan the amount of any taxes
required by law to be withheld because of such Award or payment and to take
such other action as may be necessary in the opinion of the Company to
satisfy all obligations for the payment of such taxes.
(d) GOVERNING LAW. The Plan is established under and shall be
construed according to the laws of the State of Maine.
(e) HEADINGS. Paragraph headings are included solely for convenience
and shall in no event affect, or be used in connection with, the
interpretation of the Plan.
(f) 1984 PLAN. The Employee Stock Option Plan of the Company, as
adopted in 1984 and amended and restated in 1994, shall terminate as of the
effective date of the 1998 Employee Stock Option Plan. Termination of the
Employee Stock Option Plan shall not adversely affect awards previously
granted under such plan or the authority of the Board or Committee to make
determinations with regard to such prior awards.
Exhibit 10.5
LEASE EXTENSION AGREEMENT
AGREEMENT made this 27 day of March, 1998 between APOLLO DEVELOPMENT CORP.
("Landlord") and INTELLIGENT CONTROLS, INC. ("Tenant").
WHEREAS the parties have a lease between them currently in force,
covering property in the Saco, Maine, Industrial Park, which lease is dated
April 11, 1991, with a lease extension agreement dated May 27, 1997, with a
termination date of August 15, 1998, and
WHEREAS the parties desire to extend the term of said lease, as set
forth herein,
NOW THEREFORE in consideration of the mutual promises herein made, the
parties agree that the termination date of said lease shall be extended to
August 15, 1999. During the extension period the rent shall be $5,482.50
per month, payable monthly in advance. The rent shall be prorated for the
final half month.
Tenant has the right to extend the lease from August 15, 1999 to
August 15, 2000 at a monthly rent of $5,590.00. All other terms on the
original lease remain in effect.
The period for exercise of the option to purchase the leased real
property (set forth in paragraph 20 of said original lease) is also extended
to the new lease termination date of August 15, 1999 (or August 15, 2000, if
the option to renew the lease is exercised). The 2% increase factor in the
option purchase price shall be computed over the entire period (including
the extension term) as applicable.
In all other respects the lease terms are ratified and confirmed.
Executed at Saco, Maine, on the above date.
Witnessed by: APOLLO DEVELOPMENT CORP.
/s/ Priscilla M. Hadiaris By: /s/Clifford A. Purvis
Its Treasurer LANDLORD
INTELLIGENT CONTROLS, INC.
/s/ Sharon Binette By: /s/Alan Lukas
Its President TENANT
Exhibit 10.6
ADDENDUM TO
LEASE BETWEEN BJB ASSOCIATES, LANDLORD and
INTELLIGENT CONTROLS, INC., TENANT
DATED JUNE 21,1994
The lease is hereby revised as follows. All other terms and conditions to
remain the same.
1. Lease to expire October 14, 2000
2. Space leased to total 14,520 square feet
3. Monthly lease payments to be as follows:
May 1 through August 14, 1998 $4,970.00*
August 15, 1998 - August 14, 1999 $5,272.50
August 15, 1999 - August 14, 2000 $5,580.72
August 15 - October 14, 2000 $5,908.41
4. There are no further options to renew
5. Tenant's share of real estate taxes and insurance is 88%
* April 15 - May 14, 1998 Prorated as follows:
4/15 - 4/30 $4,580/30 = 152.67 Diem x 16 days = $2,442.72
5/1 - 5/14 $4,970/30 = 165.66 Diem x 14 days = $2,319.24
TOTAL DUE APRIL 15, 1998 $4,761.96
LANDLORD: BJB ASSOCIATES:
/s/ Leilani McCabe By: /s/ Glenn Joziatis
Witness Its Partner
April 28, 1998
DATE
TENANT: INTELLIGENT CONTROLS, INC.
/s/ Sharon Binette By: /s/ Alan Lukas
Witness Its President
April 17, 1998
DATE
BJB Properties
158 Greeley Street
Hudson, N.H. 03051
April 3, 1998
INCON
P.O. Box 638
Saco, ME 04072
ATTN: Mr. Stephen Leuth, PLANT MANAGER
Dear Mr. Leuth:
Enclosed are two (2) copies of Addendum to BJB ASSOCIATES-INTELLIGENT
CONTROLS LEASE dated 6/21/94.
Kindly sign and date both copies and return to us. Upon receipt, we will
send you a fully executed copy.
To confirm our discussion, the Lease Agreement Rider is amended as follows:
Effective May 1, 1998, Landlord is to compensate Tenant $191.47
monthly for Landlord's share of utility costs for reduced square
footage retained by Landlord.
AGREED TO:
/s/ Alan Lukas April 17, 1998
INCON DATE
Kindly sign above, retain one copy and return signed copy to us.
If you have any questions, please call Glenn Joziatis at 603-882-2638.
Sincerely,
BJB PROPERTIES
/s/ Lonnie McCabe
Lonnie McCabe
LM/reg
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-28-1998
<CASH> 300
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<RECEIVABLES> 2,948,769
<ALLOWANCES> 68,000
<INVENTORY> 1,605,832
<CURRENT-ASSETS> 4,998,446
<PP&E> 1,564,560
<DEPRECIATION> 717,696
<TOTAL-ASSETS> 5,802,159
<CURRENT-LIABILITIES> 2,559,142
<BONDS> 324,003
0
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<COMMON> 2,359,201
<OTHER-SE> 469,180
<TOTAL-LIABILITY-AND-EQUITY> 5,873,270
<SALES> 3,537,314
<TOTAL-REVENUES> 3,537,314
<CGS> 1,992,464
<TOTAL-COSTS> 1,436,347
<OTHER-EXPENSES> 17,024
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<INTEREST-EXPENSE> 29,857
<INCOME-PRETAX> 61,622
<INCOME-TAX> 24,650
<INCOME-CONTINUING> 36,972
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