PART I
ITEM 1. Business
Symmetricom, Inc. (the "Company"), formerly Silicon General, Inc.,
was incorporated in California in 1956. The Company conducts its
business through two separate operations, Telecom Solutions and Linfinity
Microelectronics Inc. (LMI). Each operates in a different industry
segment. Telecom Solutions principally designs, manufactures and markets
telecommunications equipment. LMI principally designs, manufactures and
markets linear and mixed signal integrated circuits.
Telecom Solutions
Telecom Solutions products include telecommunications equipment that
synchronizes digital telephone offices and networks, as well as the
Integrated Digital Services Terminal (IDST) which provides transmission,
monitoring and test access for signaling networks and enhanced
intelligent digital services.
Synchronization products consist principally of quartz and rubidium
based Digital Clock Distributors (DCDs), which provide highly accurate
and uninterruptible clocks that meet the synchronization requirements of
digital networks. Telecom Solutions has established itself as a leader
in telephone digital network synchronization and has introduced a series
of DCDs and related products. These products provide the critical timing
that permits telephone companies and private network operators to
precisely synchronize such diverse telephone network elements as digital
switches, digital cross-connect systems and multiplexers for customers
who are dependent upon high quality data transmission.
Customer requirements for synchronization are changing as telephone
companies are using new transmission technologies. In response, Telecom
Solutions developed a new platform, the DCD500 Series, which meets the
evolving requirements for more accurate synchronization of networks such
as the Synchronous Optical Network (SONET) and the Signaling System Seven
(SS7) network. The DCD500 Series provides new network management
functionality and increased monitoring capabilities, and meets the
international standards required for deployment in a Synchronous
Digital Hierarchy network. DCD500 Series products were first shipped in
fiscal 1994.
In addition, a platform was developed, the DCD Local Primary
Reference (LPR), which provides the ability to cost effectively use
Global Positioning System (GPS) and LOng RAnge Navigation (LORAN-C)
satellite and land navigation services to provide direct Stratum 1
traceable synchronization at offices equipped with DCD systems. The
DCD LPR was introduced in fiscal 1994. Other new products have been
developed to increase the functionality of Telecom Solutions existing
products. Also, a primary reference clock was designed as Telecom
Solutions first Master Clock for telecommunications networks.
Telecom Solutions synchronization systems are typically priced from
$5,000 to $40,000.
In the first quarter of fiscal 1994, the Company acquired Navstar
Limited, a United Kingdom company, and its U.S. affiliate (collectively
"Navstar"). Navstar develops and manufactures GPS receivers for the
Company's internal use in its synchronization products and for use in the
survey positioning and location markets. Navstar products are typically
priced from $300 to $10,000.
The IDST is a network access system designed for use in telephone
company central and end offices. Customers deploy the IDST primarily
as a transmission, monitoring and test access vehicle for SS7 networks,
which provides maintenance personnel with flexible, centralized remote
access to SS7 links for troubleshooting and performance verification.
The IDST can also be deployed as an intelligent digital terminal, an
intelligent network element providing connectivity between the transport
network and customer-serving side of the network. The IDST enhances the
network with distributed digital cross-connect functionality and provides
subrate, multipoint, test and surveillance capabilities to the subscriber
loop.
IDST systems are typically priced at less than $75,000 for a small
system to more than $300,000 for a large system.
Linfinity Microelectronics Inc.
During July 1993, substantially all of the assets and liabilities of
the Company's Semiconductor Group were transferred to LMI, a newly-formed
and wholly-owned subsidiary of the Company. LMI products principally
include linear and mixed signal, standard and custom integrated circuits
(ICs) primarily for use in intelligent power management, motion control
and signal conditioning applications in the commercial, industrial and
defense and space markets. LMI derives a substantial portion of its
sales from power management products including pulse width modulators,
linear voltage regulators, supervisory circuits and power factor
correction ICs. A significant portion of LMI sales is attributable to
motion control ICs for the computer disk drive industry. Signal
conditioning ICs are a new product line for LMI.
LMI manufactures linear and mixed signal ICs utilizing bipolar and
bipolar complementary metal oxide silicon (BiCMOS) wafer fabrication
processes. LMI also sells ICs utilizing CMOS wafer fabrication
processes. LMIs new strategy is to develop more market driven standard
products which are primarily used in computer and data storage, lighting,
automotive, communications and test equipment, instrumentation and
defense and space equipment. LMI products are generally priced from
$0.30 to $5.00 for commercial and industrial applications, $2.50 to
$22.00 for defense applications and $200 to $500 for high reliability
defense and space applications.
Industry Segment Data
Information as to net sales, operating income or loss and
identifiable assets attributable to each of the Company's two industry
segments for each year in the three year period ended June 30, 1994, is
contained in Note N of the Notes to Consolidated Financial Statements
included in the Company's 1994 Annual Report (the "Annual Report"), which
Note is incorporated herein by reference to Excerpts of the Annual
Report.
Marketing
In the United States, Telecom Solutions markets and sells most of
its products through its own sales force to telephone and
telecommunications companies. Internationally, Telecom Solutions markets
and sells its products through its own sales operation in the United
Kingdom and independent sales representatives and distributors elsewhere.
In the United States and internationally, LMI sells its products through
its own sales force and independent sales representatives to original
equipment manufacturers and distributors.
Licensing and Patents
The Company has several United States patents and patent
applications pending covering certain technology used by its Telecom
Solutions and LMI operations. In addition, both operations use
technology licensed from others. However, while the Company believes
that its patents have value, the Company relies primarily on innovation,
technological expertise and marketing competence to maintain its
competitive advantage. The Company intends to continue its efforts to
obtain patents, whenever possible, but there can be no assurance that any
patents obtained will not be challenged, invalidated or circumvented or
that the rights granted will provide any commercial benefit to the
Company. Additionally, if any of the Company's processes or designs are
identified as infringing upon patents held by others, there are no
assurances that a license will be available or that the terms of
obtaining any such license will be acceptable to the Company.
Manufacturing
The Telecom Solutions manufacturing process consists primarily of
in-house electrical assembly and test performed by the Company's wholly-
owned subsidiary in Aguada, Puerto Rico.
The LMI manufacturing process consists primarily of bipolar and
BiCMOS wafer fabrication, component assembly and final test. Its
integrated circuits are principally fabricated in the Company's wafer
fabrication facility in Garden Grove, California. However, LMI also
utilizes outside services to perform certain operations during the
fabrication process. In addition, most of LMI integrated circuits
utilizing CMOS wafer processes are currently manufactured by outside
semiconductor foundries. Component assembly and final test are performed
in the Far East by independent subcontract manufacturers or in Garden
Grove by employees.
The Company primarily uses standard parts and components and
standardsubcontract assembly and test, which are generally available from
multiple sources. The Company, to date, has not experienced any
significant delays in obtaining needed standard parts, components and
services from its suppliers but there can be no assurance that such
problems will not develop in the future. However, the Company maintains
a reserve of certain single source components and seeks alternative
suppliers where possible as the Company believes that a lack of
availability of single source components would have an adverse effect on
the Company's operating results.
Backlog
The Company's backlog was approximately $18,000,000 at June 30,
1994, compared to approximately $18,300,000 at June 30, 1993. Backlog
consists of orders which are expected to be shipped within the next
twelve months. However, the Company does not believe that current or
future backlog levels are necessarily indicative of future operating
results. Historically, a substantial portion of Telecom Solutions net
sales in any fiscal period have been derived from orders received during
that period. Furthermore, most orders in backlog can be rescheduled or
canceled without significant penalty. In addition to its dependence on
the timing of the receipt of orders, backlog is dependent on the
seasonality of telephone company capital spending and on the cyclical
nature of customer demand, particularly for semiconductors.
Key Customers and Export Sales
No customer accounted for 10% or more of net sales in fiscal years
1994 or 1993. One customer, principally a Telecom Solutions customer,
AT&T, accounted for 14% of the Company's net sales in fiscal year 1992.
Export sales, primarily to Western Europe, Canada and the Far East,
accounted for 18%, 12% and 14% of the Company's net sales in fiscal
years 1994, 1993 and 1992, respectively.
Competition
The businesses in which the Company is engaged are highly
competitive. A number of the Company's competitors or potential
competitors have been in operation for a much longer period of time than
the Company, have greater financial, manufacturing, technical and
marketing resources, and are able to or could offer much broader lines of
products than are presently marketed by the Company.
Telecom Solutions competes primarily on product reliability and
performance, customer service and, to a lesser extent, price. The
Company believes that Telecom Solutions generally competes favorably with
respect to these factors.
LMI competes primarily on price, product reliability and
performance, and customer service. The Company believes that LMI
generally competes favorably with respect to these factors.
The Company's ability to compete successfully is dependent upon
development or acquisition of new products, continued improvement of
existing products, cost effectiveness and market acceptance of the
Company's products.
Research and Development
The Company has actively pursued the application of new technology
in the industries in which it competes and has its own staff of engineers
and technicians who are responsible for the design and development of new
products. In fiscal years 1994, 1993 and 1992, research and development
expenditures were $11,454,000, $8,355,000, and $5,919,000, respectively.
All research and development expenditures were expensed as incurred. At
June 30, 1994, 66 engineering and engineering support employees were
engaged in development activities. Telecom Solutions focused its
development efforts in fiscal year 1994 on new synchronization platforms
and related products. New products which conform with the requirements
of the SONET and SS7 network as well as the emerging international
standards went into production during fiscal year 1994. Telecom
Solutions research and development expenditures were $7,821,000,
$6,374,000 and $4,600,000 in fiscal years 1994, 1993 and 1992,
respectively. LMI focused its development efforts in fiscal year 1994 on
improving its design capabilities and bipolar and BiCMOS process
technologies, and new product development. New products for use in
power management, motion control and signal conditioning applications
are currently in the development stage. LMI research and development
expenditures were $3,633,000, $1,981,000 and $1,319,000 in fiscal years
1994, 1993 and 1992, respectively. There can, of course, be no assurance
that the Company will be able to continue to develop proprietary products
which will be accepted in its markets.
Environmental Regulation
The Company's operations are subject to numerous federal, state and
local environmental regulations. Failure to comply with such regulations
could result in suspension or cessation of the Company's operations,
could require significant capital expenditures, or could subject the
Company to significant future liabilities.
Employees
At June 30, 1994, the Company had 616 employees, including 377 in
manufacturing, 92 in engineering and 147 in sales, marketing and
administration. At June 30, 1994, Telecom Solutions had 398 employees
and LMI had 218 employees. The Company believes that its future success
is highly dependent on its ability to attract and retain highly qualified
management, sales, marketing and technical personnel. Accordingly, the
Company maintains employee performance incentive and stock plans for
certain of its employees. No Company employees are represented by a
labor union, and the Company has experienced no work stoppages. The
Company believes that its employee relations are good.
Operating Results and Stock Price Volatility
Future operating results will largely depend upon the Company's
ability to implement new technologies and develop and market new
products, changes in product mix and manufacturing efficiencies. Future
Telecom Solutions operating results will continue to be highly dependent
on receipt of orders during the applicable fiscal period. Future LMI
operating results will also be subject to the cyclical nature of the
semiconductor industry.
The Company's future earnings and stock price may be subject to
significant volatility. Any shortfall in sales or earnings from levels
expected by securities analysts and investors could have an immediate and
significant adverse effect on the trading price of the Company's common
stock.
ITEM 2. Properties
The following are the principal facilities of the Company as of June
30, 1994:
Approximate Owned/Lease
Principal Floor Area Expiration
Location Operations (Sq. Ft.) Date
________ __________ ___________ ___________
San Jose, California Corporate Offices,
and Telecom Solutions
administration,
sales, engineering
and manufacturing 47,000 July 1997
Aguada, Puerto Rico Telecom Solutions
manufacturing 22,000 September
2000
Aguada, Puerto Rico Telecom Solutions
manufacturing 23,000 September
1999
Northampton, Navstar administration,
England sales, engineering and
manufacturing 28,000 April
1999
Guildford, Surrey, Telecom Solutions
England sales and service 2,000 April
1995
Garden Grove, LMI administration,
California sales, engineering
and manufacturing 96,000 Owned
Garden Grove, LMI wafer
California fabrication 9,000 Owned
The 96,000 square foot facility located in Garden Grove, California
is subject to an encumbrance as described in Note F of the Notes to
Consolidated Financial Statements which information is incorporated
herein by reference to Excerpts of the Annual Report. The Company
believes that its current facilities are well maintained and generally
adequate to meet short-term requirements.
ITEM 3. Legal Proceedings
On January 11, 1994, a securities class action complaint was filed
in the United States District Court for the Northern District of
California
against the Company, three of its officers and two unaffiliated parties,
by one of the Company's shareholders. The complaint requests that the
court certify a class of plaintiffs consisting of persons who purchased
shares of the Company's common stock during a specified period in 1993.
The complaint alleges that false and misleading statements made during
that period artificially inflated the price of the common stock in
violation of federal securities laws. There is no specific amount of
damages requested in the complaint. The Company and its officers believe
that the complaint is entirely without merit, and intend to vigorously
defend against the action. The Company is also a party to certain other
claims which are normal in the course of its operations. While the
results of such claims cannot be
predicted with certainty, management believes that the final outcome of
such matters will not have a material adverse effect on the Company's
financial position or results of operations.
ITEM 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the security holders of the
Company during the last quarter of the fiscal year ended June 30, 1994.
Executive Officers of the Company
Following is a list of the executive officers of the Company and
brief summaries of their business experience. All officers, including
executive officers, are elected annually by the Board of Directors at
its meeting following the annual meeting of shareholders. The Company
is not aware of any officer who was elected to the office pursuant to
any arrangement or understanding with another person.
Name Age Position
William D. Rasdal 61 Chairman of the Board and Chief
Executive Officer
Paul N. Risinger 61 Vice Chairman and Assistant
Secretary
J. Scott Kamsler 46 Vice President, Finance, Chief
Financial Officer and Secretary
D. Ronald Duren 51 President and Chief Operating
Officer, Telecom Solutions
Dale Pelletier 43 Vice President, Operations,
Telecom Solutions
Brad P. Whitney 40 President and Chief Operating
Officer, Linfinity
Microelectronics
Inc.
Mr. Rasdal has served as Chairman of the Board of the Company since
July 1989 and as Chief Executive Officer since joining the Company in
November 1985. From November 1985 until July 1989, Mr. Rasdal was
President and a Director of the Company. From March 1980 until March
1985, Mr. Rasdal was associated with Granger Associates, a manufacturer
of telecommunications products. His last position with Granger
Associates was President and Chief Operating Officer. From November 1972
to January 1980, Mr. Rasdal was employed by Avantek as Vice President and
Division Manager for Avantek's microwave integrated circuit and
semiconductor operations. For the thirteen years prior to joining
Avantek, he was associated with TRW in various management positions. His
last position there was General Manager of TRW's Semiconductor Division.
Mr. Risinger has served as Vice Chairman of the Company since August
1990 and as a Director of the Company since March 1989. From November
1985, when Mr. Risinger joined the Company, until August 1990, he served
as Executive Vice President, Advanced Marketing and Technology (AMAT).
From April 1981 to May 1985, Mr. Risinger served as Executive Vice
President, AMAT, for Granger Associates and was responsible for the
development of new businesses for the Digital Signal Processing Division.
For four years prior thereto, he served as Executive Vice President and
Chief Operating Officer of the Safariland Companies, a manufacturer of
equipment and accessories in the public safety field. Prior to joining
Safariland, Mr. Risinger was associated with TRW in various management
roles in marketing, research and development, and general management for
seventeen years.
Mr. Kamsler has served as Vice President, Finance, Chief Financial
Officer and Secretary since joining the Company in October 1989. Mr.
Kamsler has also served as a Director of DSP Technology Inc., a
manufacturer of computer automated measurement and control
instrumentation,
since November 1988. Prior to October 1989, Mr. Kamsler served as Vice
President, Finance and Chief Financial Officer of Solitec, Inc. (January
1984 to September 1989), a manufacturer of semiconductor production
equipment, DSP Technology Inc. (April 1984 to September 1989), a former
affiliate of Solitec and E-H International, Inc. (March 1982 to
January 1984), a manufacturer of automatic test equipment, disk and tape
drive controllers, and printed circuit boards. From November 1977 until
January 1982, Mr. Kamsler held various finance positions with Intel
Corporation.
Mr. Duren has served as President and Chief Operating Officer,
Telecom Solutions since August 1990. From August 1988 until August 1990,
Mr. Duren served as Vice President, Sales, Telecom Solutions. From July
1986, when Mr. Duren joined the Company, until August 1988, he held the
position of Director of Marketing and Sales, Telecom Solutions. For
three years prior to joining the Company, Mr. Duren served as Vice
President, Telco Sales for Granger Associates. Previously, Mr. Duren
served in various management positions with AT&T for seventeen years.
Mr. Pelletier has served as Vice President, Operations, Telecom
Solutions since July 1993. From July 1992 until July 1993, Mr. Pelletier
served as General Manager, Synchronization Division, Telecom Solutions.
From August 1990 until July 1992, he served as Synchronization Division
Manager, Telecom Solutions. From August 1989 until August 1990, Mr.
Pelletier served as Operations Manager, Telecom and Analog Solutions
Divisions. From August 1986, when Mr. Pelletier joined the Company,
until August 1989, he held the position of Manufacturing Manager, Telecom
Solutions. Previously, Mr. Pelletier served in various finance and
manufacturing positions for nine years with several manufacturing
companies.
Mr. Whitney joined the Company in November 1992 as President and
Chief Operating Officer for Linfinity Microelectronics Inc. and has
served in such capacity since that date. He joined the Company after
twelve years with Texas Instruments (TI), a semiconductor company.
From November 1990 to November 1992, Mr. Whitney was the Standard Linear
Products Manager, Semiconductor Group at TI. From December 1985 to
November 1990, Mr. Whitney was the Op Amps Product Manager, Semiconductor
Group. From November 1983 through November 1985, Mr. Whitney held
various
positions within the Voltage Regulator Product Group at TI. For the
three
years prior to working in the Semiconductor Group, Mr. Whitney was
associated with the Consumer Products Group. His last position in this
Group was as IC Development Manager, Home Computer Division. Prior to
joining TI, Mr. Whitney was an Engineering Supervisor and Instructor for
the University of Southwestern Louisiana Departments of Computer Science
and Electrical Engineering.
PART II
ITEM 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
The information set forth under the caption "Quarterly Results and
Stock Market Data (unaudited)" is incorporated herein by reference to
Excerpts of the Annual Report.
ITEM 6. Selected Financial Data
The information set forth under the captions "Financial Highlights,"
"Five Year Selected Financial Data" and the fourth sentence of footnote B
to the information set forth under the caption "Quarterly Results and
Stock Market Data (unaudited)" is incorporated herein by reference to
Excerpts of the Annual Report.
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The information set forth under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations" is
incorporated herein by reference to Excerpts of the Annual Report.
ITEM 8. Financial Statements and Supplementary Data
The Consolidated Financial Statements, together with the report
thereon of Deloitte & Touche LLP dated July 28, 1994, are incorporated
herein by reference to Excerpts of the Annual Report.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
Information regarding directors appearing under the caption
"Proposal No. One - Election of Directors--Nominees" on pages 2 and 3 of
the Company's Proxy Statement for the 1994 Annual Meeting of Shareholders
filed with the Commission on September 16, 1994, (the "Proxy Statement")
is incorporated herein by reference.
Information regarding executive officers is incorporated herein by
reference from Part I hereof under the heading "Executive Officers of the
Company" immediately following Item 4 in Part I hereof. Information
regarding compliance with Section 16(a) of the Securities Exchange Act of
1934, as amended, is incorporated herein by reference from the first
paragraph of the section entitled "Other Information--Compliance with
Section 16 of the Securities Exchange Act of 1934" appearing on page 7 of
the Proxy Statement.
ITEM 11. Executive Compensation
Incorporated herein by reference to the Proxy Statement under the
captions "Proposal No. One - Election of Directors--Nominees" on pages 2
and 3, "Executive Officer Compensation" on pages 9, 10 and 11, "Proposal
No. One - Election of Directors--Director Compensation" on page 4 and
"Certain Transactions" on pages 11 and 12.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
Incorporated herein by reference to the Proxy Statement under the
caption "Other Information--Share Ownership by Principal Shareholders
and Management" on page 7.
ITEM 13. Certain Relationships and Related Transactions
Incorporated herein by reference to the Proxy Statement under the
caption "Certain Transactions" on pages 11 and 12.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Financial Statements and Financial Statement Schedules
The following documents are filed as part of this report:
1. Financial Statements*:
Consolidated Balance Sheets at June 30, 1994 and 1993
Consolidated Statements of Operations for the years ended
June 30, 1994, 1993 and 1992
Consolidated Statements of Shareholders' Equity for the
years ended June 30, 1994, 1993 and 1992
Consolidated Statements of Cash Flows for the years
ended June 30, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
Independent Auditors' Report
* Incorporated herein by reference to Excerpts of the Company's 1994
Annual Report
2. Financial Statement Schedules:
Independent Auditors' Report
For the three fiscal years ended June 30, 1994
II Amounts Receivable from Related Parties and
Underwriters, Promoters and Employees other than
Related Parties
V Property, Plant and Equipment
VI Accumulated Depreciation and Amortization of
Property, Plant and Equipment
VIII Valuation and Qualifying Accounts and Reserves
All other schedules have been omitted because they are not
applicable, not required, or the required information is included in
the Consolidated Financial Statements or notes thereto.
3. Exhibits:
See Item 14(c) below.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of
the fiscal year ended June 30, 1994.
(c) Exhibits
The exhibits listed on the accompanying index immediately
following the signature page are filed as a part of this
report.
(d) Financial Statement Schedules
See Item 14(a) above.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Symmetricom, Inc.
We have audited the consolidated financial statements of
Symmetricom,
Inc., formerly Silicon General, Inc., and subsidiaries as of June 30,
1994 and 1993, and for each of the three years in the period ended June
30, 1994, and have issued our report thereon dated July 28, 1994; such
financial statements and report are included in your 1994 Annual Report
to Shareholders and are incorporated herein by reference. Our audits
also included the financial statement schedules of Symmetricom, Inc. and
subsidiaries listed in Item 14(a)2. These financial statement schedules
are the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion, such
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
DELOITTE & TOUCHE LLP
San Jose, California
July 28, 1994
SCHEDULE
II
SYMMETRICOM, INC.
_________________
AMOUNTS RECEIVABLE FROM RELATED PARTIES
AND UNDERWRITERS, PROMOTERS AND EMPLOYEES
OTHER THAN RELATED PARTIES
(In thousands)
Balance
at
Name of Debtor Beginning Amounts
of Year Additions Collected Current Noncurrent
______________ _________ _________ _________ _______ __________
Year ended June 30, 1994:
Brad P. Whitney (1) $ 95 $ -- $ -- $ -- $ 95
Brad P. Whitney (2) $ 10 $ 4 $ -- $ 14 $ --
Year ended June 30, 1993:
Brad P. Whitney (1) $ -- $ 95 $ -- $ -- $ 95
Brad P. Whitney (2) $ -- $ 10 $ -- $ 10 $ --
(1) Unsecured loan bearing interest at the rate of 5.34% per annum, due
April 1998. The Company collected $71,570 in August 1994.
(2) Short-term advance collected by the Company in August 1994.
SCHEDULE V
SYMMETRICOM, INC.
_________________
PROPERTY, PLANT AND EQUIPMENT
(In thousands)
Balance
at Balance
Beginning Additions Retire- at End
of Year at Cost ments of Year
_________ _________ ________ ________
Year ended June 30, 1994:
Land $ 1,247 $ -- $ -- $ 1,247
Buildings 8,938 109 1,056 7,991
Machinery and equipment 26,928 3,650 4,126 26,452
Leasehold improvements 2,051 219 2 2,268
________ ________ ________ ________
$ 39,164 $ 3,978 $ 5,184 $ 37,958
======== ======== ======== ========
Year ended June 30, 1993:
Land $ 1,247 $ -- $ -- $ 1,247
Buildings 8,454 563 79 8,938
Machinery and equipment 27,039 3,820 3,931 26,928
Leasehold improvements 1,861 190 -- 2,051
________ ________ ________ ________
$ 38,601 $ 4,573 $ 4,010 $ 39,164
======== ======== ======== ========
Year ended June 30, 1992: $ 1,247 $ -- $ -- $ 1,247
Buildings 8,454 -- -- 8,454
Machinery and equipment 28,385 1,628 2,974 27,039
Leasehold improvements 1,620 267 26 1,861
________ ________ ________ ________
$ 39,706 $ 1,895 $ 3,000 $ 38,601
======== ======== ======== ========
SCHEDULE VI
SYMMETRICOM, INC.
_________________
ACCUMULATED DEPRECIATION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
(In thousands)
Additions
Balance Charged
at to Cost Balance
Beginning and Retire- at End
of Year Expenses ments of Year
_________ _________ ________ ________
Year ended June 30, 1994:
Buildings $ 2,430 $ 297 $ 451 $ 2,276
Machinery and equipment 19,490 4,356 4,673 19,173
Leasehold improvements 1,302 279 2 1,579
________ ________ ________ ________
$ 23,222 $ 4,932 $ 5,126 $ 23,028
======== ======== ======== ========
Year ended June 30, 1993:
Buildings $ 2,202 $ 307 $ 79 $ 2,430
Machinery and equipment 19,449 3,972 3,931 19,490
Leasehold improvements 1,035 267 -- 1,302
________ ________ ________ ________
$ 22,686 $ 4,546 $ 4,010 $ 23,222
======== ======== ======== ========
Year ended June 30, 1992:
Buildings $ 1,921 $ 281 $ -- $ 2,202
Machinery and equipment 19,214 3,188 2,953 19,449
Leasehold improvements 809 238 12 1,035
________ ________ ________ ________
$ 21,944 $ 3,707 $ 2,965 $ 22,686
======== ======== ======== ========
1994 1993 1992
____ ____ ____
Depreciation and amortization of property,
plant and equipment charged to costs and
expenses (as shown above) $ 4,932 $ 4,546 $ 3,707
Amortization of other assets 857 399 234
________ ________ ________
Total depreciation and amortization for
the years as shown in the Consolidated
Statements of Cash Flows $ 5,789 $ 4,945 $ 3,941
======== ======== ========
SCHEDULE VIII
SYMMETRICOM, INC.
_________________
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In thousands)
Charges
Balance (Credits)
at to Costs Balance
Beginning and Deductions at End
of Year Expenses (1) of Year
_________ _________ __________ ________
Year ended June 30, 1994:
Accrued warranty expense $ 2,136 $ 386 $ 451 $ 2,071
Allowance for doubtful accounts$ 114 $ 155 $ 27 $ 242
Year ended June 30, 1993:
Accrued warranty expense $ 1,047 $ 1,646 $ 557 $ 2,136
Allowance for doubtful accounts$ 109 $ 8 $ 3 $ 114
Year ended June 30, 1992:
Accrued warranty expense $ 632 $ 1,221 $ 806 $ 1,047
Allowance for doubtful accounts$ 211 $ (41) 61 $ 109
(1) Deductions represent amounts written off against the reserve or
allowance.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SYMMETRICOM, INC.
Date: September 19, 1994 By: /s/ J. Scott Kamsler
__________________________
(J. Scott Kamsler)
Vice President, Finance and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ William D. Rasdal Chairman of the Board and
Chief Executive Officer
______________________ (Principal Executive Officer) September 19, 1994
(William D. Rasdal)
/s/ J. Scott Kamsler Vice President, Finance and
Chief Financial Officer
_____________________ (Principal Financial
(J. Scott Kamsler) and Accounting Officer) September 19, 1994
/s/ Howard Anderson Director September 19, 1994
____________________
(Howard Anderson)
/s/ Paul N. Risinger Director September 19, 1994
_____________________
(Paul N. Risinger)
/s/ Robert M. Wolfe Director September 19, 1994
____________________
(Robert M. Wolfe)
Exhibit
Number Index of Exhibits
3.1(1) Restated Articles of Incorporation.
3.2(2) Certificate of Amendment to Restated Articles of
Incorporation filed December 11, 1990.
3.3 Certificate of Amendment to Restated Articles of
Incorporation filed October 27, 1993.
3.4 By-Laws, as amended July 21, 1993.
4.1(3) Common Shares Rights Agreement dated December 6, 1990,
between Silicon General, Inc. and Manufacturers Hanover
Trust Company of California, including the form of Rights
Certificate and the Summary of Rights attached thereto
as Exhibits A and B, respectively.
4.2(4) Amendment to the Common Shares Rights Agreement dated
February 5, 1993 between Silicon General, Inc. and
Chemical Trust Company of California, formerly
Manufacturers Hanover Trust Company of California,
including the form of Rights Certificate and the
Summary of Rights attached thereto as Exhibits A and
B, respectively.
10.1(5) Amended and Restated Employees' Stock Option Plan
(1980), with form of Stock Option Agreement (1980
Plan).
10.2(5) Amended and Restated Non-Qualified Stock Option Plan
(1982), with form of Employee Non-Qualified Stock
Option (1982 Plan).
10.3(5) Amended and Restated Employee Stock Option Plan
(1983), with form of Stock Option Under Incentive
Stock Option Plan 1983.
10.4(5) 1990 Director Option Plan, with form of Director
Option Agreement.
10.5(5) 1990 Employee Stock Plan, with forms of Stock Option
Agreement, Restricted Stock Purchase Agreement,
Tandem Stock Option/SAR Agreement, and Stock
Appreciation Right Agreement.
10.6(2) Loan Agreements between the Company and the John
Hancock Mutual Life Insurance Company, dated October
18, 1990, including exhibits thereto.
10.7(6) Lease Agreement by and between the Company and Menlo
Tasman Investment Company dated June 16, 1986, and
Amendment to Lease dated March 27, 1987.
10.8(7) Lease Agreement by and between Zeltex Puerto Rico,
Inc., a subsidiary of the Company, and Puerto Rico
Industrial Development Company dated June 29, 1984.
10.9(2) Lease Agreement by and between Zeltex Puerto Rico,
Inc., a subsidiary of the Company, and Puerto Rico
Industrial Development Company dated January 22,
1991.
10.10 Lease Agreement by and between Telecom Solutions Puerto
Rico, Inc., a subsidiary of the Company, and Puerto
Rico Industrial Development dated August 9, 1994.
10.11 Lease Agreement by and between Navstar Systems Limited,
a subsidiary of the Company, and Baker Hughes Limited
dated April 22, 1994.
10.12 Revolving Credit Loan Agreement between the Company and
Comerica Bank-Detroit dated December 1, 1993.
10.13(8) Form of Indemnification Agreement.
10.14(10) Linfinity Microelectronics Inc. Common Stock and
Series A Preferred Stock Purchase Agreement dated
June 28, 1993.
10.15(10) Tax Sharing Agreement between Linfinity
Microelectronics Inc. and the Company dated June 28,
1993.
10.16(10) Intercompany Services Agreement between Linfinity
Microelectronics Inc. and the Company dated June 28,
1993.
10.17(10) Linfinity Microelectronics Inc. 1993 Stock Option
Plan with form of Stock Option Agreement.
10.18(10) Linfinity Microelectronics Inc. Form of
Indemnification Agreement.
10.19(10) Employment offer letter by and between the Company
and Brad P. Whitney, President and Chief Operating
Officer, Linfinity Microelectronics Inc. dated
November 20, 1992.
10.20(9) Agreement for Sale and Purchase of the Navstar
Business of Radley Services Limited.
10.21(9) Agreement for the Sale and Purchase of Certain Assets
of Navstar Electronics, Inc.
13.1 Symmetricom, Inc. Excerpts of the 1994 Annual Report.
21.1 Subsidiaries of the Company.
23.1 Independent Auditors' Consent.
Footnotes to Exhibits
(1) Incorporated by reference from Exhibits to Annual
Report on Form 10-K for the fiscal year ended July 2,
1989.
(2) Incorporated by reference from Exhibits to Annual
Report on Form 10-K for the fiscal year ended June 30,
1991.
(3) Incorporated by reference from Exhibits to
Registration Statement on Form 8-A filed with the
Securities and Exchange Commission on December 8,
1990.
(4) Incorporated by reference from Exhibits to
Registration Statement on Form 8-A filed with the
Securities and Exchange Commission on February 11,
1993.
(5) Incorporated by reference from Exhibits to
Registration Statement on Form S-8 filed with the
Securities and Exchange Commission on December 24,
1990.
(6) Incorporated by reference from Exhibits to Annual
Report on Form 10-K for the fiscal year ended June 28,
1987.
(7) Incorporated by reference from Exhibits to Annual
Report on Form 10-K for the fiscal year ended June 30,
1990.
(8) Incorporated by reference from Exhibits to the 1990
Proxy Statement.
(9) Incorporated by reference from Exhibits to Current Report
on Form 8-K filed with the Securities and Exchange
Commission on September 2, 1993.
(10) Incorporated by reference from Exhibits to Annual Report
on Form 10-K for the fiscal year ended June 30, 1993.
CERTIFICATE OF AMENDMENT
OF ARTICLES OF INCORPORATION OF
SILICON GENERAL, INC.
William D. Rasdal and J. Scott Kamsler certify that:
1. They are the Chairman of the Board and Secretary,
respectively, of Silicon General, Inc., a California corporation.
2. Article 1 of the Articles of Incorporation of this
corporation is amended to read in full as follows:
"(1) The name of this corporation is Symmetricom, Inc."
3. The foregoing amendment of Articles of Incorporation has
been duly approved by the Board of Directors.
4. The foregoing amendment of Articles of Incorporation has
been duly approved by the required vote of shareholders in
accordance with Section 902 of the California Corporations Code. The
total number of outstanding shares of Common Stock of the corpora-
tion entitled to vote with respect to this matter is 13,841,870.
The number of shares voting in favor of the amendment equaled or
exceeded the vote required. The percentage vote required was more
than 50% of the outstanding shares of Common Stock.
We further declare under penalty of perjury under the laws of
the State of California that the matters set forth in this
certificate are true and correct of our own knowledge.
Date: October 21, 1993
William D. Rasdal, Chairman of
the Board
J. Scott Kamsler, Secretary
BYLAWS
OF
SYMMETRICOM, INC.
(a California corporation)
ARTICLE I
OFFICES;
Section 1. PRINCIPAL OFFICES;. The board of directors
shall fix the location of the principal executive office of the
corpora-tion at any place within or outside the State of
California. If the principal executive office is located outside
this state, and the corporation has one or more business offices
in this state, the board of directors shall fix and designate a
principal business office in the State of California.
Section 2. OTHER OFFICES;. The board of directors or
officers of the corporation may at any time establish branch or
subordinate offices at any place or places wherein such board or
officers shall deem advisable.
ARTICLE II
MEETINGS OF SHAREHOLDERS;
Section 1. PLACE OF MEETINGS;. Meetings of
shareholders shall be held at any place within or outside of the
State of California designated by the board of directors. In the
absence of any such designation, shareholders' meetings shall be
held at the principal executive office of the corporation.
Section 2. ANNUAL MEETING;. The annual meeting of
share-holders shall be held each year on the date and at a time
designated by the board of directors. In the absence of such
designation, the annual meeting of shareholders shall be held on
the third Thursday of October in each year at 10:00 a.m. However,
if such day falls on a legal holiday, then the meeting shall be
held at the same time and place on the next succeeding full
business day. At each annual meeting directors shall be elected,
and any other proper business may be transacted.
Section 3. SPECIAL MEETING;. A special meeting of
share-holders may be called at any time by the board of directors,
or by the chairman of the board, or by the president, or by one or
more shareholders holding shares in the aggregate entitled to cast
not less than 10% of the votes at that meeting.
If a special meeting is called by any person or persons other
than the board of directors or the president or the chairman of
the board, then, the request shall be in writing, specifying the
time of such meeting and the general nature of the business
proposed to be transacted, and shall be delivered personally or
sent by regis-tered mail or by telegraphic or other facsimile
transmission to the chairman of the board, the president, any vice
president, or the secretary of the corporation. The officer
receiving the request shall cause notice to be promptly given to
the shareholders enti-tled to vote, in accordance with the
provisions of Sections 4 and 5 of this Article II, that a meeting
will be held at the time requested by the person or persons
calling the meeting, so long as that time is not less than thirty-
five (35) nor more than sixty (60) days after the receipt of the
request. If the notice is not given within twenty (20) days after
receipt of the request, the person or persons requesting the
meeting may give the notice. Nothing contained in this paragraph
of this Section 3 shall be construed as limiting, fixing or
affecting the time when a meeting of shareholders called by action
of the board of directors may be held.
Section 4. NOTICE OF SHAREHOLDERS' MEETING;. All
notices of meetings of shareholders shall be sent or otherwise
given in accordance with Section 5 of this Article II not less
than ten (10) (or, if sent by third-class mail pursuant to
Section 5 of this Article II, thirty (30)) nor more than sixty
(60) days before the date of the meeting. The notice shall
specify the place, date and hour of the meeting and (i) in the
case of a special meeting, the general nature of the business to
be transacted (no business other than that specified in the notice
may be transacted), or (ii) in the case of the annual meeting,
those matters which the board of directors, at the time of giving
the notice, intends to present for action by the share-holders (but
subject to the provisions of the following paragraph of this
Section 4 of Article II, any proper matter may be presented at the
meeting for such action). The notice of any meeting at which
directors are to be elected shall include the name of any nominee
or nominees whom, at the time of the notice, management intends to
present for election.
If action is proposed to be taken at any meeting for approval
of (i) a contract or transaction in which a director has a direct
or indirect financial interest, pursuant to Section 310 of the
Corporations Code of California, (ii) an amendment to the articles
of incorporation, pursuant to Section 902 of that Code, (iii) a
reorganization of the corporation, pursuant to Section 1201 of
that Code, (iv) a voluntary dissolution of the corporation,
pursuant to Section 1900 of that Code, or (v) a distribution in
dissolution other than in accordance with the rights of
outstanding preferred
shares, pursuant to Section 2007 of that Code, the notice shall
also state the general nature of that proposal.
Section 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF
NOTICE;. Written notice of any meeting of shareholders given shall
be given either (i) personally or (ii) by first-class mail or
(iii) by third-class mail but only if the corporation has
outstanding shares held of record by five hundred (500) or more
persons (determined as provided in Section 605 of the Code) on the
record date for the shareholders' meeting, or (iv) telegraphic or
other written com-muni-cation. Notices not personally delivered
shall be sent charges prepaid, addressed to the shareholder at the
address of that share-holder appearing on the books of the corpora-
tion or given by the shareholder to the corporation for the
purpose of notice. If no such address appears on the
corporation's books or is given, notice shall be deemed to have
been given if sent to that share-holder by mail or telegraphic or
other written communication to the corporation's principal execu-
tive office, or if published at least once in a newspaper of
general circulation in the county where that office is located.
Notice shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by telegram
or other means of written communication.
If any notice addressed to a shareholder at the address of
that shareholder appearing on the books of the corporation is
returned to the corporation by the United States Postal Service
marked to indicate that the United States Postal Service is unable
to deliver the notice to the shareholder at that address, all
future notices or reports shall be deemed to have been duly given
without further mailing if these shall be available to the
shareholder on written demand of the shareholder at the principal
executive office of the corporation for a period of one year from
the date of the giving of the notice.
An affidavit of mailing or other means of giving any notice
of any shareholders' meeting shall be executed by the secretary,
assistant secretary, or any transfer agent of the corporation
giving the notice, and shall be filed and maintained in the minute
book of the corporation, and shall be prima facie evidence of the
giving of such notice.
Section 6. QUORUM;. The presence in person or by
proxy of the holders of a majority of the shares entitled to vote
at any meeting of shareholders shall constitute a quorum for the
trans-action of business. The shareholders present at a duly
called or held meeting at which a quorum is present may continue
to do business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority
of the shares required to constitute a quorum.
Section 7. ADJOURNED MEETING; NOTICE;. Any
shareholders' meeting, annual or special, whether or not a quorum
is present, may be adjourned from time to time by the vote of the
majority of the shares represented at that meeting, either in
person or by proxy, but in the absence of a quorum, no other
business may be transacted at that meeting, except as provided in
Section 6 of this Article II.
When any meeting of shareholders, either annual or special,
is adjourned to another time or place, notice need not be given of
the adjourned meeting if the time and place are announced at a
meeting at which the adjournment is taken, unless a new record
date for the adjourned meeting is fixed, or unless the adjournment
is for more than forty-five (45) days from the date set for the
original meeting, in which case the board of directors shall set a
new record date. Notice of any such adjourned meeting shall be
given to each shareholder of record entitled to vote at the
adjourned meeting in accordance with the provisions of Sections 4
and 5 of this Article II. At any adjourned meeting the
corporation may transact any business which might have been
transacted at the original meeting.
Section 8. VOTING;. The shareholders entitled to vote
at any meeting of shareholders shall be determined in accordance
with the provisions of Section 11 of this Article II, subject to
the provi-sions of Sections 702 to 704, inclusive of the
Corporations Code of California (relating to voting shares held by
a fiduciary, in the name of a corporation, or in joint ownership).
The shareholders' vote may be by voice vote or by ballot;
provided, however, that any election for directors must be by
ballot if demanded by any share-holder before the voting has begun.
Except as provided in the last paragraph of this Section 8, or as
may be otherwise provided in the articles of incorporation, each
outstanding share, regardless of class, shall be entitled to one
vote on each matter submitted to a vote of the shareholders. On
any matter other than elections of directors, any shareholder may
vote part of the shares in favor of the proposal and refrain from
voting the remaining shares or vote them against the proposal,
but, if the shareholder fails to specify the number of shares
which the shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is
with respect to all shares that the shareholder is entitled to
vote. If a quorum is present, the affirmative vote of the
majority of the shares represented at the meeting and voting on
any matter (other than the election of directors) shall be the act
of the shareholders, unless the vote of a greater number or voting
by classes or cumulative voting is required by California General
Corporation Law or by the articles of incorporation or by these
bylaws.
At a shareholders' meeting at which directors are to be
elected, no shareholder shall be entitled to cumulate votes (i.e.,
cast for any one or more candidates a number of votes greater than
the number of the shareholder's shares) unless the candidates'
names have been placed in nomination prior to commencement of the
voting and a shareholder has given notice prior to commencement of
the voting of the shareholder's intention to cumulate votes. If
any shareholder has given such a notice, then every shareholder
entitled to vote may cumulate votes for candidates in nomination
and give one candidate a number of votes equal to the number of
directors to be elected multiplied by the number of votes to which
that shareholder's shares are entitled, or distribute the share-
holder's votes on the same principle among any or all of the
candidates, as the shareholder thinks fit. The candidates
receiving the highest number of votes, up to the number of
directors to be elected, shall be elected; votes against any
candidate and votes withheld shall have no legal effect.
Section 9. WAIVER OF NOTICE OR CONSENT BY ABSENT
SHARE-HOLDERS;. The transactions of any meeting of shareholders,
either annual or special, however called and noticed, and wherever
held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present either in person
or by proxy, and if, either before or after the meeting, each
person entitled to vote, who was not present in person or by
proxy, signs a written waiver of notice or a consent to a holding
of the meeting, or an approval of the minutes. The waiver of
notice or consent need not specify either the business to be
transacted or the purpose of any annual or special meeting of the
shareholders, except that if action is taken or proposed to be
taken for approval of any of those matters specified in the second
paragraph of Sec-tion 4 of this Article II, the waiver of notice or
consent shall state the general nature of the proposal. All such
waivers, consent, or approvals shall be filed with the corporate
records or made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a
waiver of notice of that meeting, except when the person objects,
at the beginning of the meeting, to the transaction of any busi-
ness because the meeting is not lawfully called or convened, and
except that attendance at a meeting is not a waiver of any right
to object to the consideration of matters not included in the
notice of the meeting if that objection is expressly made at the
meeting.
Section 10. SHAREHOLDER ACTION BY WRITTEN CONSENT
WITHOUT A MEETING;. Any action which may be taken at any annual
or special meting of shareholders may be taken without a meeting
and without prior notice, if a consent in writing, setting forth
the action so taken, is signed by the holders of outstanding
shares having not less than the minimum number of votes that would
be necessary to
authorize or take that action at a meeting at which all shares
entitled to vote on that action were present and voted. In the
case of election of directors, such a consent shall be effective
only if signed by the holders of all outstanding shares entitled
to vote for the election of directors; provided, however, that a
director may be elected at any time to fill a vacancy on the board
of directors (provided that the vacancy was not created by removal
of a director and that it has not been filled by the directors) by
a majority of the outstanding shares entitled to vote for the
election of directors. All such consents shall be filed with the
secretary of the corpora-tion and shall be maintained in the corpo-
rate records. Any share-holder giving a written consent, or the
shareholders' proxy holders, or a transferee of the shares or a
personal representative of the shareholder or their respective
proxy holders, may revoke the consent by a writing received by the
secretary of the corpora-tion before written consents of the number
of shares required to authorize the proposed action have been
filed with the secretary.
If the consents of all shareholders entitled to vote have not
been solicited in writing, and if the unanimous written consent of
all such shareholders shall not have been received, the secretary
shall give prompt notice of the corporate action approved by the
shareholders without a meeting. This notice shall be given to
those shareholders entitled to vote who have not consented in
writing and shall be given in the manner specified in Section 5 of
this Article II. In the case of approval of (i) contracts or
trans-actions in which a director has a direct or indirect
financial interest, pursuant to Section 310 of the Corporations
Code of California, (ii) indemnification of agents of the
corporation, pursuant to Section 317 of that Code, (iii) a
reorganization of the corporation, pursuant to Section 1201 of
that Code, and (iv) a distribution in dissolution other than in
accor-dance with the rights of outstanding preferred shares,
pursuant to Section 2007 of that Code, the notice shall be given
at least ten (10) days before the consummation of any action
authorized by that approval.
Section 11. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING,
AND GIVING CONSENTS;. For purposes of determining the
shareholders entitled to notice of any meeting or to vote or
entitled to give consent to corporate action without a meeting,
the board of directors may fix, in advance, a record date, which
shall not be more than sixty (60) days nor less than ten (10) days
before the date of any such meeting nor more than sixty (60) days
before any such action without a meeting, and in this event only
shareholders of record on the date so fixed are entitled to notice
and to vote or to give consents, as the case may be,
notwithstanding any transfer of any shares on the books of the
corporation after the record date, except as otherwise provided in
the California General Corporation Law.
If the board of directors does not so fix a record date:
(a) The record date for determining shareholders
enti-tled to notice of or to vote at a meeting of shareholders
shall be at the close of business on the business day next
preceding the day on which notice is given or, if notice is
waived, at the close of business on the business day next
preceding the day on which the meeting is held.
(b) The record date for determining shareholders
enti-tled to give consent to corporate action in writing without a
meeting, (i) when no prior action by the board has been taken,
shall be the day on which the first written consent is given, or
(ii) when prior action of the board has been taken, shall be at
the close of business on the day on which the board adopts the
reso-lu-tion relating to that action, or the sixtieth (60th) day
before the date of such other action, whichever is later.
The record date for any other purpose shall be as provided in
Article VIII of these bylaws.
Section 12. PROXIES;. Every person entitled to vote
for directors or on any other matter shall have the right to do so
either in person or by one or more agents authorized by a written
proxy signed by the person and filed with the secretary of the
corporation. A proxy shall be deemed signed if the shareholder's
name is placed on the proxy (whether by manual signature, type-
writing, telegraphic transmission, or otherwise) by the share-
holder or the shareholder's attorney in fact. A validly executed
proxy which does not state that it is irrevocable shall continue
in full force and effect unless (i) revoked by the person
executing it, before the vote pursuant to that proxy, by a writing
delivered to the corporation stating that the proxy is revoked, or
by a subse-quent proxy executed by, or attendance at the meeting
and voting in person by, the person executing the proxy; or
(ii) written notice of the death or incapacity of the maker of
that proxy is received by the corporation before the vote pursuant
to that proxy is counted; provided, however, that no proxy shall
be valid after the expiration of eleven (11) months from the date
of the proxy, unless otherwise provided in the proxy. The dates
contained on the forms of proxy presumptively determine the order
of execution, regardless of the postmark dates on the envelopes in
which they are mailed. The revocability of a proxy that states on
its face that it is irrevocable shall be governed by the
provisions of Sections 705(e) and 705(f) of the Corporations Code
of California.
Section 13. INSPECTORS OF ELECTION;. Before any
meeting of shareholders, the board of directors may appoint any
person or persons other than nominees for office to act as an
inspector or inspectors of election at the meeting or its
adjournment. If no inspectors of election are so appointed, the
chairman of the meet-ing may, and on the request of any shareholder
or a share-holder's proxy shall, appoint inspectors of election at
the meeting. The number of inspectors shall be either one (1) or
three (3). If inspectors are appointed at a meeting on the
request of one or more shareholders or proxies, the holders of a
majority of shares or their proxies present at the meeting shall
determine whether one (1) or three (3) inspectors are to be
appointed. If any person appointed as inspector fails to appear or
fails or refuses to act, the chairman of the meeting may, and upon
the request of any shareholder or a shareholder's proxy shall,
appoint a person to fill that vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and
the voting power of each, the shares represented at the meeting,
the existence of a quorum, and the authenticity, validity, and
effect of proxies;
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions
in any way arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct
the election or vote with fairness to all shareholders.
ARTICLE III
DIRECTORS;
Section 1. POWERS;. Subject to the provisions of the
California General Corporation Law and any limitations in the
articles of incorporation and these bylaws relating to the action
required to be approved by the shareholders or by the outstanding
shares, the business and affairs of the corporation shall be
managed and all corporate powers shall be exercised by or under
the direction of the board of directors.
Section 2. NUMBER OF DIRECTORS;.
(a) The number of directors shall be not less than a
minimum of three nor more than a maximum of five. After adoption
or amendment of this bylaw by the shareholders, the exact number
of directors shall be fixed, within the limits specified in this
bylaw, by the following bylaw which may be amended from time to
time by the Board of Directors. The indefinite number of
directors may be changed, or a definite number may be fixed
without provision for an indefinite number, by a duly adopted
amendment to the articles of incorporation or by an amendment to
this bylaw duly adopted by the vote or written consent of holders
of a majority of the outstanding shares entitled to vote;
provided, however, that an amendment reducing the fixed number or
the minimum number of directors to a number less than five (5)
cannot be adopted if the votes cast against its adoption at a
meeting, or the shares not consenting in the case of an action by
written consent, are equal to more than sixteen and two-thirds
percent (16-2/3%) of the outstanding shares entitled to vote
thereon. No amendment may change the stated maximum number of
authorized directors to a number greater than two (2) times the
stated minimum number of directors minus one (1).
(b) The number of directors of the corporation shall
be five.
Section 3. ELECTION AND TERM OF OFFICE OF DIRECTORS;.
Directors shall be elected at each annual meeting of the share-
holders to hold office until the next annual meeting. Each
director, including a director elected to fill a vacancy, shall
hold office until the expiration of the term for which elected and
until a successor has been elected and qualified. No reduction of
the authorized number of directors shall have the effect of
removing any director before the director's term of office
expires.
Section 4. VACANCIES;. Vacancies in the board of
directors may be filled by a majority of the remaining directors,
though less than a quorum, or by a sole remaining director, except
that a vacancy created by the removal of a director by the vote or
written consent of the shareholders or by court order may be
filled only by the vote of a majority of the shares entitled to
vote represented at a duly held meeting at which a quorum is
present (which shares voting affirmatively also constitute a
majority of the required quorum), or by the written consent of
holders of a majority of the outstanding shares entitled to vote.
Each director so elected shall hold office until the next annual
meeting of shareholders and until a successor has been elected and
qualified.
A vacancy or vacancies in the board of directors shall be
deemed to exist in the event of the death, resignation, or removal
of any director, or if the board of directors by resolution
declares vacant the office of a director who has been declared of
unsound mind by an order of court or convicted of a felony, or if
the authorized number of directors is increased, or if the
shareholders fail, at any meeting of shareholders at which any
director or directors are elected, to elect the number of
directors to be voted for at that meeting.
The shareholders may elect a director or directors at any
time to fill any vacancy or vacancies not filled by the directors,
but any such election by written consent shall require the consent
of a majority of the outstanding shares entitled to vote.
Any director may resign effective on giving written notice to
the chairman of the board, the president, the secretary, or the
board of directors, unless the notice specifies a later time for
that resignation to become effective. If the resignation of a
director is effective at a future time, the board of directors may
elect a successor to take office when the resignation becomes
effective.
No reduction of the authorized number of directors shall have
the effect of removing any director before that director's terms
of office expires.
Section 5. PLACE OF MEETINGS AND MEETINGS BY
TELEPHONE;. Regular meetings of the board of directors may be held
at any place within or outside the State of California that has
been designated from time to time by resolution of the board. In
the absence of such designation, regular meetings shall be held at
the principal executive office of the corporation. Special
meetings of the board shall be held at any place within or outside
the State of California that has been designated in the notice of
the meeting or, if not stated in the notice or there is no notice,
at the principal executive office of the corporation. Any
meeting, regular or special, may be held by conference telephone
or similar communication equipment, so long as all directors
participating in the meeting can hear one another, and all such
directors shall be deemed to be present in person at the meeting.
Section 6. ANNUAL MEETING;. Immediately following
each annual meeting of shareholders, the board of directors shall
hold a regular meeting for the purpose of organization, any
desired elec-tion of officers, and the transaction of other
business. Notice of this meeting shall not be required.
Section 7. OTHER REGULAR MEETINGS;. Other regular
meetings of the board of directors shall be held without call at
such time as shall from time to time be fixed by the board of
directors. Such regular meetings may be held without notice.
Section 8. SPECIAL MEETINGS;. Special meetings of the
board of directors for any purpose or purposes may be called at
any time by the chairman of the board or the president or any vice
president or the secretary or any two directors.
Notice of the time and place of special meetings shall be
delivered personally or by telephone to each director or sent by
first-class mail or telegram, charges prepaid, addressed to each
director at that director's address as it is shown on the records
of the corporation. In case the notice is mailed, it shall be
deposited in the United States mail at least four (4,) days before
the time of the holding of the meeting. In case notice is
delivered personally, or by telephone or telegram, it shall be
delivered personally or by telephone or to the telegraph company
at least forty-eight (48) hours before the time of the holding of
the meeting. Any oral notice given personally or by telephone may
be communicated either to the director or to a person at the
office of the director who the person giving the notice has reason
to believe will promptly communicate it to the director. The
notice need not specify the purpose of the meeting nor the place
if the meeting is to be held at the principal executive office of
the corporation.
Section 9. QUORUM;. A majority of the authorized
number of directors shall constitute a quorum for the transaction
of business, except to adjourn as provided in Section 11 of this
Article III. Every act or decision done or made by a majority of
the directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the board of directors,
subject to the provisions of Section 310 of the Corporations Code
of California (as to approval of contracts or transactions in
which a director has a direct or indirect material financial
interest), Section 311 of that Code (as to appointment of commit-
tees), and Section 317(e) of that Code (as to indemnification of
directors), the articles of incorporation, and other applicable
laws. A meeting at which a quorum is initially present may
continue to transact business notwithstanding the withdrawal of
directors, if any action taken is approved by at least a majority
of the required quorum for that meeting.
Section 10. WAIVER OF NOTICE;. The transactions of any
meeting of the board of directors, however called and noticed or
wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice if a quorum is present and if,
either before or after the meeting, each of the directors not
present signs a written waiver of notice, a consent to holding the
meeting or an approval of the minutes. The waiver of notice or
consent need not specify the purpose of the meeting. All such
waivers, consents, and approvals shall be filed with the corporate
records or made a part of the minutes of the meeting. Notice of a
meeting shall also be deemed given to any director who attends the
meeting without protesting before or at its commencement, the lack
of notice to that director.
Section 11. ADJOURNMENT;. A majority of the directors
present, whether or not constituting a quorum, may adjourn any
meeting to another time and place.
Section 12. NOTICE OF ADJOURNMENT;. Notice of the time
and place of holding an adjourned meeting need not be given,
unless the meeting is adjourned for more than twenty-four (24)
hours, in which case notice of the time and place shall be given
before the time of the adjourned meeting, in the manner specified
in Section 8 of this Article III, to the directors who were not
present at the time of adjournment.
Section 13. ACTION WITHOUT MEETING;. Any action
required or permitted to be taken by the board of directors may be
taken with-out a meeting, if all members of the board shall
individually or collectively consent in writing to that action.
Such action by written consent shall have the same force and
effect as an unani-mous vote of the board of directors. Such
written consent or consents shall be filed with the minutes of the
proceedings of the board.
Section 14. FEES AND COMPENSATION OF DIRECTORS;.
Directors and members of committees may receive such compensation,
if any, for their services, and reimbursement of expenses, as may
be fixed or determined by resolution of the board of directors.
This Section 14 shall not be construed to preclude any director
from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise, and receiving compensation for
those services.
ARTICLE IV
COMMITTEES;
Section 1. COMMITTEE OF DIRECTORS;. The board of
directors may, by resolution adopted by a majority of the
authorized number of directors, designate one or more committees,
each consisting of two or more directors, to serve at the pleasure
of the board. The board may designate one or more directors as
alternate members of any committee, who may replace any absent
member at any meeting of the committee. Any committee, to the
extent provided in the resolution of the board, shall have all the
authority of the board, except with respect to:
(a) the approval of any action which, under the
General Corporation Law of California, also requires shareholders'
approval or approval of the outstanding shares;
(b) the filling of vacancies on the board of
directors or in any committee;
(c) the fixing of compensation of the directors for
serving on the board or on any committee;
(d) the amendment or repeal of bylaws or the adoption
of new bylaws;
(e) the amendment or repeal of any resolution of the
board of directors which by its express terms is not so amendable
or repealable;
(f) a distribution to the shareholders of the
corpora-tion, except at a rate or in a periodic amount or within a
price range determined by the board of directors; or
(g) the appointment of any other committees of the
board of directors or the members of these committees.
Section 2. MEETINGS AND ACTION OF COMMITTEES;.
Meetings and actions of committees shall be governed by, and held
and taken in accordance with, the provisions of Article III of
these bylaws, Section 5 (place of meetings) Section 7 (regular
meetings), Section 8 (special meetings and notice), Section 9
(quorum), Section 10 (waiver of notice), Section 11 (adjournment),
Section 12 (notice of adjournment) and Section 13 (action without
meeting), with such changes in the context of those bylaws as are
necessary to substitute the committee and its members for the
board of directors and its members, except that the time of
regular meetings of committees may be determined either by
resolution of the board of directors or by resolution of the
committee; special meetings of committees may also be called by
resolution of the board of directors; and notice of special
meetings of committees shall also be given to all alternate
members, who shall have the right to attend all meetings of the
committee. The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions
of these bylaws.
ARTICLE V
OFFICERS;
Section 1. OFFICERS;. The officers of the corporation
shall be a chairman of the board or a president, or both, a
secretary and a chief financial officer. The corporation may also
have, at the discretion of the board of directors, a chief
executive officer, a chief operating officer, one or more vice
presidents, one or more assistant secretaries, one or more
assistant treasurers, and such other officers as may be appointed
in accordance with the provi-sions of Section 3 of this Article V.
Any number of offices may be held by the same person.
Section 2. ELECTION OF OFFICERS;. The officers of the
corporation, except such officers as may be appointed in
accordance with the provisions of Section 3 or Section 5 of this
Article V, shall be chosen by the board of directors, and each
shall serve at the pleasure of the board, subject to the rights,
if any, of an officer under any contract of employment. Any
contract of employ-ment with an officer shall be unenforceable
unless in writing and specifically authorized by the board of
directors.
Section 3. SUBORDINATE OFFICERS;. The board of
directors may appoint, and may empower the president to appoint,
such other officers as the business of the corporation may
require, each of whom shall hold office for such period, have such
authority and perform such duties as are provided in the bylaws or
as the board of directors may from time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS;.
Subject to the rights, if any, of any officer under any contract
of employ-ment, any officer may be removed, either with or without
cause, by the board of directors, at any regular or special
meeting of the board, or, except in case of an officer chosen by
the board of directors, by any officer upon whom such power of
removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice
to the corporation. Any resignation shall take effect at the date
of receipt of that notice or at any later time specified in that
notice; and, unless otherwise specified in that notice, the
acceptance of the resignation shall not be necessary to make it
effective. Any resignation is without prejudice to the rights, if
any, of the corporation under any contract to which the officer is
a party.
Section 5. VACANCIES IN OFFICES;. A vacancy in any
office because of death, resignation, removal, disqualification or
any
other cause shall be filled in the manner prescribed in these
bylaws for regular appointments to that office.
Section 6. CHAIRMAN OF THE BOARD;. The chairman of
the board, if such officer be elected, shall, if present, preside
at meeting of the board of directors and exercise and perform such
other powers and duties as may from time to time be assigned to
him by the board of directors or prescribed by the bylaws. If
there is no president or chief executive officer, the chairman of
the board shall act as chief executive officer of the corporation
and shall have the powers and duties prescribed in Section 7 of
this Article V.
Section 7. PRESIDENT;. Subject to any supervisory
powers, if any, as may be given by the board of directors to the
chairman of the board and/or chief executive officer, if there be
such an officer or officers, the president shall, subject to the
control of the board of directors, have general supervision,
direction, and control of the business and the affairs of the
corporation. In the absence of the chairman of the board, or if
there be none, he shall preside at all meetings of the
shareholders and at all meetings of the board of directors. He
shall have the general powers and duties of management usually
vested in the office of president of a corporation, and shall have
such other powers and duties as may be prescribed by the board of
directors or the bylaws.
Section 8. VICE PRESIDENTS;. In the absence or
disability of the chairman of the board, the chief executive
officer and the president, the vice presidents, if any, in order
of their rank as fixed by the board of directors or, if not
ranked, a vice presi-dent designated by the board of directors,
shall perform all the duties of the such officers, and when so
acting shall have all the powers of, and be subject to all the
restrictions upon, such officers. The vice presidents shall have
such other powers and perform such other duties as from time to
time may be prescribed for them respectively by the board of
directors, the chairman of the board, the chief executive officer,
or the president.
Section 9. SECRETARY;. The secretary shall keep or
cause to be kept, at the principal executive office or such other
place as the board of directors may direct, a book of minutes of
all meetings and action of the directors, committees of directors,
and shareholders, with the time and place of holding, whether
regular or special, and if special, how authorized, the notice
given, the names of those present at directors' meetings or
committee meet-ings, the number of shares present or represented at
shareholders' meetings, and the proceedings.
The secretary shall keep, or cause to be kept, at the
principal executive office of the corporation or at the office of
the corporation's transfer agent or registrar, as determined by
resolution of the board of directors, a share register, or a
duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares,
and the number and date of cancellation of every certificate
surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all
meetings of the shareholders and of the board of directors
required by the bylaws or by law to be given, and he shall keep
the seal of the corporation if one be adopted, in safe custody,
and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or by the bylaws.
Section 10. CHIEF FINANCIAL OFFICER; TREASURER;. The
chief financial officer or, if there be none, the treasurer shall
keep and maintain, or cause to be kept and maintained, adequate
and correct books and records of accounts of the properties and
busi-ness transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses,
capital, retained earnings, and shares. The books of account
shall at all reasonable times be open to inspection by any
director.
The chief financial officer (or the treasurer) shall deposit
all moneys and other valuables in the name and to the credit of
the corporation with such depositories as may be designated by the
board of directors. He shall disburse the funds of the corpora-
tion as may be ordered by the board of directors, shall render to
the chairman of the board, the chief executive officer, the
president and board of directors, whenever they request it, an
account of all of his transactions as chief financial officer (or
treasurer) and of the financial condition of the corporation, and
shall have other powers and perform such other duties as may be
prescribed by the board of directors or the bylaws.
Should there be no one serving in the capacity of chief
finan--cial officer, the treasurer (or, in his absence, the
assistant treasurer) shall exercise all of the duties and assume
all of the responsibilities of the chief financial officer.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND OTHER AGENTS;
Section 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS;.
The corporation shall, to the maximum extent and in the manner
per-mitted by the Code, indemnify each of its directors and
officers
against expenses (as defined in Section 317(a) of the Code),
judgments, fines, settlements, and other amounts actually and
reasonably incurred in connection with any proceeding (as defined
in Section 317(a) of the Code), arising by reason of the fact that
such person is or was an agent of the corporation. For purposes
of this Article VI, a "director" or "officer" of the corporation
includes any person (i) who is or was a director or officer of the
corporation, (ii) who is or was serving at the request of the
corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or
(iii) who was a director or officer of a corporation which was a
predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
Section 2. INDEMNIFICATION OF OTHERS;. The
corporation shall have the power, to the extent and in the manner
permitted by the Code, to indemnify each of its employees and
agents (other than directors and officers) against expenses (as
defined in Section 317(a) of the Code), judgments, fines,
settlements, and other amounts actually and reasonably incurred in
connection with any proceeding (as defined in Section 317(a) of
the Code), arising by reason of the fact that such person is or
was an agent of the corporation. For purposes of this Article VI,
an "employee" or "agent" of the corporation (other than a director
or officer) includes any person (i) who is or was an employee or
agent of the corporation, (ii) who is or was serving at the
request of the corporation as an employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise, or (iii) who was an employee or agent of a corporation
which was a predecessor corporation of the corporation or of
another enterprise at the request of such predecessor corporation.
Section 3. PAYMENT OF EXPENSES IN ADVANCE;. Expenses
incurred in defending any civil or criminal action or proceeding
for which indemnification is required pursuant to Section 6.1 or
for which indemnification is permitted pursuant to Section 6.2
following authorization thereof by the Board of Directors shall be
paid by the corporation in advance of the final disposition of
such action or proceeding upon receipt of an undertaking by or on
behalf of the indemnified party to repay such amount if it shall
ultimately be determined that the indemnified party is not
entitled to be indemnified as authorized in this Article VI.
Section 4. INDEMNITY NOT EXCLUSIVE;. The
indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking
indemnification may be entitled under any bylaw, agreement, vote
of shareholders or disinterested directors or otherwise, both as
to action in an official capacity and as to action in another
capacity while holding such office, to
the extent that such additional rights to indemnification are
authorized in the Articles of Incorporation.
Section 5. INSURANCE INDEMNIFICATION;. The
corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation against any
liability asserted against or incurred by such person in such
capacity or arising out of such person's status as such, whether
or not the corporation would have the power to indemnify him
against such liability under the provisions of this Article VI.
Section 6. CONFLICTS.; No indemnification or advance
shall be made under this Article VI, except where such
indemnification or advance is mandated by law or the order,
judgment or decree of any court of competent jurisdiction, in any
circumstance where it appears:
(1) That it would be inconsistent with a provision of
the Articles of Incorporation, these bylaws, a resolution of the
shareholders or an agreement in effect at the time of the accrual
of the alleged cause of the action asserted in the proceeding in
which the expenses were incurred or other amounts were paid, which
prohibits or otherwise limits indemnification; or
(2) That it would be inconsistent with any condition
expressly imposed by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS;
Section 1. MAINTENANCE AND INSPECTION OF SHARE
REGISTER;. The corporation shall keep at its principal executive
office, or at the office of its transfer agent or registrar, if
either be appointed and as determined by resolution of the board
of directors, a record of its shareholders, giving the names and
addresses of all shareholders and the number and class of shares
held by each shareholder.
A shareholder or shareholders of the corporation holding at
least five percent (5%) in the aggregate of the outstanding voting
shares of the corporation or who holds at least once percent (1%)
of such voting shares and has filed a Schedule 14B with the
Securities and Exchange Commission relating to the election of
directors may (i) inspect and copy the records of the
shareholders' names and addresses and shareholdings during usual
business hours on five (5) days' prior written demand on the
corporation and (ii) obtain from the transfer agent of the
corporation, on written
demand and on the tender of such transfer agent's usual charges
for such list, a list of the shareholders' names and addresses,
who are entitled to vote for the election of directors, and their
shareholdings, as of the most recent record date for which that
list has been compiled or as of a date specified by the
shareholder after the date of demand. This list shall be made
available to any shareholder by the transfer agent on or before
the later of five (5) days after the demand is received or five
(5) days after the date specified in the demand as the date as of
which the list is to be compiled. The record of shareholders
shall also be open to inspection on the written demand of any
shareholder or holder of a voting trust certificate, at any time
during usual business hours, for a purpose reasonably related to
the holder's interests as a shareholder or as the holder of a
voting trust certificate. Any inspection and copying under this
Section 1 may be made in person or by an agent or attorney of the
shareholder or holder of a voting trust certificate making the
demand.
Section 2. MAINTENANCE AND INSPECTION OF BYLAWS;. The
corporation shall keep at its principal executive office, or if
its principal office is not in the State of California, at its
principal business office in this state, the original or a copy of
the bylaws as amended to date, which shall be open to inspection
by the shareholders at all reasonable times during office hours.
If the principal executive office of the corporation is outside
the State of California and the corporation has no principal
business in this state, the secretary shall, upon the written
request of any shareholder, furnish to that shareholder a copy of
the bylaws as amended to date.
Section 3. MAINTENANCE AND INSPECTION OF OTHER
CORPORATE RECORDS;. The accounting books and records and minutes
of proceedings of the shareholders and the board of directors and
any committee or committees of the board of directors shall be
kept at such place or places designated by the board of directors,
or, in the absence of such designation, at the principal executive
office of the corporation. The minutes shall be kept in written
form and the accounting books and records shall be kept either in
written form or in any form capable of being converted into
written form. The minutes and accounting books and records shall
be open to inspection upon the written demand of any shareholder
or holder of a voting trust certificate, at any reasonable time
during usual business hours, for a purpose reasonably related to
the holder's interest as a shareholder or as the holder of a
voting trust certificate. The inspection may be made in person or
by an agent or attorney, and shall include the right to copy and
make extracts. These rights of inspection shall extend to the
records of each subsidiary corporation of the corporation.
Section 4. INSPECTION BY DIRECTORS;. Every director
shall have the absolute right at any reasonable time to inspect
all books, records, and documents of every kind and the physical
properties of the corporation and each of its subsidiary corpora-
tions. This inspection by a director may be made in person or by
an agent or attorney and the right of inspection includes the
right to copy and make extracts of documents.
Section 5. ANNUAL REPORT TO SHAREHOLDERS;. The
corporation shall prepare and send to its shareholders an annual
report to shareholders as required by Section 1501 of the
California General Corporation Law.
ARTICLE VIII
GENERAL CORPORATE POWERS;
Section 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE
AND VOTING;. For purposes of determining the shareholders
entitled to receive payment of any dividend or other distribution
or allotment of any rights or entitled to exercise any rights in
respect of any other lawful action (other than action by
shareholders by written consent without a meeting), the board of
directors may fix, in advance, a record date, which shall not be
more than sixty (60) days before any such action, and in that case
only shareholders of record on the date so fixed are entitled to
receive the dividend, distribution, or allotment of rights or to
exercise the rights, as the case may be, notwithstanding any
transfer of any shares on the books of the corporation after the
record date so fixed, except as otherwise provided in the
California General Corporation Law.
If the board of directors does not so fix a record
date, the record date for determining shareholders for any such
purpose shall be at the close of business on the day on which the
board adopts the applicable resolution or the sixtieth (60th) day
before the date of that action, whichever is later.
Section 2. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS;.
All checks, drafts, or other orders for payment of money, notes,
or other evidences of indebtedness, issued in the name of or
payable to the corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time, shall
be determined by resolution of the board of directors.
Section 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW
EXECUTED;. The board of directors, except as otherwise provided
in these bylaws, may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in
the name of and on behalf of the corporation, and this authority
may be
general or confined to specific instances; and, unless so
authorized or ratified by the board of directors or within the
agency power of an officer, no officer, agent, or employee shall
have any power or authority to bind the corporation by any
contract or engagement or to pledge its credit or to render it
liable for any purpose or for any amount.
Section 4. CERTIFICATE FOR SHARES;. A certificate or
certificates for shares of the capital stock of the corporation
shall be issued to each shareholder when any of these shares are
fully paid, and the board of directors may authorize the issuance
of certificates or shares as partly paid provided that these
certificates shall state the amount of the consideration to be
paid for them and the amount paid. All certificates shall be
signed in the name of the corporation by the chairman of the board
or vice chairman of the board or the president or vice president
and by the chief financial officer or an assistant treasurer or
the secretary or any assistant secretary, certifying the number of
shares and the class or series of shares owned by the shareholder.
Any or all of the signatures on the certificate may be facsimile.
In case any officer, transfer agent, or registrar who has signed
or whose facsimile signature has been placed on a certificate
shall have ceased to be that officer, transfer agent, or registrar
before that certificate is issued, it may be issued by the
corporation with the same effect as if that person were an
officer, transfer agent, or registrar at the date of issue.
Section 5. LOST CERTIFICATES;. Except as provided in
this Section 5, no new certificates for shares shall be issued to
replace an old certificate unless the latter is surrendered to the
corporation and cancelled at the same time. The board of
directors may, in case any share certificate or certificate for
any other security is lost, stolen or destroyed, authorize the
issuance of a replacement certificate on such terms and conditions
as the board may require, including provision for indemnification
of the corporation secured by a bond or other adequate security
sufficient to protect the corporation against any claim that may
be made against it, including any expense or liability, on account
of the alleged loss, theft, or destruction of the certificate or
the issuance of the replacement certificate.
Section 6. REPRESENTATION OF SHARES OF OTHER
CORPORATIONS;. The chairman of the board, the president, or any
vice president, or any other person authorized by resolution of
the board of directors or by any of the foregoing designated
officers, is authorized to vote on behalf of the corporation any
and all shares of any other corporation or corporations, foreign
or domestic, standing in the name of the corporation. The
authority granted to these officers to vote or represent on behalf
of the corporation any and all shares held by the corporation in
any other corporation or corpo-ra-
- - -tions may be exercised by any of these officers in person or by
any person authorized to do so by a proxy duly executed by these
officers.
Section 7. CONSTRUCTION AND DEFINITIONS;. Unless the
context requires otherwise, the general provisions, rules of
construction, and definitions in the California General
Corporation Law shall govern the construction of these bylaws.
Without limiting the generality of this provision, the singular
number includes the plural, the plural number includes the
singular, and the term "person" includes both a corporation and a
natural person.
ARTICLE IX
AMENDMENTS;
Section 1. AMENDMENTS BY SHAREHOLDERS;. New bylaws
may be adopted or these bylaws may be amended or repealed by the
vote or written consent of holders of a majority of the
outstanding shares entitled to vote; provided, however, that if
the articles of incorporation of the corporation set forth the
number of authorized directors of the corporation, the authorized
number of directors may be changed only by an amendment of the
articles of incorporation.
Section 2. AMENDMENT BY DIRECTORS;. Subject to the
rights of the shareholders as provided in Section 1 of this
Article IX, bylaws, other than a bylaw or an amendment of a bylaw
changing the authorized number of directors (except to fix the
authorized number of directors pursuant to a bylaw providing for a
variable number of directors), may be adopted, amended, or
repealed by the board of directors.
CERTIFICATE OF AMENDMENT NO. 1
OF THE BYLAWS OF
SYMMETRICOM, INC.
1. Article III, Section 15, was added to the Bylaws of this
corporation, effective July 21, 1993 by the Board of Directors to
read in its entirety as follows:
"Section 15. APPROVAL OF LOANS TO OFFICERS. The
corporation may, upon the approval of the board of directors
alone, make loans of money or property to, or guarantee the
obligations of, any officer of the corporation or its parent or
subsidiary, whether or not a director, or adopt an employee
benefit plan or plans authorizing such loans or guaranties
provided that (i) the board of directors determines that such a
loan or guaranty or plan may reasonably be expected to benefit the
corporation, (ii) the corporation has outstanding shares held of
record by 100 or more persons (determined as provided in Section
605 of the California Corporations Code) on the date of approval
by the board of directors, and (iii) the approval of the board of
directors is by a vote sufficient without counting the vote of any
interested director or directors."
BYLAWS
OF
SYMMETRICOM, INC.
BYLAWS
OF
SYMMETRICOM, INC.
TABLE OF CONTENTS
Page
ARTICLE I - OFFICES 1
Section 1. PRINCIPAL OFFICES 1
Section 2. OTHER OFFICES 1
ARTICLE II - MEETINGS OF SHAREHOLDERS 1
Section 1. PLACE OF MEETINGS 1
Section 2. ANNUAL MEETING 1
Section 3. SPECIAL MEETING 1
Section 4. NOTICE OF SHAREHOLDERS' MEETING 2
Section 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF
NOTICE 3
Section 6. QUORUM 3
Section 7. ADJOURNED MEETING; NOTICE 4
Section 8. VOTING 4
Section 9. WAIVER OF NOTICE OR CONSENT BY ABSENT
SHARE-HOLDERS 5
Section 10. SHAREHOLDER ACTION BY WRITTEN CONSENT
WITHOUT A MEETING 5
Section 11. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING,
AND GIVING CONSENTS 6
Section 12. PROXIES 7
Section 13. INSPECTORS OF ELECTION 8
ARTICLE III - DIRECTORS 8
Section 1. POWERS 8
Section 2. NUMBER OF DIRECTORS 9
Section 3. ELECTION AND TERM OF OFFICE OF DIRECTORS 9
Section 4. VACANCIES 9
Section 5. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE 10
Section 6. ANNUAL MEETING 10
Section 7. OTHER REGULAR MEETINGS 10
Section 8. SPECIAL MEETINGS 11
Section 9. QUORUM 11
Section 10. WAIVER OF NOTICE 11
Section 11. ADJOURNMENT 12
Section 12. NOTICE OF ADJOURNMENT 12
Section 13. ACTION WITHOUT MEETING 12
Section 14. FEES AND COMPENSATION OF DIRECTORS 12
ARTICLE IV - COMMITTEES 12
Section 1. COMMITTEE OF DIRECTORS 12
Section 2. MEETINGS AND ACTION OF COMMITTEES 13
ARTICLE V - OFFICERS 14
Section 1. OFFICERS 14
Section 2. ELECTION OF OFFICERS 14
Section 3. SUBORDINATE OFFICERS 14
Section 4. REMOVAL AND RESIGNATION OF OFFICERS 14
Section 5. VACANCIES IN OFFICES 14
Section 6. CHAIRMAN OF THE BOARD 15
Section 7. PRESIDENT 15
Section 8. VICE PRESIDENTS 15
Section 9. SECRETARY 15
Section 10. CHIEF FINANCIAL OFFICER; TREASURER 16
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND OTHER AGENTS 16
Section 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS 16
Section 2. INDEMNIFICATION OF OTHERS 17
Section 3. PAYMENT OF EXPENSES IN ADVANCE 17
Section 4. INDEMNITY NOT EXCLUSIVE 17
Section 5. INSURANCE INDEMNIFICATION 18
Section 6. CONFLICTS. 18
ARTICLE VII - RECORDS AND REPORTS 18
Section 1. MAINTENANCE AND INSPECTION OF SHARE
REGISTER 18
Section 2. MAINTENANCE AND INSPECTION OF BYLAWS 19
Section 3. MAINTENANCE AND INSPECTION OF OTHER
CORPORATE RECORDS 19
Section 4. INSPECTION BY DIRECTORS 20
Section 5. ANNUAL REPORT TO SHAREHOLDERS 20
ARTICLE VIII - GENERAL CORPORATE POWERS 20
Section 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE
AND VOTING 20
Section 2. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS 20
Section 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW
EXECUTED 20
Section 4. CERTIFICATE FOR SHARES 21
Section 5. LOST CERTIFICATES 21
Section 6. REPRESENTATION OF SHARES OF OTHER
CORPORATIONS 21
Section 7. CONSTRUCTION AND DEFINITIONS 22
ARTICLE IX - AMENDMENTS 22
Section 1. AMENDMENTS BY SHAREHOLDERS 22
Section 2. AMENDMENT BY DIRECTORS 22
1
SYMMETRICOM, INC.
FINANCIAL HIGHLIGHTS
(In thousands, except per share amounts)
Year ended June 30,
1994 1993 1992
_______ _______ _______
Net sales:
Telecom Solutions $59,215 $57,031 $42,094
Linfinity Microelectronics 39,170 30,882 26,704
_______ _______ _______
Total 98,385 87,913 68,798
Operating income 8,331 7,940 3,136
Earnings before income taxes 8,125 7,724 2,825
Net earnings 6,551 6,001 2,194
Net earnings per common and common
equivalent share .43 .40 .16
Cash and cash equivalents 21,250 18,232 10,146
Working capital 38,503 29,348 20,661
Total assets 69,054 58,954 48,231
Shareholders' equity 46,786 38,102 30,185
SYMMETRICOM, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30,
1994 1993
_______ _______
ASSETS
Current assets:
Cash and cash equivalents $21,250 $18,232
Accounts receivable, net of allowance for
doubtful accounts of $242 and $114 12,277 10,905
Inventories 15,811 12,937
Other current assets 2,405 216
_______ _______
Total current assets 51,743 42,290
Property, plant and equipment, net 14,930 15,942
Other assets, net 2,381 722
_______ _______
$69,054 $58,954
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,224 $ 2,914
Accrued liabilities 8,969 9,986
Current maturities of long-term debt 47 42
_______ _______
Total current liabilities 13,240 12,942
Long-term debt, less current maturities 5,818 5,865
Deferred rent 430 604
Deferred income taxes 2,780 1,441
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value:
Authorized - 500 shares
Issued - none -- --
Common stock, no par value:
Authorized - 32,000 shares
Issued and outstanding - 14,071
and 13,728 shares 16,069 13,936
Retained earnings 30,717 24,166
_______ _______
Total shareholders' equity 46,786 38,102
_______ _______
$69,054 $58,954
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
SYMMETRICOM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Year ended June 30,
1994 1993 1992
_______ _______ _______
Net sales $98,385 $87,913 $68,798
Cost of sales 57,165 52,984 45,350
_______ _______ _______
Gross profit 41,220 34,929 23,448
Operating expenses:
Research and development 11,454 8,355 5,919
Selling, general and
administrative 21,435 18,634 14,393
_______ _______ _______
Operating income 8,331 7,940 3,136
Interest income 397 392 300
Interest expense (603) (608) (611)
_______ _______ _______
Earnings before income taxes 8,125 7,724 2,825
Income taxes 1,574 1,723 631
_______ _______ _______
Net earnings $ 6,551 $ 6,001 $ 2,194
======= ======= =======
Net earnings per common and common
equivalent share $ .43 $ .40 $ .16
======= ======= =======
Weighted average common and common
equivalent shares outstanding 15,370 15,036 13,654
======= ======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
SYMMETRICOM, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
Total
Common Stock Retained Shareholders'
Shares Amount Earnings Equity
______ _______ _______ _______
Balances at June 30, 1991 12,508 $11,293 $15,971 $27,264
Stock option exercises 361 727 -- 727
Net earnings -- -- 2,194 2,194
______ _______ _______ _______
Balances at June 30, 1992 12,869 12,020 18,165 30,185
Stock option exercises, net of
shares tendered upon
exercise 859 1,916 -- 1,916
Net earnings -- -- 6,001 6,001
______ _______ _______ _______
Balances at June 30, 1993 13,728 13,936 24,166 38,102
Stock option exercises,
including tax benefits of
$1,156 arising from
stock option plans 343 2,133 -- 2,133
Net earnings -- -- 6,551 6,551
______ _______ _______ _______
Balances at June 30, 1994 14,071 $16,069 $30,717 $46,786
====== ======= ======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
SYMMETRICOM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year ended June 30,
1994 1993 1992
_______ _______ _______
Cash flows from operating activities:
Cash received from customers $97,514 $85,433 $66,499
Cash paid to suppliers and employ (87,805) (73,446) (61,689)
Interest received 407 359 306
Interest paid (603) (608) (611)
Income taxes paid (1,273) (896) (444)
_______ _______ _______
Net cash provided by operating
activities 8,240 10,842 4,061
_______ _______ _______
Cash flows from investing activities:
Purchase of Navstar (2,012) -- --
Capital expenditures, net (3,606) (4,573) (1,860)
Acquisition of other assets (539) (61) (230)
_______ _______ _______
Net cash used for investing
activities (6,157) (4,634) (2,090)
_______ _______ _______
Cash flows from financing activities:
Repayment of long-term debt (42) (38) (34)
Proceeds from issuance of common stock 977 1,916 727
_______ _______ _______
Net cash provided by financing
activities 935 1,878 693
_______ _______ _______
Net increase in cash and
cash equivalents 3,018 8,086 2,664
Cash and cash equivalents at
beginning of year 18,232 10,146 7,482
_______ _______ _______
Cash and cash equivalents at end
of year $21,250 $18,232 $10,146
======= ======= =======
Reconciliation of net earnings to
net cash provided by operating
activities:
Net earnings $ 6,551 $ 6,001 $ 2,194
Adjustments (net of effects of Navstar
purchase):
Depreciation and amortization 5,789 4,945 3,941
Net deferred income taxes (656) 674 --
(Increase) in accounts receivable (1,060) (2,516) (1,969)
(Increase) in inventories (2,430) (515) (2,311)
Decrease (increase) in other
current assets (194) 83 (41)
Increase (decrease) in accounts
payable 275 (323) 702
Increase in accrued liabilities 139 2,634 1,635
(Decrease) in deferred rent (174) (141) (90)
_______ _______ _______
Net cash provided by operating
activities $ 8,240 $10,842 $ 4,061
======= ======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A--Summary of Significant Accounting Policies
Business. Symmetricom, Inc., formerly Silicon General, Inc., conducts
its business through two separate operations, Telecom Solutions and
Linfinity Microelectronics Inc. (LMI). Each operates in a different
industry segment. Telecom Solutions principally designs, manufactures
and markets telecommunications equipment. LMI designs, manufactures and
markets linear and digital integrated circuits.
Principles of Consolidation. The consolidated financial statements
include the accounts of the Company and its subsidiaries. All
significant intercompany accounts and transactions are eliminated.
Fiscal Period. The Company's fiscal year ends on the Sunday closest to
June 30. For presentation purposes, however, each fiscal year is
presented as if it ended on June 30. All references to years refer to
the Company's fiscal years. Fiscal year 1994 consisted of 53 weeks and
fiscal years 1993 and 1992 consisted of 52 weeks.
Cash Equivalents. The Company considers all highly liquid debt
investments purchased with an original maturity of three months or
less to be cash equivalents.
Inventories. Inventories are stated at the lower of cost (first-in,
first-out) or market.
Property, Plant and Equipment. Property, plant and equipment are stated
at cost. Depreciation and amortization are computed using the straight-
line method based on the estimated useful lives of the assets (three to
thirty years) or the lease term if shorter.
Intangible Assets. Intangible assets, primarily purchased technology,
are included in other assets and amortized over five years
Revenue Recognition. Sales are recognized upon shipment. Provisions are
made for warranty costs, sales returns and price protection.
Foreign Currency Translation. Foreign currency translation gains and
losses and the effect of foreign currency exchange rate fluctuations have
not been significant.
Concentrations of Credit Risk. Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally
of cash equivalents and accounts receivable. The Company places its
investments with high-credit-quality financial institutions. Accounts
receivable are derived primarily from sales to telecommunications
companies and original equipment manufacturers. Management believes that
any risk of accounting loss is significantly reduced by the Company's
credit evaluation process.
Income Taxes. The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes,"
which requires an asset and liability approach to account for income
taxes.
Net Earnings Per Common and Common Equivalent Share. Net earnings per
common and common equivalent share is computed using the weighted
average number of common shares outstanding and dilutive stock options
and warrants, using the treasury stock method.
Reclassifications. Certain 1993 balances have been reclassified to
conform to the 1994 presentation.
Note B--Acquisition
In August 1993, the Company acquired, in a purchase transaction,
substantially all the assets of Navstar Limited, a U.K. company, and
its U.S. affiliate (collectively "Navstar") for $2,012,000 in cash and
the assumption of $1,035,000 in liabilities. The fair value of assets
acquired included purchased technology of $1,756,000, tangible assets of
$1,071,000 and goodwill of $220,000. Navstar designs, manufactures and
markets Global Positioning System receivers.
The operating results of Navstar have been included in the
consolidated statements of operations since the date of acquisition and
have not been material to consolidated operations. Unaudited pro forma
combined results of operations of the Company for the year ended June 30,
1993, assuming the acquisition of Navstar had occurred on July 1, 1992,
are as follows: net sales, $90,342,000, net earnings, $5,052,000 and net
earnings per common and common equivalent share, $0.34.
Note C--Linfinity Microelectronics Inc.
At July 1, 1993, substantially all of the assets and liabilities of
the Silicon General Semiconductor Group were transferred to LMI, a
newly-formed and wholly-owned subsidiary. At July 1, 1993, LMI common
shares were reserved for issuance under the LMI stock option plan which
would represent 20% ownership of LMI if stock options to purchase all
reserved shares were granted and exercised. Stock options granted will
vest at 25% per year from date of grant. At June 30, 1994, 893,600
shares were available for grant under the LMI stock option plan, options
to purchase 1,106,400 shares of LMI common stock were outstanding and
options to purchase 222,500 shares were exercisable.
Note D--Inventories
Inventories consist of:
June 30,
1994 1993
_______ _______
(In thousands)
Raw materials $ 7,677 $ 4,115
Work-in-process 5,110 5,424
Finished goods 3,024 3,398
_______ _______
$15,811 $12,937
======= =======
Note E--Property, Plant and Equipment
Property, plant and equipment consist of:
June 30,
1994 1993
_______ _______
(In thousands)
Land $ 1,247 $ 1,247
Buildings and improvements 7,991 8,938
Machinery and equipment 26,452 26,928
Leasehold improvements 2,268 2,051
_______ _______
37,958 39,164
Accumulated depreciation and amortization (23,028) (23,222)
_______ _______
$14,930 $15,942
======= =======
Maintenance and repairs expense was $1,268,000 in 1994, $1,077,000 in
1993 and $854,000 in 1992.
Note F--Borrowing Arrangements
The Company has a $7,000,000 unsecured bank line of credit which
expires in December 1995 and bears interest at the bank's prime rate,
7.25% at June 30, 1994. The line of credit agreement requires that the
Company maintain certain financial ratios and prohibits an operating
loss in two consecutive quarters. At June 30, 1994, the Company had
available credit of $7,000,000.
Long-term debt consists of a 10.25% note, payable in monthly
installments of approximately $54,000, including interest, until
November 1997 when the balance of the principal is due. The note is
collateralized by land, building and related personal property. At
June 30, 1994, maturities of long-term debt were $47,000 in 1995,
$52,000 in 1996, $57,000 in 1997 and $5,709,000 in 1998.
Note G--Accrued Liabilities
Accrued liabilities consist of:
June 30,
1994 1993
_______ _______
(In thousands)
Employee compensation and benefits $ 3,769 $ 5,533
Accrued warranty expense 2,071 2,136
Other 3,129 2,317
_______ _______
$ 8,969 $ 9,986
======= =======
Note H--Income Taxes
Income tax expense consists of:
Year ended June 30,
1994 1993 1992
_______ _______ _______
(In thousands)
Current:
Federal $ 1,366 $ 183 $ 102
State 778 151 265
Puerto Rico 86 715 264
_______ _______ _______
2,230 1,049 631
_______ _______ _______
Deferred:
Federal (1,144) (767) --
State 104 370 --
Puerto Rico 384 1,071 --
_______ _______ _______
(656) 674 --
_______ _______ _______
$ 1,574 $ 1,723 $ 631
======= ======= =======
Deferred income tax expense (benefit) is recorded when income and
expenses are recognized in different periods for financial reporting and
tax purposes. The significant components of deferred income tax expense
(benefit) are as follows:
Year ended June 30,
1994 1993 1992
_______ _______ _______
(In thousands)
Net operating loss and credit carryforwards $ 642 $ 421 $ 306
Reserves and accruals (600) (850) (65)
Deferred rent 52 35 33
Depreciation and amortization (639) (678) (839)
Reduction of taxes provided in prior y -- (767) --
Deferred taxes on unremitted Puerto Rico
earnings 1,339 1,441 --
Change in valuation allowance (1,450) 1,072 565
_______ _______ _______
$ (656) $ 674 $ --
======= ======= =======
The Company's effective income tax rate differs from the federal
statutory income tax rate as follows:
Year ended June 30,
1994 1993 1992
_______ _______ _______
Federal statutory income tax rate 35.0% 34.0% 34.0%
Change in valuation allowance (17.8) (9.5) --
State income taxes, net of federal benefi 4.6 1.3 6.2
Net tax expense (benefit) of Puerto Rico
operations (1.8) 6.3 (17.9)
Other (0.6) 0.1 --
Reduction of taxes provided in prior yea -- (9.9) --
_______ _______ _______
Effective income tax 19.4% 22.3% 22.3%
======= ======= =======
The net tax expense of Puerto Rico operations in 1993 includes a
non-recurring provision of approximately $980,000 for taxes on
unremitted Puerto Rico earnings for prior years.
The principal components of the Company's deferred tax assets and
liabilities are as follows:
June 30,
1994 1993
_______ _______
(In thousands)
Deferred tax assets:
Net operating loss and credit carryforwards $ 4,591 $ 5,233
Reserves and accruals 3,077 2,477
Deferred rent 278 330
_______ _______
7,946 8,040
Valuation allowance (4,780) (6,230)
_______ _______
3,166 1,810
_______ _______
Deferred tax liabilities:
Depreciation and amortization 1,171 1,810
Unremitted Puerto Rico earnings 2,780 1,441
_______ _______
3,951 3,251
_______ _______
Net deferred tax liability $ 785 $ 1,441
======= =======
A valuation allowance is provided due to the uncertainty of
realization of certain temporary differences and tax credit
carryforwards, based on the Company's assessment of future
realizability of these deferred tax assets. Approximately $1,477,000
of the valuation allowance is attributable to the tax benefit of stock
option transactions, which will be credited to common stock when
realized.
At June 30, 1994, for federal income tax purposes, the Company had
net operating loss carryforwards of approximately $610,000 which expire
in 2004, research and development and investment tax credit
carryforwards of approximately $2,415,000 which expire in the years 1999
through 2001 and alternative minimum tax credit carryforwards of
approximately $1,970,000 which have no expiration date.
The Company operates a subsidiary in Puerto Rico under a grant
providing for partial exemption from Puerto Rico taxes through the
year 2008. During 1993, the Company elected to have this subsidiary
taxed under Section 936 of the Internal Revenue Code which exempts
qualified Puerto Rico source earnings from federal income taxes.
Income taxes have been provided on this subsidiary's unremitted
earnings since 1993, as the Company anticipates that such earnings
will ultimately be distributed in a taxable transaction. At June 30,
1994, total unremitted earnings and the related income tax liability of
this subsidiary were $19,000,000 and $2,840,000, respectively.
Certain provisions of the Omnibus Budget Reconciliation Act of
1993 may result in less favorable tax treatment for the Puerto Rico
operation in future years.
During 1993, the Company resolved all outstanding Internal Revenue
Service examinations. Accordingly, the Company reduced previously
provided federal taxes
by $767,000 in 1993.
Note I--Commitments
The Company leases certain facilities and equipment under operating
lease agreements which expire at various dates through September 2000.
Rental expense charged to operations was $1,859,000 in 1994, $2,015,000
in 1993 and $1,958,000 in 1992. Future minimum payments due under
noncancelable leases at June 30, 1994, were $1,486,000 in 1995,
$1,444,000 in 1996, $1,175,000 in 1997, $295,000 in 1998, $208,000 in
1999 and $626,000 thereafter.
Note J--Contingencies
In January 1994, a complaint was filed in the United States
District Court for the Northern District of California against the
Company, three of its officers and two unaffiliated parties, by one of
the Company's shareholders. The complaint requests that the court
certify a class of plaintiffs consisting of persons who purchased shares
of the Company's common stock during a specified period in 1993. The
complaint alleges that false and misleading statements made during that
period artificially inflated the price of the common stock in violation
of federal securities laws. There is no specific amount of damages
requested in the complaint. The Company and its officers believe that
the complaint is entirely without merit, and intend to vigorously defend
against the action. The Company is also a party to certain other claims
which are normal in the course of its operations. While the results of
such claims cannot be predicted with certainty, management, after
consultation with counsel, believes that the final outcome of such
matters will not have a material adverse effect on the Company's
financial position or results of operations.
Note K--Related Party Transactions
During 1993, the Company made a $95,000 unsecured loan to an
executive officer. The loan bears interest at approximately 5% per
annum which is payable quarterly. The loan is due and payable in
April 1998.
Note L--Employee Benefit Plans
The Company's U.S. and Puerto Rico employees are eligible to
participate in the Company's 401(k) plans. The Company's
discretionary contributions vest immediately and were $89,000,
$63,000 and $57,000 in 1994, 1993 and 1992, respectively.
Note M--Shareholders' Equity
Stock Options. The Company has an employee stock option plan under
which employees and consultants may be granted non-qualified and
incentive options to purchase shares of the Company's authorized but
unissued common stock. Stock appreciation rights may also be granted
under this plan, however, none have been granted. In addition, the
Company has a director stock option plan under which non-employee
directors are automatically granted annual options to purchase 10,000
shares of the Company's authorized but unissued common stock. Three
previous option plans have been closed to future grants. All options
have been granted at the fair market value of the Company's common stock
on the date of grant. Options expire no later than ten years from the
date of grant and are generally exercisable in annual installments of
25%, 25% and 50% at the end of each of the first three years following
the date of grant. In July 1994, the Company's Board of Directors
approved a program under which employees, other than executive officers,
may exchange options to purchase shares of the Company's common stock
with exercise prices greater than $8.9375 per share for new options with
an exercise price of $8.9375. A total of 286,500 shares were eligible
for exchange. New options would begin re-vesting in July 1994. Stock
option activity for the three years ended June 30, 1994, is as follows:
Shares Options Outstanding
Available Number Price
For Grant of Shares Per Share
_________ _________ ______________
(In thousands, except per share amounts)
Balances at June 30, 1991 619 2,875 $1.50 to 3.75
Granted (440) 440 3.13 to 5.69
Exercised -- (361) 1.75 to 3.75
Canceled 15 (15) 1.94 to 3.75
Canceled under closed plan -- (75) 1.75 to 3.75
_____ _____ ______________
Balances at June 30, 1 194 2,864 1.50 to 5.69
Authorized 1,000 -- -- --
Granted (316) 316 4.88 to 13.00
Exercised -- (867) 1.50 to 5.69
Canceled 58 (58) 1.50 to 10.13
Canceled under closed pl -- (24) 1.63 to 3.63
_____ _____ ______________
Balances at June 30, 199 936 2,231 1.50 to 13.00
Granted (489) 489 7.63 to 17.75
Exercised -- (343) 1.50 to 7.50
Canceled 92 (92) 2.50 to 17.75
_____ _____ ______________
Balances at June 30, 1994 539 2,285 $1.50 to 17.75
===== ===== ==============
Exercisable at June 30, 1994 1,480 $1.63 to 13.00
===== ==============
Employee Stock Purchase Plan. During July 1994, subject to shareholder
approval, the Company's Board of Directors approved an employee stock
purchase plan under which 450,000 shares of common stock have been
reserved for issuance. Under this plan, qualified employees may
purchase shares of common stock at 85% of the fair market values at
certain dates.
Common Share Purchase Rights. The Company's shareholder rights plan
(the Plan) was adopted in December 1990 and amended in January 1993.
The Plan authorizes the issuance of one common share purchase right for
each share of common stock. The rights expire in December 2000 and are
not exercisable or transferable apart from the common stock until the
occurrence of certain events. Such events include the acquisition of
20% or more of the Company's outstanding common stock or the
commencement of a tender or exchange offer for 30% or more of the
Company's outstanding common stock. If the rights become exercisable,
each right entitles its holder to purchase one new share of common stock
at an exercise price of $25.00, subject to certain antidilution
adjustments. Additionally, if the rights become exercisable, a holder
will be entitled, under certain circumstances, to purchase, for the
exercise price, shares of common stock of the Company or in other cases,
of the acquiring company, having a market value of twice the exercise
price of the right. Under certain conditions, the Company may redeem
the rights for a price of $.01 per right or exchange each right not held
by the acquirer for one share of the Company's common stock.
Warrants. At June 30, 1994, a warrant was outstanding to purchase
125,000 shares of the Company's common stock at $3.375 per share.
The warrant expires in April 1995.
Note N--Business Segment Information
Industry Segment Information. Information relating to the Company's
industry segments is as follows:
Year ended June 30,
1994 1993 1992
_______ _______ _______
(In thousands)
Net sales:
Telecom Solutions $59,215 $57,031 $42,094
LMI 39,170 30,882 26,704
_______ _______ _______
$98,385 $87,913 $68,798
======= ======= =======
Operating income (loss):
Telecom Solutions $ 3,588 $ 7,877 $ 4,636
LMI 4,743 63
(1,500)
_______ _______ _______
$ 8,331 $ 7,940 $ 3,136
======= ======= =======
Identifiable assets:
Telecom Solutions $43,223 $37,258 $25,957
LMI 25,831 21,696 22,274
_______ _______ _______
$69,054 $58,954 $48,231
======= ======= =======
Depreciation and amortization expense:
Telecom Solutions $ 2,917 $ 1,965 $ 1,395
LMI 2,872 2,980 2,546
_______ _______ _______
$ 5,789 $ 4,945 $ 3,941
======= ======= =======
Capital expenditures:
Telecom Solutions $ 2,017 $ 2,475 $ 1,401
LMI 1,589 2,098 494
_______ _______ _______
$ 3,606 $ 4,573 $ 1,895
======= ======= =======
Major Customers and Export Sales. No customer accounted for 10% or more
of net sales in 1994 or 1993. One of Telecom Solutions' customers
accounted for 14% of the Company's net sales in 1992. Export sales,
primarily to Western Europe, Canada and the Far East, accounted for 18%,
12% and 14% of the Company's net sales in 1994, 1993 and 1992,
respectively.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Symmetricom, Inc.
We have audited the accompanying consolidated balance sheets of
Symmetricom, Inc., formerly Silicon General, Inc., and subsidiaries
as of June 30, 1994 and 1993, and the related consolidated statements
of operations, shareholders' equity and cash flows for each of the
three years in the period ended June 30, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
Symmetricom, Inc. and subsidiaries at June 30, 1994 and 1993, and the
results of their operations and their cash flows for each of the three
years in the period ended June 30, 1994 in conformity with generally
accepted accounting principles.
San Jose, California
July 28, 1994
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto.
Results of Operations
The Company conducts its business through two separate operations,
Telecom Solutions, which designs, manufactures and markets
telecommunications equipment, and Linfinity Microelectronics Inc. (LMI),
which designs, manufactures and markets linear and digital integrated
circuits.
Net sales of $98.4 million in fiscal 1994 increased by $10.5 million
(12%) from fiscal 1993 net sales of $87.9 million, which in turn
increased by $19.1 million (28%) from fiscal 1992 net sales. The
increase in fiscal 1994 sales was primarily due to higher unit volume
at LMI and to sales at Navstar, which was acquired by the Company in
August 1993. The increase in fiscal 1993 sales was primarily due to
higher unit volume at both Telecom Solutions and LMI.
Telecom Solutions net sales increased by $2.2 million (4%) to $59.2
million in fiscal 1994 and by $14.9 million (35%) to $57.0 million in
fiscal 1993. The increase in fiscal 1994 sales was due to Navstar
sales; as Integrated Digital Services Terminal (IDST) and Analog sales
were slightly higher in fiscal 1994, and only partially offset a decline
in Synchronization sales. The Telecom Solutions increase in fiscal 1993
sales was primarily due to higher Synchronization and IDST unit volume.
LMI's net sales increased by $8.3 million (27%) to $39.2 million in
fiscal 1994 and by $4.2 million (16%) to $30.9 million in fiscal 1993
primarily due to higher unit volume.
Gross profit margin, as a percentage of net sales, was 42%, 40% and
34% in fiscal 1994, 1993 and 1992, respectively. In fiscal 1994, the
higher gross profit margin percentage resulted primarily from increased
unit volume and other manufacturing efficiencies at LMI which offset a
shift to lower margin products and decreased manufacturing efficiencies
at Telecom Solutions. In fiscal 1993, the gross profit margin
improvement was attributable to increased unit volume, other
manufacturing efficiencies and a shift to higher margin products for
both operations. Future gross profit margins will largely depend on
product mix and manufacturing efficiencies.
Research and development expense increased to $11.5 million (or 12%
of sales) in fiscal 1994 from $8.4 million (10% of sales) and $5.9
million (or 9% of sales) in fiscal 1993 and 1992, respectively. The
increase in fiscal 1994 was primarily due to research and development
employee additions at both operations. In fiscal 1993, the increase in
research and development expense was primarily attributable to employee
additions at Telecom Solutions.
Selling, general and administrative expense increased by 15% to
$21.4 million (or 22% of sales) in fiscal 1994 from $18.6 million (or
21% of sales) in fiscal 1993 and by 29% in fiscal 1993 from $14.4
million (or 21% of sales) in fiscal 1992. The increase in fiscal 1994
was due to continued development of a Telecom Solutions international
presence, establishment of a LMI marketing department and higher selling
expenses associated with increased sales. In fiscal 1993, the dollar
increase was principally due to higher selling expenses associated with
higher sales.
Operating income of $8.3 million in fiscal 1994 increased by 5%
from fiscal 1993 operating income of $7.9 million which increased by
155% from fiscal 1992 operating income of $3.1 million. The increase
in fiscal 1994 was due to higher LMI operating income which more than
offset the decrease in Telecom Solutions operating income, and the
increase in fiscal 1993 was due to higher operating income from both
operations. See Note N of Notes to Consolidated Financial Statements
Interest expense was $0.6 million in fiscal 1994, 1993 and 1992.
Interest income, attributable to interest earned on cash and cash
equivalents, was $0.4 million in fiscal 1994 and 1993 and $0.3 million
in fiscal 1992.
The Company's effective tax rate was 19% in fiscal 1994 and 22%
in fiscal 1993 and 1992. The effective tax rate was lower than the
statutory tax rate due to a reduction in the valuation allowance for
deferred tax assets based on the Company's assessment of future
realizability of such assets, and the benefit of having a portion of the
Company's income taxed at lower rates in Puerto Rico. In addition,
during fiscal 1993, the Company recorded a provision for taxes on prior
years unremitted earnings of its Puerto Rico subsidiary which was
substantially offset by the reduction of previously provided taxes as a
result of resolving all outstanding Internal Revenue Service
examinations. The effective tax rate may be higher in future years as
the rate is dependent on the Company's ability to realize its deferred
tax assets and the percentage of Puerto Rico earnings to total earnings.
In addition, certain provisions of the Omnibus Budget Reconciliation Act
of 1993 may result in less favorable tax treatment for Puerto Rico
earnings.
As a result of the factors discussed above, net income in fiscal
1994 was $6.6 million, or $.43 per share, compared to net income of
$6.0 million, or $.40 per share, in fiscal 1993 and net income of $2.2
million, or $.16 per share, in fiscal 1992.
Management does not believe inflation has had a significant effect
on operations.
Future Company operating results will largely depend upon the
Company's ability to implement new technologies and products, changes in
product mix and manufacturing efficiencies. Future Telecom Solutions
operating results will continue to be highly dependent on receipt of
orders during the applicable fiscal period. Future LMI operating
results will also be subject to the cyclical nature of the semiconductor
industry.
The Company's future earnings and stock price may be subject to
significant volatility. Any shortfall in sales or earnings from levels
expected by securities analysts and investors could have an immediate
and significant adverse effect on the trading price of the Company's
common stock.
Liquidity and Capital Resources
Working capital increased by $9.2 million to $38.5 million at June
30, 1994, from $29.3 million at June 30, 1993, while the current ratio
increased to 3.9 to 1.0 from 3.3 to 1.0. During the same period, cash
and cash equivalents increased to $21.3 million from $18.2 million
primarily due to $8.2 million in cash provided by operating activities
and $1.0 million in cash received from stock option exercises, offset by
$3.6 million used for capital expenditures and $2.0 million used for the
acquisition of Navstar. Inventory increased $2.4 million substantially
due to the purchase of certain components by the Company's Telecom
Solutions operation in anticipation of possible shortages. At June 30,
1994, the Company had $7.0 million of unused credit available under its
bank line of credit which expires in December 1995.
The Company believes that cash and cash equivalents, funds
generated from operations and funds available under its bank line of
credit will be sufficient to satisfy working capital and capital
equipment requirements in fiscal 1995. At June 30, 1994, the Company
had no material outstanding commitments to purchase capital equipment.
QUARTERLY RESULTS AND STOCK MARKET DATA (UNAUDITED)
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
(A)
_______ _______ _______ _______ _______
(In thousands, except per share amounts)
Fiscal Year 1994:
Net sales $24,034 $25,011 $24,368 $24,972 $98,385
Gross profit 10,420 10,811 9,911 10,078 41,220
Operating income 2,428 2,402 2,100 1,401 8,331
Earnings before
income taxes 2,380 2,307 2,032 1,406 8,125
Net earnings 1,723 1,670 1,471 1,687 6,551
Net earnings per
common and common
equivalent share .11 .11 .10 .11 .43
Common stock
price range (B):
High 18-1/8 17 10-1/2 8-5/8 18-1/8
Low 13-1/2 7-7/8 7-1/2 6-5/8 6-5/8
Fiscal Year 1993:
Net sales $21,116 $21,646 $22,067 $23,084 $87,913
Gross profit 7,565 8,596 9,130 9,638 34,929
Operating income 1,656 1,880 2,142 2,262 7,940
Earnings before
income taxes 1,608 1,813 2,094 2,209 7,724
Net earnings 1,301 1,467 1,523 1,710 6,001
Net earnings per
common and common
equivalent share .09 .10 .10 .11 .40
Common stock price range (B):
High 5-1/4 10-3/8 14-7/8 17-3/8 17-3/8
Low 4-1/8 4-3/4 8-7/8 12-1/8 4-1/8
(A) The 1994 fourth quarter includes a reduction of income taxes of
approximately $670,000, $.04 per share, resulting in a decrease of
the Company's annual effective tax rate from 27.6% to 19.4%.
(B) The Company's common stock trades on the Nasdaq Stock Market
System under the symbol SYMM. At June 30, 1994, there were
approximately 1,639 shareholders of record. Common stock prices are
closing prices as reported on the Nasdaq Stock Market System. The
Company has not paid cash dividends during the last two fiscal years
and has no present plans to do so.
FIVE YEAR SELECTED FINANCIAL DATA
Year ended June 30,
1994 1993 1992 1991 1990
_______ _______ _______ _______ _______
(In thousands, except per share amounts)
Operating Results:
Net sales:
Telecom Solutions $59,215 $57,031 $42,094 $28,950 $22,491
Linfinity
Microelectronics
Inc. 39,170 30,882 26,704 33,018 35,715
_______ _______ _______ _______ _______
Total 98,385 87,913 68,798 61,968 58,206
Operating income 8,331 7,940 3,136 2,574 2,317
Earnings before
income taxes 8,125 7,724 2,825 2,055 1,146
Net earnings 6,551 6,001 2,194 1,801 1,146
Net earnings per
common and common
equivalent share .43 .40 .16 .14 .09
Balance Sheet:
Cash and cash
equivalents 21,250 18,232 10,146 7,482 955
Working capital 38,503 29,348 20,661 16,092 10,768
Total assets 69,054 58,954 48,231 43,097 41,253
Non-mortgage debt -- -- -- -- 851
Long-term debt 5,818 5,865 5,907 5,945 4,884
Shareholders' equity 46,786 38,102 30,185 27,264 25,098
CORPORATE DIRECTORY
Directors Telecom Solutions Officers
William D. Rasdal 1 D. Ronald Duren
Chairman of the Board President and Chief Operating
and Chief Executive Officer Officer
Symmetricom, Inc
M.J. Narasimha, Ph.D.
Vice President, Technology
Paul N. Risinger
Vice Chairman Dale Pelletier
Symmetricom, Inc. Vice President, Operations
Howard Anderson 2,3
Managing Director Rick Stroupe
The Yankee Group Vice President, Sales
Allen M. Peterson 1,2,3 Toney C. Warren
Professor (emeritus), Vice President, Strategic
Electrical Electrical Planning
Stanford University
Linfinity Microelectronics
Inc. Officers
Robert M. Wolfe 1,2,3 Brad P. Whitney
Telecommunications President and Chief Operating
Network Consultant Officer
1 Member, Executive Committee Ralph Brandi
2 Member, Audit Committee Vice President, Sales
3 Member, Stock Option and
Compensation Committee
Shufan Chan
Corporate Officers Vice President, Development
William D. Rasdal
Chairman of the Board Mark Granahan
and Chief Executive Officer Vice President, Marketing
Paul N. Risinger Kelly Jones
Vice Chairman Vice President, Manufacturing
J. Scott Kamsler
Vice President, Finance, Corporate Counsel
Chief Financial Officer
and Secretary Wilson, Sonsini, Goodrich &
Rosati
Palo Alto, California
Independent Auditors
Deloitte & Touche LLP
San Jose, California
Transfer Agent & Registrar
Chemical Trust Company of
California
San Francisco, California
Locations
Symmetricom, Inc.
Corporate Headquarters
85 West Tasman Drive
San Jose, California 95134-1703
Telephone: 408-943-9403
Fax: 408-428-7896
Telecom Solutions
85 West Tasman Drive
San Jose, California 95134-1703
Telephone: 408-433-0910
Fax: 408-428-7897
NavSymm
85 West Tasman Drive
San Jose, California 95134-1703
Telephone: 408-486-6338
Fax: 408-428-7998
Linfinity Microelectronics Inc.
11861 Western Avenue
Garden Grove, California 92641-2119
Telephone: 714-898-8121
Fax: 714-898-2781
Telecom Solutions Puerto Rico, Inc.
Industrial Park, Building 7
P.O. Box 1046
Aguada, Puerto Rico 00602-1046
Telephone: 809-868-3535
Fax: 809-868-4466
Telecom Solutions (Europe) Limited
3 The Billings
Walnut Tree Close
Guildford, Surrey, GU1 4UL
England
Telephone: 44-483-451122
Fax: 44-483-451133
Navstar Systems Ltd.
Mansard Close
Westgate
Northampton NN5 5DL
England
Telephone: 44-604-585588
Fax: 44-604-585599
Form 10-K
Shareholders may obtain a copy of
Symmetricom's 1994 annual report on
Form 10-K as filed with the
Securities and Exchange Commission,
without charge, by writing to:
Investor Relations, Symmetricom, Inc.,
85 West Tasman Drive, San Jose,
California 95134-1703
1
DATED 1994
_______________________________________________________________________
BAKER HUGHES LIMITED (1)
NAVSTAR SYSTEMS.LIMITED (2)
SYMMETRICOM INC (3)
_______________________________________________________________________
UNDERLEASE
of
Premises at Mansard Close
Westgate Interchange Estate
Northampton
_______________________________________________________________________
Osborne Clarke
30 Queen Charlotte Street
Bristol BS99 7QQ
78/3580l4
PARTICULARS
1. DATE OF THIS DEED day Of 1994
2. LEASE OR UNDERLEASE UNDERLEASE
3. LANDLORD BAKER HUGHES LIMITED (Company
Number 1388658) whose registered
office is at Hammersley House 5-8
Warwick Street London WlR 5RA
4. TENANT NAVSTAR SYSTEMS LIMITED (Company
Number 2801218 ) whose registered
office is at 3 The Billings
Walnut Tree Close Guildford Surrey
5. SURETY SYMMETRICOM INC whose registered
office is at 85 West Tasman Drive
San Jose, California 95134-1703
6. SITE premises at Mansard Close Westgate
Interchange Estate Northampton as
shown edged blue on the annexed plan
7. DEMISED PREMISES premises at the site as shown edged
red on the annexed plan
8. DATE OF COMMENCEMENT
OF TERM 5th day of April 1994
9. LENGTH OF TERM 10 years
10. EXPIRY DATE OF TERM 4th day of April 2004
11. RENT(S) as they may be
reviewed under the Third
Schedule 72,000 pounds per annum
12. RENT COMMENCEMENT DATE 5th day of October 1994
13. RENT REVIEW DATE 29th September 1995 and 29th
September 2000
14. USER Any use falling within Class III
and/or Class X of the Town and
Country Planning (Use Classes) Order
1972
15. HEAD LEASE means a Lease of the Site dated the
19th December 1985 made between
Strathclyde Regional Council (1) and
the Landlord (then called Baker
International Limited) and
references herein to superior leases
shall include the Head Lease
16. HEAD LANDLORD means any person from time to time
entitled (whether immediately or
not) to the reversion expectant on
the determination of the term
granted by the Head Lease and
references herein to superior
landlord shall include the Head
Landlord
17. SCHEDULE OF CONDITION means a schedule of the condition of
the Demised Premises and the Common
Parts agreed between the Landlord
and the Tenant's respective
surveyors and annexed hereto
THIS LEASE made on the date stated in the Particulars B E T W E E N
(1) the Landlord specified in the Particulars ("the Landlord")
(2) the Tenant specified in the Particulars ("the Tenant")
WITNESSES:-
1. Definitions
___________
IN this Lease the following expressions (where the context so admits)
shall have the following meanings:-
"the Particulars" The details on the preceding pages
headed "Particulars"
"the Plan" The plan or plans specified in the
Particulars
"the Term" The term mentioned in the
Particulars
"the Termination Date" The date of expiration or sooner
determination of the Term
"the Demised Premises" The whole and every part of the land
described in the Particulars
together with everything for the
time being on the land and/or
appurtenant to it (excluding any
tenants fixtures and fittings and
any matters the property of
statutory undertakings) provided
that the wall separating the
said premises from the adjoining
building on the Site shall be
included only to the extent of the
median line thereof
"Conduit" Any sewers drains pipe wires ducts
cables and other conducting media or
other thing within the Demised
Premises by means of which gas
electricity water soil or any other
facility service or matter may pass
"Requisite Notice" A notice in writing to the Tenant
forty eight hours before any entry
is made on the Demised Premises or
such notice to the Landlord before
any entry is made on the Site (as
the case may be) PROVIDED THAT in
the case of an emergency no notice
shall be required
"the Insured Risks" The risks insured against under
Clause 4.1
"Landlord" shall include the person entitled
for the time being to the reversion
of this Lease
"Tenant" shall (unless the context otherwise
admits) include the Tenant's
successors in title and if it is an
individual his personal
representatives
"Surety" shall include if it is an individual
his personal representatives
"Interest" Interest at the rate of 3% above
Bank of Scotland Base Rate for the
time being payable on any monies due
and payable by the Tenant to the
Landlord (if due payment is not made
by the Tenant within 14 days of
demand) from the date of demand by
the Landlord until the date of
payment to the Landlord
"Act" Shall mean every Act of Parliament
(whether specifically named herein
or not) which may be relevant to the
Demised Premises its user or
anything on the Demised Premises the
persons employed thereon or having
recourse thereto whether or not in
force at the date hereof and shall
include any statutory re-enactment
or modification thereof and any
order regulation directive bye law
rule consent or licence granted or
required thereunder or by any Public
or local authority or by any court
of competent jurisdiction
"Common Parts" shall mean all ways passages roads
pavements sewers drains sanitary
apparatus pipes gutters watercourses
walls structures fences and other
conveniences which shall belong to
or be used by or in connection with
the Demised Premises in common with
the remainder of the Site and other
premises near or adjoining thereto
2. IN THIS LEASE
_____________
2.1. The details and descriptions appearing in the Particulars
shall be included and form part of the Lease
2.2. If there shall be more than one person included in the
expression "Tenant" or "Surety" the covenants by them shall
be joint and several
2.3. Where any act is prohibited the Tenant shall not allow or
suffer such act to be done
2.4. Where the Landlord or any other person exercises any rights
to enter the Demised Premises under this Lease unless
specifically provided herein to the contrary the person
exercising such right will forthwith make good any damage
caused to the Demised Premises but neither such person nor
the Landlord shall be liable for any other compensation
3. DEMISE
______
THE Landlord DEMISES to the Tenant ALL THOSE the Demised Premises
TOGETHER with so far as the Landlord has title to grant the same the
easements and rights specified in the First Schedule EXCEPTING AND
RESERVING to the Landlord the rights and easements specified in the
Second Schedule TO HOLD the Demised Premises to the Tenant from and
including the Date of Commencement of Term for the Term SUBJECT to all
rights easements privileges restrictions and stipulations of whatever
nature and other matters referred to in the documents (if any) specified
in the Fifth Schedule YIELDING AND PAYING
3.1. yearly and proportionately for any fraction of a year from
and including the Rent Commencement Date the rents specified
in Clause 11 of the Particulars and from and including each
of the rent review dates referred to in the Particulars such
other rent as may become payable under the provisions of the
Third Schedule to be paid (by bankers order if the Landlord
so requires) by equal quarterly payments in advance on the
usual quarter days in every year the first such payment to
be made today and to be in respect of the period from and
including the Rent Commencement Date to the quarter day
following whichever is the later of today's date and the
Rent Commencement Date save that for the purposes of this
Clause 3.1 for the period from the first rent review date
until the fifth anniversary of the date hereof the Tenant
shall pay the rent specified in the Particulars instead of
the reviewed rent
3.2. the insurance rent as determined pursuant to Clause 4 hereof
and Interest and all other sums whatsoever as shall become
payable by the Tenant to the Landlord under the provisions
of this Lease which are all hereby reserved as rent
3.3. on demand as further or additional rent a due proportion (to
be reasonably determined by the Landlord) of the reasonable
costs and expenses properly incurred (including those
required under or by virtue of any Act of Parliament or
local Bye-Law or any enactment or statutory instrument for
the time being in force or by any competent public or local
authority or otherwise) of repairing maintaining rebuilding
lighting and cleansing all Common Parts and to keep the
Landlord indemnified against all such reasonable costs and
expenses as aforesaid and all reasonable costs and fees of
professional advisers reasonably and properly incurred in
connection therewith PROVIDED THAT the Tenant shall not be
obliged or be liable to pay a due proportion of the costs
and expenses of:-
3 3.1. putting and keeping the Common Parts in any
better condition than that shown in the Schedule
of Condition
3.3.2. or remedying any damage to the Common Parts due
to any defect or deterioration in the Common Parts
which is the direct or indirect result of any
fault in the initial design the siting or the
method of construction of the Common Parts or
any part or parts thereof
4. INSURANCE
_________
4.1. Subject to the Tenant paying the premium in accordance with
the provisions of this clause the Landlord hereby covenants
with the Tenant that the Landlord will procure the insurance
of the Demised Premises and the remaining part or parts of
the Site subject to such excesses exclusions or limitations
as the Head Landlord or its Insurers require in such
reputable insurance office or with such underwriters and
through such agency as the Head Landlord may from time to
time decide in the full reinstatement value of the Demised
Premises or such higher value as the Tenant may reasonably
require including Architects and Surveyors and other
professional fees and incidental expenses against:-
4.1.1. Loss or damage by fire explosion storm tempest
(including lightning) flood burst pipes impact
and (in peacetime) aircraft and articles dropped
therefrom riot civil commotion and malicious
damage and such other risks which the Landlord
may from time to time deem necessary or such
other risks against which insurance has been
effected
4.1.2. Public Liability of the Landlord and the Head
Landlord arising out of or in connection with any
matter involving or relating to the Demised
Premises and the remaining part or parts of the
Site
4.1.3. The loss of rent payable under this Lease from
time to time (having regard to any review of rent
which may become due under this Lease) for three
years or such longer period as the Head Landlord
may from time to time reasonably consider to be
sufficient for the purposes of planning and
carrying out any such reinstatement
4.2. The Tenant shall pay to the Landlord on demand the amount of
the premium for insuring the Demised Premises against the
Insured Risks from the Date of Commencement of Term as
reasonably determined by the Landlord
4.3. At the reasonable request of the Tenant the Landlord will
produce evidence of such insurance and of the payment of the
last premium
4.4. If any part of the Demised Premises or any part of the Site
over which rights are granted to the Tenant is damaged by
any of the Insured Risks and becomes unfit for occupation
and use and the policy or policies of insurance shall not
have been vitiated or payment refused in whole or part as a
result of some act or default of the Tenant then the rents
or a fair proportion of the rents according to the nature
and extent of the damage shall be suspended until the
Demised Premises or such parts of the Common Parts shall be
fit for occupation and use or accessible and the Landlord
shall forthwith repay to the Tenant any rent paid in advance
in respect of a period after the date of such destruction or
damage and any dispute regarding the cesser of rent shall be
referred to a single arbitrator to be appointed in default
of agreement upon the application of either party by the
President for the time being of the Royal Institution of
Chartered Surveyors under the Arbitration
Acts 1950 to 1979
4.4.1. If the Demised Premises or any part of the Site
over which rights are granted to the Tenant are
damaged by any of the Insured Risks then unless
payment of the insurance monies shall be refused
in whole or part by reason of any act or default
of the Tenant or anyone under its control and the
Tenant does not comply with Clause 4.4.2. hereof
and subject to the Head Landlord being able to
obtain all necessary consents the Landlord hereby
covenants with the Tenant that the Landlord will
use all reasonable endeavours to ensure that the
Head Landlord lays out the proceeds of such
insurance in reinstating the Demised Premises and
any part of the Site over which rights are granted
to the Tenant and the Tenant will pay to the
Landlord on demand with Interest (if appropriate)
the amount equivalent to any excess which may be
applicable to such insurance
4.4.2. If the payment of any insurance monies is refused
in whole or in part as provided in Clause 4.4.1 by
any act or default of the Tenant or anyone under
its control then the Tenant will pay to the
Landlord on demand and with Interest (if
appropriate) the amount so refused
4.5. The Tenant will not do anything which may prejudice any
policy of insurance for the time being in force in respect
of any part of the Demised Premises or any part of the Site
over which rights are granted to the Tenant or which may
result in such insurance becoming void or voidable or the
rate of premium under such insurances being increased
(unless previously authorised by the Landlord the Head
Landlord and the insurers and the Tenant shall elect to
pay the increased premium) and the Tenant will at all
times comply with all requirements of the insurers of the
Demised Premises
4.6. The Tenant will keep the Demised Premises supplied with such
fire fighting equipment as the insurers of the Demised
Premises and the competent Fire Authority may require or
as the Landlord may reasonably require and maintain such
equipment to the satisfaction of all such persons
4.7. The Tenant will not store especially inflammable or
explosive substances or goods at the Demised Premises or
obstruct the access to any fire fighting equipment or the
means of escape from or over the Demised Premises and in the
event of anything happening which might affect any insurance
policy relating to the Demised Premises forthwith to give
notice to the Landlord
4.8. The Tenant will insure in the joint names of the Landlord
the Head Landlord and the Tenant all plate glass (if any) in
the Demised Premises against breakage or damage in its full
reinstatement value for the time being with an insurance
office or underwriters approved in writing by the Landlord
(such approval not to be unreasonably refused or delayed)
and will produce to the Landlord on demand (but not more
than once in any period of twelve months) evidence of such
insurance and the payment of the current years premium and
all monies received from such insurance shall be laid
out as soon as possible in reinstating the plate glass and
any deficiency will be made up from the Tenants own monies
and subject hereto the Tenant will not effect any insurance
over the Demised Premises in respect of any of the Insured
Risks
4.9. The Tenant will on demand repay to the Landlord the
reasonable and proper costs incurred in obtaining valuations
of the Demised Premises for insurance purposes from time to
time but no more frequently than once every three years
5. TENANT'S OBLIGATIONS
____________________
THE Tenant COVENANTS with the Landlord:
5.1. Rents
To pay the rents reserved by this Lease without deduction in
accordance with its terms and in the event that any rent
shall be unpaid for more than fourteen days after the due
date (and in the case only of the rent reserved by Clause
3.1 hereof whether formally demanded or not) to pay
Interest
5.2. 5.2.1. Repair and Decoration
_____________________
Subject to the provisions of Clause 5.2.6 at all
times to repair and to keep the Demised Premises
in good and substantial repair and condition free
from all defects and to yield up the same at the
Termination Date in accordance with the covenants
by the Tenant contained in this Lease (damage by
any of the Insured Risks excepted unless payment
of the insurance moneys shall be withheld in whole
or in part by reason solely or in part of any act
or default of the Tenant its servants or agents)
PROVIDED THAT the Tenant shall not be obliged to
put or keep the Demised Premises in any better
condition than as set out in the Schedule of
Condition
5.2.2. To keep the Demised Premises (including any part
unbuilt on) and all conduits in a clean and tidy
condition and properly cleansed and free from
obstruction and in particular to clean all the
windows (both inside and out) and all other glass
in the Demised Premises monthly
5.2.3. Decoration
__________
Without prejudice to the generality of the
foregoing
5.2.3.1. during the first year and every
succeeding third year and in the last
six months of the Term (PROVIDED THAT
the Tenant shall not be liable so to
do more frequently than once every 24
months) to paint and otherwise treat
as the case may be all the outside of
the Demised Premises usually so
treated in a workmanlike manner to the
reasonable satisfaction of the Head
Landlord in colours to be approved by
the Head Landlord AND as often as in
the reasonable opinion of the Landlord
may be necessary and in any event
during the last three months of the
Term to clean all external surfaces of
the Demised Premises and to repoint
any brickwork
5.2.3.2. during the second year and every
succeeding fifth year and in the last
six months of the Term (Provided That
the Tenant shall not be liable so to
do more frequently than once every
twenty four months) to paint and
otherwise treat as the case may be all
the inside wood and metal work of the
Demised Premises usually painted or
otherwise treated in a workmanlike
manner to the reasonable satisfaction
of the Landlord and also clean all
other inside parts of the Demised
Premises and to paint or paper in a
workmanlike manner all walls and
ceilings of the Demised Premises
usually painted or papered as the
case may be such decorations in the
last three months of the Term to be
executed in such colours patterns and
materials as the Head Landlord may
require
5.2.3.3. Where painting is required under any
of the preceding paragraphs in the
case of exterior painting it shall
consist of a priming coat and three
coats of good quality paint and in
the case of interior painting three
coats of good quality paint and in
every case materials of good quality
only shall be used
5.2.4. To repair or replace forthwith by new articles of
similar kind and quality any fixtures fittings or
plant or equipment (other than tenants or trade
fixtures and fittings) in the Demised Premises
which shall become in need of repair or
replacement
5.2.5. To keep any part of the Demised Premises which
may not be built upon adequately surfaced in
good condition properly mowed (if grass) and
free from weeds and all lanascaped areas
properly cultivated
5.2.6. The Tenant's liability to keep the Demised
Premises in good and substantial repair and
condition shall not apply to damage due to any
defects or deterioration in the Demised Premises
which is the direct or indirect result of any
fault in the initial design the siting or the
method of construction of the Demised Premises
and/or the building or any part or parts thereof
5.3. Alterations and additions
_________________________
5.3.1. That no new building or new structure of any kind
shall at any time be erected upon any part of the
Demised Premises
5.3.2. Not to make any internal or external alterations
or additions to any part of the Demised Premises and
not to cut maim or remove structural parts of the
Demised Premises and not to make any change in the
existing design or appearance of the Demised Premises
PROVIDED ALWAYS that the Tenant may with the prior
written consent of the Landlord (such consent not to
be unreasonably withheld or delayed) carry out
internal non-structural alterations to any buildings
for the time being erected on the Demised Premises
5.4. User
_____
At all times during the said term to use the Demised
Premises for the User specified in the Particulars and
not to use the same or any part for any other purpose
5.5. Alienation
__________
5.5.1. Not to assign charge or underlet or part with or
share the possession or occupation of any part or
parts (as distinct from the whole) of the Demised
Premises and not to agree so to do
5.5.2. Not to underlet part with or share possession of the
whole of the Demised Premises or agree so to do or
permit anyperson to occupy the same save by way
of an assignment of the whole of the Demised
Premises in accordance with theprovisions
hereinafter contained
5.5.3. Without prejudice to the foregoing provisions of
this sub-clause not to assign or charge the whole
of the Demised Premises without the previous written
consent of the Landlord such consent not to be
unreasonably withheld or delayed
5.5.4. On any assignment to procure that the Assignee
enters into a covenant with the Landlord to pay
the rents reserved byand perform and observe the
covenants on the part of the Tenant contained in
this Deed
5.5.5. If the Landlord shall reasonably so require to
obtain acceptable Guarantors for any person to
whom this Lease is to be assigned who shall covenant
with the Landlord in the terms (mutatis mutandis)
set out in the Fourth Schedule hereto
5.5.6. Not to vary the terms of or accept any surrender of
any underlease permitted under this clause (or agree
so to do) without the Head Landlord's and the
Landlord's written consent (such consent not to be
unreasonably withheld or delayed)
5.5.7. Within one month after the transmission of any
interest under this Lease or derivative on it or
the execution of any document dealing with such
interest to produce to and leave with the Landlord
the Deed instrument or other document evidencing or
effecting such dealing or transmission together with
the Landlord's registration fee of 20 and with such
reasonable registration fee as the Head Landlord may
require PROVIDED THAT registration of any such deed
instrument or other document shall be evidence of
notification of such transaction to the Landlord but
shall not require the Landlord to consider the terms
of such transaction or of the said deed instrument or
other document and shall not be evidence that it has
done so
5.6. Entry
_____
5.6.1. To permit the Landlord and all persons authorised
by it at all reasonable times upon Requisite
Notice to enter upon the Demised Premises:
5.6.1.1. to examine their condition and to take
schedules of repairs and the like and
inventories of and fittings plant and
machinery
5.6.1.2. to execute any works of construction
repair decoration or of any other
nature on any adjoining or
neighbouring premises and to carry
out any repairs decorations or other
work which the Landlord must or may
carry out under the provisions of this
Lease upon or to the Demised Premises
5.6.1.3. for any other reasonable and proper
purpose connected with the interest of
the Landlord in the Demised Premises
including (without prejudice to the
generality of the foregoing) for the
purpose of valuing or disposing of any
interest of the Landlord or any
superior landlord or doing anything
which may be reasonably necessary to
prevent a forfeiture of any superior
lease for the time being affecting the
Demised Premises
5.6.1.4. in the last six months of the Term to
affix a sign or signs indicating that
the Demised Premises are to let unless
the Tenant enjoys a statutory right to
renew this Lease
5.6.1.5. The person or persons exercising the
right of entry contained in this
Clause 5.6.1. shall cause as little
interference with the Tenant's use
and/or enjoyment of the Demised
Premises and/or the Tenant's business
as reasonably possible and forthwith
make good all damage thereby caused to
the reasonable satisfaction of the
Tenant and the right of entry is
subject thereto
5.6.2. If as a result of an inspection or otherwise the
Landlord becomes aware of any breaches of covenant
by the Tenant hereunder the Landlord may give notice
in writing thereof to the Tenant and within two
months after every such notice or sooner if
reasonably required the Tenant shall remedy such
breach of covenant in accordance with such notice
and the covenants contained in this Lease to the
reasonable satisfaction of the Landlord AND if the
Tenant shall fail within two months of such notice
or immediately in case of emergency to commence and
to diligently and expeditiously continue to comply
with such notice or if the Tenant shall at any time
make default in the performance of any of the
covenants contained in this Lease for or relating
to the repair decoration or maintenance of the
Demised Premises then (without prejudice to the
right or re-entry and forfeiture hereinafter
contained) the Landlord may enter upon the Demised
Premises pursuant to and subject to the provisions
of Clause 5.6.1 hereof and carry out or cause to be
carried out all or any of the works referred to in
such notice or remedy the default of the Tenant and
in such circumstances the Landlord shall be under
no liability to make good any damage whatsoever
and all reasonable costs of all such works and all
expenses properly incurred in remedying such
defaults in each case together with Interest (if
applicable) shall be paid by the Tenant to the
Landlord on demand
5.7. Town and Country Planning Acts and Acts Generally
_________________________________________________
5.7.1. To comply with al1 Acts (including without
prejudice to the generality of the foregoing the
Town and Country Planning Acts 1971 to 1991)
5.7.2. At its expense to obtain from the appropriate
authorities all licences consents and permissions
as may be required for the carrying out by the
Tenant of any operations or use on any part of the
Demised Premises
5.7.3. Not to make any application for planning permission
without first producing a copy of the same and
obtaining the prior written consent of the Landlord
to such application which consent shall not be
unreasonably withheld or delayed
5.7.4. Notwithstanding any consent which may be granted by
the Landlord under this Lease not to carry out or
make any alteration or addition to the Demised
Premises or any change of use thereof (being an
alteration addition or change of use for which a
planning permission needs to be obtained) before a
planning permission therefor has been produced to
the Landlord and acknowledged by it in writing as
being satisfactory to it such acknowledgement
(subject to the proviso contained in this sub-
clause) not to be unreasonably withheld or delayed
PROVIDED ALWAYS that the Landlord may refuse so to
express its satisfaction with any such planning
permission on the ground that the period thereof
or anything contained therein or omitted therefrom
in the reasonable opinion of the Head Landlord or
its Surveyor would be or be likely to be prejudicial
to the Head Landlords interest in the Demised
Premises whether during the said term or following
the expiration thereof or likely to involve the Head
Landlord in liability to Development Land Tax or
any similar or substituted tax or charge on
development gains
5.7.5. Unless the Landlord shall otherwise in writing
direct to carry out before the Termination Date
any works stipulated to be carried out to the
Demised Premises as a condition of any planning
permission which may have been granted during the
Term and implemented by the Tenant or any other
person whether or not the date by which the
planning permission requires such works to be
carried out falls within the Term
5.7.6. In any case where a Planning Permission granted
is granted subject to conditions and if the Head
Landlord reasonably so requires to provide
reasonable security for the compliance with such
conditions and such planning permission shall not
be implemented until such security shall have been
provided
5.7.7. If reasonably required by the Landlord but at
the cost of the Tenant to appeal to the Secretary
of State against any refusal of planning permission
or the imposition of any conditions on a planning
permission in either case made pursuant to an
application therefor under this sub-clause PROVIDED
THAT the Tenant shall not be obliged to appeal
against the decision of the Secretary of State
5.7.8. Within seven days of the receipt of notice thereof
to give full particulars to the Landlord of any
permission notice order or proposal relevant to
the Demised Premises or to the use thereof given to
the Tenant or the occupier of the Demised Premises
(together with a copy of any notice permission
letter or document) under the Planning Acts or any
Act and without delay to take all necessary steps
to comply therewith with the written approval of
the Landlord (such approval not to be unreasonably
withheld or delayed) and also at the request of the
Landlord to make or join with the Landlord in making
such objections and representations against or in
respect of any such notice order or proposal as
aforesaid as the Landlord shall reasonably require
the cost of which is to be shared equally between
the Landlord and the Tenant
5.8. Outgoings Costs and Fees
________________________
5.8.1. To pay and discharge all existing and future rates
taxes duties charges assessments impositions and
outgoings whatsoever and whether or not of a non-
recurring nature (hereinafter called "outgoings")
which now are or may be charged levied assessed or
imposed upon the Demised Premises or upon the owner
or occupier thereof and to pay bear and discharge
the proportion properly attributable to the Demised
Premises of any outgoings as may be charged levied
assessed or imposed upon any premises of which the
Demised Premises form part (such proportion to be
reasonably determined by the Surveyor for the time
being to the Landlord) and not to make any claim
for relief against outgoings payable in respect of
the Demised Premises without the Landlords prior
written consent such consent not to be unreasonably
withheld or delayed
5.8.2. To pay to the Landlord all costs charges and
expenses(including professional advisers costs and
fees) incurred by any superior Landlord and/or
reasonably and properly incurred by the Landlord
5.8.2.1. In or in contemplation of any proceedings
under Sections 146 or 147 of the Law of
Property Act 1925 including the
preparation and service of notice
thereunder (notwithstanding forfeiture
is avoided otherwise than by relief
granted by the Court)
5.8.2.2. In the preparation and service of a
Schedule of Dilapidations at any time
during the Term or within three months
after the Term expires
5.8.2.3. In respect of any application for
consent required by this Lease whether
or not such consent be granted
5.8.3. If any payments of rent or otherwise are to be made
by the Tenant under this Lease (hereafter in this
clause called "the Payments") to the Landlord or
any person on the Landlord's behalf the Tenant
shall pay by way of further rent any Value Added
Tax which is or may become payable in respect of
the Payments together with Interest unless in the
case of third party costs charges and expenses the
same are recoverable by the Landlord as Input Tax
and irrecoverable by the Tenant Provided Always
that wherever appropriate the person to whom the
Payments are made shall as a condition of payment
supply the Tenant with the appropriate V.A.T.
invoice
5.9. General Requirement concerning use
__________________________________
5.9.1. Not to use any part of the Demised Premises for any
noxious noisy or offensive trade or business or
for any illegal or immoral act or purpose nor for
any sale by auction and not to commit any nuisance
or do anything which may be or become an
inconvenience or cause damage or disturbance to the
Landlord or any other person PROVIDED THAT this
shall not restrict or prohibit the Tenant using
the Demised Premises for the User authorised herein
5.9.2. Not to allow empty containers or rubbish of any
description to accumulate upon the Demised
Premises nor to discharge into any Conduit any
deleterious matter or any substance which might be
or become a source of danger or injury to the
drainage system of the Demised Premises or any
other property or person
5.9.3. Not to use any part of the Demised Premises in
such manner as to subject it to any strain or
interference which is not reasonable or is in
excess of that which the Demised Premises were
designed to bear and not to install machinery on
the Demised Premises which shall be unduly noisy
or cause vibration
5.9.4. Not to do anything on the Demised Premises which
might reasonably be expected to produce directly or
indirectly corrosive fumes or vapours or moisture
or humidity in excess of that which the Demised
Premises were designed to bear and are otherwise
reasonable
5.9.5. Not to erect or display any mast or pole flag
signboard advertisement inscription bill placard
or sign whatsoever on the Demised Premises or the
windows thereof so as to be seen from the exterior
without the previous written consent of the Landlord
which shall not be unreasonably withheld or delayed
in respect of a sign stating the Tenant's name and
business or profession (such sign if the Landlord so
requires to be removed and any damage caused thereby
made good by the Tenant at the Termination Date)
5.9.6. To comply with all reasonable regulations made by
the Landlord (in the interest of good estate
management) or the Head Landlord from time to time
for the management of the Demised Premises and/or
any land or premises used or to be used in common or
jointly with any other person
5.9.7. Not to load or unload any vehicle unless the vehicle
shall be in a loading area provided for that purpose
and not to obstruct or damage any access ways roads
or landscaped areas in or leading to the Demised
Premises
5.9.8. To give written notice to the Landlord of any defect
in the Demised Premises which might give rise to an
obligation on the Landlord to do or refrain from
doing any act or thing in order to comply with the
duty of care imposed on the Landlord pursuant to the
Defective Premises Act 1972 and at all times to
display and maintain all notices which the Tenant
is from time to time required under the provisions
of any Act to display at the Demised Premises or the
Head Landlord reasonably requires to be so displayed
5.9.9. Not to stop up or paint out any windows at the
Demised Premises and not to permit any encroachment
upon the Demised Premises or the acquisition of any
new right to light passage drainage or other
easement over any part of the Demised Premises and
to give immediate written notice to the Landlord of
any threat of such encroachment or acquisition and
at the Landlord's written request to take such
action as the Landlord may reasonably require to
prevent such encroachment or acquisition
5.10. New Guarantor
_____________
Within fourteen days of the death during the Term of any
person who has or shall have guaranteed to the Landlord the
Tenants obligations contained in this lease or of such person
becoming bankrupt or having a Receiving Order made against
him or being a Company passing a Resolution to wind up or
entering into liquidation (other than for the purpose of
reconstruction or amalgamation whilst solvent) then to give
notice thereof to the Landlord and if so required by the
Landlord at the expense of the Tenant within twenty eight
days to procure some other person acceptable to the Landlord
to execute a Guarantee in respect of the Tenants obligations
contained in this lease in the form set out in the Fourth
Schedule hereto
5.11. Superior Interests
__________________
If this lease shall at any time be an underlease:
5.11.1. Any provision for consent or approval of the
Landlord shall be deemed to be subject to the
consent or approval of all superior landlords
and the costs and expenses of obtaining such
consents (whether or not consent is forthcoming)
shall be repaid by the Tenant to the Landlord on
demand
5.11.2. To comply with all the Tenants covenants contained
in the Head Lease so far as they relate to the
Demised Premises (but not those expressly assumed
by the Landlord in this Lease or the covenant
contained in clause 5.2.3.1 of the Head lease])
5.12 Indemnity
_________
The Tenant will keep the Landlord fully indemnified against
all damages losses reasonable costs expenses proceedings and
liabilities purposes properly arising directly or indirectly
out of the existence state of repair or user of the Demised
Premises any breach of the Tenants covenants herein contained
or any failure to comply with the Planning Acts or any other
Act and against any liability for any tax levy charge or
other fiscal imposition of whatsoever nature including
penalties and interest on overdue tax (and penalties for
failure to give appropriate notices and information as
properly required under the provision of any Acts) for which
the Landlord shall be liable as a result of any material
development carried out by or on behalf of the Tenant on the
Demised Premises and shall on demand pay to the Landlord the
amount of any such sum and (if applicable) Interest PROVIDED
THAT this clause shall not impose upon the Tenant a greater
liability to keep the Demised Premises in good and
substantial repair and condition than that imposed by clause
5.2 hereof
6. THE Landlord COVENANTS with the Tenant as follows:-
6.1. Quiet Enjoyment
_______________
That the Tenant paying the rents hereby reserved and
observing and performing its covenants and conditions
contained in this Lease may peaceably and quietly hold and
enjoy the Demised Premises without any lawful interruption
by the Landlord or any person rightfully claiming through
under or in trust for it
6.2. To pay the rents reserved by any superior lease (including
the Head Lease) for the time being in force on the due dates
for payment thereof and to observe and perform all the
covenants on its part contained in any superior lease
(including the Head Lease) insofar as the same are not to
be observed and performed by the Tenant in accordance with
the provisions of this Lease
6.3. To take reasonable and necessary steps to ensure that the
Head Landlord complies with the covenants and agreements
on its part contained in the Head Lease to enable the
Tenant to have the continued use and enjoyment and benefit
of all the obligations contained in such covenants and
agreements during the Term so far as such covenants and
agreements relate or to affect the Demised Premises
6.4. Subject to the Tenant paying to the Landlord the sums due in
accordance with Clause 3.3 hereof to keep the Common Parts
and all fixtures and fittings therein and additions thereto
in a good state of repair and decoration and condition
including renewal and replacement of all worn and damaged
parts including in particular but without prejudice to the
generality of the foregoing to maintain the surface or any
roads and pavements and keeps the same properly lit PROVIDED
THAT the Landlord shall act fairly and reasonably in carrying
out its obligations hereunder at all times and shall manage
and maintain the Common Parts economically and efficiently
and in the interests of good estate management
6.5. That the Landlord will forthwith following the destruction or
damage of the Demised Premises or the Common Parts due to
any defect or deterioration in the Demised Premises or Common
Parts which is the direct or indirect result of any fault in
the initial design the siting or the method of the
construction of the Demised Premises or the Common Parts
and/or the building or any part or parts thereof use all
reasonable endeavours to reinstate and/or rebuild the
Demised Premises or the Common Parts
6.6. That the Landlord will use all reasonable endeavours
following destruction or damage to the Demised Premises or
the Common Parts without delay to obtain all necessary
consents and approvals to enable the reinstatement and/or
rebuilding to be carried out.
6.7. That the Landlord will at all times repair and keep the
remainder of the site in good and substantial repair and
condition.
7. PROVIDED ALWAYS AND IT IS HEREBY AGREED AND DECLARED as follows:
7.1. Re-entry
________
Notwithstanding and without prejudice to any other remedies
and powers herein contained or otherwise available to the
Landlord if the rents hereby reserved or any part thereof
shall be unpaid for twenty eight days after becoming payable
whether formally demanded or not or if any covenant on the
Tenant's part or condition contained in this Lease shall not
be performed or observed or if the Tenant for the time being
(being a Company) shall enter into liquidation whether
compulsory or voluntary (save for the purpose of
reconstruction or amalgamation whilst solvent) or pass a
resolution for winding up (save as aforesaid) or suffer a
Receiver to be appointed or being an individual or being more
than one individual any one of them shall have a Receiving
Order made against him or become bankrupt or if the Tenant
(or if there shall be more than one Tenant any of them) shall
enter into composition with their or his creditors then and
in any such case it shall be lawful for the Landlord at any
time thereafter to re-enter upon the Demised Premises or any
part thereof in the name of the whole and thereupon this
demise shall absolutely determine but without prejudice to
any right of action or remedy of the Landlord in respect of
any breach non-observance or non-performance of any of the
Tenant's covenants or any condition herein contained
7.2. Service of Notices
__________________
7.2.1. Any demand or notice to be served on the Tenant or
any Surety hereunder shall be validly served if sent
by first class post addressed to the Tenant or the
Surety respectively at its registered office or its
last known address or at the Demised Premises
7.2.2. Any notice to be served on the Landlord shall be
validly served if sent by first class post addressed
to the Landlord at its registered office
7.3. Adjoining land
______________
Nothing in this Lease shall prevent the Landlord and all
persons authorised by it without requiring any consent
from or making any compensation to the Tenant dealing as
it or they may think fit with any land or buildings
adjacent or near to the Demised Premises and erecting or
suffering to be erected on any part of such land any
buildings or structures whatsoever and making any
alterations or additions and carrying out any demolition
or rebuilding whatsoever which it or they may think fit
subject to such buildings alterations or additions not
affecting or diminishing the light or air or any right
and easement specified in the First Schedule hereto which
may now or at any time during the Term be enjoyed by the
Demised Premises
7.4. No liability in damages
_______________________
The Head Landlord shall not in any circumstances incur any
liability in respect of damage to person or property or
otherwise howsoever by reason of any act neglect default
or misfeasance of the Head Landlord or their servants
employees agents or independent contractors or by reason
of any accidental damage which may at any time be done
to the Demised Premises or to any of the goods persons or
property of the Tenant or any other person in performance
of any services for the Tenant at the Tenant's request
7.5. Failure to Perform Obligation
_____________________________
The Landlord shall not in any event be liable to the
Tenant in respect of any failure of the Landlord to
perform any of its obligations to the Tenant hereunder
whether expressed or implied (other than those contained
in Clause 4 hereof) unless the Tenant has so notified the
Landlord and the Landlord has failed within a reasonable
time to remedy the same
7.6. Statutory Compensation
______________________
Except where any statutory provision prohibits the Tenant's
right to compensation being reduced or excluded by agreement
the Tenant shall not be entitled to claim from the Landlord
on quitting the Demised Premises or any part thereof any
compensation under the Landlord and Tenant Act 1954
7.7. Exclusion of Riqhts not Granted
_______________________________
Nothing herein contained shall operate expressly or impliedly
to confer upon or grant to the Tenant any easement right
or privilege other than those expressly hereby granted and
set out in the First Schedule hereto
7.8. If Navstar Systems Limited shall assign this Lease to an
assignee (in this clause called "the assignee") then
forthwith upon the completion of an assignment of this lease
by the assignee Navstar Systems Limited and Symmetricom Inc
shall be released from any further liability under the terms
hereof and the Landlord shall at the Tenant's cost execute
such deed of release as the Tenant and/or the Surety shall
reasonably require Provided that the assignee is not a
group company of the original Tenant within the meaning of
Section 42 of the Landlord and Tenant Act 1954
7.9. If the Demised Premises any part thereof or any part of the
Common Parts over which rights are granted to the Tenant
shall at any time be destroyed or damaged due to any defect
or deterioration in the Demised Premises or the Common Parts
which is the direct or indirect result of any fault in the
initial design the siting or the method of construction of
the Demised Premises and/or the building or any part or
parts thereof or the Common Parts then the rent reserved
or a fair and just proportion thereof according to the
nature and extent of the damage shall be suspended until
the Demised Premises or such parts of the Common Parts over
which rights are granted to the Tenant shall be fit for
occupation and use or accessible and the Landlord shall
forthwith repay to the Tenant such rent paid in advance in
respect of the period after the date of such destruction or
damage and any dispute regarding the cesser of rent shall be
referred to a single arbitrator to be appointed in default
of agreement upon the application of either party by the
President for the time being of the Royal Institution of
Chartered Surveyors under the Arbitration Acts 1950-1979.
7.10.1. In this clause 7.10 the following expressions shall
have the following meanings:-
7.10.1.1. "Rent first reserved" means the Rent first reserved
from time to time pursuant to clause 3.1 hereof;
and
7.10.1.2. "VAT" means any Value Added Tax or other tax
replacing or supplementing the same from time to
time
7.10.2. In the event of the Head Landlord serving on the Tenant
notice under Section 6 of the Law of Distress Amendment
Act 1908 or any statutory enactment replacing the same
requiring the Tenant to pay the Rent first reserved
direct to the Head Landlord then in respect of any
period when the Tenant is required to pay the Rent
first reserved direct to the Head Landlord the Rent
first reserved shall be deemed to be inclusive of
any VAT charged assessed or payable thereon
7.11 If the tenant shall desire to determine the Term at
the expiration of the fifth sixth seventh or ninth
years thereof then the Tenant shall serve notice on
the Landlord as follows:-
7.11.1 if the tenant shall desire to determine the Term at
the expiration of the fifth year of the Term the Tenant
shall serve not less than six months previous notice in
writing of such desire (such notice to specify that the
Term is to determine on the expiration of the fifth year
of the Term); and
7.11.2. if the Tenant shall desire to determine the Term at the
expiration of the sixth or the seventh or the ninth
years of the Term the Tenant shall serve not less than
nine months previous notice in writing of such desire
(such notice to specify when the Term is to determine)
and the Term shall thereupon cease at the end of the year of
the Term specified in the Tenant's notice and the Landlord
shall refund to the Tenant all sums by way of rent paid in
advance for any period beyond that date but without prejudice
to the rights or remedies of either party against the other
in respect of any antecedent claim for breach of covenant
8. COVENANTS BY SURETY
___________________
THE Surety HEREBY COVENANTS with the Landlord in the terms set out
in the Fourth Schedule hereto
IN WITNESS the parties hereto have executed these presents on the date
specified in Paragraph 1 of the Particulars
THE FIRST SCHEDULE above referred to
____________________________________
(Rights and Easements Granted)
_____________________________
The right (insofar as the Landlord has power to grant the same) for
the Tenant in common with the Landlord any superior landlords those
authorised by any of them and all others having the same right to:-
1. For the purpose only of access to and egress from the Demised
Premises to pass and repass with or without vehicles at all
times over the roadways comprised in the Site and to use any
areas within the Site so allocated for the loading and
unloading of vehicles subject always to compliance by the Tenant
with all reasonable rules and regulations for the use thereof
prescribed from time to time by the Landlord and provided that
no obstruction is caused to any car parking spaces on the Site
2. To pass and repass on foot only over and along the footways
comprised in the Site as a means of access to and egress from
the Demised Premises
3. Free and uninterrupted passage of services and facilities
through the Conduits which are now or may at any time during
the Term serve the Demised Premises with the right to construct
and maintain new Conduits for the benefit of the Demised
Premises (but not to construct new Conduits in on or under
any new buildings now or hereafter to be erected on the Site)
the right to repair maintain and renew such existing and new
Conduits and the right at any time but on Requisite Notice to
enter (or in the Landlord's absence but in emergency only to
break and enter) the Site subject to the Tenant forthwith
making good any damage caused in the exercise of this right
4. The right of support and protection for the Demised Premises from
the Site and any buildings now or hereafter to be erected on
the Site
5. Such rights of access to and entry upon the Site as are necessary
for the proper performance of the Tenant's obligations hereunder
or as may be required to remedy a failure by the Landlord to
observe and perform its obligations in this Lease or in the Head
Lease
THE SECOND SCHEDULE above referred to
_____________________________________
(Rights and Easements Excepted)
_______________________________
The following rights and easements are excepted and reserved out of
the Demised Premises to the Landlord any superior landlords and their
respective tenants and the occupiers of any adjoining or neighbouring
premises and all other persons authorised by the Landlord or any
superior landlord or having the like rights and easements:
1. The free and uninterrupted passage of services and facilities
through the Conduits which are now or may at any time during the Term
be in the Demised Premises with the right to construct and maintain
new Conduits for the benefit of any adjacent or nearby premises (but
not to construct new Conduits in on or under any buildings now or
hereafter to be erected on the Demised Premises) the right to repair
maintain and renew such existing and new Conduits and the right at
any time but on Requisite Notice to enter (or in the Tenant's absence
but in emergency only to break and enter) the Demised Premises subject
to the Landlord forthwith making good any damage caused in the exercise
of this right
2. The right to build rebuild or execute any other works upon any
adjacent or nearby premises in such manner as the Landlord may think
fit subject to the Landlord not affecting or diminishing the access
or enjoyment of light or air to or in respect of the Demised Premises
or any right and easement specified in the First Schedule hereto
SUBJECT to the Landlord giving Requisite Notice and forthwith making
good any damage caused in the exercise of this right
3. The support and protection from the Demised Premises enjoyed by
buildings now or hereafter to be erected
4. The right to build on or into any perimeter wall of the Demised
Premises and after giving Requisite Notice to enter the Demised
Premises to place and lay in under and upon the same such footing
for any intended wall or structure with the foundations therefor as
the Landlord shall think proper and for such purpose to excavate the
Demised Premises along the line of the junction between the Demised
Premises and any adjoining premises And also the right to erect and
use scaffolding upon the Demised Premises for such purposes PROVIDED
THAT the Landlord shall (a) not interfere with or restrict the
Tenant's access to or enjoyment or use of the Demised Premises or
any part thereof and (b) forthwith make good any damage caused
5. The right at any time on Requisite Notice to enter (or during
the Tenant's absence but in emergency only to break and enter) the
Demised Premises in order to (a) inspect or view the condition of the
Demised Premises (b) to carry out work upon any adjacent premises and
(c) to carry out any repairs or other Work or do anything which the
Landlord and/or the Head Landlord must or may carry out or do under the
provisions of this Lease or the Head Lease respectively
THE THIRD SCHEDULE above referred to
____________________________________
(Provisions for Rent Review)
____________________________
1. In this Schedule the following expressions shall have the
following meanings:
1.1. "the Rent Review Date" the date specified in the Particulars
1.2. "open market rent" shall mean the best yearly rent for which
the Demised Premises could reasonably be expected to be let
with vacant possession on the Relevant Review Date (as
hereinafter defined) in the open market by a willing lessor
to a willing lessee without taking a fine or premium for a term
of Ten years from the Relevant Review Date with provisions
similar to those contained in the Head Lease for Rent Review
every five years and otherwise upon the terms and conditions
(save that the extent of the demised premises and rights granted
shall be as are herein contained and save also as to the amount
of rent) as are contained in this Lease and on the assumption
(if not the fact) that the Demised Premises shall be ready for
immediate beneficial occupation and that all the Tenant's and
the Landlord's covenants shall have been complied with but
there being disregarded:
1.2.1. any effect on rent of the fact that the Tenant or an
undertenant may have been in occupation of the Demised
Premises
1.2.2. any goodwill attached to the Demised Premises by reason
of any trade or business carried on therein by the
Tenant or any undertenant
1.2.3. any effect of any improvement made by the Tenant for
the time being after the date hereof otherwise than
in pursuance of an obligation to the Landlord
1.2.4. Any effect of the Works carried out pursuant to a
Licence to Carry Out Works dated the 11th day of April
1994 made between Strathclyde Regional Council of the
first part the Landlord of the second part the Tenant
of the third part and the Surety of the fourth part
2. From and after the Relevant Rent Review Date the rent first
reserved shall be whichever is the higher of:
2.1. the yearly rent operative immediately before the Rent Review
Date and
2.2. the open market rent of the Demised Premises (hereinafter called
"the new rent")
3. If the Landlord and the Tenant shall be able to agree the new
rent or when the new rent shall have been determined in accordance
with the provisions hereof as the case may be a note of the new rent
shall be endorsed in the Sixth Schedule to this lease and the
Counterpart hereof and signed by the parties hereto
4. If three months before the Rent Review Date the Landlord and the
Tenant shall not have agreed on the new rent payable from the Rent
Review Date the Landlord or the Tenant may at any time thereafter
before the rent shall be agreed between the Landlord and the Tenant
require an independent Surveyor (hereinafter called "the Surveyor")
to determine the open market rent
5. The Surveyor may be agreed upon by the Landlord and the Tenant
and in default of such agreement shall be appointed by the President
for the time being of the Royal Institution of Chartered Surveyors or
the person designated by such institution for such purpose on the
application of the Landlord or the Tenant and any reference hereafter
to the said President shall be deemed to include a reference to such
officer
6.1. Notice in writing of his appointment shall forthwith be given
by the Surveyor to the Landlord and the Tenant and he shall
invite each to submit within a specified period (which shall
not exceed four weeks) a valuation accompanied if desired by a
statement of reasons
6.2. The Surveyor (who shall be a Chartered Surveyor experienced in
the letting and/or valuation of premises of a similar nature to
and situate in the same region as the Demised Premises and used
for purposes similar to those authorised hereunder at the date
of his appointment) shall at the option of the Landlord to be
notified to the Surveyor and the Tenant in writing within 21
days following the receipt by the Landlord of notice from the
Surveyor pursuant to paragraph 6.1 hereof act either as an
Arbitrator pursuant to the provisions of the Arbitration Act
1950 and 1979 or as an expert valuer whose decision shall be
final and binding on all persons who are or who have been
parties hereto and if the Surveyor shall act as expert he
shall invite each party to make written representations within
the period specified in paragraph 6.1 of this Schedule and
shall invite each party to make observations on such
representations within a further specified period (which shall
not exceed four weeks)
6.3. The Surveyor shall give notice in writing of his decision to
the Landlord and the Tenant within two months of his appointment
or within such extended period as may be reasonable
7. If the Surveyor shall fail to determine the open market rent
and give notice thereof within the time and in the manner provided
or if he shall relinquish his appointment or die or if it shall become
apparent that for any reason he will be unable to complete his duties
the Landlord may apply to the said President for a substitute to be
appointed in his place which procedure may be repeated as many times
as necessary
8. In the event that by the Rent Review Date the new rent shall
not have been agreed or determined (whether or not negotiations shall
have commenced) the Tenant shall continue to pay rent at the rate of
the current rent on each day appointed by this Lease for payment of
rent until the new rent shall have been agreed or determined and
thereupon the Tenant shall pay to the Landlord as arrears of rent an
amount equal to the difference between the new rent and the rent
actually paid for the period since the Rent Review Date together with
interest thereon at the base lending rate for the time being of the
Bank of Scotland from the Rent Review Date
9. The fees of the Surveyor shall be shared as the Surveyor shall
determine
10. As respects all periods of time referred to in this Schedule time
shall be deemed not to be of the essence
11. If on the Rent Review Date there shall be in force any act which
shall restrict interfere with or affect the Landlord's right to revise
the rent hereby reserved in accordance with the terms hereof then the
Landlord shall be entitled once following each removal or modification
of such Act to serve notice requiring a review of the said rent
(hereinafter called an "interim notice") upon the Tenant and from
and after the date of service of such interim notice until the end of
the Term the rent shall be increased to whichever is the higher of the
open market rent at the date of service of the interim notice and the
rent payable immediately prior thereto and the provisions of this
Schedule shall apply accordingly with the substitution of the said
date of service for the Rent Review Date
THE FOURTH SCHEDULE above referred to
_____________________________________
The Surety COVENANTS with the Landlord:
1. That if at any time during the Term the Tenant shall default in
payment of any of the rents reserved by this lease on the due dates
or in observing or performing any of the covenants and conditions
contained in this Lease which the Tenant is obliged to observe and
perform the Surety will pay the rents or observe or perform the
covenants or conditions in respect of which the Tenant shall have
defaulted notwithstanding any time or indulgence granted by the
Landlord to the Tenant or that the Tenant may have ceased to exist or
any other act or thing whereby but for this provision the Surety would
have been released
2. That if the liquidator or trustee in bankruptcy shall disclaim
this Lease the Surety will at the request of the Landlord within three
months after such disclaimer take from the Landlord a Lease of the
Demised Premises for a term equal to the residue of the Term which
would have remained had there been no disclaimer at the same rent and
subject to the same covenants and conditions as are reserved by and
contained in this Lease (except the requirement that a Surety join
therein) such lease to take effect from the date of such disclaimer and
in such case the Surety shall pay the reasonable costs of the Landlord
in the preparation of such new Lease and execute and deliver a
counterpart of it to the Landlord
3. In this Schedule the expression "the Tenant" shall mean only
Navstar Systems Limited and not any and every person or persons
company or corporation in whom the term shall for the time being be
vested
4. The covenants and guarantees contained in clauses 1 and 2 of
this Schedule shall (subject to the provisions of clause 3 of this
Schedule) have effect throughout the Term and also throughout any
period thereafter during which the Tenant shall occupy the Demised
Premises and the said covenants and guarantees shall relate to any
sums greater than the rents hereby reserved which the Tenant shall
become liable to pay under the terms hereof or of any subsequent deed
or licence supplemental to this Lease save and except any subsequent
deed or licence supplemental to this Lease which has the effect of
extending the contractual term
THE FIFTH SCHEDULE above referred to
____________________________________
(Deeds to which the demise is subject)
______________________________________
The covenants restrictions reservations conditions and other matters
contained or referred to in the Property Register and entries numbered
1 to 4 inclusive of the Charges Register of Title Number NN.85259
THE SIXTH SCHEDULE above referred to
____________________________________
Memoranda of rent review:
_________________________
The rent payable from the first review date specified in the
particularshas been agreed as Pounds ( ) per annum
Signed______________________
duly authorised signatories
of the Landlord/Tenant/Surety
The rent payable from the Second review date has been agreed as
Pounds ( per annum)
Signed_____________________
duly authorised signatories
of the Landlord/Tenant/Surety
Executed as a Deed by NAYSTAR SYSTEMS
LIMITED was hereunto affixed (but this
Deed was not delivered until the date
hereof) acting by its Secretary and a
Director or two Directors
Director
Secretary/
Director
THE COMMON SEAL OF SYMMETRICON INC
was hereunto affixed (but this Deed)
was not delivered until the date
hereof) in the presence of:-
Director
Secretary
SYMMETRICOM, INC.
formerly Sillcon General, Inc.
To: Andrea Collins
From: Jane Williamson
RE: Lease
Mansard Close Northampton
Attached please find the duly signed and
sealed above mentioned lease agreement.
This is being returned to you via Federal
Express on this date.
A copy of this lease agreement has been
filed in our files at Telecom Solutions/
Symmetricom, Inc.
cc: Paul Risinger
Scott Kamsler
Date APril 22, 1994
M Duckham Esq Oxford House Telephone (0604) 230400
Navstar Ltd Cliftonville Fax (0604)20956 & 230426
Royal Oak Way Northampton NN1 5PN DX 12413 Northampton
DAVENTRY Direct Fax Line No: (0604) 32102
Northants NN11 5PJ
Our Ref: GLG/sh.18.9
Your Ref:
Date: 18th April 1994
Dear Mike
Mansard Close Northampton
_________________________
I enclose the underlease for sealing by Navstar and Symmetricom. I
have amended the attestation clause as I believe that Navstar does
not have a seal.
Can you please return the underlease to me duly sealed and undated
as soon as possible.
G L GILBERT
Enc
Ipswich (Martlesham) Milton Keynes Northamtpton Norwich
Associateded Offices: Brussels Gilbraltar The Hague Los Angeles
New York Oslo
1
PUERTO RICO INDUSTRIAL DEVELOPMENT COMPANY
PO BOX 362350
SAN JUAN, PUERTO RICO 00936-2350
LEASE CONTRACT
PROJECT NO.:T-0796-0-67 AND T-0796-
1-67
LOCATION: AGUADA, PUERTO RICO
THIS AGREEMENT ENTERED into onby:
AS "LANDLORD", THE PUERTO RICO INDUSTRIAL DEVELOPMENT COMPANY, AND AS
"TENANT", TELECOM PUERTO RICO, INC. (FORMERLY ZELTEX P.R.,
INC.)
WITNESSETH
WHEREAS, LANDLORD is the owner of certain landsite and building,
identified in the Epigraph, hereinafter referred to as the Premises.
WHEREAS, LANDLORD has agreed to lease to TENANT, and TENANT has
agreed to hire from LANDLORD the Premises.
NOW THEREFORE, in consideration of the foregoing premises, the
parties herein agree on this Lease subject to the following:
TERMS AND CONDITIONS
ONE: LANDLORD hereby demises and lets unto TENANT, and TENANT
hereby leases from LANDLORD the Premises which are fully described
in Schedule "A" hereto annexed and made a part hereof.
The Premises are subject to the encumbrances, liens and/or
restrictions, if any, that may appear from said Schedule "A".
Furthermore, the air rights of the Premises, are excepted and
reserved to LANDLORD.
TWO: Premises shall be used and occupied exclusively in the
manufacture of "TELECOMMUNICATION & COMPUTER PRODUCTS".
THREE: TENANT shall hold the Premises for a period of FIVE (5)
years to commence on October 1st., 1994.
FOUR: Commencing on October 1st., 1994, TENANT shall pay to
LANDLORD an annual rental as follows:
PERIOD RENT PER SQUARE FOOT MONTHLY INSTALLMENTS
T-0796-0-67 T-0796-1-67
10-1-94 $ 2.20 $ 2,078.09 $ 2,069.79
The monthly installments for rent specified herein, shall be paid in
advance on the first day of each month at LANDLORD'S office, or at
any other place that LANDLORD may notify. In the event that the
date of commencement does not fall on the first of the month, TENANT
further agrees to pay the first partial monthly installments, prior
to, or on the date of commencement.
FIVE: The amount of $3,016.62 deposited by TENANT under the
provisions of a previous Lease Contract shall be credited to
the $4,147.88 deposit required herein; therefore, simultaneously
herewith TENANT shall pay $1,131.26 in a Certified Check to
complete said amount.
This deposit shall guarantee the compliance by TENANT of its
obligations, under this Contract, particularly, but not limited to,
the payment of rent, the compliance of the environmental clauses
herein included and the return of the Premises in proper condition
at the termination of this Lease. On said termination, if TENANT is
not in default of any of the terms and conditions of this Contract,
LANDLORD will return to TENANT the sum of money, if any, held
pursuant to this provision, after LANDLORD's Environmental Office
certifies that there are no environmental deficiencies as a result
of TENANT's manufacturing operation on the demised Premises.
SIX: TENANT agrees to have on the date of commencement of the term
of this Lease a capitalization of $4,500,000.00.
Likewise TENANT agrees to install within six (6) months from the
same date manufacturing machinery and equipment with a value of at
least $2,200,000.00.
This shall not include the cost of transportation and installation
thereof, nor its ordinary depreciation after installation; and
within eighteen (18) months from the date of commencement of the
term, to employ a minimum of ONE HOUNDRED EIGHTY (180)
production workers.
The aforementioned levels of capitalization, machinery and equipment
and employment herein required are not in addition to those required
in the previous lease contract; and shall be maintained throughout
the term of this Lease or any extension thereof.
SEVEN: All notices, demands, approvals, consents and/or
communications herein required or permitted shall be in writing. If
by mail should be certified and to the following addresses, to
LANDLORD: PO BOX 362350, SAN JUAN, PUERTO RICO 00936-2350.
To TENANT:
MAX GOLDMAN, ESQ., GOLDMAN, ANTONETTI & CORDOVA, PO BOX 70364,
SAN JUAN, PR 00936-0364
EIGHT: Net Lease - This Lease shall be interpreted as a net lease;
it being the exclusive responsibility of TENANT to pay for all
operating expenses, utilities, maintenance, expenses, insurance,
taxes or any other costs, expenses or charges of any nature not
specifically assumed by LANDLORD hereunder.
NINE: Warranty as to use - LANDLORD does hereby warrant that at the
time of the commencement of the term of this Lease, the Premises
may be used by TENANT for the manufacturing purposes herein intended
which are deemed consistent with the design and construction in
accordance with the corresponding plans and specifications.
TEN: Alterations - TENANT shall make no alterations, additions or
improvements to the Premises without the prior consent of LANDLORD
and all such alterations, additions or improvements made by or
for
TENANT, shall be at TENANT'S own cost and expenses and shall, when
made, be the property of LANDLORD without additional consideration and
shall remain upon and be surrendered with the Premises as a part
thereof at the expiration or earlier termination of this Lease, subject
to any right of LANDLORD to require removal or to remove as provided
for hereinafter.
In the event TENANT asks for LANDLORD'S consent for any
alteration; LANDLORD may at its option, require from TENANT to submit
plans and specifications for said alteration. Before commencing any
such work, said plans and specifications, if required, shall be filed
with and approved by all governmental agencies having jurisdiction
thereof, and the consent of any mortgagee having any interest in or
lien upon this Lease shall be procured by TENANT and delivered to
LANDLORD if required by the term of the mortgage.
Before commencing any such work, TENANT shall at TENANT'S own cost
and expense, deliver to LANDLORD a General Accident Liability Policy
more particularly described in Article THIRTY (30) hereof, but said
policy shall recite and refer to such work, and in addition thereto, if
the estimated cost of such work in more than FIVE THOUSAND DOLLARS
($5,000.00), TENANT shall, at TENANT'S own cost and expense, deliver to
LANDLORD a surety bond, or a performance bond from a company acceptable
to LANDLORD, or a similar bond or other security satisfactory to
LANDLORD, in an amount equal to the estimated cost of such work,
guaranteeing the completion of such work within a reasonable time, due
regard being had to conditions, free and clear of materialmen liens,
mechanics liens or any other kind of lien,encumbrances, chattel
mortgages and conditional bills of sale and in accordance with said
plans and specifications submitted to and approved by LANDLORD. At
LANDLORD'S option TENANT shall provide a blanket written guarantee in
an amount sufficient to satisfy LANDLORD as to all alterations,
changes, additions and improvements to the Premises in lieu of separate
guarantee for each such project.
TENANT shall pay the increased premium, if any, charged by the
insurance companies carrying insurance policies on said building, to
cover the additional risk during the course of such work.
ELEVEN. Power Substation - If required by TENANT'S operations,
TENANT shall, at its own cost and expense, construct and/or install a
power substation and connect it to the PUERTO RICO ELECTRICAL POWER
AUTHORITY (PREPA) distribution lines, for voltages up to 13.2 KV; and
to PREPA transmission lines for voltages of 38 KV, all in conformity to
PREPA'S requirements. Such construction shall, in no event, be
undertaken by TENANT until after LANDLORD has approved the location
thereof, as well as the routing of the power line extension.
TWELVE. Repairs and Maintenance - TENANT shall, at its own cost
and expense, put, keep and maintain in thorough repair and good order
and safe condition the building and improvements standing upon the
Premises at the commencement of the term hereon or thereafter erected
upon the premises, or forming part of the Premises, and their full
equipment and appurtenances, the side walks areas, sidewalk hoists,
railings, gutters, curbs and the like in from of the adjacent to the
Premises, and each and every part thereof, both inside and outside,
extraordinary and ordinary, and shall repair the whole and each and
every part thereof in order to keep the same at all times during the
term hereof in through repair and good order and safe conditions,
whenever the necessity or desirability therefor may occur, and whether
or not the same shall occur, in whole or in part, by wear, tear,
obsolescence or defects, and shall use all reasonable precautions to
prevent waste, damage or injury, except as provided hereinafter.
LANDLORD and not TENANT, shall be responsible for and shall
promptly correct any defects in the building on the Premises which are
due to faulty design, or to errors of construction not apparent at the
time the Premises were inspected by TENANT for purposes of occupancy by
TENANT; this shall not be interpreted to relieve TENANT of any
responsibility or liability herein otherwise provided, including among
others, for structural failure due to the fault or negligence of
TENANT.
TENANT shall also, at TENANT'S own cost and expense, maintain the
landsite in thoroughly clean condition; free from solid waste (which
includes liquid and gaseous as defined by the Resource Conservation and
Recovery Act), and the Regulation on Hazardous and Non-Hazardous Waste
of the Environmental Quality Board, as amended, rubbish, garbage and
other obstructions. Specifically, TENANT shall not use said landsite,
nor permit it to be used, as a deposit or as dump for raw materials,
waste materials, hazardous, toxic or non-toxic substances, or
substances of whichever nature. TENANT shall neither make any
excavation for the purpose of storing, putting away and/or concealing
waste materials of any kind. Underground storage of
hazardous and/or toxic substances is specifically prohibited.
TENANT shall not do or cause to be done, nor permit on the
Premises anything deemed extra hazardous, nor shall it store in the
Premises flamable or toxic products of any class or kind without taking
the proper precautions and complying with applicable federal and
Commonwealth laws and regulations.
In case TENANT needs to store in the landsite raw materials of a
hazardous and/or toxic nature or hazardous and/or toxic wastes, TENANT
shall notify LANDLORD and secure its prior authorization. LANDLORD
shall be furnished with a copy of any permit issued for such storage.
Although it is not intended that TENANT shall be responsible for
any decrease in value of the Premises due to the mere passing of time,
or for ordinary wear and tear of surfaces and other structural members
of the building, nevertheless TENANT shall. (i) replace, with like
kind and quality, doors, windows; electrical, sanitary and plumbing,
fixtures; building equipment and/or other facilities or fixtures in the
Premises which through TENANT's use, fault or negligence, become too
worn out to repair during the life of this Lease, (ii) paint the
property inside and outside as required.
In addition to the foregoing, TENANT shall indemnify and safe
harmless LANDLORD from and against any and all cost, expenses, claims,
losses, damages, or penalties, including counsel fees, because of or
due to TENANT'S failure to comply with the foregoing, and TENANT shall
not call upon the LANDLORD for any disbursement or outlay of money
whatsoever, and hereby expressly releases and discharges LANDLORD of
and from any liability or responsibility whatsoever in connection
therewith.
THIRTEEN. Roof Care - TENANT, without the prior consent of
LANDLORD, shall not. (i) erect or cause to be erected on the roof any
bill board, aerial sign, or structure of any kind, (ii) place any
fixture, equipment or any other load over the roof, (iii) drill any
hole on the roof for whichever purpose, (iv) use the roof for storage,
nor (v) correct any leaks whatsoever, this being LANDLORD'S sole
responsibility. Furthermore, TENANT shall take all reasonable
precautions to insure that the drainage facilities of the roof are not
clogged and are in good and operable conditions at all times.
FOURTEEN. Floor Loads - TENANT hereby acknowledges that it has
been informed by LANDLORD that the maximum floor load of the Premises
herein demised is 150 pounds per sq. ft. Therefore, TENANT hereby
agrees that in the event the load of the machinery and equipment to be
installed thereat exceeds such maximum load, it shall, at its own cost
and expense, carry out any improvements to the floor of the Premises
which may be necessary to support such additional load; it being
further agreed and understood that construction and/or installation of
such improvements shall not be commenced until after LANDLORD'S
approval of the plans to be prepared therefor by TENANT and thereafter,
after completion of construction and/or installation of said
facilities, they shall be deemed covered by and subject to the
applicable provisions of this Contract; it being further specifically
agreed and understood that upon termination of this Lease, such
facilities shall be removed by TENANT, at its own cost and expense, or
in the alternative, and upon request by LANDLORD, they shall remain as
part of the Premises with no riqht whatsoever on the part of TENANT to
be reimbursed and/or compensated therefor.
FIFTEEN. Fixtures - TENANT shall not affix to the ceiling, nor to
its supporting joists or columns, nor to any of its walls, any air
conditioning unit, nor any other fixture, without the prior consent of
LANDLORD.
SIXTEEN. Environmental Protection and Compliance - TENANT agrees,
as a condition hereof, that it will not discharge its solid, liquid or
gaseous industrial and/or sanitary effluent or discharges, either into
the sewer system and/or into any other place until after required
authorizations therefor has been obtained from the Puerto Rico Aqueduct
and Sewer Authority, and/or the Department of Health of Puerto Rico
and/or Environmental Quality Board, and/or any other governmental
agency having jurisdiction thereof and TENANT further agrees and
undertakes to pre-treat any such effluent, prior to discharge thereof
as required by the said Authority, Department and/or governmental
agency with jurisdiction, and/or to install any equipment or system
required, and to fully abide by and comply with any and all requisites
imposed thereby, and upon request by LANDLORD to submit evidence of
such compliance; it being agreed that non-compliance thereof by TENANT
for a period of ninety (90) days after notice, shall be deemed an
additional event of default under the provisions hereof. Provided,
that no construction and/or installation shall be made until LANDLORD
has approved of it.
TENANT shall also, at TENANT'S own cost and expense, construct and
maintain Premises, processes and/or operating procedures in compliance
with the terms, conditions and commitments specified in any
Environmental Impact Statement, Environmental Assessment or any other
analogous document produced by the Commonwealth of Puerto Rico,
Economic Development Administration /LANDLORD as lead agency/ or by any
other governmental agency in connection with the approval or operation
of the project.
TENANT shall also serve LANDLORD with a copy of any lawsuit,
notice of violation, order to show cause or any other regulatory or
legal action against TENANT in any environmental-related case or issue.
TENANT shall also serve LANDLORD with a copy of any permit granted
to TENANT for air emissions, water discharge, solid waste generation,
storage, treatment and/or disposal, and for any hazardous and/or toxic
waste raw materials or by-products used or generated, stored, treated
and/or disposed or any other endorsement, authorization or permit
required to be obtained by TENANT.
TENANT shall also serve LANDLORD with a copy of any filing or
notification to be filed by TENANT with any regulatory agency or any
environmentally related case or issue, especially in any situation
involving underground or surface water pollution, hazardous and/or
toxic waste spillage and ground contamination. The notification to
LANDLORD shall take place not later than the actual filing of the
pertinent documents with the regulatory agency.
SEVENTEEN. Improper Use - TENANT, during the term of this Lease
and of any renewal or extension thereof, agrees not to use or keep or
allow the leased Premises or any portion thereof to be used or occupied
for any unlawful purpose or in violation of this Lease or of any
certificate of occupancy or certificate of compliance covering or
affecting the use of the Premises or any portion thereof, and will not
suffer any act to be done or any condition to exist on the Premises or
any portion thereof, or any article to be brought thereon, which may be
dangerous, unless safeguarded as required by law, or which may in law,
constitute a nuisance, public or private, or which may made void or
voidable any insurance then in force on the leased Premises.
EIGHTEEN. Government Requlations - TENANT agrees and undertakes
to abide by and comply with any and all rules, regulations and
requirements of the Planning Board of Puerto Rico, the Department of
Health, the Environmental Quality Board, the Environmental Protection
Agency (EPA), where applicable and/or of any other governmental agency,
having jurisdiction thereon applicable to TENANT'S operations at the
Premises and/or products to be manufactured thereat, and if requested
by LANDLORD, TENANT shall submit evidence of such compliance; it being
agreed and understood that noncompliance with any and all such rules,
regulations and requisites shall be deemed an additional event of
default under the provisions of this Contract, unless remedied within
thirty (30) days after receipt of notice thereof.
Any and all improvements to the Premises required by any
governmental agency, having jurisdiction thereon so as to carry
TENANT'S operations in accordance with the regulations and requisites
thereof, shall be at TENANT'S own cost and expense, except for any
improvements that may be required as a result of any violation by
LANDLORD that may exist at the effective date hereof other than
violations caused by TENANT or TENANT'S agents.
TENANT further agrees and undertakes to install in the Premises,
at its own costs and expense, such devices as may be necessary to
prevent any hazard, which may be caused or created by its operations
from affecting the environmental integrity of the landsite or causing
any nuisance to adjacent TENANTS and/or the community in general; it
being agreed and understood that creating or causing any such nuisance,
shall be deemed an additional event of default under the provisions of
this Contract.
TENANT further agrees and undertakes to abide by and comply with
any and all rules, regulations and requisites of the Fire Department
relative to the use and storage of raw materials, finished products
and/or inflammable materials, and/or of any other governmental agency,
having jurisdiction thereon applicable to TENANT'S operations at the
Premises, and if requested by LANDLORD, TENANT shall submit evidence of
such compliance; it being agreed and understood that noncompliance by
TENANT with any of the aforementioned rules, regulations and requisites
shall be deemed, in each of such cases, an additional event of default
under the provisions of this Contract, unless remedied within thirty
(30) days after receipt of notice thereof.
If as a consequence of the foregoing dispositions, TENANT need to
make alterations to the Premises, the same shall be done subject to the
dispositions of Article TEN hereof.
NINETEEN. Use Permit - TENANT agrees to abide by and comply with
any and all conditions and requisites included in the Use Permit which
may be issued by the Puerto Rico Permits and Regulations Administration
(ARPE), and if requested by LANDLORD, shall submit evidence of such
compliance; it being agreed and understood that noncompliance by TENANT
with any and all such conditions and requisites and/or the cancellation
of the said Use Permit shall, in each of such cases, be deemed an
additional event of default under the provisions of this Contract.
TWENTY. Inspection - TENANT shall permit LANDLORD or LANDLORD'S
agents to enter the Premises at all reasonable time for the purpose of
inspecting the same, or of making repairs that TENANT has neglected or
refused to make as required by the terms, covenants and conditions of
this Lease, and also for the purpose of showing the Premises to persons
wishing to purchase the same, and during the year next preceding the
expiration of this Lease, shall permit inspection thereof by or on
behalf of prospective TENANTS. If, at a reasonable time, admission to
the Premises for the purposes aforesaid cannot be obtained, or if at
any time an entry shall be deemed necessary for the inspection or
protection of the property, or for making any repairs, whether for the
benefit of TENANT or LANDLORD, LANDLORD'S agents or representatives may
enter the Premises by force, or otherwise, without rendering LANDLORD,
or LANDLORD'S agents or representative liable to any claim or cause of
action or damage by reason thereof, and accomplish such purpose.
The provisions contained in this Article are not to be construed
as an increase of LANDLORD'S obligations under this Lease; it being
expressly agreed that the right and authority hereby reserved does not
impose, nor does LANDLORD assume, by reason thereof, any responsibility
or liability whatsoever for the repair, care of supervision of the
Premises, or any building, equipment or appurtenance on the Premises.
TWENTY ONE. LANDLORD'S entrv for rePairs and alterations -
LANDLORD reserves the right to make such repairs, changes alterations,
additions or improvements in or to any portion of the building and the
fixtures and equipment which are reputed part thereof as it may deem
necessary or desirable and for the purpose of making the same, to use
the street entrances, halls, stairs and elevators of the building
provided that there be no unnecessary obstruction of TENANT'S right of
entry to and peaceful enjoyment of the Premises, and TENANT shall make
no claim for rent abatement compensation or damages against LANDLORD by
reason of any inconvenience or annoyance arising therefrom.
TWENTY TWO. LANDLORD excused in certain instances - If, by reason
of inability to obtain and utilized labor, materials or supplies, or by
reason of circumstances directly or indirectly the result of any state
of war, or of emergency duly proclaimed by the corresponding
governmental authority, or by reason of any laws, rules orders,
regulations or requirements of any governmental now or hereafter in
force or by reason of strikes or riots, or by reason of accidents, in
damage to or the making of repairs, replacements or improvements to the
building or any of the equipment thereof, or by reason of any other
cause reasonable beyond the control of LANDLORD, LANDLORD shall be
unable to perform or shall be delayed in the performance of any
covenant to supply any service, such non-performance or delay in
performance shall not be ground to any claim against LANDLORD for
damages or constitute a total or partial eviction, constructive or
otherwise. It being agreed and understood that the time for completion
of any such construction, shall be extended for a period of time equal
to the number of days of any such delay.
TWENTY THREE. Quiet Enioyment - TENANT on paying the full rent
and keeping and performing the conditions and covenants herein
contained, shall and may peaceably and quietly enjoy the Premises for
the term aforesaid, subject, however, to the terms of this Lease and
TWENTY FOUR. Leasehold Improvements - If leasehold improvements
made by or for the benefit of TENANT in the Premises at his request or
other personal property to TENANT are assessable or taxable and a tax
liability is imposed to TENANT or LANDLORD, it is understood that it
shall be the sole responsibility of TENANT to pay such taxes and in no
event shall such taxes be the liability of or be transferable to
LANDLORD. In the event that by operation of law, such taxes became a
liability of LANDLORD, TENANT shall pay such taxes as they become due
and payable and shall promptly reimburse LANDLORD for any payments or
expenses incurred or disbursed by LANDLORD by reasons of any such
assessment. Said amount shall be due and payable, as additional rent,
with the next installment of rent. In the event that TENANT fails to
make this payment when due, it shall be subject to the dispositions of
Article THIRTY SEVEN hereof.
TWENTY FIVE. Stoppaqe of Operations - It is understood by the
parties hereto that this Lease is made by LANDLORD in furtherance of
the industrialization plans of the Commonwealth of Puerto Rico, and it
is accordingly understood that TENANT will use all reasonable efforts
while this Lease is in effect to maintain a manufacturing operation
upon the Premises, but nothing contained in this paragraph shall be
deemed to require TENANT to maintain such an operation otherwise than
in accordance with sound principles of business management, or (without
limiting the generality of the foregoing) to prevent TENANT from
curtailing such operation or from shutting it down, whenever and as
often as TENANT may, in the exercise of sound business judgment, deem
such action advisable. However, TENANT shall give to LANDLORD notice
of any necessary or convenient curtailment and/or shut-down, at least
seven (7) days prior to the date fixed therefor except in cases of an
emergency shut-down, in which case such notice shall be given at the
earliest possible time. No curtailment of operations or shut-down in
accordance with the provisions of this paragraph shall constitute a
default under the provisions of this Contract which will enable
LANDLORD to terminate it, unless such plants shall have been shut-down
for a period of six (6) consecutive months. A shut-down on account of
unforeseeable event or events which although foreseeable could not be
prevented, shall not constitute a breach of this agreement.
Nothing in this paragraph contained shall relieve TENANT from the
payment of rent during the period of any shut-down or curtailments
of operations.
TWENTY SIX: Assignment and Subletting - TENANT shall not assign,
this Lease nor let or sublet the Premised or any part thereof except
to its parent company, to a wholly owned subsidiary, to an affiliate
of TENANT, wholly owned by TENANT'S parent company or to a
corporation to be organized by TENANT. In any of these cases,
TENANT shall promptly notify LANDLORD of said assignment or
subletting, it being agreed and understood that no such assignment
or subletting shall: (i) reduce or, in any way, affect the
obligations of TENANT under this Lease, nor (ii) release TENANT from
liability under this Lease.
TWENTY SEVEN: "LANDLORD"- Effect of Conveyance: The word
"LANDLORD", as used herein, means only the owner for the event of
any sale, conveyance or transfer of title of the demised premises,
LANDLORD shall be and hereby is entirely freed and relieved of all
covenants and obligations of LANDLORD hereunder, whenever LANDLORD,
at the time of any sale, conveyance or transfer of title, obtains an
agreement in writing from the purchaser or transferee assuming the
performance of all covenants and obligations in this Lease".
TWENTY EIGHT: No Representation by LANDLORD - LANDLORD, LANDLORD'S
agents or employees, or the agents, executives or employees of the
Economic Development Administration, have made no representations or
promises with respect to the Premises except as herein expressly set
forth and no rights, easements or licenses are acquired by TENANT by
implication or otherwise except as expressly set forth in the
provisions of this Contract. The taking possession of the Premises
by TENANT, shall be conclusive evidence, as against TENANT, that
TENANT accepts same "AS IS" and that said Premises, particularly
the building which forms a part of the same, were in good and
satisfactory conditions at the time such possession was so taken.
TWENTY NINE. Damages Except as provided in the se ond
subparagraph Twelve herein LANDLORD shall not be responsible for
any latent defect or change of conditions in the Premises resulting
in damage to the same, or the property or person therein, except to
extent of LANDLORD'S gross negligence, and provided such claims or loss
is not covered by insurances herein required from TENANT. TENANT shall
promptly notify LANDLORD of any damage to or defects in the Premises,
particularly in any part of the building's sanitary, electrical, air
conditioning or other systems located in our passing through the
Premises, and the damage or defective conditions, subject to the
provisions of Article TWENTY ONE (21) hereof, shall be remedied by
LANDLORD with reasonable diligence.
THIRTY. General Liability Insurance - TENANT shall indemnify,
have harmless and defend LANDLORD and agents, servants and employees of
LANDLORD against and from any and all liability, fines, suits, claims,
demands, expenses, including attorneys' fees, and actions of any kind
or nature arising by reason of injury to person or property including
the loss of use resulting thereof or, violation of law occurring in the
Premises occasioned in whole or in part by any negligent act or
omission on the part of TENANT or an employee (whether or not acting
within the scope of his employment), servant, agent, licensee, visitor,
assignor or undertenant of TENANT, or by any neglectful use or
occupancy of the Premises or any breach, violation or non-performance
of any covenant in this Lease on the part of TENANT to be observed or
performed.
Pursuant to the foregoing, TENANT shall, maintain during the term
of this lease, at its own cost and expense, a Comprehensive General
Liability Policy. Said policy shall: (i) be for a combined single
limit of no less than $500,000.00 per accident, (ii) hold LANDLORD
harmless against any and all liability as hereinbefore stated, and
(iii) the care, custody & control exclusion shall be deleted from this
coverage. LANDLORD may require additional reasonable limits of public
liability insurance and coverages, when changing circumstances so
require.
THIRTY ONE. Property Insurance - TENANT recognizes that the rent
provided for herein does not include any element to indemnify, repair,
replace or make whole TENANT, his employees, servants, agents,
licensees, visitors, assignees, or undertenant for any loss or damage
to any property or injury to any person in the Premises.
Accordingly, during the term of this Lease, TENANT shall keep the
building standing upon the Premises at the commencement of the term
hereof or thereafter erected upon the Premises, including all equipment
appurtenant to the Premises and all alterations, changes, additions and
improvements, insured for the benefit of LANDLORD and TENANT, as their
respective interest may appear, in an amount at least equal to the
percentages stated below (as LANDLORD may from time to time determine).
The basis of the Property Insurance shall be Replacement Cost and the
coverage an "All Risks" Property Insurance Policy. Coverages included
in the All Risks Form:
1. Fire - "Building & Contents Form"
(a) Building - 100% of insurable value exclusive of
foundations
(b) Contents - All equipment appurtenant to the
Premises (State value of Policy)
2. Additional Coverages under the Fire Policy
(a) Extended Coverage Endorsement - 100% of insurable
value exclusive of foundations
(b) Earthquake - 100% of insurable value including
foundations
(c) Vandalism and Malicious Mischief Endorsement
(d) Improvements and Betterments - For all
alterations, changes, additions and improvements
3. Landsite and Flood whenever applicable and/or necessary
4. Boiler and Machinery (if any) - 100% of insurable value
5. Pollution Liability Policy - if necessary.
THIRTY TWO. Multifactory Building Specific Dispositions - In the
event that the Premises constitute a section or sections of an
industrial building and landsite in which other operations are
conducted by other TENANTS. (i) the insurance coverage herein
required, shall be acquired by LANDLORD for the whole of the industrial
building and TENANT shall reimburse LANDLORD, for its proportionate
share in the total cost of said policies, (ii) if, because of anything
done, caused or permitted to be done, permitted or omitted by TENANT,
the premium rate for any kind of insurance affecting the Premises shall
be increased, TENANT shall pay to LANDLORD the additional amount which
LANDLORD may be thereby obligated to pay for such insurance, and if
LANDLORD shall demand that TENANT remedy the condition which cause the
increase in the insurance premiums rate, TENANT will remedy such
conditions within five (5) days after such demand, and (iii) the
insurance policies required in the preceding Articles THIRTY (30) &
THIRTY ONE (31) shall be endorsed to include a waiver of subrogation
against TENANT. All amounts to be reimbursed by TENANT under this
ARticle, shall be due and payable, as additional rent, with the next
installment of rent. In the event that TENANT fails to make this
payment, when due, it shall be subject to the dispositions of Article
THIRTY SEVEN (37) hereof.
THIRTY THREE. Additional DisDositions about Insurance - All the
Insurance policies herein required from TENANT, shall be taken in form
and substance acceptable to LANDLORD with insurance companies duly
authorized to do business in Puerto Rico, having a "A" and a higher
financial fatting according to Best's Insurance Report; and shall
include LANDLORD as additional insured. TENANT shall instruct the
corresponding insurer to deliver such policies or certified copies of
Certificates of Insurance, in lieu of, directly to LANDLORD. LANDLORD
reserves the right not to deliver possession of the Premises to TENANT,
unless, and until two (2) days after such original policies, or
certified copies or certificates have been deposited with LANDLORD.
Furthermore, said policies, shall. (i) provide that they may not
be cancelled by the insurer for nonpayment of premium or otherwise,
until at least thirty (30) days after services of notice by registered
or certified mail of the proposed cancellation upon LANDLORD, and (ii)
be promptly renewed by TENANT upon expiration and TENANT shall, within
thirty (30) days after such renewal, deliver to LANDLORD adequate
evidence of the payment of premiums thereon. If such premiums or any
of them shall not be so paid, LANDLORD may procure the same in the
manner set forth for governmental agencies, and TENANT shall reimburse
LANDLORD any amount so paid. This reimbursement being due and payable
with the next installment of rent. In the event that TENANT fails to
make this payment when due, it shall be subject to the dispositions of
Article THIRTY SEVEN (37) hereof. It is expressly agreed and
understood, that payment by LANDLORD of any such premiums shall not be
deemed to waive or release the default in the payment thereof by TENANT
nor the right of LANDLORD to take such action as may be available
hereunder as in the case of default in the payment of rent.
upon the commencement of the term hereof, TENANT shall pay to
LANDLORD the apportioned unearned premiums on all such policies of
insurance then carried by LANDLORD in respect of the Premises in the
event TENANT continues with the insurance policies placed in LANDLORD.
TENANT shall not violate nor permit to be violated any of the
conditions or provisions of any of said policies, and TENANT shall so
perform and satisfy the requirements of the companies writing such
policies that at all times companies of good standing and acceptable to
LANDLORD shall be willing to write and continue such insurance.
TENANT shall cooperate with LANDLORD in connection with the
collection of any insurance monies that may be due in the event of loss
and shall execute and deliver to LANDLORD such proofs of loss and other
instruments that may be required for the purpose of facilitating the
recovery of any such insurance monies, and in the event that TENANT
shall fail or neglect so to cooperate or to execute, acknowledge and
deliver any such instrument, LANDLORD, in addition to any other
remedies, may as the agent or attorney-in fact of TENANT, execute and
deliver any proof of loss or any other instruments as may seem
desirable to LANDLORD and any mortgagee for the collection of such
insurance monies. This shall not be interpreted as any waiver of the
obligations of TENANT under Articles THIRTY, THIRTY ONE, THIRTY TWO and
THIRTY THREE hereof or exclusively in favor of LANDLORD under Article
THIRTY NINE hereof.
THIRTY FOUR. Waivers - The receipt by LANDLORD of the rent,
additional rent, or any other sum or charges payable by TENANT with or
without knowledge of the breach of any covenant of this Contract, shall
not be deemed a waiver of such breach. No act or omission of LANDLORD
or its agent during the term of this Lease shall be deemed an
acceptance of a surrender of the Premises and no agreement to accept a
surrender of the Premises shall be valid unless it be made in writing
and subscribed by LANDLORD. This Contract contains all the agreements
and conditions made between the parties hereto with respect to the
Premises and it cannot be changed orally. Any additions to, or charges
in this Lease must be in writing, signed by the party to be charged.
Failure on the part of LANDLORD to act or complain of any action
or nonaction on the part of TENANT shall not be deemed to be a waiver
of any of its respective rights hereunder nor constitute a waiver at
any subsequent time of the same provision. The consent or approval by
LANDLORD to, or of any action by the other requiring consent or
approval shall not be deemed to waive or render unnecessary the
consent or approval by LANDLORD of any subsequent similar act.
THIRTY FIVE. Reinstatement - No receipt of monies by LANDLORD for
TENANT after the termination or cancellation hereof in any lawful
manner shall reinstate, continue or extend the term hereof, or affect
any notice theretofore given to TENANT, or operate as a waiver of the
right of LANDLORD to enforce the payment of rent, additional rent, or
other charges then due or thereafter falling due, or operate as a
waiver of the right of LANDLORD to recover possession of the Premises
by proper suit, action, proceeding or remedy; it being agreed that,
after the service of notice to terminate or cancel this Lease, and the
expiration of the time therein specified, if the default has not been
cured in the meantime, or after the commencement of suit, action or
summary proceedings or of any other remedy, or after a final order,
warrant of judgment of the possession of the Premises, LANDLORD may
demand, receive and collect any monies then due, or thereafter becoming
due, without in any manner affecting sueh notice, proceeding, suit,
action, order, warrant or judgment; and any and all such monies so
collected shall be deemed to be payments for the use and occupation of
the Premises, or at the election of LANDLORD, on account of TENANT'S
liability hereunder. Delivery or acceptance of the keys to the
Premises, or any similar act, by the LANDLORD, or its agents or
employees, during the term hereof, shall not be deemed to be a delivery
or an acceptance of a surrender of the Premises unless LANDLORD shall
explicity consent to it, in the manner set forth hereinbefore.
THIRTY SIX. Subordination and Attornment - This Lease is and
shall be subject and subordinate to all liens, or mortgages which may
now or hereafter affect the Premises and to all renewals,
modifications, consolidations, replacements and extensions thereof and,
although this subordination provision shall be deemed for all purposes
to be automatic and effective without any further instrument on the
part of TENANT, TENANT shall execute any further instrument requested
by LANDLORD to confirm such subordination.
TENANT further covenants and agrees that if by reason of a default
upon the part of LANDLORD of any mortgage affecting the Premises, the
mortgage is terminated or foreclosed by summary proceedings or
otherwise, TENANT will attorn to the mortgagee or the purchaser in
foreclosure proceedings, as the case may be, and will recognize such
mortgage or purchaser, as the TENANT'S landlord under this Lease.
TENANT agrees to execute and deliver, at any time and from time to
time, upon the request of LANDLORD or of the mortgagee or the purchaser
in foreclosure proceedings, as the case may be, any reasonable
instrument which may be necessary or appropriate to evidence such
attornment. TENANT further waives the provision of any statute or rule
of law now or hereafter in effect which may give or purport to give
TENANT any right of election to terminate this lease or to surrender
possession of the Premises demised hereby in the event any such
proceeding is brought by the holder of any such mortgage, and TENANT'S
obligations hereunder shall not be affected in any way whatsoever by
any such proceeding.
TENANT, covenants and agrees, upon demand of the holder of any
mortgage duly recorded or recordable in the corresponding Registry of
the Property or of any receiver duly appointed by the foreclose any
such mortgage, to pay to the holder of any such mortgage or to such
receiver, as the case may be, all rent becoming due under this Lease
after such demand, provided such holder of any such mortgage or any
such receiver complies with the obligations of LANDLORD under this
Lease.
TENANT, upon request of LANDLORD or any holder of any mortgage or
lien affecting the Premises, shall from time to time, deliver or cause
to be delivered to LANDLORD or such lien holder or mortgagee, within
ten (10) working days from date of demand a certificate duly executed
and acknowledged in form for recording, without charges, certifying, if
true, or to extent true, that this Lease is valid and subsisting and in
full force and effect and LANDLORD is not in default under any of the
terms of this Lease.
THIRTY SEVEN. Late Payments and Payment by LANDLORD - In the
event that (i) TENANT makes late payment, or fails to make payments to
LANDLORD, in whole or in part, of the rent, or of the additional rent,
or of any of the other payments of money required to be paid by TENANT
to LANDLORD, as stipulated in this Lease, when and as due and payable;
or if (ii) LANDLORD, without assuming any obligation to do so, after
any notice or grace period provided hereunder, performs or causes to be
performed, at the cost and expense of TENANT, any of the acts or
obligations agreed to be performed by TENANT, as stipulated in this
Lease, and TENANT fails to refund LANDLORD any amounts of money paid
or incurred by LANDLORD in performing of causing the performance of
such acts or obligations, when and as due and payable, TENANT
undertakes and agrees to pay LANDLORD as additional rent, interest on
such lately paid or unpaid rents, additional rent, and/or on such other
payments of money required to be paid, and/or on any such amounts of
money required to be refunded, from and after the date when payment
thereof matured or became due and payable, until full payment, at the
rate of twelve (12%) per cent per annum, or if such 12% interest, is
unlawful, then and in such event, at the highest maximum prevailing
rate of interest on commercial unsecured loans as fixed by the Board of
Regulatory Rates of Interest and Financial Charges, created under Law
#1, approved October 15, 1973 (10 LPRA 998), as amended, or by any
successor statute or regulation thereof.
THIRTY EIGHT. Abatement - If any substantial service or facility
to be provided by LANDLORD is unavailable for a period exceeding thirty
(30) days and LANDLORD has been notified of the same, should time
unavailability of such service render all or any portion of the
Premises untenable, TENANT after the aforesaid thirty (30) days, shall
be entitled to an abatement of a portion of the rent that shall reflect
that portion of the Premises which is untenable, provided the damage to
the service or facility is not attributable to the act or neglect of
TENANT or the employees, servants, licensees, visitors, assigns or
undertenants of TENANT.
THIRTY NINE. Fire or other Casualty - If before or during the
term of this Lease, the Premises shall be damaged by fire or other
casualty, LANDLORD after written notice thereof is given by TENANT,
shall repair the same with reasonable dispatch after notice to it of
the damage, due allowances being made for any delay due to causes
beyond the LANDLORD'S reasonable control, provided, however, that
LANDLORD shall not be required to repair or replace any furniture,
furnishings or other personal property which TENANT may have placed or
installed or which it may be entitled or required to remove from the
Premises. LANDLORD shall proceed with due diligence to obtain the
corresponding insurance adjustment of the loss and TENANT shall fully
cooperate with LANDLORD and assist in the adjustment of the loss.
Until such repairs are completed, and provided such damage or other
casualty is not attributable to the act or neglect of TENANT or the
employees, servants, licensees, visitors, assigns or undertenants of
TENANT, the rent required to be paid pursuant to Article FOUR hereof,
shall be abated in proportion to the part of the Premises which are
untenable. If the building, be so damaged that LANDLORD shall decide
to demolish and/or to reconstruct the building, in whole or in part,
LANDLORD may terminate this Lease by notifying TENANT within a
reasonable time after such damage of LANDLORD'S election to terminate
this Lease, such termination to be effective immediately if the term
shall not have commenced or on a date to be specified in such notice if
given during the term. In the event of the giving of such notice
during the term of this Lease, the rent shall be apportioned and paid
up to the time of such fire or other casualty if the Premises are
damaged, or up to the specified date of termination if the Premises are
not damaged and LANDLORD shall not be otherwise liable to TENANT for
the value of the unexpired term of this Lease.
FORTY. Default Provisions - If, during the term of this Lease,
TENANT shall. (i) apply for or consent in writing to, the appointment
of a receiver, trustee or liquidator of TENANT or of all or
substantially all of its assets or (ii) seek relief under the
Bankruptcy Act, or admit in writing its inability to pay its debts as
they become due, or (iii) make a general assignment for the benefit of
this creditors, or (iv) file a petition case or an answer seeking
relief (other than a reorganization not involving the liabilities of
TENANT) or arrangement with creditors, or take advantage of any
insolvency law, or (v) file an answer admitting the material
allegations of a case filed against it in any bankruptcy,
reorganization or insolvency proceeding or, if an order, judgment or
decree shall be entered by any court of competent jurisdiction on the
application of TENANT or creditor adjudicating TENANT a bankrupt or
insolvent, or approving a petition seeking reorganization of TENANT
(other than a reorganization not involving the liabilities of TENANT)
or appointment of a receiver, trustee or liquidator of TENANT, or of
all or substantially all its assets, and such order, judgment or
decree, shall continue stayed and in effect for any period of sixty
(60) consecutive days, the term of this Lease and all right, title and
interest of TENANT hereunder shall expire as fully and completely as if
that day were the date herein specifically fixed for the expiration of
the term, and TENANT will then, quit and surrender the Premises to
LANDLORD, but TENANT shall remain liable as hereinafter provided.
If, during the term of this Lease. (i) TENANT shall
default in fulfilling any of the covenants of this Lease (other than
the covenants for the payment of rent or additional rent), or of any
other standing contract with LANDLORD or (ii) if, during the term of
this Lease TENANT shall abandon, vacate, or remove from the Premises
the major portion of the goods, wares, equipment, or furnishings
usually kept on said premises, of (iii) this Lease, without the prior
consent of LANDLORD, shall be encumbered, assigned or transferred in
any manner in whole or in part or shall, by operation of law, pass to
or devolve upon any third party, except as herein provided, or (iv) if
TENANT is in violation of laws, rules and regulations regarding minimum
wages of its employees, or of any other law, rules and regulations
applicable to his operations, but which have not been specifically
mentioned in this Lease, LANDLORD may give to TENANT notice of any such
default or the happening of any event referred to above and if at the
expiration of thirty (30) days after the service of such a notice the
default or event upon which said notice was based shall continue to
exist, or in the case of a default which cannot with due diligence be
cured within a period of thirty (30) days, if TENANT fails to proceed
promptly after the service of such notice and with all due diligence to
cure the same and thereafter to prosecute the curing of such default
with all due diligence (it being intended that in connection with a
default not susceptible of being cured with due diligence within thirty
(30) days that the time of TENANT within which to cure the same shall
be extended for such period as may be necessary to complete the same
with all due diligence), LANDLORD may give to TENANT a notice of
expiration of the term of this Lease as of the date of the service of
such second notice, and upon the giving of said notice of expiration
the term of this Lease and all right, title and interest of TENANT
hereunder shall expire as full and completely as if that day were the
date herein specifically fixed for the expiration of the term, and
TENANT or any party holding under his will then quit and surrender the
Premises to LANDLORD, but TENANT shall remain liable as hereinafter
provided.
If, (i) TENANt shall default in the payment of the rent,
the additional rent, or of any other payment as required under this
Lease and such default shall continue for ten (10) working days after
notice thereof by LANDLORD, of (ii) if the default of the payment of
the rent, continues for thirty (30) days from the date any such payment
became due and payable (AUTOMATIC DEFAULT TERMINATION), or (iii) if
this Lease shall terminate as in Paragraph one and two of this Article
provided, this Lease shall terminate and TENANT will then quit and
surrender the Premises to LANDLORD, but TENANT shall remain liable as
hereinafter provided, LANDLORD or LANDLORD's agents and servants may
immediately or at any time thereafter re-enter the Premises and remove
all persons and all or any property therefrom, whether by summary
dispossess proceedings or by any suitable action or proceeding at law,
or with the license and permission of TENANT, which shall under this
Contract be deemed given upon expiration of the strict thirty (30) days
notice period of subdivision of paragraph Two of this Article, without
LANDLORD being liable to indictment, prosecution or damages therefor
and repossess and enjoy the Premises with all additions, alterations
and improvements.
If TENANT shall fail to take possession of the Premises
within ten (10) days after the commencement of the term of this Lease,
or if TENANT shall vacate and abandon the Premises, LANDLORD shall have
the right, at LANDLORD'S option, to terminate this Lease and the term
hereof, as well as all the right, title and interest of TENANT
hereunder, by giving TENANT five (5) days notice in writing of such
intention, and upon the expiration of the time fixed in such latter
notice, if such default be not cured prior thereto, this lease and the
term hereof, as well as all the right, title and interest of TENANT
hereunder, shall wholly cease and expire in the same manner and with
the same force and effect (except as to TENANT'S liability) as if the
date fixed by such latter notice were the expiration of the term herein
originally granted; and TENANT shall immediately quit and surrender to
LANDLORD the Premises and each and every part thereof and LANDLORD may
enter into or repossess the Premises, either by force, summary
proceedings or otherwise. The right granted to LANDLORD in this
Article or any other Article of this Lease to terminate this Lease,
shall apply to any extension or renewal of the term hereby granted, and
the exercise of any such right by LANDLORD during the term hereby
granted, shall terminate any extension or renewal of the term hereby
granted and any right on the part of TENANT thereto.
Upon the termination of this Lease by reason of any of the
foregoing event, or in the event of the termination of this Lease by
summary dispossess proceedings or under any provisions of law, now or
at any time hereafter, in force by reason of, or based upon, or arising
out of a default under or breach of this Lease on the part of TENANT,
or upon LANDLORD recovering possession of the Premises in the manner or
in any of the circumstances hereinbefore mentioned, or in any other
manner or circumstances whatsoever , whether with or without legal
proceedings, by reason of, or based upon, or arising out of a default
under or breach of this Lease on the part of TENANT, LANDLORD, at its
option, but without assuming any obligation to do so in any case, may
at any time, and from time to time, relet the Premises or any part or
parts thereof for the account of TENANT or otherwise on such terms as
LANDLORD may elect, including the granting of concessions, and receive
and collect the rents therefor, applying the same at a rental not
higher than the one stipulated in this Contract, first to the payment
of such reasonable expenses as LANDLORD may have incurred in recovering
possession of the Premises, including reasonable legal expenses, and
for putting the same into good order or condition or preparing or
altering the same for re-rental, and expenses, commissions and charges
paid, assumed, or incurred by LANDLORD in and about the reletting of
the Premises or any portion thereof and then to the fulfillment of the
covenants of TENANT hereunder. Any such reletting herein provided for,
may be for the remainder of the term of this Lease or for a longer or
shorter period or at a higher or lower rental. In any such case,
whether or not, the Premises or any part thereof be relet, TENANT shall
pay to LANDLORD the rent required to be paid by TENANT up to the
time of such termination of this Lease, and/or the full l~nt
provided for in the agreement for any holdover of such period after
termination and up to the surrender or recovery of possession of
the Premises by LANDLORD, as the case may be, and thereafter TENANT
covenants and agrees, to pay to LANDLORD until the end of the term
of this Lease as originally demised the equivalent of any
deficiency amount of all the rent reserved herein, less the net
avails of reletting, if any, as specified hereinabove in this
Article and the same shall be due and payable by TENANT to LANDLORD
as provided herein, that is to say, TENANT shall pay to LANDLORD
the amount of any deficiency then existing.
FORTY ONE: LANDLORD'S Remedies - In the event TENANT
shall default in the performance of any of the terms, covenants or
provisions herein contained, LANDLORD may, but without the
obligation to do so, perform the same for the account of TENANT and
any amount paid or expense incurred by LANDLORD in the performance
of the same shall be repaid by TENANT on demand. In the event of a
breach or threatened breach by TENANT or any subtenant or other
person holding or claiming under TENANT of any of the covenants,
conditions or provisions hereof, LANDLORD shall have the right of
injunction to restrain the same, and the right to invoke any remedy
allowed by law or in equity as if specific remedies, indemnity or
reimbursement were not herein provided for. The rights and remedies
given to LANDLORD in this Lease are distinct, separate and
cumulative, and no one of them, whether or not exercised by
LANDLORD, shall be deemed to be a waiver, or an exclusion of any of
the others.
FORTY TWO: Notice of Default - Anything in this Lease to the
contrary notwithstanding, it is specifically agreed that there shall
be no enforceable default against LANDLORD under any provisions of
this Lease, unless notice of such default be given by TENANT to
LANDLORD in which TENANT shall specify the default or omission
complained of, and LANDLORD shall have thirty (30) days after
receipt of such notice in which to remedy such default, or if said
default or omission shall be of such a nature that the same cannot
be cured within said period, then the same shall not be an
enforceable default if TENANT shall have commenced taking the
necessary steps to cure or remedy said default within the said
thirty (30) days and diligently proceeds with the correction
thereof.
FORTY THREE. Capitalization - For the purpose of this Contract,
specifically of Article SIX, Capitalization includes the total of
owner's equity sources (preferred stock, common stock and surplus
accounts) plus long-term debts, it being agreed and understood that the
amortization of any such debt shall in no way diminish the amount
originally determined as capitalization.
FORTY FOUR. Disclosure of Information - TENANT agrees to furnish
to LANDLORD within ninety (90) days after the expiration of each fiscal
year of TENANT, an annual statement certified by an independent
Certified Public Accountant showing as of the end of each such fiscal
year. (i) TENANT'S paid-in capital, (ii) long-term debts and
capitalization as required by Articles SIX and FORTY THREE hereof,
(iii) investment in machinery and its capacity to provide employment,
(iv) taxes (including Social Security taxes) paid, and (v) any other
information as required by this Lease.
In the event such statement is not filed with LANDLORD as
herein provided, LANDLORD may obtain such information from TENANT at
TENANT'S expense, and for such purpose TENANT shall make available to
LANDLORD'S designated representatives, its books of accounts and other
necessary data and facilities, all of which shall be provided and made
available at TENANT'S principal office in Puerto Rico.
FORTY FIVE. Automatic Renewal - In the event TENANT does not
vacate the Premises in the manner and under the conditions hereinbefore
provided, within ninety (90) days after the normal expiration of the
term hereof, LANDLORD shall have the option to be exercised at any time
thereafter, to notify TENANT that the lease herein has been renewed for
an additional term of ten (10) years from the date of the last normal
expiration of the term hereof and, in such event, the parties agree
that this Contract shall be held to have been renewed and to continue
in full force and effect for such additional term of ten (10) years
upon the mere mailing of such notice by LANDLORD to TENANT. This
provision shall in no way prejudice, affect or deny any right which
LANDLORD may otherwise have because, or at the time, of any such
termination of the term hereof, particularly whenever LANDLORD does not
exercise such option; it being agreed and understood that such renewal
shall be upon the same terms and conditions contained herein except
that the rental rate to be charged shall be the rate then currently
being charged by LANDLORD for similar building in the area, but in no
event shall it be less than the rate herein stipulated.
FORTY SIX. Partial Invalidity and Applicable Law - If any term or
provisions of this Lease or the application thereof to any person or
circumstances shall, to any extent, be invalid or unenforceable the
remainder of this Lease and the application of such term or provision
to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each term
and provision of this Lease shall be valid and be enforceable to the
fullest extent permitted by law. This Contract is entered into and
shall be interpreted in accordance with the laws of the Commonwealth of
Puerto Rico.
FORTY SEVEN. Lease Termination and Holdina Over - Upon the
expiration or termination of this Lease:
(i) TENANT shall inform LANDLORD in writing of TENANT'S activities
affecting each or any environmental area of concern during the period
of TENANT'S operation, including a description from an environmental
standpoint of the physical conditions of the premises and landsite.
TENANT shall also inform to LANDLORD in writing of any environmental
regulatory violations, compliance plans, permits, closure plans, clean-
up actions or any other regulatory procedures related to the operation.
In the event that the information reveals TENANT'S noncompliance of any
of the above, or in the event that a physical inspection of the
Premises and adjacent areas by LANDLORD, or any other source of
information reveal the possibility of contamination, in that event,
TENANT shall, at LANDLORD'S request submit a plan of action with the
appropriate financial provisions to execute it. LANDLORD shall hold
TENANT responsible for any and all environmental damage, or any damage
to third parties as a result of any environmental damage, or any
remedial action (including monitoring) to be performed at landsite or
otherwise as a result of TENANT'S operations after termination of Lease
and until such a time as complete remediation or fulfillment of
TENANT'S obligations is effected. In case TENANT fails to comply with
the foregoing provisions, LANDLORD may elect to effect them at TENANT'S
expense and responsibility.
(ii) TENANT shall remove all hazardous and toxic
substances belonging to TENANT or to a third party. TENANT shall also
ren.ove all other property of TENANT and that of any third party and
failing so to do, TENANT hereby appoints LANDLORD its agent so that
LANDLORD may cause all of the said property to be removed at the
expense and risk of TENANT. TENANT covenants and agrees to give full
and timely observance and compliance to this covenant to remove all its
property and surrender the Premises broom clean. TENANT hereby agrees
to pay all reasonable necessary cost and expenses thereby incurred by
LANDLORD. If, as the sole result of the removal of TENANT'S property
any portion of the Additional Premises or of the building of which they
are a part, are damaged, TENANT shall pay to LANDLORD the reasonable
cost of repairing such damages unless due to the gross negligence of
LANDLORD, its agents, servants, employees and contractors. TENANT'S
obligation to observe or perform this covenant shall survive the
expiration or other termination of the term of this Lease.
FORTY EIGHT. Chanqe of Address - TENANT shall promptly notify
LANDLORD of any change in the addresses other than those required from
it in Article SEVEN hereof.
FORTY NINE. TENANT will indemnify LANDLORD for any and all
liability, loss, damages, expenses, penalties and/or fines, and any
additional expenses including any attorney fees LANDLORD may suffer as
a result of claims, lawsuits, demands, administrative orders, costs,
resolutions or judgements against it arising out of negligence and/or
failure of TENANT or those acting under TENANT to conform to the
statutes, ordinances, or other regulations or requirements of any
governmental authority, be it Federal, of the Commonwealth of Puerto
Rico, its instrumentalities or public corporations, in connection with
the performance of this Lease.
FIFTY: Inasmuch as TENANT is presently in possession of the demised
premises pursuant to a certain Lease Contract executed between the
parties hereto, TENANT hereby accepts the Premises in their present
condition.
FIFTY ONE: LANDLORD shall provide a basic electrical distribution
system consisting of a 200 AMP meterbase, conduits, conductors,
receptacles and junction boxes as indicated in PRIDCO'S Electrical
Distribution System Drawings for indicated building.
FIFTY TWO: TENANT shall, at is own cost and expense, construct
and/or install all necessary equipment required to connect the
building's electrical system to the Puerto Rico Electrical Power
Authority's electrical distribution lines, such connection to be
made in compliance with the requirement of PREPA.
FIFTY THREE: Anything contained in this Contract to the contrary
notwithstanding, if required by TENANT, it shall be at TENANT's own
cost and expense the construction and/or installation of a sprinkler
system; it being agreed and understood that such construction shall
be in accordance with the provisions hereof.
FIFTY FOUR: TENANT shall, at its own cost and expense, install a
fire protection system and shall obtain the endorsement and approval
from said Fire Department for such installation. TENANT must also
provide security measures to prevent or reduce fire hazard due to
the storage of inflammable materials and products.
FIFTY FIVE: TENANT hereby acknowledges that in the industrial park
there are other industries; therefore TENANT hereby specifically
agrees and undertakes to take such steps and install such equipment
as may be necessary to prevent that any hazard and/or noise which
may be created by its operations may in any way or manner unduly
affect the operations of the other industries and therefore TENANT
hereby releases and saves LANDLORD harmless from any and all claims
or demands arising therefrom or in connection therewith.
FIFTY SIX: TENANT must comply with the rules and regulations of
pre-treatment established by the Puerto Rico Aqueduct and Sewer
Authority, the Environmental Quality Board and the Environmental
Protection Agency related to the effluent industrial discharge
in the sanitary sewer system and their final disposition.
Also, any improvement necessary to provide pre-treatment facilities
for the above mentioned effluents shall be at TENANT'S own cost and
expense and in coordination and with the approval of LANDLORD's
Engineering and Maintenance Departments.
FIFTY SEVEN: TENANT shall procure and obtain a permit for the
operation of a solid waste emission source from the Environmental
Quality Board and authorization for the Office of Solid Waste and/or
from the Municipality of AGUADA for the final disposition of
wastes.
FIFTY EIGHT: TENANT, at its own cost and expense, shall implement
the necessary measures and install the control equipment to maintain
the atmospheric air quality levels in compliance with the
environmental laws and regulations of the Environmental Quality
Board and the Environmental Protection Agency, as promulgated by any
succeeding law or regulations.
FIFTY NINE: It is hereby agreed and understood that TENANT shall
take the necessary steps to comply with the regulations and law
requirements of the PUERTO RICO OCCUPATIONAL SAFETY AND HEALTH
OFFICE (PROSHO).
SIXTY : TENANT certifies and guarantees that at the date of
subscribing this Contract it has submitted the Corporate Tax Returns
Forms during the last five (5) years and does not have any tax debt
pending with the Commonwealth of Puerto Rico, or is complying with
the terms of a payment plan duly approved.
TENANT also certifies and guarantees that at the date of execution
of this contract it has paid unemployment insurance compensation,
temporary disability insurance, and the driver's social security (as
applicable); or is complying with a payment plan duly approved.
TENANT acknowledges that this is an essential condition of the
Contract and if the above certification is incorrect in any of its
parts, LANDLORD may cancel this contract.
SIXTY ONE: LANDLORD reserves the right to audit the leased premises
from time to time during the term of this contract, as LANDLORD may
deem necessary, in order to assess all aspects of the environmental
condition of said premises and TENANT's compliance with
all environmental legislation and regulations, under Commonwealth and
federal law; TENANT hereby agrees to provide access to all areas and
structures of the premises for these purposes, upon LANDLORD's
request, and to also provide access to all books, records, documents and
instruments which LANDLORD may deem necessary in order to fully
audit the premises as herein stated.
SIXTY TWO: TENANT shall furnish to LANDLORD, in addition to any
other information, documents or instruments that may be required in
this contract:
a) Prompt written notice of the occurrence of any event
that by law or regulation would require any oral, telephonic or
written notice or communication to the US Environmental Protection
Agency and/or to the Puerto Rico Environmental Quality Board, or any
successor agency, and copies of all orders, notices or other
communications and reports received, made or given in connection
with any such event, and any enforcement action taken against TENANT
or against any property owned, occupied or used by TENANT;
b) Quarterly certifications subscribed by an authorized
representative designated by TENANT, as to the environmental
condition of the leased premises, containing the information
required by LANDLORD, which is specified in the form included as
Schedule "B" of this contract, or any subsequent modification
thereto;
c) Any other information and documents relating to TENANT's
compliance with environmental legislation and regulations under
federal and commonwealth laws.
SIXTY THREE: TENANT hereby guarantees to LANDLORD that, neither he,
or any of its stockholders, in case of a corporation, owes any money
to LANDLORD under its corporate name or any other corporate name
and/or person.
SIXTY FOUR: TENANT shall not transfer, lease, burden or dispose of
in any way of the equipment used on its operations without the
previous written notice to LANDLORD.
SIXTY FIVE: TENANT shall not sell, lease or transfer in any way
its operations to any other tenant without the previous written
consent of LANDLORD.
SIXTY SIX: If TENANT is not in default hereunder, beyond the period
for the cure of defaults hereunder, TENANT shall have the right to
further extend this lease for an additional FIVE (5) years period,
upon written notice given to LANDLORD of ninety (90) days prior to
the termination date of the term hereof, such extension to be upon
the terms, covenants and conditions contained herein, except that
the rental rate will be the rate then currently being charged by
LANDLORD in the area. If so requested by any of the parties hereto,
both parties agree to promptly execute such documents as may be
necessary to incorporate in the lease the agreements for said
extended period. If TENANT does not excersise this option, the
Article FORTY-FIVE (45) shall apply in full force and effect.
SIXTY SEVEN: TENANT agrees to submit to LANDLORD within thirty
(30) days from the date of execution of this Contract: (a) evidence
of its registration in the Department of State of the Commonwealth
of Puerto Rico and the name and address of its resident agent; and
(b) a certificate of a resolution of its Board of Directors either
authorizing or ratifying the execution of this Contract.
IN WITNESS WHEREOF, LANDLORD and TENANT have respectively signed upon
proper authority this Lease, this day of
PUERTO RICO INDUSTRIAL DEVELOPMENT COMPANY
BY:_____________________________________
TELECOM PUERTO RICO, INC.
(FORMERLY ZELTEX P.R., INC.)
SOCIAL SECURITY #
BY:_____________________________________
TELECOM PUERTO RICO, INC.
(FORMERLY ZELTEX P.R., INC.) SCHEDULE
"A"
- - ---------------------------------------------------------------
- - --------
Description of Building No. T-0796-1-67
Located at Aguada, Puerto Rico
This is a pitched roof type building consisting of reinforced concrete
foundation, columns and girders supporting 30 feet long steel joists
which in turn support prestressed concrete slabs poretes covered by
1/2" fiberglass insulation and a 3 ply built-up roofing.
Roof ventilators are provided.
The structure consists of a main floor 120' - 0" x 90' - 6" out to out
dimensions with an area of 10,860.00 sq. ft. of manufacturing space;
a lean-to 37' - 2" x 11' - 6 3/4" for an area of 429.78 sq. ft.
This amounts to a total area of 11,289.78 sq. ft. of covered floor
space.
The floor consists of a 4" thick reinforced concrete slab with a
monolithic cement finish; floor slab designed for a load capacity
of 150 pounds p.s.f.
Exterior walls are of concrete blocks plastered and painted on both sides.
Interior walls at lean-to are plastered and painted.
Ceiling is rubbed and painted throughout the building.
Windows are Miami aluminum type throughout the building.
Interior doors are made of plywood and exterior are industrial type metal
ones.
Clearance in the manufacturing area from finish floor to lowest part of
beams at the side eaves is 12'-0".
Description of Parcel of Land, Lot No. 2
Located at Aguada Industrial Area,
Aguada, Puerto Rico
Parcel of land, lot no. 2, located at Aguada Industrial Area, Aguada,
Puerto Rico. It bounds by the North, with lot no. 4 of the same
industrial area, by the South, with State Road No. 115, by the East,
with Street "A", of the same industrial area and by the West, with
land owned by Sucn. Raffucci.
It has a surface area of 5753.8898 sq. meters, equivalent to 1.4639
cuerdas.
Encumbrances:
It is affected by a 5.0 feet wide right of way in favor of P.R.E.P.A.
running along its western boundary.
Building: Project No. T-0796-0-67
This is a pitched roof type building consisting of reinforced concrete
foundations, columns and girders supporting 30 feet long steel
joists which in turn support prestressed concrete slabs poretes,
covered by 1/2" fiberglass insulation and a 3 plies built-up
roofing. Roof ventilators are provided.
TELECOM PUERTO RICO, INC.
(FORMERLY ZELTEX P.R., INC.)
SCHEDULE "A"
- - ---------------------------------------------------------------
- - --------
The structure consists of a main floor 120'- 6" x 90' - 6" out to out
dimensions with an area of 10,905.25 sq. ft. of manufacturing space,
lean-to 37' - 2" x 11' - 6" - 6 3/4 for an area of 429.69 sq. ft.
This amounts to a total area of 11,334.94 sq. ft. of covered floor
space.
The floor consists of 4" thick reinforced concrete slab with a monolithic
cement finish. Designed for a live load of 150 p.s.f. on both
sides.
Interior walls at the lean-to are plastered and painted together with a
6'-1" high sprayed-on glazed finish wainscoat.
Ceiling is rubbed and painted throughout the building.
Interior doors are made of plywood and exterior are industrial type metal
ones.
Clearance in the manufacturing area from finished floor to lowest part of
beams at the side eaves is 12'-0".
Windows are miami aluminum louvers throughout the building.
1
REVOLVING CREDIT LOAN AGREEMENT
THIS REVOLVING CREDIT LOAN AGREEMENT made and delivered this _1st__
day of December, 1993, by and between SYMMETRICOM, INC. and COMERICA
BANK-CALIFORNIA.
WITNESSETH
WHEREAS, the Borrower desires to borrow up to Seven Million
Dollars ($7,000,000) from the Bank from time to time for the working
capital needs of the Borrower; and
WHEREAS, the Bank is willing to supply such financing subject to
the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, the Borrower and the Bank agree as follows:
1. Definitions.
1.1 Defined Terms. As used in this Agreement, the following
terms shall have the following respective meanings:
"Accounts Receivable" shall mean and include all Accounts, Chattel
Paper and General Intangibles (including, but not limited to Tax
Refunds, trade names, trade styles and goodwill, trade marks, copyrights
and patents, and applications therefor, trade and proprietary secrets,
formulae, designs, blueprints and plans, customer lists, literary
rights, licenses and permits, receivables, insurance proceeds,
beneficial interests in trusts and minute books and other books and
records) now owned or hereafter acquired by Borrower.
"Affiliate" shall mean, when used with respect to any person, any
other person which, directly or indirectly, controls or is controlled by
or is under common control with such person. For purposes of this
definition, "control" (including the correlative meanings of the terms
"controlled by" and "under common control with"), with respect to any
person, shall mean possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such
person, whether through the ownership of voting securities or by
contract or otherwise.
"Agreement" shall mean this Revolving Credit Loan Agreement.
"Bank" shall mean Comerica Bank- California, a California banking
corporation.
"Bankruptcy Code" shall mean Title 11 of the United States Code,
as amended, or any successor act or code.
"Borrower" shall mean SYMMETRICOM, INC., a California Corporation.
"Business Day" shall mean a day on which the Bank is open to carry
on its normal commercial lending business.
"Commitment Amount" shall mean, as of any applicable date of
determination, Seven Million Dollars ($7,000,000).
"Consolidated" or "consolidated" shall mean, when used with
reference to any financial term in this Agreement, the aggregate for two
or more persons of the amounts signified by such term for all such
persons determined on a consolidated basis in accordance with GAAP.
Unless otherwise specified herein, references to "consolidated"
financial statements or data of the Borrower includes consolidation with
its Subsidiaries in accordance with GAAP.
"Contract Rate" shall mean, as of any applicable date of
determination, the interest rate determined in accordance with Sections
2.4 and 2.5 of this Agreement.
"Current Assets" shall mean, as of any applicable date of
determination, all cash, non-affiliated customer receivables, United
States government securities, claims against the United States
government, and inventories.
"Current Liabilities" shall mean, as of any applicable date of
deter-mination, (i) all liabilities of a person that should be classified
as current in accordance with GAAP, including without limitation any
portion of the principal of the Note classified as current, plus (ii) to
the extent not otherwise included, all liabilities of the Borrower to
any of its Affiliates whether or not classified as current in accordance
with GAAP.
"Debt" shall mean, as of any applicable date of determination, all
items of indebtedness, obligation or liability of a person, whether
matured or unma-tured, liquidated or unliquidated, direct or indirect,
absolute or contingent, joint or several, that should be classified as
liabilities in accordance with GAAP.
"Default" shall mean a condition or event which, with the giving
of notice or the passage of time, or both, would become an Event of
Default.
"Disbursement Date" shall mean each date upon which the Bank makes
a loan to the Borrower under Section 2.1 of this Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, or any successor act or code.
"Event of Default" shall mean any of those conditions or events
listed in Section 8.1 of this Agreement.
"Financial Statements" shall mean all those balance sheets,
earnings sta-tements and other financial data (whether of the Borrower,
any of its Subsidiaries, the Guarantor or otherwise) which have been
furnished to the Bank for the purposes of, or in connection with, this
Agreement and the transactions con-templated hereby.
"GAAP" shall mean, as of any applicable date of determination,
generally accepted accounting principles consistently applied.
"Guarantor" shall mean (jointly and severally if more than one)
TELECOM SOLUTIONS PUERTO RICO, INC. and LINFINITY MICROELECTRONICS INC.
"Guaranty" shall mean a guaranty (or separate guaranties) in the
form and content of Exhibit C to this Agreement pursuant to which the
Guarantor (jointly and severally if more than one) unconditionally
guarantees repayment to the Bank of all the Indebtedness.
"Indebtedness" shall mean all loans, advances, indebtedness,
obligations and liabilities of the Borrower to the Bank under this
Agreement, together with all other indebted-ness, obligations and
liabilities whatsoever of the Borrower to the Bank, whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several, due or to become due, now existing or
hereafter arising.
"Legal Rate" shall mean the maximum interest rate permitted to be
paid by the Borrower or received by the Bank with respect to the
Indebtedness represented by the Note under applicable law.
"Loan" shall mean the Revolving Loans.
"Net Income" shall mean the net income (or loss) of a person for
any period determined in accordance with GAAP but excluding in any
event:
(i) any gains or losses on the sale or other disposition,
not in the ordinary course of business, of investments or fixed or
capital assets, and any taxes on the excluded gains and any tax
deductions or credits on account on any excluded losses; and
(ii) in the case of the Borrower, net earnings of any
Person in which Borrower has an ownership interest, unless such net
earnings shall have actually been received by Borrower in the form of
cash distributions.
"Note" shall mean the Revolving Credit Note.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
person succeeding to the present powers and functions of the Pension
Benefit Guaranty Corporation.
"Permitted Liens" shall mean:
(a) Liens and encumbrances in favor of the Bank;
(b) Liens for taxes, assessments or other governmental
charges incurred in the ordinary course of business and for which no
interest, late charge or penalty is attaching or which is being
contested in good faith by appropriate proceedings and, if requested by
the Bank, bonded in an amount and manner satisfactory to the Bank;
(c) Liens, not delinquent, created by statute in connection
with worker's compensation, unemployment insurance, social security and
similar statutory obligations;
(d) Liens of mechanics, materialmen, carriers, warehousemen
or other like statutory or common law liens securing obligations
incurred in good faith in the ordinary course of business that are not
yet due and payable;
(e) Encumbrances consisting of existing or future zoning
restrictions, existing recorded rights-of-way, existing recorded
easements, existing recorded private restrictions or existing or future
public restrictions on the use of real property, none of which
materially impairs the use of such property in the operation of the
business for which it is used and none of which is violated in any
material respect by any existing or proposed structure or land use; and
(f) Existing liens as reported in the Financial Statements provided to the
Bank by Borrower; and
(g) Liens for the purchase or acquisition of fixed assets.
"Person" or "person" shall mean any individual, corporation,
partnership, joint ven-ture, association, trust, unincorporated
association, joint stock company, government, municipality, political
subdivision or agency, or other entity.
"Prime Rate" shall mean that annual rate of interest designated by
the Bank as its prime rate, which rate may not be the lowest rate of
interest charged by the Bank to any of its customers, and which rate is
changed by the Bank from time to time.
"Quarterly Operating Profits" shall mean operating profits (or
Loss) of a person for each quarter determined in accordance with GAAP.
"Quick Assets" shall mean, as of any applicable date of
determination, all cash, non-affiliated customer receivables, United
States government securities and claims against the United States
government.
"Revolving Credit Note" shall mean a promissory note conforming to
Section 2.3 of this Agreement and in the form and content of Exhibit E
to this Agreement.
"Revolving Loan" shall mean an advance made by the Bank to the
Borrower under Section 2.1 of this Agreement on a Disbursement Date.
"Subsidiary" shall mean any corporation (whether now existing or
hereafter organized or acquired) in which more than fifty percent (50%)
of the outstanding securities having ordinary voting power for the
election of directors, as of any applicable date of determination, shall
be owned directly, or indirectly through one or more Subsidiaries, by
the Borrower.
"Tangible Net Worth" shall mean, as of any applicable date of
deter-mination, the excess of (i) the net book value of all assets of a
person (other than patents, patent rights, trademarks, trade names,
franchises, copyrights, licenses, goodwill, and similar intangible
assets) after all appropriate deductions in accordance with GAAP
(including, without limitation, reserves for doubtful receivables,
obsolescence, depreciation and amortization), over (ii) all Debt of such
person.
"Tax Refunds" shall mean refunds or claims for refunds of any
taxes at any time paid by Borrower to the United States of America or
any state, city, county or other governmental entity.
"Termination Date" shall mean December 1, 1995 (or such earlier
date on which the Borrower shall permanently terminate the Bank's
commitment under Section 2.8.1 of this Agreement).
"UCC" shall mean Uniform Commercial Code of the State of
California (approved June 8, 1968) as amended.
"Working Capital" shall mean, as of any applicable date of
determination, Current Assets less Current Liabilities.
1.2 Accounting Terms. All accounting terms not specifically
defined in this Agreement shall be construed in accordance with GAAP.
1.3 Singular and Plural. Where the context herein requires, the
singular number shall be deemed to include the plural, the masculine
gender shall include the feminine and neuter genders, and vice versa.
2. Commitment, Interest and Fees.
2.1 Revolving Credit Commitment. Subject to the terms and
conditions of this Agreement, the Bank agrees to make loans to the
Borrower on a revolving basis in such amount as the Borrower shall
request pursuant to Section 2.2 of this Agreement at any time from the
date of this Agreement until the Termination Date, up to an aggregate
principal amount outstanding at any time not to exceed the lesser of the
Commitment Amount, provided that each Disbursement Date under this
Agreement must be a Business Day.
2.2 Borrowing Procedures.
2.2.1 Notice. The Borrower shall by telephone give the Bank
notice of the Borrower's desire for a Revolving Loan no later than 1:00
p.m. San Jose, California time in order to have the date of notice be
the Disbursement Date, otherwise the following Business Day shall be the
Disbursement Date. Such notice shall specify the principal amount of
the proposed advance for such Revolving Loan. Prior to such telephone
notice, Borrower shall have executed and delivered to the Bank a
Telephone Notice Authorization.
2.2.2 Bank Obligations. The Bank agrees to make the
Revolving Loan on the Disbursement Date established by notice to the
Bank from the Borrower conforming to the requirements of Section 2.2.1
by crediting the deposit account of the Borrower with the Bank specified
in the Advance & Payment Agreement in the amount of such Revolving Loan,
provided, however, that the Bank shall not be obligated if:
(a) Any of the conditions precedent set forth in
Section 4 of this Agreement shall not have been satisfied or waived by
the Bank in accordance with Section 9.3 of this Agreement, or
(b) Such proposed Revolving Loan would cause the
aggregate unpaid principal amount of the Revolving Loans outstanding
under this Agreement to exceed the Commitment Amount on the Disbursement
Date.
2.3 Revolving Credit Note. The Revolving Loans shall be
evidenced by the Revolving Credit Note, executed by the Borrower, dated
the date of this Agreement, payable to the Bank on the Termination Date
(unless sooner accelerated pursuant to the terms of this Agreement), and
in the principal amount of the original Commitment Amount. The date and
amount of each Revolving Loan made by the Bank and of each repayment of
principal thereon received by the Bank shall be recorded by the Bank in
its records. The aggregate unpaid principal amount so recorded by the
Bank shall constitute the best evidence of the principal amount owing
and unpaid on the Revolving Credit Note, provided, however, that the
failure by the Bank so to record any such amount or any error in so
recording any such amount shall not limit or otherwise affect the
obligations of the Borrower under this Agreement or the Note to repay
the principal amount of all the Revolving Loans together with all
interest accrued or accruing thereon.
2.4 Interest. The Revolving Credit Note shall bear interest on
the principal balance from time to time outstanding under the Revolving
Credit Note at a rate equal to the Prime Rate of the Bank until
maturity, whether by acceleration or otherwise, and thereafter at a rate
equal to three percent (3%) per annum plus the rate otherwise prevailing
hereunder, but in no event to exceed the Legal Rate. Interest shall be
payable to the extent then accrued on the first day of each consecutive
calendar month, beginning December 1, 1993, in the case of the Revolving
Credit Note until maturity (whether by acceleration or otherwise) and
from and after such maturity, on demand. The rate of interest
applicable to the Note shall change as and when the Bank's Prime Rate
changes.
2.5 Maximum Rate. At no time shall the Contract Rate payable on
the Revolving Credit Note be deemed to exceed the Legal Rate. In the
event any interest is charged or received by the Bank in excess of the
Legal Rate, the Borrower acknowledges that any such excess interest
shall be the result of an accidental and bona fide error, and such
excess shall first be applied to reduce the principal then unpaid
hereunder (in inverse order of their maturities if principal amounts are
due in installments); second, applied to reduce any obligation for other
indebtedness of the Borrower to the Bank; and third, any remaining
excess returned to the Borrower.
2.6 Fees.
2.6.1 Commitment Fee. The Borrower shall pay to the Bank a
commitment fee for the period from the date of this Agreement to and
including the Termination Date equal to Twenty Five Thousand Dollars
($25,000) per annum. Such commitment fee shall be payable in quarterly
installments on the first Business Day of each quarter, beginning
October 1, 1993, and on the Termination Date, for the periods ending on
such date.
2.7 Basis of Computation. The amount of all interest and fees
hereunder shall be computed for the actual number of days elapsed on the
basis of a year consisting of three hundred sixty (360) days.
2.8 Changes in Commitment and Prepayments.
2.8.1 Termination or Reduction in Commitment. The Borrower,
at any time and from time to time (except as may hereinafter be
provided), upon at least five (5) Business Days' prior written notice
received by the Bank, may permanently terminate the Bank's commitment to
make Revolving Loans under this Agreement or permanently reduce the
Commitment Amount by an integral multiple of One Hundred Thousand
Dollars ($100,000), provided, however, that the Borrower, on the
effective date of such termination or reduction, shall pay to the Bank,
in the case of a termination, the aggregate unpaid principal amount of
all Revolving Loans, or, in the case of a reduction, the amount, if any,
by which the aggregate unpaid principal amount of all Revolving Loans
exceeds the then reduced Commitment Amount, together in either case with
all interest accrued and unpaid on the principal amounts so prepaid, but
without other premium. The notice shall specify the Termination Date or
the reduced Commitment Amount and the effective date of the reduction,
as the case may be. The Borrower may not revoke any such notice of
termination or reduction without the prior written consent of the Bank.
2.10 Basis of Payments. All sums payable by the Borrower to the
Bank under this Agreement or the other documents contemplated hereby
shall be paid directly to the Bank at its principal office set forth
Section 9.10 hereof in immediately available United States funds,
without set off, deduction or coun-terclaim. In its sole discretion, the
Bank may charge any and all deposit or other accounts (including without
limit an account evidenced by a certificate of deposit) of the Borrower
with the Bank for all or a part of any Indebtedness then due; provided,
however, that this authorization shall not affect the Borrower's
obligation to pay, when due, any Indebtedness whether or not account
balances are sufficient to pay amounts due.
2.11 Receipt of Payments. Any payment of the Indebtedness made
by mail will be deemed tendered and received only upon actual receipt by
the Bank at the address designated for such payment, whether or not the
Bank has authorized payment by mail or any other manner, and shall not
be deemed to have been made in a timely manner unless received on the
date due for such payment, time being of the essence. The Borrower
expressly assumes all risks of loss or liability resulting from non-
delivery or delay of delivery of any item of payment transmitted by mail
or in any other manner. Acceptance by the Bank of any payment in an
amount less than the amount then due shall be deemed an acceptance on
account only, and the failure to pay the entire amount then due shall be
and continue to be an Event of Default, and at any time thereafter and
until the entire amount then due has been paid, the Bank shall be
entitled to exercise any and all rights conferred upon it herein upon
the occurrence of an Event of Default. The Borrower waives the right to
direct the application of any and all payments at any time or times
hereafter received by the Bank from or on behalf of the Borrower. The
Borrower agrees that the Bank shall have the continuing exclusive right
to apply and to reapply any and all payments received at any time or
times hereafter against the Indebtedness in such manner as the Bank may
deem advisable, notwithstanding any entry by the Bank upon any of its
books and records. The Borrower expressly agrees that to the extent
that the Bank receives any payment or benefit and such payment or
benefit, or any part thereof, is subsequently invalidated, declared to
be fraudulent or preferential, set aside or is required to be repaid to
a trustee, receiver, or any other party under any bankruptcy act, state
or federal law, common law or equitable cause, then to the extent of
such payment or benefit, the Indebtedness or part thereof intended to be
satisfied shall be revived and continued in full force and effect as if
such payment or benefit had not been made and, further, any such
repayment by the Bank, to the extent that the Bank did not directly
receive a corresponding cash payment, shall be added to and be
additional Indebtedness payable upon demand by the Bank.
4. Conditions Precedent to Obligations of Bank.
4.1 Conditions to First Disbursement. The obligations of the
Bank under this Agreement are subject to the occurrence, prior to or
simultaneously with the Disbursement Date first occurring, of each of
the following conditions:
4.1.1 Documents Executed and Filed. The Borrower shall have
exe-cuted (or caused to be executed) and delivered to the Bank and, as
appropriate, there shall have been filed or recorded with such filing or
recording offices as the Bank shall deem appropriate, the following:
(a) The Revolving Credit Note;
(b) The Guaranty:
1. TELECOM SOLUTIONS PUERTO RICO, INC.;
2. LINFINITY MICROELECTRONICS Inc.;
(c) The Corporate Resolution Authorizing Execution
Of Guaranty:
1. TELECOM SOLUTIONS PUERTO RICO, INC.;
2. LINFINITY MICROELECTRONICS Inc.;
(d) The Loan Disbursement Order;
(e) The Advance & Payment Agreement;
4.1.2 Certified Resolutions. If the Borrower is a
corporation, the Borrower shall have furnished to the Bank a copy of
resolutions of the Board of Directors of the Borrower authorizing the
execution, delivery and performance of this Agreement, the borrowing
hereunder, the Revolving Credit Note and any other documents
contemplated by this Agreement, which shall have been certified by the
Secretary or Assistant Secretary of the Borrower as of the Disbursement
Date first occurring as being complete, accurate and in effect. If the
Borrower is a partnership, the Borrower shall have furnished to the Bank
a copy of resolutions of the partners of the Borrower authorizing the
execution, delivery and performance of this Agreement, the borrowing
hereunder, the Revolving Credit Note and any other documents
contemplated by this Agreement, which shall have been certified by the
general partners of the Borrower as of the Disbursement Date first
occurring as being complete, accurate and in effect.
4.1.3 Certified Articles/Partnership Certificate. If the
Borrower is a corporation, the Borrower shall have furnished to the Bank
a copy of the Articles of Incorporation including all amendments thereto
and restatements thereof, and all other charter documents of the
Borrower, all of which shall have been certified by the California
Secretary of State as of a date within thirty days of the Disbursement
Date first occurring. If the Borrower is a general partnership, the
Borrower shall have furnished to the Bank a copy of the Certificate of
Co-Partnership and all other documents required to be filed by the
Borrower to create a general partnership, including all amendments
thereto and restatements thereof, all of which shall have been certified
by the office of the county clerk or other appropriate filing office as
of a date within thirty days of the Disbursement Date first occurring.
If the Borrower is a limited partnership, the Borrower shall have
furnished to the Bank a copy of the Certificate of Limited Partnership
and all other documents required to be filed by the Borrower to create a
limited partnership, including all amendments thereto and restatements
thereof, all of which shall have been certified by the California
Secretary of State or other appropriate filing office as of a date
within thirty days of the Disbursement Date first occurring.
4.1.4 Certified Bylaws/Partnership Agreement. If the
Borrower is a corporation, the Borrower shall have furnished to the Bank
a copy of the Bylaws of the Borrower, including all amendments thereto
and restatements thereof, which shall have been certified by the
Secretary or Assistant Secretary of the Borrower as of the Disbursement
Date first occurring as being complete, accurate and in effect. If the
Borrower is a partnership, the Borrower shall have furnished to the Bank
a copy of the partnership agreement of the Borrower, including all
amendments thereto and restatements thereof, which shall have been
certified to by the general partners of the Borrower as of the
Disbursement Date first occurring as being complete, accurate and in
effect.
4.2 Conditions to All Disbursements. The obligations of the
Bank to make any Revolving Loan on any Disbursement Date, including, but
not limited to, the Disbursement Date first occurring, are subject to
the occurrence, prior to or on the Disbursement Date related to such
Revolving Loan, of each of the following conditions:
4.2.3 Bank Satisfaction. The Bank shall not know or have
any reason to believe that, as of such Disbursement Date:
(a) Any Default or Event of Default has occurred and
is continuing;
(b) Any warranty or representation set forth in
Section 5 of this Agreement shall not be true and correct; or
(c) Any provision of law, any order of any court or
other agency of government on any regulation, rule or interpretation
thereof shall have had any material adverse effect on the validity or
enforceability of this Agreement, the Revolving Credit Note, the
Guaranty, the Corporate Resolution To Borrow, the Corporate Resolution
Authorizing Execution Of Guaranty by (i) TELECOM SOLUTIONS PUERTO RICO, INC.
and
(ii) LINFINITY MICROELECTRONICS Inc. or the other documents
contemplated hereby.
5. Warranties and Representations.
On a continuing basis from the date of this Agreement until the
later of the Termination Date or when the Indebtedness is paid in full
and the Borrower has performed all of its other obligations hereunder,
the Borrower represents and warrants to the Bank that:
5.1 Corporate Existence and Power. (a) The Borrower and
the Guarantor are a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and California,
(b) the Borrower, its Subsidiaries and the Guarantor each has the power
and authority to own its properties and assets and to carry out its
business as now being conducted and is qualified to do business and in
good standing in every jurisdiction wherein such qualification is
necessary and (c) the Borrower has the power and authority to execute,
deliver and perform this Agreement, to borrow money in accordance with
its terms, to execute, deliver and perform the Revolving Credit Note
and other documents contemplated hereby, to grant to the Bank liens and
security interests in the Collateral as hereby contemplated and to do
any and all other things required of it hereunder.
5.2 Authorization and Approvals. The execution, delivery and
performance of this Agreement, the borrowings hereunder and the
execution, delivery and performance of the Revolving Credit Note, the
Guaranty, and other documents contemplated hereby (a) have been duly
authorized by all requisite corporate action of the Borrower, (b) will
not violate any provision of law, any order of any court or other agency
of government, the Articles of Incorporation or Bylaws of the Borrower,
any provision of any indenture, note, agreement or other instrument to
which the Borrower is a party, or by which it or any of its properties
or assets are bound, (c) will not be in conflict with, result in a
breach of or constitute (with or without notice or passage of time) a
default under any such inden-ture, note, agreement or other instrument,
and (d) will not result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of the
properties or assets of the Borrower other than in favor of the Bank and
as contemplated hereby. References to the "Borrower" in this Section
5.2 shall instead be deemed to be references to the Guarantor as the
case may be, with respect to the Guaranty.
5.3 Valid and Binding Agreement. This Agreement is, and the
Revolving Credit Note, the Corporate Resolution To Borrow, the Corporate
Resolution Authorizing Execution Of Guaranty by (i) Telecom Solutions Puerto
Rico,
Inc. and (ii) Linfinity Microelectronics Inc. or the other documents
contemplated hereby will be, when delivered, valid and binding obli-
gations of the Borrower, and the Guaranty will be valid and binding
obligations of the Guarantor in accordance with their terms.
5.4 Actions, Suits or Proceedings. There are no actions, suits
or proceedings, at law or in equity, and no pro-ceedings before any
arbitrator or by or before any governmental commission, board, bureau,
or other administrative agency, pending, or, to the best knowledge of
the Borrower, threatened against or affecting the Borrower, any of its
Subsidiaries or the Guarantor or any properties or rights of the
Borrower, any of its Subsidiaries or the Guarantor, which, if adversely
determined, could materially impair the right of the Borrower, any of
its Subsidiaries or the Guarantor to carry on business substantially as
now conducted or could have a material adverse effect upon the financial
condition of the Borrower, any of its Subsidiaries or the Guarantor.
5.6 Accounting Principles. All consolidated and consolidating
balance sheets, earnings statements and other financial data furnished
to the Bank for the purposes of, or in connection with, this Agreement
and the transactions contemplated by this Agreement, have been prepared
in accordance with GAAP, and do or will fairly present the financial
condition of the Borrower, its Subsidiaries and the Guarantor, as of the
dates, and the results of their operations for the periods, for which
the same are furnished to the Bank. Without limiting the generality of
the foregoing, the Financial Statements have been prepared in accordance
with GAAP (except as disclosed therein) and fairly present the financial
condition of the Borrower, its Subsidiaries and, if relevant, the
Guarantor as of the dates, and the results of its operations for the
fiscal periods, for which the same are furnished to the Bank. The
Borrower has no material con-tingent obligations, liabilities for taxes,
long-term leases or unusual for-ward or long-term commitments not
disclosed by, or reserved against in, the Financial Statements.
5.7 Financial Condition. The Borrower and the Guarantor is each
solvent, able to pay its debts as they mature, has capital sufficient to
carry on its business and has assets the fair market value of which
exceed its liabilities, and neither the Borrower nor the Guarantor will
be rendered insolvent, under-capitalized or unable to pay maturing debts
by the execution or performance of this Agreement, the Guaranty or the
other documents contemplated hereby. There has been no material adverse
change in the business, properties or condition (financial or otherwise)
of the Borrower, any of its Subsidiaries or the Guarantor since the date
of the latest of the Financial Statements.
5.8 Conditions Precedent. As of each Disbursement Date, all
appropriate conditions precedent referred to in Section 4 hereof shall
have been satisfied or waived in writing by the Bank.
5.9 Taxes. The Borrower, its Subsidiaries and the Guarantor has
each filed by the due date therefor all federal, state and local tax
returns and other reports it is required by law to file, has paid or
caused to be paid all taxes, assessments and other governmental charges
that are shown to be due and payable under such returns, and has made
adequate provision for the payment of such taxes, assessments or other
governmental charges which have accrued but are not yet payable. The
Borrower has no knowledge of any deficiency or assessment in connection
with any taxes, assessments or other governmen-tal charges not adequately
disclosed in the Financial Statements.
5.10 Compliance with Laws. The Borrower, its Subsidiaries and
the Guarantor has each complied with all applicable laws, to the extent
that failure to comply would materially interfere with the conduct of
the business of the Borrower, any of its Subsidiaries or the Guarantor.
5.11 Indebtedness. Except as disclosed in the Financial Statements, neither
the Borrower, any of its Subsidiaries nor the Guaranto
has any indebtedness for money borrowed or any direct or indirect
obligations under any leases (whether or not required to be capita-lized
under GAAP) or any agreements of guarantee or surety except for the
endorsement of negotiable instruments by the Borrower, its Subsidiaries
or the Guarantor in the ordinary course of business for deposit or
collection.
5.12 Material Agreements. Except as disclosed in the Financial Statements,
neither the Borrower, any of its Subsidiaries nor the
Guarantor has any material leases, contracts or commit-ments of any kind
(including, without limitation, employment agreements, collective
bargaining agreements, powers of attorney, distribution contracts,
patent or trademark licenses, contracts for future purchase or delivery
of goods or rendering of services, bonus, pension and retirement plans,
or accrued vacation pay, insurance and welfare agreements); to the best
knowledge of Borrower, all parties to such agreements have complied with
the provisions of such leases, contracts or commitments; and to the best
knowledge of the Borrower, no party to such agreements is in default
thereunder, nor has there occurred any event which with notice or the
passage of time, or both, would constitute such a default.
5.13 Margin Stock. Neither the Borrower nor any of its
Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of
purchasing or carrying any "margin stock" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System,
and no part of the proceeds of any loan hereunder will be used, directly
or indirectly, to purchase or carry any margin stock or to extend credit
to others for the purpose of purchasing or carrying any margin stock or
for any other purpose which might violate the provisions of Regulation
G, T, U or X of the said Board of Governors. The Borrower does not own
any margin stock.
5.14 Pension Funding. Neither the Borrower, any of its
Subsidiaries nor the Guarantor has incurred any accumu-lated funding
deficiency within the meaning of ERISA or incurred any liability to the
PBGC in connection with any employee benefit plan established or
maintained by the Borrower, any of its Subsidiaries or the Guarantor and
no reportable event or prohibited transaction, as defined in ERISA, has
occurred with respect to such plans.
5.15 Misrepresentation. No warranty or representation by the
Borrower contained herein or in any certificate or other document
furnished by the Borrower pursuant hereto contains any untrue statement
of material fact or omits to state a material fact necessary to make
such warranty or represen-tation not misleading in light of the
circumstances under which it was made. There is no fact which the
Borrower has not disclosed to the Bank in writing which materially and
adversely affects nor, so far as the Borrower can now foresee, is likely
to prove to affect materially and adversely the business, operations,
properties, prospects, profits or condition (financial or otherwise) of
the Borrower, any of its Subsidiaries or the Guarantor or ability of the
Borrower to perform this Agreement or the ability of the Guarantor to
perform the Guaranty.
5.19 No Conflicting Agreements. Neither the Borrower, any of its
Subsidiaries nor the Guarantor is in default under any shareholder
agreement, preferred stock agreement or any other agreement to which it
is a party or by which it or any of its property is bound, the effect of
which might have a material adverse effect on the business or operations
of the Borrower, any of its Subsidiaries or the Guarantor. No provision
of the Certificate of Incorporation, By-Laws or preferred stock, if any,
of the Borrower, and no provision of any existing mortgage, indenture,
note, contract, agreement, statute (including, without limitation, any
applicable usury or similar law), rule, regulation, judgment, decree or
order binding on the Borrower or affecting the property of the Borrower
conflicts with, or requires any consent under, or would in any way
prevent the execution, delivery or carrying out of the terms of, this
Agreement and the documents contemplated hereby, and the taking of any
such action will not constitute a default under, or result in the
creation or imposition of, or obligation to create any lien upon the
property of the Borrower pursuant to the terms of any such mortgage,
indenture, note, contract or agreement.
6. Affirmative Covenants.
On a continuing basis from the date of this Agreement until the
later of the Termination Date or when the Indebtedness is paid in full
and the Borrower has performed all of its other obligations hereunder,
the Borrower covenants and agrees that it will:
6.1 Financial and Other Information.
6.1.1 Annual Financial Reports. Furnish to the Bank, in
form and reporting basis satisfactory to the Bank, not later than ninety
(90) days after the close of each fiscal year of the Borrower, beginning
with the fiscal year ending June 30, 1994, financial statements of the
Borrower on a consolidated basis containing the
balance sheet of the Borrower as of the close of each such fiscal year,
statements of income and retained earnings and a statement of cash flows
for each such fiscal year, and such other comments and financial details
as are usually included in similar reports. Such reports shall be
prepared in accordance with GAAP by independent certified public
accountants of recognized standing selected by the Borrower and
acceptable to the Bank and shall contain unqualified opinions as to the
fairness of the statements therein contained.
6.1.2 Quarterly Financial Statements. Furnish to the Bank
not later than forty-five (45) days after the close of each quarter of
each fiscal year of the Borrower, beginning with the fiscal quarter
ending December 31, 1993, financial statements on a consolidated basis
containing the balance sheet of the Borrower as of
the end of each such period, statements of income and retained earnings
of the Borrower and a statement of cash flows of the Borrower for the
portion of the fiscal year up to the end of such period, and such other
comments and financial details as are usually included in similar
reports. These statements shall be prepared on the same accounting
basis as the statements required in Section 6.1.1 of this Agreement and
shall be in such detail as the Bank may reasonably require, and the
accuracy of the statements shall be certified by the chief executive or
financial officer of the Borrower.
6.1.4 Aging of Accounts Certificate. In the event that
Indebtedness exceeds $3,500,000.00 Borrower shall furnish to the Bank by
the 15th of each month an aging of Borrower's Accounts Receivable as of
the end of the preceding month in a form satisfactory to the Bank.
6.1.8 Adverse Events. Promptly inform the Bank of the
occurrence of any Default or Event of Default, or of any other
occurrence which has or could reasonably be expected to have a
materially adverse effect upon the Borrower's or any of its
Subsidiaries' business, properties, or financial condition or upon the
Borrower's ability to comply with its obligations hereunder.
6.1.9 Shareholder Reports. Promptly furnish to the Bank
upon becoming available a copy of all financial statements, reports,
notices, proxy statements and other communications sent by the Borrower
or any of its Subsidiaries to their stockholders, and all regular and
periodic reports filed by the Borrower or any of its Subsidiaries with
any securities exchange, the Securities and Exchange Commission or any
governmental authorities succeeding to any or all of the functions of
said Commission or Bureau.
6.1.10 Management Letters. Furnish to the Bank,
promptly upon receipt thereof, copies of all management letters and
other reports of substance submitted to the Borrower or any of its
Subsidiaries by independent certified public accountants in connection
with any annual or interim audit of the books of the Borrower or any of
its Subsidiaries.
6.1.11 Other Information As Requested. Promptly
furnish to the Bank such other information regarding the operations,
business affairs and financial condition of the Borrower and its
Subsidiaries as the Bank may reasonably request from time to time and
permit the Bank, its employees, attorneys and agents, to inspect all of
the books, records and properties of the Borrower and its Subsidiaries
at any reasonable time. References in Section 6 to "the chief executive
or financial officer" shall mean "the general partners" where the
Borrower is a partnership.
6.3 Taxes. Pay promptly and within the time that they can be
paid without late charge, penalty or interest all taxes, assessments and
similar imposts and charges of every kind and nature lawfully levied,
assessed or imposed upon the Borrower or its Subsidiaries, and their
property, except to the extent being contested in good faith and, if
requested by the Bank, bonded in an amount and manner satisfactory to
the Bank. If the Borrower shall fail to pay such taxes and assessments
within the time they can be paid without penalty, late charge or
interest the Bank shall have the option to do so, and the Borrower
agrees to repay the Bank upon demand, with interest at the Contract
Rate, all amounts so expended by the Bank.
6.4 Maintain Corporation and Business. Do or cause to be done
all things necessary to preserve and keep in full force and effect the
Borrower's and each of its Subsidiaries' corporate existence, rights and
franchises and comply with all applicable laws; continue to conduct and
operate its and each of its Subsidiaries' business substantially as
conducted and operated during the present and preceding calendar year;
at all times maintain, preserve and protect all franchises and trade
names and preserve all the remainder of its and its Subsidiaries'
property and keep the same in good repair, working order and condition;
and from time to time make, or cause to be made, all needed and proper
repairs, renewals, replacements, betterments and improvements thereto so
that the business carried on in connection therewith may be properly and
advantageously con-ducted at all times.
6.5 Maintain Tangible Net Worth. On a consolidated and non-
consolidated basis, maintain a Tangible Net Worth for it of not less
than the amounts specified during the periods specified below:
(a) $35,000,000.00 from the date of this Agreement until
December 1, 1995.
6.6 Maintain Debt Ratio. On a consolidated
basis, maintain the ratio of its Debt to Tangible Net Worth at not more
than 1.00 to 1.00.
6.7 Maintain Quick Ratio. On a consolidated basis, maintain the ratio of its
Quick Assets to Current
Liabilities at not less than 1.25 to 1.00.
6.8 Maintain Profitability. On a consolidated basis, Quarterly Operating
Profits shall be greater than
zero if the prior quarter's Quarterly Operating Profits were less than
zero.
6.10 ERISA. (a) At all times meet and cause each of the
Subsidiaries to meet the minimum funding requirements of ERISA with
respect to the Borrower's and Subsidiaries' employee benefit plans
subject to ERISA; (b) promptly after the Borrower knows or has reason to
know (i) of the occurrence of any event, which would constitute a
reportable event or prohibited transaction under ERISA, or (ii) that the
PBGC or the Borrower has instituted or will institute proceedings to
terminate an employee pension plan, deliver to the Bank a certificate of
the chief financial officer of the Borrower setting forth details as to
such event or proceedings and the action which the Borrower proposes to
take with respect thereto, together with a copy of any notice of such
event which may be required to be filed with the PBGC; and (c) furnish
to the Bank (or cause the plan administrator to furnish the Bank) a copy
of the annual return (including all schedules and attachments) for each
plan covered by ERISA, and filed with the Internal Revenue Service by
the Borrower not later than ten (10) days after such report has been so
filed.
6.11 Use of Loan Proceeds. Use the proceeds of the loan
hereunder only for the purposes set forth in the recitals to this
Agreement.
7. Negative Covenants.
On a continuing basis from the date of this Agreement until the
later of the Termination Date or when the Indebtedness is paid in full
and the Borrower has performed all of its other obligations hereunder,
the Borrower covenants and agrees that it will not, and will not permit
any Subsidiary to:
7.3 Stock Acquisition. Purchase, redeem, retire or otherwise
acquire any of the shares of its capital stock, or make any commitment
to do so in excess of $1,000,000 in any given fiscal year.
7.4 Liens and Encumbrances. Create, incur, assume or suffer to
exist any mortgage, pledge, encumbrance, security interest, lien or
charge of any kind upon any of its property or assets (including without
limit any charge upon property purchased or acquired under a conditional
sales or other title retaining agreement or lease required to be
capitalized under GAAP) whether now owned or hereafter acquired other
than Permitted Liens.
7.5 Indebtedness. Incur, create, assume or permit to exist any
indebtedness or liability on account of deposits or advances or any
indebtedness or liability for borrowed money, or any other indebtedness
or liability evidenced by notes, bonds, debentures or similar
obligations, or any other indebtedness whatsoever, except for (a) the
Indebtedness, (b) indebtedness subordinated to the prior payment in full
of the Indebtedness upon terms and conditions approved in writing by the
Bank, (c) existing indebtedness to the extent set forth on attached
Schedule 5.11, (d) trade indebtedness incurred and paid in the ordinary
course of business, (e) contingent indebtedness to the extent permitted
by Section 7.7 of this Agreement, and (f) indebtedness secured by
Permitted Liens.
7.6 Extension of Credit. Make loans, advances or extensions of
credit to any Person, except for sales on open account and otherwise in
the ordinary course of business.
7.7 Guarantee Obligations. Guarantee or otherwise, directly or
indirectly, in any way be or become responsible for obligations of any
other Person, whether by agreement to purchase the indebtedness of any
other Person, agreement for the furnishing of funds to any other Person
through the fur-nishing of goods, supplies or services, by way of stock
purchase, capital contribution, advance or loan, for the purpose of
paying or discharging (or causing the payment or discharge of) the
indebtedness of any other Person, or otherwise, except for the
endorsement of negotiable instruments by the Borrower in the ordinary
course of business for deposit or collection; and except for aggregate
guarantees not to exceed $500,000 at any one point in time.
7.8 Subordinate Indebtedness. Subordinate any indebtedness due
to it from a Person to indebtedness of other creditors of such Person.
7.9 Acquire Securities. Purchase or hold beneficially any stock
or other securities of, or make any investment or acquire any interest
whatsoever in, any other Person, except for the common stock of the
Subsidiaries owned by the Borrower on the date of this Agreement and
except for certificates of deposit with maturities of one year or less
of United States commercial banks with capital, surplus and undivided
profits in excess of $100,000,000 and except for money market funds mutually
agreed to by Bank and Borrower, and direct obligations
States Government maturing within one year from the date of acquisition
thereof.
7.12 Pension Plan. (a) Allow any fact, condition or event to
occur or exist with respect to any employee pension or profit sharing
plans established or maintained by it which might constitute grounds for
termination of any such plan or for the court appointment of a trustee
to administer any such plan, or (b) permit any such plan to be the
subject of termination proceedings (whether voluntary or involuntary)
from which termination proceedings there may result a liability of the
Borrower or any of its Subsidiaries to the PBGC which, in the opinion of
the Bank, will have a materially adverse effect upon the operations,
business, property, assets, financial condition or credit of the
Borrower or any of its Subsidiaries.
7.13 Misrepresentation. Furnish the Bank with any certificate or
other document that contains any untrue statement of a material fact or
omits to state a material fact necessary to make such certificate or
document not misleading in light of the circumstances under which it was
furnished.
7.14 Margin Stock. Apply any of the proceeds of the Note to the
purchase or carrying of any "margin stock" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System, or
any regulations, interpretations or rulings thereunder.
8. Events of Default, Enforcement, Application of Proceeds.
8.1 Events of Default. The occurrence of any of the following
events shall constitute an Event of Default hereunder:
8.1.1 Failure to Pay Monies Due. If the Borrower shall fail
to pay, when due, any principal or interest under the Revolving Credit
Note or any taxes, insurance or other amount payable by the Borrower
under this Agreement or if the Borrower, any of its Subsidiaries or the
Guarantor shall fail to pay, when due, any indebtedness, obligation or
liability whatsoever of the Borrower, any of its Subsidiaries or the
Guarantor to the Bank.
8.1.2 Misrepresentation. If any warranty or representation
of the Borrower in connection with or contained in this Agreement, or if
any financial data or other information now or hereafter furnished to
the Bank by or on behalf of the Borrower, shall prove to be false or
misleading in any material respect.
8.1.3 Noncompliance with Bank Agreement. If the Borrower,
any of its Subsidiaries or the Guarantor shall fail to perform in the
time and manner required any of its obligations or cove-nants under, or
shall fail to comply with any of the provisions of, this Agreement or
any other agreement with the Bank to which it may be a party, which does
not involve the failure to make a payment when due (be it principal,
interest, taxes, insurance or otherwise) and which is not cured by the
Borrower within thirty (30) days after the earlier of the date of notice
to the Borrower by the Bank of such Default or the date the Bank is
notified, or should have been notified pursuant to the Borrower's
obligation under Section 6.1.8 hereof, of such Default.
8.1.4 Other Defaults. If the Borrower, any of its
Subsidiaries or the Guarantor shall default in the payment when due of
any of its indebted-ness (other than to the Bank) or in the observance or
performance of any term, covenant or condition in any agreement or
instrument evidencing, securing or relating to such indebtedness, and
such default be continued for a period sufficient to permit acceleration
of the indebtedness, irrespective of whether any such default shall be
forgiven or waived or there has been acceleration by the holder thereof.
8.1.5 Judgments. If there shall be rendered against the
Borrower, any of its Subsidiaries or the Guarantor one or more judgments
or decrees involving an aggregate liability of One Million Dollars
($1,000,000.00) or more, which has or have become non-appealable and
shall remain undischarged, unsatisfied by insurance and unstayed for
more than thirty (30) days, whether or not consecutive; or if a writ of
attachment or garnishment against the pro-perty of the Borrower, any of
its Subsidiaries or the Guarantor shall be issued and levied in an
action claiming One Million Dollars ($1,000,000.00) or more and not
released or appealed and bonded in an amount and manner satisfactory to
the Bank within thirty (30) days after such issuance and levy.
8.1.6 Business Suspension, Bankruptcy, Etc. If the
Borrower, any of its Subsidiaries or the Guarantor shall voluntarily
suspend transaction of its business; or if the Borrower, any of its
Subsidiaries or the Guarantor shall not pay its debts as they mature or
shall make a general assignment for the benefit of creditors; or
proceedings in bankruptcy, or for reorganization or liquidation of the
Borrower, any of its Subsidiaries or the Guarantor under the Bankruptcy
Code or under any other state or federal law for the relief of debtors
shall be commenced or shall be commenced against the Borrower, any of
its Subsidiaries or the Guarantor and shall not be discharged within
thirty (30) days of commencement; or a receiver, trustee or custodian
shall be appointed for the Borrower, any of its Subsidiaries or the
Guarantor or for any substantial portion of their respective properties
or assets.
8.1.8 Inadequate Funding or Termination of Employee Benefit
Plan(s). If the Borrower, any of its Subsidiaries or the Guarantor shall
fail to meet its minimum funding requirements under ERISA with respect
to any employee benefit plan established or maintained by it, or if any
such plan shall be subject of termination proceedings (whether voluntary
or involuntary) and there shall result from such termination proceedings
a liability of Borrower, any of its Subsidiaries or the Guarantor to the
PBGC which in the opinion of the Bank will have a materially adverse
effect upon the operations, business, property, assets, financial
condition or credit of the Borrower, any of its Subsidiaries or the
Guarantor, as the case may be.
8.1.9 Occurrence of Certain Reportable Events. If there
shall occur, with respect to any pension plan maintained by the
Borrower, any of its Subsidiaries or the Guarantor any reportable event
(within the meaning of Section 4043(b) of ERISA) which the Bank shall
determine constitutes a ground for the termination of any such plan, and
if such event continues for thirty (30) days after the Bank gives
written notice to the Borrower, provided that termination of such plan
or appointment of such trustee would, in the opi-nion of the Bank, have a
materially adverse effect upon the operations, business, property,
assets, financial condition or credit of the Borrower, any of its
Subsidiaries or the Guarantor, as the case may be.
8.2 Acceleration of Indebtedness; Remedies. Upon the
occurrence of an Event of Default, all Indebtedness shall be due and
payable in full immediately at the option of the Bank without
presentation, demand, pro-test, notice of dishonor or other notice of any
kind, all of which are hereby expressly waived. Unless all of the
Indebtedness is then immediately fully paid, the Bank shall have and may
exercise any one or more of the rights and remedies for which provision
is made for a secured party under the UCC, under the Security
Agreements, the Continuing Collateral Mortgage or under any other
document contemplated hereby or for which provision is provided by law
or in equity, including, without limitation, the right to take
possession and sell, lease or otherwise dispose of any or all of the
Collateral and to set off against the Indebtedness any amount owing by
the Bank to the Borrower and/or any property of the Borrower in
possession of the Bank. The Borrower agrees, upon request of the Bank,
to assemble the Collateral and make it available to the Bank at any
place designated by the Bank which is reasonably convenient to the Bank
and the Borrower.
8.3 Application of Proceeds. All of the Indebtedness shall
constitute one loan secured by the Bank's security interest in the
Collateral and by all other security interests, mortgages, liens,
claims, and encumbrances now and from time to time hereafter granted
from the Borrower to the Bank. Upon the occurrence of an Event of
Default which is not cured within the cure period, if any, provided
under Section 8.2, the Bank may in its sole discretion apply the
Collateral to any portion of the Indebtedness. The proceeds of any sale
or other disposition of the Collateral authorized by this Agreement
shall be applied by the Bank, first upon all expenses authorized by the
UCC or otherwise in connection with the sale and all reasonable
attorneys' fees and legal expenses incurred by the Bank; the balance of
the proceeds of such sale or other disposition shall be applied in the
payment of the Indebtedness, first to interest, then to principal, then
to other Indebtedness and the surplus, if any, shall be paid over to the
Borrower or to such other Person or Persons as may be entitled thereto
under applicable law. The Borrower shall remain liable for any
deficiency, which the Borrower shall pay to the Bank immediately upon
demand.
8.4 Cumulative Remedies. The remedies provided for herein are
cumulative to the remedies for collection of the Indebtedness as
provided by law, in equity or by any mortgage, security agreement or
other document contemplated hereby. Nothing herein contained is
intended, nor shall it be construed, to preclude the Bank from pursuing
any other remedy for the recovery of any other sum to which the Bank may
be or become entitled for the breach of this Agreement by the Borrower.
9. Miscellaneous.
9.1 Independent Rights. No single or partial exercise of any
right, power or privilege hereunder, or any delay in the exercise
thereof, shall preclude other or further exercise of the rights of the
parties to this Agreement.
9.2 Covenant Independence. Each covenant in this Agreement
shall be deemed to be independent of any other covenant, and an
exception or illegality in one cove-nant shall not create an exception or
illegality in another covenant.
9.3 Waivers and Amendments. No forbearance on the part of the
Bank in enforcing any of its rights under this Agreement, nor any
renewal, extension or rearrangement of any payment or covenant to be
made or performed by the Borrower hereunder, shall constitute a waiver
of any of the terms of this Agreement or of any such right. No Default
or Event of Default shall be waived by the Bank except in a writing
signed and delivered by an officer of the Bank, and no waiver of any
other Default or Event of Default shall operate as a waiver of any
Default or Event of Default or of the same Default or Event of Default
on a future occasion. No other amendment, modification or waiver of, or
consent with respect to, any provision of this Agreement or the Note or
other documents contemplated hereby shall be effective unless the same
shall be in writing and signed and delivered by an officer of the Bank.
9.4 Governing Law. This Agreement, and each and every term and
provi-sion hereof, shall be governed by and construed in accordance with
the internal law of the State of California. If any provisions of this
Agreement shall for any reason be held invalid or unenforceable, such
invalidity or unenforceability shall not affect any other provision
hereof, but this Agreement shall be construed as if such invalid or
unenforceable provisions had never been contained herein.
9.5 Survival of Warranties, Etc. All of the Borrower's
covenants, agreements, representations and warranties made in connection
with this Agreement and any document contemplated hereby shall survive
the borrowing and the delivery of the Note hereunder and shall be deemed
to have been relied upon by the Bank, notwithstanding any investigation
heretofore or hereafter made by the Bank. All statements contained in
any certificate or other docu-ment delivered to the Bank at any time by
or on behalf of the Borrower pur-suant hereto or in connection with the
transactions contemplated hereby shall constitute representations and
warranties by the Borrower in connection with this Agreement.
9.6 Costs and Expenses. The Borrower agrees that it will
reimburse the Bank, upon demand, for all costs and expenses incurred by
the Bank in connection with (i) collecting or attempting to collect the
Indebtedness or any part thereof, (ii) maintaining or defending the
Bank's security interests or liens (or the priority thereof), (iii) the
enforcement of the Bank's rights or remedies under this Agreement or the
other documents contemplated hereby, (iv) the preparation or making of
any amendments, modifications, waivers or consents with respect to this
Agreement or the other documents contemplated hereby, and/or (v) any
other matters or proceedings arising out of or in connection with any
lending arrangement between the Bank and the Borrower, which costs and
expenses include without limit payments made by the Bank for taxes,
insurance, assessments, or other costs or expenses which the Borrower is
required to pay under this Agreement or the other documents contemplated
hereby; expenses related to the examination of the Collateral; audit
expenses; court costs and reasonable attorneys' fees (whether in-house
or outside counsel is used, whether legal assistants are used, and
whether such costs are incurred in formal or informal collection
actions, federal bankruptcy proceedings, probate proceedings, on appeal
or otherwise); and all other costs and expenses of the Bank incurred in
connection with any of the foregoing.
9.7 Payments on Saturdays, Etc. Whenever any payment to be made
hereunder shall be stated to be due on a Saturday, Sunday or any other
day which is not a Business Day, such payment may be made on the next
succeeding Business Day, and such extension, if any, shall be included
in computing interest in connection with such payment.
9.8 Binding Effect. This Agreement shall inure to the benefit
of and shall be binding upon the parties hereto and their respective
successors and assigns; provided, however, that the Borrower may not
assign or transfer its rights or obligations hereunder without the prior
written consent of the Bank.
9.9 Maintenance of Records. The Borrower will keep all of its
records concerning its business operations and accounting at its
principal place of business. The Borrower will give the Bank prompt
written notice of any change in its principal place of business, or in
the location of its records.
9.10 Notices. All notices and communications provided for herein
or in any document contemplated hereby or required by law to be given
shall be in writing (unless expressly provided to the contrary) and, if
personally delivered, effective when delivered at the address below or,
in the case of mailing, effective two (2) days after sending by first
class mail, postage prepaid, addressed as follows: (a) If to the
Borrower, to: 85 West Tasman Drive, San Jose, CA 95134; and (b) if to
the Bank, to: Pier 33 South Bulkhead, San Francisco, CA 94111; or to
such other address as a party shall have designated to the other in
writing in accordance with this section. The giving of at least five
(5) days notice before the Bank shall take any action described in any
notice shall conclusively be deemed reasonable for all purposes;
provided, that this shall not be deemed to require the Bank to give five
day notice or any notice if not specifically required in this Agreement.
9.11 Counterparts. This Agreement may be signed in any number of
coun-terparts with the same effect as if the signatures were upon the
same instrument.
9.12 Headings. Article and section headings in this Agreement
are included for the convenience of reference only and shall not
constitute a part of this Agreement for any purpose.
9.13 Release and Discharge. Upon full payment of the
Indebtedness and performance by the Borrower of all its other
obligations hereunder, the parties shall thereupon automatically each be
fully, finally and forever released and discharged from any claim,
liability or obligation in connection with this Agreement and the other
documents contemplated hereby.
9.14 Waiver of Jury Trial. The Borrower and the Bank hereby
irrevocably waive the right to trial by jury with respect to any and all
actions or proceedings at any time in which the Borrower and the Bank
are parties arising out of this Agreement or the other documents
contemplated hereby.
9.15 Integration. This Agreement, Master Revolving Note,
Security Agreements, Financing Statements, and such other agreements,
documents and instruments as may be executed in connection herewith
shall supersede all prior negotiations, agreements and commitments with
respect to the subject matter hereof. In the event of a conflict
between this Agreement and any other agreement between the parties, this
Agreement shall govern.
9.16 Further Assurances. Borrower shall execute such instruments
and documents as Bank may request from time to time, and take such other
actions to perfect and continue the security interest granted hereunder
and otherwise to effect the purposes of this Agreement.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this
Agreement to be executed by their duly authorized officers as of the day
and year first written above.
By: /s/ William D. Rasdal By: /s/ J. Scott Kamsler
_____________________ ____________________
William D. Rasdal J. Scott Kamsler
Its: Chief Executive Officer Its: Chief Financial Officer
COMERICA BANK-California
By: /s/ Greg Atkinson
_________________
Greg Atkinson
Its: Corporate Banking Officer
LIST OF EXHIBITS
EXHIBIT E - Revolving Credit Note
EXHIBIT E
REVOLVING CREDIT MASTER NOTE
$7,000,000.00San Francisco, California
December __1__, 1993
FOR VALUE RECEIVED, the undersigned promises to pay to the order
of COMERICA BANK-CALIFORNIA (the "Bank") at Pier 33 South Bulkhead, San
Francisco, California, on December __1_, 1993, the principal sum or so
much of the principal sum of Seven Million Dollars ($7,000,000.00) as
may from time to time have been advanced and be outstanding under that
certain Revolving Credit Loan Agreement dated December _1__, 1993,
between the undersigned and the Bank (the "Agreement") plus all accrued
but unpaid interest thereon.
The unpaid principal amount of this Note shall bear interest at
the rate provided in Section 2.4 of the Agreement, which Agreement, as
it may be amended from time to time, is by this reference incorporated
herein and made a part hereof. Interest shall be payable to the extent
accrued on the first day of each consecutive calendar month, beginning
December 1, 1993, until maturity (whether by acceleration or otherwise)
and, thereafter, on demand at a rate equal to three percent (3%) per
annum plus the rate otherwise prevailing hereunder, but in no event to
exceed the Legal Rate (as defined in the Agreement).
This Note is a Master Note under which sums may or must be repaid
from time to time and under which new advances are to be made by the
Bank pursuant to the terms and conditions of the Agreement, and the
books and records of the Bank shall constitute the best evidence of the
amount of the indebtedness at any time owing hereunder.
The Bank is hereby granted a security interest in all property of
the undersigned at any time in the possession of the Bank or any
Affiliate (as defined in the Agreement) of the Bank (or as to which the
Bank or any Affiliate of the Bank at any time controls possession by
documents or otherwise) and in all balances of deposit or other accounts
(including without limit an account evidenced by a certificate of
deposit) of the undersigned from time to time with the Bank or any
Affiliate of the Bank.
If an Event of Default (as defined in the Agreement) occurs and is
not cured within the time, if any, provided for by the Agreement, the
Bank may exercise any one or more of the rights and remedies granted by
the Agreement or any document contemplated thereby or given to a secured
party under applicable law, including without limit the right to
accelerate this Note and any other Indebtedness (as defined in the
Agreement), and may set off against the principal of and interest on
this Note or against any other Indebtedness (i) any amount owing by the
Bank to the undersigned, (ii) any property of the undersigned at any
time in the possession of the Bank or any Affiliate of the Bank and
(iii) any amount in any deposit or other account (including without
limit an account evidenced by a certificate of deposit) of the
undersigned with the Bank or any Affiliate of the Bank.
The undersigned and all accommodation parties, guarantors and
indorsers (i) waive presentment, demand, protest and notice of dishonor,
(ii) agree that no extension or indulgence to the undersigned or release
or non-enforcement of any security, whether with or without notice,
shall affect the obligations of any accommodation party, guarantor or
indorser, and (iii) agree to reimburse the holder of this note for any
and all costs and expenses incurred in collecting or attempting to
collect any and all principal and interest under this Note (including,
but not limited to, court costs and reasonable attorney fees, whether
in-house or outside counsel is used and whether such costs and expenses
are incurred in formal or informal collection actions, federal
bankruptcy proceedings, appellate proceedings, probate proceedings, or
otherwise). This Note shall be governed by and construed in accordance
with the laws of the State of California.
IN WITNESS WHEREOF, the undersigned has executed this Note as of
the ___1__ day of December, 1993.
By: /s/ William D. Rasdal
_____________________
William D. Rasdal
Its: Chief Executive Officer
By: /s/ J. Scott Kamsler
____________________
J. Scott Kamsler
Its: Chief Financial Officer
EXHIBIT 21.1
SYMMETRICOM, INC.
SUBSIDIARIES OF THE COMPANY
Analog Solutions, Inc., a California corporation
Telecom Solutions, Inc., a Delaware corporation
Telecom Solutions Puerto Rico, Inc., a Delaware corporation
Linfinity Microelectronics Inc., a Delaware corporation
Telecom Solutions (Europe) Limited, a United Kingdom
Corporation
Navstar Systems Ltd., a United Kingdom Corporation
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement No. 33-38384 on Form S-8, Post-Effective Amendment No. 2 to
Registration Statement No. 33-3456 on Form S-8, Post-Effective Amendment
No. 2 to Registration Statement No. 33-11317 on Form S-8, Post-Effective
Amendment No. 3 to Registration Statement No. 2-70291 on Form S-8 and
Registration Statement No. 33-52356 on Form S-8 of our report dated July
28, 1994, appearing in and incorporated by reference in the Annual Report
on Form 10-K of Symmetricom, Inc. and Subsidiaries for the year ended
June 30, 1994.
/s/ Deloitte & Touche LLP
_________________________
DELOITTE & TOUCHE LLP
San Jose, California
September 16, 1994
