<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 19, 1996
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
NAVIGATION TECHNOLOGIES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7372 77-0170321
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
740 E. ARQUES AVENUE
SUNNYVALE, CA 94086
(408) 737-3200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
RONALD A. BRUMBACK
PRESIDENT AND CHIEF OPERATING OFFICER
NAVIGATION TECHNOLOGIES CORPORATION
740 E. ARQUES AVENUE
SUNNYVALE, CA 94086
(408) 737-3200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C> <C>
BARRY E. TAYLOR, ESQ. W. LOEBER LANDAU, ESQ. GREGORY M. GALLO, ESQ.
DONNA M. PETKANICS, ESQ. SULLIVAN & CROMWELL DENNIS C. SULLIVAN, ESQ.
WILSON SONSINI GOODRICH & ROSATI 125 BROAD ST. GRAY CARY WARE & FREIDENRICH
PROFESSIONAL CORPORATION NEW YORK, NY 10004 A PROFESSIONAL CORPORATION
650 PAGE MILL ROAD (212) 558-4000 400 HAMILTON AVENUE
PALO ALTO, CALIFORNIA 94304 PALO ALTO, CA 94301
(415) 493-9300 (415) 328-6561
</TABLE>
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
----------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===============================================================================================
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.001 par
value................. 13,800,000 shares $14.00 $193,200,000 $66,621
===============================================================================================
</TABLE>
(1) Includes 1,800,000 shares of Common Stock which the Underwriters have the
option to purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(a).
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
The shares of Common Stock registered by this registration statement are to
be offered pursuant to two forms of prospectus; one to be used in connection
with an offering in the United States and Canada (the "U.S. Prospectus") and
one to be used in connection with a concurrent offering outside the United
States and Canada (the "International Prospectus"). The U.S. Prospectus and
the International Prospectus will be identical except for the front and back
cover pages. The form of U.S. Prospectus is included herewith in its entirety.
Only the front and back cover pages of the International Prospectus are
included, appearing at the end of the U.S. Prospectus.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated July 19, 1996
PROSPECTUS
12,000,000 SHARES
[LOGO OF NAVIGATION TECHNOLOGIES]
COMMON STOCK
------------
Of the 12,000,000 shares of Common Stock, $.001 par value ("Common Stock"),
of Navigation Technologies Corporation ("NavTech" or the "Company") being
offered hereby, 9,600,000 shares are being offered initially in the United
States and Canada by the U.S. Underwriters (the "U.S. Offering") and 2,400,000
shares are being offered initially outside the United States and Canada by the
International Managers (the "International Offering"). Such offerings are
referred to collectively as the "Offerings".
Prior to the Offerings, there has been no public market for the Common Stock.
It is currently estimated that the initial public offering price will be
between $12.00 and $14.00 per share. See "Underwriting" for a discussion of the
factors to be considered in determining the initial public offering price.
Application has been made to have the Common Stock approved for quotation on
the Nasdaq National Market under the symbol "NAVT."
Philips Electronics N.V. ("Philips") has agreed to purchase directly from the
Company, concurrently with the closing of the Offerings, a number of shares of
Common Stock that will result in Philips owning 48% of the outstanding shares
of Common Stock (assuming no exercise of the over-allotment options described
below). In addition, Zenrin Co. Ltd. ("Zenrin") has agreed to purchase directly
from the Company shares of Common Stock having an aggregate purchase price of
$1,000,000. All of such shares to be purchased by Philips and Zenrin will be
purchased at the initial public offering price of the Common Stock offered
hereby, less the underwriting discount. See "Sale of Shares to Philips and
Zenrin" and "Certain Transactions."
------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 7.
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share............................... $ $ $
- --------------------------------------------------------------------------------
Total(3)................................ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company has agreed to indemnify the U.S. Underwriters and the
International Managers against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting estimated expenses of the Offerings of $2,000,000 payable
by the Company.
(3) The Company has granted the U.S. Underwriters a 30-day option to purchase
up to 1,440,000 additional shares of Common Stock on the same terms and
conditions as set forth above solely to cover over-allotments, if any. The
International Managers have been granted a similar option to purchase up to
360,000 additional shares solely to cover over-allotments, if any. If such
options are exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
------------
The shares of Common Stock offered by this Prospectus are offered by the U.S.
Underwriters subject to prior sale, to withdrawal, cancellation or modification
of the offer without notice, to delivery to and acceptance by the U.S.
Underwriters and to certain further conditions. It is expected that delivery of
the shares will be made at the offices of Lehman Brothers Inc., New York, New
York, on or about , 1996.
------------
LEHMAN BROTHERS
COWEN & COMPANY
SALOMON BROTHERS INC
, 1996
<PAGE>
[ARTWORK]
IN CONNECTION WITH THE OFFERINGS, THE U.S. UNDERWRITERS AND INTERNATIONAL
MANAGERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE
MARKET PRICE OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED
ON THE NASDAQ NATIONAL MARKET, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes thereto appearing elsewhere
in this Prospectus. See "Risk Factors" for information that should be
considered by prospective investors.
THE COMPANY
Navigation Technologies Corporation ("NavTech" or the "Company") is a leading
developer and provider of a navigable database for use in route guidance
products ("Route Guidance Products") in the United States and Europe. Route
Guidance Products are in-vehicle software and hardware systems that use global
positioning satellite (GPS) and other technologies. These products provide
dynamic real-time positioning information and turn-by-turn driving directions,
enabling accurate and efficient vehicle navigation. A highly accurate and
comprehensive navigable database, such as the NavTech database, is essential to
the successful operation of Route Guidance Products, both for continuously
tracking the vehicle's position and for calculating driving routes. NavTech's
navigable database is a digital representation of road transportation networks
and points of interest in the United States and selected European countries,
constructed to provide the high level of accuracy and detail necessary to
support route guidance and related applications. The NavTech database includes
extensive information, including the location, shape and arterial
classification of roads, details on ramps, dividers, bridges and overpasses,
certain traffic rules and regulations, street names and addresses and points of
interest, such as airports, hotels and restaurants.
The demand for time savings, increased safety and security, reduced stress
and hassle, and traffic congestion control is expected to bring many changes in
the way people drive for business, commuting and leisure over the coming
decade. Route Guidance Products are expected to play a major role in addressing
these demands by providing more accurate, efficient and safe vehicle
navigation. More than 20 companies in the United States, Europe and Japan are
currently selling or developing Route Guidance Products, and according to an
industry source approximately 300,000 Route Guidance Products were sold in
Japan in 1995. The use of Route Guidance Products is now emerging in the United
States and Europe where the principal initial markets are expected to be luxury
cars, rental cars and vehicles used for business purposes such as sales,
delivery and service.
Through June 30, 1996, the Company has invested more than $200 million in the
development of its business, principally to create and update the NavTech
database, to establish a field organization and to develop technology and
software. Since 1988, the Company has had a strategic relationship with
Philips, which has provided approximately $148 million in equity financing to
the Company as well as assistance with customer and industry relationships.
Upon the closing of the Offerings and the direct placement of shares to Philips
and Zenrin, Philips will own 48% of the Company's outstanding shares of Common
Stock.
In the United States, NavTech has completed detailed city databases for
metropolitan areas representing in aggregate approximately 100 million in
population, and has established nationwide coverage by completing the intertown
database for the continental United States. In Europe, NavTech has completed
detailed city databases for metropolitan areas representing in aggregate
approximately 70 million in population and intertown databases for Austria,
Belgium, southeastern England, France, Germany, northern Italy and Switzerland.
3
<PAGE>
NavTech has established customer relationships and entered into licensing
agreements with key participants in each of the Company's principal initial
route guidance markets including luxury cars, rental car fleets and vehicles
used for business purposes in the United States and Europe. The Company
believes there are currently approximately 1,700 vehicles in the United States
and approximately 12,000 vehicles in Europe equipped with Route Guidance
Products incorporating the NavTech database. Route Guidance Products using the
NavTech database are currently available in limited quantities in certain
Oldsmobile models and Acura RL automobiles in selected United States markets
and in certain BMW 5 Series and 7 Series models in selected European countries.
Route Guidance Products using the NavTech database are also available in Avis,
Hertz and National rental cars in the United States and Eurodollar (Dollar)
rental cars in France. The Company believes a majority of the Route Guidance
Products currently available in the United States and Europe, including those
manufactured or offered by Aisin AW, Alpine, Magneti Marelli, Philips Car
Systems, Rockwell, Siemens and Zexel, incorporate the NavTech database.
The Company's strategy is to generate license and distribution revenue
through use of its database in products developed and marketed by its
customers, principally for route guidance applications. NavTech typically
receives license fees in connection with its customers' sales of products that
incorporate a portion of the NavTech database. The Company also expects to earn
revenue from database distribution and support services and from providing
periodic database updates to end users. NavTech also derives revenue from
consulting and contract services provided by Shields Enterprises, Inc. ("SEI"),
which the Company will acquire concurrently with the closing of the Offerings
(the "SEI Merger").
The principal office of the Company is located at 740 E. Arques Avenue,
Sunnyvale, California 94086, and its telephone number is (408) 737-3200. The
Company was incorporated in California in August 1985 as Karlin & Collins,
Inc., and reincorporated in Delaware in September 1987. Unless the context
requires otherwise, references to "NavTech" or the "Company" herein refer to
Navigation Technologies Corporation and its subsidiaries, including SEI.
References to "Philips" herein refer to Philips Electronics N.V. and its
subsidiaries.
THE OFFERINGS
<TABLE>
<S> <C>
Common Stock initially offered in:
The U.S. Offering............................. 9,600,000 shares
The International Offering.................... 2,400,000 shares
Total Common Stock offered................... 12,000,000 shares
----------
Common Stock to be outstanding after the
Offerings..................................... 44,128,630 shares(1)
Use of proceeds................................ For general corporate purposes,
including working capital.
Proposed Nasdaq National Market symbol......... NAVT
</TABLE>
- --------
(1) Excludes (i) 2,474,769 shares of Common Stock issuable upon the exercise of
options outstanding as of June 30, 1996 with a weighted average exercise
price of $8.96 per share and (ii) 2,595,303 shares of Common Stock held by
SEI which will be accounted for as treasury stock on the Company's
consolidated balance sheet upon the closing of the SEI Merger. In addition,
contingent on the closing of the SEI Merger, the Company has granted
options to purchase 833,334 shares of Common Stock with an exercise price
of $20.40 per share. Also, in connection with the SEI Merger, the Company
has agreed to issue, in substitution for shares of SEI common stock
issuable upon exercise of outstanding options, an aggregate of 333,334
shares of Common Stock at a price of $10.20 per share. See
"Capitalization."
4
<PAGE>
SUMMARY CONSOLIDATED AND PRO FORMA COMBINED FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------------------- ----------------------------
1995 1996
------------------ ------------------
PRO PRO
1993 1994 ACTUAL FORMA(1) 1995 ACTUAL FORMA(1)
-------- -------- -------- -------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue:
Database license and
distribution.......... $ 1,093 $ 1,721 $ 3,377 $ 3,377 $ 675 $ 577 $ 577
Consulting and contract
services and other.... 762 765 296 27,809 80 69 7,208
-------- -------- -------- -------- -------- -------- --------
Total revenue.......... 1,855 2,486 3,673 31,186 755 646 7,785
Costs and expenses:
Cost of revenue........ -- -- -- 22,398 -- -- 6,111
Database production and
updating.............. 18,713 31,075 40,359 40,359 9,269 9,842 9,842
Software engineering
and development....... 4,506 4,337 8,314 12,186 1,624 3,063 3,785
Selling, general and
administrative........ 3,913 7,217 13,444 16,837 2,931 4,050 5,417
Amortization of
goodwill.............. -- -- -- 7,686 -- -- 1,922
-------- -------- -------- -------- -------- -------- --------
Total costs and
expenses.............. 27,132 42,629 62,117 99,466 13,824 16,955 27,077
-------- -------- -------- -------- -------- -------- --------
Loss from operations.... (25,277) (40,143) (58,444) (68,280) (13,069) (16,309) (19,292)
Net loss ............... $(25,852) $(41,102) $(56,912) $(66,914) $(12,439) $(16,556) $(19,589)
Net loss per share ..... $ (2.57) $ (2.68) $ (0.67) $ (0.71)
Shares used in per share
computation............ 22,114 24,963 24,782 27,631
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------------------
ACTUAL PRO FORMA(1) AS ADJUSTED(2)
------- ------------ --------------
(in thousands)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.................. $ 8,315 $34,232 $207,977
Working capital............................ 283 23,188 196,933
Total assets............................... 15,613 85,479 259,224
Long-term debt and obligations............. 20,342 15,655 15,655
Total stockholders' equity (deficit)....... (14,760) 52,369 226,114
</TABLE>
- --------
(1) Pro forma to give effect to (i) the issuance of Preferred Stock to Philips
and others in a private financing in June 1996 (the "Private Financing")
(partially paid by conversion of loans payable to Philips), (ii) the
conversion of all outstanding shares of Preferred Stock to Common Stock
concurrently with the closing of the Offerings and (iii) the SEI Merger to
be effective concurrently with the closing of the Offerings.
(2) Adjusted to reflect the sale by the Company of the 12,000,000 shares of
Common Stock offered hereby at an assumed initial public offering price of
$13.00 per share and 2,458,667 shares of Common Stock at an assumed price
of $12.16 per share to Philips and Zenrin concurrently with the closing of
the Offerings (the "Direct Placement"). See "Sale of Shares to Philips and
Zenrin," "Use of Proceeds" and "Capitalization."
5
<PAGE>
Unless otherwise indicated, all information contained in this Prospectus
assumes (i) no exercise of the U.S. Underwriters' and International Managers'
over-allotment options, (ii) a one-for-twelve reverse stock split of the Common
Stock and Preferred Stock to be effected prior to the closing of the Offerings,
(iii) the automatic conversion of all outstanding shares of the Company's
Preferred Stock into shares of Common Stock on a one-for-one basis upon the
closing of the Offerings, (iv) the issuance of 3,632,099 shares of Common Stock
(net of shares exchanged for shares held by SEI which will be accounted for as
treasury stock on the Company's consolidated balance sheet) in connection with
the SEI Merger concurrently with the closing of the Offerings, (v) the sale of
shares of Preferred Stock to Philips and certain other stockholders in the
Private Financing which will be converted into an aggregate of 2,886,661 shares
of Common Stock concurrently with the closing of the Offerings, (vi) the sale
of 2,458,667 shares of Common Stock to Philips and Zenrin in the Direct
Placement, (vii) the filing of amendments to the Company's Certificate of
Incorporation authorizing 150,000,000 shares of Common Stock and 5,000,000
shares of undesignated Preferred Stock and eliminating the Company's existing
Preferred Stock, (viii) the cancellation of options to purchase 166,667 shares
of Common Stock upon the closing of the SEI Merger, (ix) no exercise of rights
by certain existing stockholders to sell Common Stock to Philips subsequent to
June 30, 1996 and (x) no exercise of options to purchase shares of Common Stock
subsequent to June 30, 1996. The number of shares of Common Stock that will be
issued upon conversion of the shares of Preferred Stock issued in the Private
Financing, and the number of shares of Common Stock that will be issued in the
Direct Placement, have been calculated based on an assumed initial public
offering price of $13.00 per share and will be adjusted based on the actual
initial public offering price. See "Sale of Shares to Philips and Zenrin,"
"Certain Transactions," "Principal Stockholders," "Description of Capital
Stock" and "Underwriting," and Notes 2, 7 and 11 to the NavTech Consolidated
Financial Statements.
----------------
NavTech, SEI EnRoute, SEI and SEI Information Technology are trademarks
and/or service marks or registered marks of the Company. All other marks
appearing in this Prospectus are marks of the respective companies that own or
utilize them.
6
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, investors should
carefully consider the following risk factors when evaluating an investment in
the Common Stock offered hereby. This Prospectus contains certain forward
looking statements that involve risks and uncertainties. The Company's actual
results could differ materially from the results discussed in the forward
looking statements, as a result of the factors discussed in "Risk Factors"
below, in "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and in "Business," as well as those discussed elsewhere
in this Prospectus.
HISTORY OF SUBSTANTIAL LOSSES AND ANTICIPATED FUTURE LOSSES
Since its incorporation in 1985, the Company has been primarily engaged in
developing its database and through March 31, 1996 has generated minimal
revenue from the licensing of its database. NavTech incurred net losses of
$56.9 million and $16.6 million for the year ended December 31, 1995 and the
three month period ended March 31, 1996, respectively. As of March 31, 1996,
the Company had an accumulated deficit of $177.7 million. Concurrently with
the closing of the Offerings, NavTech will acquire SEI. SEI had net losses of
$2.0 million and $1.9 million for the fiscal year ended September 30, 1995 and
the six month period ended March 31, 1996, respectively. The pro forma net
loss for NavTech combined with SEI for the year ended December 31, 1995 and
the three month period ended March 31, 1996 would have been $66.9 million and
$19.6 million, respectively. The Company must be evaluated in light of the
problems, delays, expenses, uncertainties and complications frequently
encountered in connection with a business addressing a developing market. To
address these risks, the Company must, among other things, continue to respond
to a developing market for its database, to complications in distributing its
database, to future capital needs and to risks associated with managing the
transition from a development organization to a commercial production
organization. The Company has not been profitable since inception and
anticipates that it will continue to incur annual operating losses for at
least the next five years. Achieving profitability will be dependent upon,
among other things, significant unit sales of Route Guidance Products
utilizing the Company's database and the Company's ability to realize
sufficient license fees for use of its database. No assurance can be given
that the Company's database or its customers' products will achieve
significant unit sales or that the Company will achieve profitable operations
in the future. In its independent auditors' report on the Company's
consolidated financial statements included herein, KPMG Peat Marwick LLP
indicates that the Company has had recurring losses from operations since
inception and requires significant additional financing which raise
substantial doubt about the Company's ability to continue as a going concern.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations," Independent Auditors' Report and Note 1 to the NavTech
Consolidated Financial Statements.
NEW AND EMERGING MARKET; UNCERTAINTY OF MARKET ACCEPTANCE
The markets for products that use the Company's database are new and
emerging. The Company believes that the most important commercial application
for its database will be Route Guidance Products. The Company's success
depends upon both the development of a market for Route Guidance Products and
upon the utilization of the Company's database in Route Guidance Products. The
Company does not intend to develop or market its own Route Guidance Products.
There are significant uncertainties as to whether a large market for these
products will ever develop and if it does, whether it will develop at a rate
and to the extent that will enable the successful commercialization and
significant unit sales of Route Guidance Products utilizing the NavTech
database. Route Guidance Products can be either factory-installed, dealer-
installed or sold as aftermarket products. The Company is heavily dependent on
automotive electronics manufacturers to complete the development and
introduction of Route Guidance Products and on vehicle manufacturers to offer
such products with their vehicles. To date, only a few vehicle manufacturers
have introduced vehicles in the United States and Europe that are equipped
with a Route Guidance Product. Although many of the Company's customers are
making significant investments to develop Route Guidance Products, and certain
of the Company's customers have introduced Route Guidance Products utilizing
the NavTech database, sales of such products have been very limited and there
can be no assurance that such products or any future products that may be
developed by such customers or others will achieve significant unit sales. The
Company does not expect significant unit sales of
7
<PAGE>
Route Guidance Products in the United States or Europe for at least three to
five years. According to industry sources, the design cycle time for vehicles
sold in North America and Europe can be as long as four to seven years. The
Company believes that demand for Route Guidance Products will be price-
sensitive and that such products are unlikely to achieve significant unit
sales unless and until prices decline substantially. The Company has no
control over the pricing of Route Guidance Products that utilize its database
and, therefore, cannot provide any assurance that any such products will reach
the price points necessary to achieve significant unit sales. If Route
Guidance Products utilizing the Company's database fail to achieve significant
unit sales, the Company's business, financial condition and results of
operations will be materially adversely affected.
In addition to Route Guidance Products, the Company has identified other
products and services, such as fleet management and personal navigation
applications that could utilize its database. Although third parties are
developing such products and services, there can be no assurance that any of
such products or services will achieve significant unit sales or that the
Company's database will be utilized with any such products or services. There
can be no assurance that even if route guidance and such other products and
services attain significant unit sales, the Company will be able to license
its database at prices that will result in the Company achieving profitable
operations. The development of alternatives to Route Guidance Products, such
as "off-board" navigation products that receive navigation and traffic
information via wireless communications, could delay or limit acceptance of
Route Guidance Products or render them obsolete. There can be no assurance
that the Company will be successful in participating in the market for any
alternative navigation products, and therefore the development of such
alternate navigation products could have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company believes that the availability of regular database updates will
be an important factor in commercial acceptance of the NavTech database by
manufacturers of Route Guidance Products. The Company also believes that the
ongoing licensing of database updates to end users will be an important source
of future revenue. However, the completion and updating of the NavTech
database will continue to involve significant costs. There can be no assurance
that the market for updates of the NavTech database will develop or that
demand for the NavTech database will be sufficient to justify the costs of
completing geographic coverage of and updating of the database in the United
States and Europe. See "Business--Industry Background," "Business--The NavTech
Database," "Business--Marketing and Database Distribution" and "Business--
Customers."
DEPENDENCE ON SUCCESS OF THIRD-PARTY ROUTE GUIDANCE PRODUCTS
The Company's business is critically dependent upon the timely introduction
and successful marketing and sale of Route Guidance Products that utilize the
NavTech database. The Company, however, has no control over any of its
customers' hardware or software design, user interface, product functionality,
product quality, pricing strategy, release dates, market positioning, product
promotion or distribution, all of which affect Route Guidance Product success
and, therefore, the Company's financial results. In addition, the Company's
license agreements with its customers are non-exclusive, and such customers
have no contractual obligations either to produce and market Route Guidance
Products or to utilize the Company's database with their Route Guidance
Products. If the Company is unable to maintain its customer base, its future
operating results and its ability to achieve profitability will be materially
adversely affected. The Company cannot be certain that automotive electronics
manufacturers that have introduced products incorporating the NavTech database
will be successful or will continue to utilize the NavTech database in
connection with such products, or that other products currently under
development by automotive electronics manufacturers will be completed or
introduced, achieve significant unit sales or utilize the NavTech database.
The Company is also dependent upon automotive electronics manufacturers to
market their products to vehicle manufacturers and retail distributors and
train vehicle dealers on the sale and use of Route Guidance Products. If
products utilizing NavTech's database do not generate significant unit sales,
the Company's revenue from initial database licenses and the Company's
opportunity to license database updates to end users of such products will be
materially adversely affected. See "Business--Industry Background,"
"Business--The NavTech Database," "Business--Marketing and Database
Distribution" and "Business--Customers."
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FUTURE CAPITAL NEEDS
The Company's operations to date have required substantial amounts of
capital. Through June 30, 1996, the Company has invested more than $200
million in the development of its business, principally to create and update
the NavTech database, to establish a field organization and to develop
technology and software. The Company expects to require substantial additional
infusions of capital to complete development of its database and to fund its
operations. The Company is dependent upon the net proceeds from the Offerings
and the Direct Placement and from future financings to continue to fund its
operations. The Company believes that the net proceeds from the Offerings and
the Direct Placement, together with other available cash resources, will be
sufficient to meet the Company's cash needs for the next 18 to 24 months.
There can be no assurance, however, that the Company will have adequate funds
to finance its operations through such period.
The Company expects to continue to incur annual operating losses for at
least the next five years. Prior to achieving profitability, in addition to
the funds being raised in the Offerings and the Direct Placement, the Company
expects to require funds currently estimated at approximately $200 million,
although the required amount could be substantially greater. The actual funds
required by the Company will depend upon many factors, including the extent
and timing of the introduction of products utilizing the NavTech database,
unit sales of such products, the rate of expansion of database coverage, the
cost of updating the database, the ability to generate revenue from the
licensing of its database, strategic investment or acquisition opportunities
and operating results. In any event, the Company will need to raise
significant additional funds to support its operations before profitability
can be achieved and may seek to raise such additional funds before 1998. There
can be no assurance that any additional funds will be available to the Company
on acceptable terms, or at all, when required by the Company. Philips, the
Company's largest stockholder, may in the future agree to make additional
investments and may make purchases of Common Stock in the open market, in
negotiated transactions or otherwise in its discretion from time to time.
However, there is no contractual or other commitment by Philips or by any
other third party to provide additional funds, and Philips has indicated to
the Company that it has no present intention to make any additional investment
in the Company. If additional funds are raised by issuing equity securities,
there will be dilution to the ownership interest of existing stockholders and
there may be dilution to the Company's earnings per share, if any. The
inability to obtain funds as needed on reasonable terms would have a material
adverse effect on the Company's business, financial condition and results of
operations. If such funds are not available, the Company may be required to
delay development of portions of its database, to forego market opportunities,
to obtain funds through arrangements with strategic partners or others that
may require the Company to relinquish material rights to certain of its
technologies or potential markets or otherwise to curtail or discontinue its
operations. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
NEED TO DEVELOP DISTRIBUTION CAPABILITY AND END USER SUPPORT
The Company's database is presently licensed to automotive electronics
manufacturers who market their Route Guidance Products to vehicle
manufacturers for factory installation or as dealer-installed options in new
vehicles and to the aftermarket. In addition, an important element of the
Company's strategy is to realize revenues from licensing of updates of its
database to end users. Unless the Company is able to market and distribute its
database directly to end users, the Company will be dependent on third parties
to market and distribute the database and updates for use in vehicles. There
can be no assurance that third parties will be willing or able to effectively
undertake such marketing and distribution efforts. The Company intends to
develop a substantial sales and marketing organization and a distribution
mechanism to market and distribute its database. Distribution of both initial
copies of the Company's database and updates is a complex process. Effective
marketing and distribution of the Company's database will require, among other
things, cooperation by automobile electronics manufacturers, vehicle
manufacturers, dealers and others to identify end users. Privacy and
confidentiality issues may inhibit the Company's ability to obtain such
information. The Route Guidance Products that currently utilize the Company's
database employ proprietary technology, which requires the Company to create
customer-specific versions of its database. In addition, only a specific
regional portion of the Company's database is provided with each Route
Guidance Product, which further complicates distribution
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logistics of the database. Due to the size and scope of the database and the
need to deliver geographic and customer-specific versions of the database, the
Company will need to establish an efficient distribution capability. In
Europe, the Company has contracted to use a third party for certain aspects of
its distribution. If licensing of the Company's database grows rapidly, the
Company could experience difficulties in delivering the appropriate portion of
its database to its customers and end users on a timely basis. The failure of
the Company to establish the necessary sales, marketing and database
distribution infrastructure could have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company believes that timely and effective customer and end user support
will be important to the successful introduction of Route Guidance Products
and other products using its database. The Company intends to rely in part on
the experience of its SEI subsidiary and third parties to provide customer and
end user support. NavTech currently provides end user support in the United
States through a telephone "help desk." If use of the Company's database
increases significantly in the United States, there can be no assurance that
the Company's help desk organization will be successful in expanding its
capabilities to provide the support required by end users. In Europe, the
Company currently offers first level help desk capability through a third
party, with the Company's limited capability as back-up. There can be no
assurance that the Company will be successful in developing a more
comprehensive help desk capability in Europe in a timely and cost-effective
manner. Inadequate or poor quality customer support could materially and
adversely impact the market acceptance of Route Guidance Products and other
navigation products and, consequently, the Company's business, financial
condition and results of operations. See "Business--The NavTech Database" and
"Business--Marketing and Database Distribution."
RELATIONSHIP WITH AND CONTROL BY PHILIPS
Since 1988, the Company has had a strategic relationship with Philips, which
has provided approximately $148 million in equity financing to the Company. As
a result of its investments in the Company and purchases of shares from third
parties, Philips holds 18,555,345 shares of the Company's Common Stock. In
addition, Philips has agreed to purchase shares from the Company in the Direct
Placement at the initial public offering price less the underwriting discount
and 250,000 shares from an SEI employee at the initial public offering price,
immediately following the SEI Merger.
Upon the closing of the Offerings and the Direct Placement, Philips will own
48% of the outstanding shares of Common Stock, and will have four
representatives on the Company's nine member Board of Directors. Thus,
Philips, acting alone, will have significant voting power and will have power
to exercise effective control over all actions affecting the Company's
operations, including actions requiring stockholder approval, such as the
election or removal of the Company's entire Board of Directors, amendments to
the Company's Restated Certificate of Incorporation, or mergers or other
change in control transactions involving the Company. Philips, together with
other holders of Common Stock, may act by written consent to take such actions
at any time, including the election or removal of directors. Certain
contractual limitations on Philips' voting rights and representation on the
Company's Board of Directors that are currently in effect will terminate upon
the closing of the Offerings. Philips has agreed to vote its shares to elect
T. Russell Shields, the Company's Chairman of the Board of Directors and Chief
Executive Officer, to the Company's Board of Directors so long as Mr. Shields
together with his family beneficially owns at least 10% of the Company's
outstanding Common Stock. Following the closing of the Offerings and the
Direct Placement, Mr. Shields and his family will beneficially own
approximately 12.5% of the Company's outstanding Common Stock.
Philips may in the future agree to make additional investments in the
Company and may make purchases of the Company's Common Stock in the open
market, in negotiated transactions or otherwise in its discretion from time to
time. However, Philips is not contractually obligated to purchase any
additional shares and has indicated to the Company that it has no present
intention to make any additional investment in the Company. Until three years
after the closing of the Offerings, Philips has agreed not to acquire more
than 75% of the Company's outstanding Common Stock without the approval of a
majority of the disinterested members of the Board of Directors, except in
response to tender or exchange offers or in the case of mergers and similar
transactions or
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because of actions by the Company or others that Philips cannot prevent. In
addition, for five years following the closing of the Offerings, Philips has
agreed to give the Company's other stockholders the right to participate on
equal terms in any sale by Philips of all or substantially all of its equity
interest in the Company other than in an underwritten public offering.
Other than a 180-day lock-up agreement entered into with the Representatives
of the Underwriters and as described above, there are no contractual
restrictions on the ability of Philips to sell shares of the Company's Common
Stock; however, the sale of any shares by Philips will be subject to the
volume limitation and other provisions of Rule 144 under the Securities Act of
1933, as amended (the "Securities Act"). If the Company effects a future
registration of its shares of Common Stock, Philips may request inclusion of
its shares of Common Stock in such registration, subject to certain
exceptions. In addition, beginning on the third anniversary date of the
Offerings, Philips has a contractual right to require registration of its
shares of Common Stock. In addition, at any time prior to or after such three
year period, Philips could cause or agree with the Company to cause
registration of its shares of Common Stock. Sales by Philips of substantial
amounts of Common Stock in the public market after the Offerings could
adversely affect the prevailing market price of the Common Stock. See "Shares
Eligible for Future Sale."
Philips currently manufactures and sells Route Guidance Products that
compete with products offered by the Company's other customers, and Philips
may develop and commercialize other competitive products in the future.
Philips also has developed and continues to independently develop and acquire
intellectual property and other rights that could be competitive with those of
the Company or its customers. The Company's contracts with Philips and other
major customers extend most favored customer terms and prices for similar
applications, quantities and territories. However, Philips is not
contractually restricted in competing with the Company or licensing or selling
rights to, or otherwise cooperating with, others who may compete directly or
indirectly with the Company. Any such competition or cooperation could have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, the Company's relationship with Philips
may deter Philips' competitors from using the Company's database. See "Sale of
Shares to Philips and Zenrin," "Certain Transactions," "Principal
Stockholders" and "Description of Capital Stock."
FLUCTUATIONS IN OPERATING RESULTS
The Company derives its revenue from license and distribution activities and
consulting services. The Company's period-to-period results may fluctuate
substantially as a result of a variety of factors, such as order deferrals for
products and services using the Company's database as a result of product,
market or technology-related announcements by third parties; the number of
potential end users or products incorporating the Company's database;
cyclicality in the automotive, electronics or other industries that may
utilize the Company's database; delay in the production or shipment of new or
enhanced versions of the Company's database or products incorporating such
database; delays in revenue recognition due to the timing of customer
reporting of database usage; and the mix of revenues between license and
distribution activities and consulting services. In addition, if there is a
downturn in the automotive or electronics industry generally, the
manufacturers of products that utilize the Company's database could delay or
cancel development, marketing and production of such products. As a result,
any downturns in the automotive industry or the electronics industry could
have an adverse effect on the Company's business, financial condition and
results of operations. In the near term, the Company expects a substantial
majority of its revenue to be derived from consulting services performed
through SEI. Factors that could affect the operating results of SEI include
the timing of completion of major projects, the ability to attract business
from new and existing customers, fluctuations in the number of consulting
personnel, the extent to which consulting personnel are utilized on client
projects and the extent of competition. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
COMPETITION
The Company's principal map database competitors are Etak, Inc. ("Etak") in
the United States and the United Kingdom and TeleAtlas in Europe, excluding
the United Kingdom. Sony Corporation recently acquired
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Etak from News Corporation Limited. Robert Bosch GmbH owns 50% of TeleAtlas.
The Company expects to experience significant competition from TeleAtlas and
Etak. The Company could face competition from additional competitors in the
future. Etak and TeleAtlas, together with their corporate parents, each may
have substantially greater financial resources and research and development,
marketing and other capabilities than the Company. There can be no assurance
that the Company will be able to compete successfully in the future or that
competitive pressures will not result in price reductions for the Company's
database and distribution services that could materially adversely affect the
Company's business, financial condition and results of operations. SEI's
software and systems consulting services business faces substantial
competition from larger consulting firms, including nationally recognized
accounting firms and other professional service organizations, many of which
have substantially greater financial resources and other capabilities than the
Company. The Company's failure to be competitive in the software and systems
consulting services business could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Competition."
MANAGEMENT OF GROWTH AND NEED TO HIRE SUBSTANTIAL ADDITIONAL PERSONNEL
The Company is continuing to expand the detailed city and intertown areas
covered by its database and the personnel and systems required to support the
expanding coverage of the database. In addition, the Company anticipates
further increases in its field and other personnel over the next several
years. The Company's future performance will depend in part on its ability to
manage such growth, and such growth will continue to place significant demands
on the Company's administrative, operational and financial resources. The
failure of the Company to effectively manage its growth could have a material
adverse effect on its business, financial condition and results of operations.
As the Company commercializes its database, it will need to hire additional
employees for the marketing, production and distribution of its database and
database updates. In recent years, the Company has substantially increased its
staff and expects to continue to do so in the future. There can be no
assurance that the Company will be successful in hiring and assimilating such
personnel. In addition, if the Company grows, the Company will need to upgrade
its financial and management information systems. There can be no assurance
that the Company will be successful in building the necessary infrastructure,
including the hiring of the requisite personnel, to make a successful
transition from a predominantly database development organization to a
commercial production, sales and distribution organization. See "Business--
Employees" and "Management."
NEED TO HIRE ADDITIONAL OFFICERS; DEPENDENCE ON KEY PERSONNEL
A number of the Company's key management personnel, including Ronald A.
Brumback, NavTech's President and Chief Operating Officer, as well as other
management, support and technical personnel, have recently joined NavTech. The
Company is also in the process of recruiting executives for several other key
positions, including President, NavTech North America; President, NavTech
Europe and Vice President, Corporate Sales and Marketing. The Company's
performance depends, in significant part, upon the continued services of T.
Russell Shields, its Chairman of the Board and Chief Executive Officer, as
well as numerous other management, support and technical personnel. The loss
of services of Mr. Shields, or a significant number of such other personnel,
could have a material adverse effect on the Company's business, financial
condition and results of operations. There can be no assurance that the
Company can attract sufficient numbers of new personnel to complete its
database in a timely manner or that existing personnel will not leave the
Company to pursue other opportunities. See "Business--Employees" and
"Management."
DATABASE DEVELOPMENT RISKS
The Company believes the market for its database is dependent upon the
extent of its content and geographic coverage. The Company's future success
will depend in part on its ability to further expand the content and
geographic coverage of its database. The Company must also update the
information in its database. There can be no assurance that the Company will
be successful in expanding and updating its database on a timely basis, or
that such efforts will be well-received in the marketplace. The Company,
through its European subsidiary, European Geographic Technologies B.V.
("NavTech Europe"), began database development more recently in Europe than in
the United States and the European coverage is not as complete as in the
United States. The Company must extend its database coverage in Europe,
particularly in the United Kingdom, the Netherlands,
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Scandinavia, Spain and central and southern Italy, in order to compete
effectively across Europe and to support the product introduction plans of
automotive electronics manufacturers. Certain portions of the Company's
European database must also be upgraded to meet full NavTech specifications.
While the Company has announced a projected database coverage completion
schedule, the schedule has in the past changed and the Company believes it is
likely to change in the future depending upon strategic decisions, including
customer requests, expected market need for particular detailed city or
intertown coverage, costs of completion, financial constraints and other
operational issues. The Company has in the past and may in the future alter
its schedule for completing certain portions of the database. If the Company
fails to develop and deliver its database in a timely manner, the Company's
customers could choose an alternative database, if one is available, which may
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business--The NavTech Database."
RISKS ASSOCIATED WITH ACQUISITION OF SEI AND NAVTECH EUROPE OPERATIONS
The Company entered into an agreement in June 1996 to acquire SEI effective
concurrently with the closing of the Offerings. The integration of the
operations of SEI following the closing of the SEI Merger will require the
dedication of management resources which may detract attention from the day-
to-day business of NavTech. Historically, SEI has provided critical software
development and support services to the Company and certain of NavTech's
customers. The Company is unable to predict what effect, if any, the SEI
Merger will have on SEI's or NavTech's ability to maintain existing customer
relationships, to retain employees, to attract qualified personnel, or to
secure additional future consulting business. SEI's results of operations have
been and will continue to be dependent on its ability to attract business from
new and existing customers. Pursuant to the SEI Merger, NavTech will be the
successor to all of SEI's liabilities, known and unknown. Although NavTech is
indemnified for certain of SEI's liabilities (subject to amount and time
limitations), there can be no assurance that such indemnification will be
adequate. In September 1994, the Company acquired substantially all of the
stock of NavTech Europe, its European affiliate. The Company has incurred and
expects to continue to incur substantial costs to expand database content and
coverage in Europe and the Company continues to work to integrate the NavTech
Europe operations with its United States operations. There can be no assurance
that the Company will be successful in upgrading its European database content
and coverage or integrating its European and North American operations and the
failure to do so could have a material adverse effect on the Company's
business, financial condition and results of operations.
RISKS OF INTERNATIONAL OPERATIONS AND FOREIGN CURRENCY FLUCTUATIONS
The Company has substantial operations in Europe and expects a significant
portion of its expenses and potential revenues will be generated by NavTech
Europe. Accordingly, the Company's operating results are subject to the risks
of doing business in foreign countries, including compliance with, or changes
in, the laws and regulatory requirements of various foreign countries and the
European Community, difficulties in staffing and managing foreign subsidiary
operations, taxes, trade barriers and business interruptions. In addition, all
of NavTech Europe's expenses and revenues are denominated in foreign
currencies. The Company historically has not engaged in activities to hedge
its foreign currency exposure and has no plans to do so in the foreseeable
future. Accordingly, the Company is, and will continue to be, subject to risks
related to foreign currency fluctuations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
INTELLECTUAL PROPERTY
The Company's success and its ability to compete are dependent, in part,
upon its ability to establish and protect its intellectual property rights.
The Company primarily relies on a combination of copyright laws, trade secrets
and contractual rights to establish and protect its intellectual property
rights in its database, software and related technology. The laws of some
foreign countries do not protect the Company's database, software or related
technology to the same extent as the laws of the United States. There can be
no assurance that the steps taken by the Company to establish and protect its
intellectual property will be sufficient to prevent
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misappropriations or that the Company's current or potential competitors will
not develop databases, software or technologies that are substantially
equivalent or superior to those of the Company. While the Company's database
and software are protected in part by copyright and trade secrets protection,
copyright protection does not extend to facts, and thus does not restrict the
ability of a competitor to independently develop substantially the same
database. There can be no assurance that the Company's competitors will not
independently create a database containing substantially the same facts as the
Company's database. Also, there can be no assurance that the Company's trade
secrets will not become known or be independently discovered by competitors.
The Company's database is a compilation of public domain, licensed,
otherwise-acquired and independently developed information obtained from
various sources such as aerial photographs, commercially available maps and
data, government records, other data sources and field observation. Various
public authorities and private entities claim copyright or other ownership of
or protection with respect to certain data and map information. The
intellectual property laws governing databases, map information and related
technology are unclear and are developing. The Company's general policy is to
seek to obtain licenses or other rights where necessary or appropriate. There
can be no assurance that the Company has obtained or will be successful in
obtaining all such licenses or rights that may be necessary to use such
information on reasonable terms or at all. While the Company believes that its
database, software and related technology do not infringe any intellectual
property rights of which it is aware, due to the uncertain and developing
nature of this area of the law, there can be no assurance that claims of
infringement or similar claims will not be asserted against the Company.
The Company claims rights in its trademarks and service marks. Certain marks
of the Company are registered in the United States. The Company has filed
applications to register certain other marks in the United States and is
investigating its right to use and register certain marks in Europe and
elsewhere. Marks of others that are the same or similar to certain marks of
the Company exist or may exist. There can be no assurance that the Company
will be able to continue using certain marks or that certain of the Company's
marks do not infringe the marks of others in North America, Europe or
elsewhere. The Company has licensed others to use certain of its marks and
expects to continue licensing certain of its marks in the future. No assurance
can be given that others will not take actions that might materially and
adversely affect the value of the Company's marks or reputation.
The Company's database, software and related technologies may be used in a
variety of new and evolving industries and markets. Several participants in
these industries and markets hold patents relating to databases, software and
related subject matter and additional patents may issue in the future. The
validity, scope and enforceability of such patents is unclear. Moreover, since
patent applications in the United States are not publicly disclosed until the
patents issue, applications may have been filed that, if issued, would relate
to the Company's database, software and related technologies. The Company does
not believe that it infringes any patents of which it is aware; however, there
can be no assurance that patent infringement claims will not be asserted
against the Company. The ability of the Company's customers to develop and
market products using the Company's database and software may also be
materially affected by such patents. The existence and assertion of such
patents may deter current and potential customers of the Company from
developing and introducing products, with a corresponding adverse effect on
the Company's operations. In the event that claims of infringement are
asserted against current or potential customers of the Company, such customers
may be required to obtain one or more licenses from third parties. There can
be no assurance that any necessary licenses from third parties can or will be
obtained at a reasonable cost or at all. Also, in the event that a customer of
the Company is found to have infringed such patents, such customer may be
subject to payment of substantial royalties or damages, or enjoined or
otherwise prevented from marketing products which would incorporate the
Company's database, software or related technologies. The Company's license
agreements with its customers generally include mutual indemnity provisions
which in certain cases may require indemnification by the responsible party
for liabilities, costs and expenses arising out of potential violations of
intellectual property rights. Depending upon the scope and applicability of
such indemnification provisions, indemnity claims may be asserted against the
Company. While the Company does not believe that it infringes any patents of
which it is aware, there can be no assurance that such indemnification
provisions and other actions by the Company will not result in indemnification
claims
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or claims of direct or contributory patent infringement or patent infringement
inducement. There can be no assurance that the outcome of any such claim would
not have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company has in some cases engaged in negotiations and discussions, and
entered into relationships, with customers regarding its database, software
and related technologies without having executed definitive written
agreements. The parties' respective rights and obligations under such
circumstances may be unclear. In addition, without definitive written
agreements, the Company's ability to develop, protect and exploit its
database, software and related intellectual property may be impaired. There
can be no assurance that the Company will be successful in executing
definitive written agreements with all of its customers, and its failure to do
so could have a material adverse effect on the Company's business, financial
condition and results of operations.
The resolution of any claims related to the Company's intellectual property
would generally involve complex legal and factual questions and would
consequently be uncertain. In particular, resolution of such claims would
likely entail considerable cost to the Company and diversion of efforts of
management. The Company is currently involved in litigation with Etak, Zexel
USA Inc. and its parent regarding alleged patent infringement, indemnification
and related issues. See "--Etak Litigation" and "Business--Intellectual
Property."
ETAK LITIGATION
On November 18, 1994, Etak, the Company's primary competitor in the United
States, filed suit against one of the Company's customers, Zexel USA, Inc.
("Zexel USA"), in the United States District Court for the Northern District
of California, alleging that Zexel USA's Route Guidance Product infringes U.S.
Patent Nos. 4,796,191 and 4,914,605 (the "Etak Patents"), and seeking monetary
damages, the trebling of such damages for willful infringement and injunctive
relief. Subsequently, Etak filed an amended complaint adding the Japanese
parent of Zexel USA, Zexel Corporation ("Zexel Japan"), as a defendant. Etak
has not filed any claims that allege that the Company's database or software
infringes the Etak Patents. The suit is currently scheduled for trial in
October 1996.
On June 30, 1995, Zexel Japan filed a third-party complaint against the
Company, seeking recovery of any and all damages awarded against Zexel Japan,
and for costs and expenses incurred by Zexel Japan, in the litigation with
Etak. The third-party complaint is based on certain alleged representations,
warranties, indemnity and other provisions in license agreements between Zexel
Japan and the Company, pursuant to which the Company provided certain software
products to Zexel Japan which allegedly are used in Zexel USA's Route Guidance
Product. Thereafter, the Company filed an answer to Zexel Japan's complaint,
denying all material allegations thereof and asserting numerous affirmative
defenses, and a counterclaim and cross-claim for indemnification against Zexel
Japan and Zexel USA, respectively. The Company also filed claims against Etak
seeking a declaration that the Etak Patents are invalid, unenforceable and not
infringed by Zexel USA or the Company, and for Etak's violation of the federal
antitrust laws. Proceedings on the antitrust claims against Etak have been
stayed pending the resolution of the underlying patent issues.
If Etak prevails in the litigation, Zexel USA or Zexel Japan (collectively,
"Zexel") could be enjoined from selling products incorporating the Company's
proprietary technology and could be required to pay significant monetary
damages to Etak. If the Etak litigation were to be resolved by a settlement,
Zexel might be required to make substantial payments to Etak. If Zexel were
found liable to Etak and prevailed on its indemnification claim against the
Company, the Company could be required to pay substantial amounts to Zexel.
Zexel and the Company are vigorously contesting all of Etak's claims. It is
the Company's position that the Etak Patents are invalid, unenforceable and
not infringed. However, the Company cannot predict the ultimate outcome of the
lawsuit. Patent litigation is highly complex and can extend for a protracted
time, which can substantially increase the cost of such litigation. In
connection with the Etak litigation, the Company has incurred, and expects to
continue to incur, substantial legal fees and legal expenses. The Etak
litigation has also diverted, and is expected to continue to divert, the
efforts and attention of the Company's management and technical personnel. An
adverse
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result in the Etak litigation could have a material adverse effect on the
Company's business, financial condition and results of operations, including,
but not limited to, disruption of the Company's business relationship with
Zexel and other customers and impairment of the market generally for Route
Guidance Products. See "Business--Litigation."
DATA ACQUISITION RISKS; GOVERNMENTAL APPROVALS
Data required to compile the Company's database is, in certain cases,
available only from limited third-party sources and at significant cost. The
Company has generally experienced more difficulty in acquiring data from third
parties in Europe than in the United States. Depending on the nature, scope
and extent of the Company's use of third-party data in the creation and
updating of its database, and upon the actual or possible assertion of rights
in such data by third parties, the Company seeks to enter into agreements with
third parties under which it acquires necessary or appropriate rights and
licenses with respect to such data. The Company has not entered into such
agreements in all geographic areas and no assurance can be made that the
Company will be successful in securing such agreements on terms acceptable to
the Company or at all. Even in the cases where the Company has entered into
data acquisition agreements, the Company's rights and licenses may be limited
in scope and duration and subject to various other terms and restrictions
which may impair or delay the Company's expansion, updating and distribution
of its database. It is unclear whether the Company will be successful in
restructuring or renewing such agreements if and when necessary. The Company's
inability to obtain the data or rights in data necessary to expand, update and
distribute its database, or any significant increase in the cost thereof,
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--The NavTech Database."
Certain governmental authorities, mapping agencies, military institutes and
other political bodies, particularly in European jurisdictions, have acquired
by contract or otherwise possess certain rights to inspect portions of the
Company's database prior to commercial distribution thereof and certain
limited rights to require permits for, or to prevent, distribution of the
Company's database for certain purposes or under limited circumstances. The
Company may encounter similar situations in the United States and Canada.
While it is unclear whether or not any such rights will be asserted against
the Company, the assertion thereof could delay or impair distribution of the
Company's database and, consequently, have a material adverse effect on the
Company's business, financial condition and results of operations. In
addition, certain laws and regulations, particularly in European jurisdictions
and Canada, may otherwise restrict or impair the activities of the Company in
expanding, updating and distributing its database. The applicability, if any,
of such laws and regulations to the Company's activities is unclear. While the
Company is not aware of any such laws or regulations in the United States,
similar laws and regulations may also be enacted or promulgated in the United
States. To the extent such laws or regulations are deemed applicable to the
Company's activities, there could be a material adverse effect on the
Company's business, financial condition and results of operations.
RISKS OF PRODUCT LIABILITY
The commercialization of the Company's database and updates for certain
applications, including Route Guidance Products and other navigation products,
involves an inherent risk of product liability claims and associated adverse
publicity. In addition, certain of the Company's current or prospective
customers may delay market introduction of Route Guidance Products and other
products because of product liability concerns. Product liability claims could
arise, for example, out of accidents involving use of Route Guidance Products,
inadequate warnings and instructions, an outdated database or database errors.
Product liability claims present a risk of protracted litigation, substantial
money damages, attorneys' fees, costs and expenses, and diversion of
management attention. In an attempt to mitigate the risks of product liability
claims, the Company relies, in part, on disclaimers, limitations of liability
and indemnity provisions contained in license agreements with its customers.
There can be no assurance that any of these disclaimers, limitations of
liability and indemnity provisions will in fact be provided or that they will
prove to be effective. The Company's license agreements with its customers
generally include mutual indemnity provisions which in certain cases may
require indemnification by the responsible party for liabilities, costs and
expenses arising out of potential product liability claims. If any product
liability or indemnity claims are asserted against the Company or its
customers, such
16
<PAGE>
claims could have a material adverse effect upon the Company's business,
financial condition and results of operations.
DATABASE WARRANTY RISKS
The Company's license agreements with automotive electronics manufacturers
and other customers typically include a warranty that the Company's database
is 97% complete and accurate against ground truth at the time of delivery. A
similar warranty may also be provided to end users. Although certain of the
Company's license agreements limit warranty remedies to replacement of
database copies or refund of license fees, others do not contain such
limitations. The Company has not incurred significant costs in connection with
its warranties and has not established a reserve for future warranty-related
costs. Other than the limited warranty described above, the Company's license
agreements generally disclaim warranties, express and implied, including
warranties of merchantability and fitness for particular purposes. It is the
Company's general policy to require its licensees to include similar
disclaimers in end user license agreements. There can be no assurance that the
Company's or its licensees' disclaimers will be sufficient to protect the
Company in connection with any warranty or other claims that may be asserted
against the Company. Any failure by the Company to comply with its warranty
obligations and the absence or ineffectiveness of warranty or other
disclaimers could expose the Company to claims for substantial monetary
damages and have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Database
Warranty."
RELIANCE ON THIRD PARTY DATA CENTERS
The Company currently relies on two commercial service bureaus, one in the
United States and one in Europe, for all of its mainframe computer data center
operations. This reliance involves certain risks. Although the Company has
taken precautions to protect itself and its customers from events that could
interrupt delivery of the Company's database, there can be no assurance that
such precautions will be adequate. These precautions include off-site storage
of back-up data and fire protection and physical security systems.
Notwithstanding these precautions, there can be no assurance that a fire,
earthquake, other natural disaster or any other interruption affecting either
of the data centers would not impair the Company's database operations or
create significant downtime. Any significant damage to or downtime at either
of the data centers used by the Company could have a material adverse effect
on the Company's business, financial condition and results of operations, at
least until an alternative site could become operational.
The Company may establish its own data center operations in the future to
obtain greater financial and operational control. However, such a transition
would involve risks of successful transfer of the operations and will require
the Company to significantly expand its operations and to develop the
expertise required to manage the data center operations internally. There can
be no assurance as to when or if the Company will establish its own data
center operations or whether a transfer of data center operations would be
successful.
NO PRIOR MARKET; VOLATILITY OF SHARE PRICE
Prior to the Offerings, there has been no public market for the Common Stock
of the Company, and there can be no assurance that an active public market
will develop or be sustained after the Offerings or that the market price of
the Common Stock will not decline below the initial public offering price. The
initial public offering price will be determined by negotiations among the
Company, the Representatives and the Lead Managers. See "Underwriting" for a
discussion of factors to be considered in determining the initial public
offering price. Factors such as announcements of technological innovation,
fluctuations in the Company's operating results, the introduction of new
products by the Company's customers or its competitors, the formation or
termination of relationships with customers, or changes in earnings estimates
or recommendations by securities analysts may have a significant impact on the
market price of the Company's Common Stock. In addition, the stock market has
experienced volatility which has particularly affected the market prices of
equity securities of companies which have recently had initial public
offerings and which often has been unrelated to the operating performance of
such companies. These market fluctuations may adversely affect the price of
the Common Stock.
17
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offerings, there has been no market for the Common Stock of the
Company. The amount and timing of any future sales of substantial amounts of
Common Stock in the public market could adversely affect market prices
prevailing from time to time and the ability of the Company to raise equity
capital in the future. The number of shares of Common Stock held by the
Company's existing stockholders that will be available for sale in the public
market following the Offerings is limited by restrictions under the Securities
Act, and by lock-up agreements under which certain holders of such shares have
agreed not to sell or otherwise dispose of any of their shares for a period of
180 days after the date of this Prospectus without the prior written consent
of Lehman Brothers. However, Lehman Brothers may, in its sole discretion and
at any time without notice, release all or any portion of the securities
subject to lock-up agreements. As a result of these restrictions, based on
shares outstanding as of June 30, 1996, (i) the 12,000,000 shares offered
hereby and additional shares will be eligible for sale on the date of
this Prospectus, (ii) another shares will be eligible for sale 90 days
after the date of this Prospectus, (iii) an additional shares will be
eligible for sale 180 days after the date of this Prospectus (of which
will be held by Philips and other affiliates of the Company and therefore
subject to volume limitations pursuant to Rule 144 under the Securities Act)
and (iv) a further shares (including the shares sold in the Direct
Placement and issued in the SEI Merger) will become eligible for sale
thereafter pursuant to Rule 144 under the Securities Act upon the expiration
of their respective two-year holding periods. In addition, the Company intends
to register on a registration statement on Form S-8 a total of 8,140,645
shares of Common Stock issuable upon exercise of outstanding options or
reserved for issuance under the Company's stock option plans. Of these
8,140,645 shares, shares which are not subject to lock-up agreements
will be vested and eligible for sale (if the related options are exercised)
beginning 90 days after the date of this Prospectus and shares will
vest and become eligible for sale (if the related options are exercised)
between 90 and 180 days after the date of this Prospectus. Beginning on the
third anniversary date of the Offerings, Philips and Mr. Shields together with
his family, who hold an aggregate of approximately 26,681,700 shares of Common
Stock, have contractual rights to require registration of such shares. In
addition, at any time prior to or after such three year period, such holders
could cause or agree with the Company to cause registration of their shares of
Common Stock. If such holders, by exercising their registration rights or by
otherwise causing the Company to effect a registration of shares, cause a
large number of shares to be registered and sold in the public market, such
sales could have a material adverse effect on the market price for the
Company's Common Stock. See "Description of Capital Stock--Registration
Rights," "Shares Eligible for Future Sale" and "Underwriting."
IMMEDIATE SUBSTANTIAL DILUTION
Purchasers of the Common Stock offered hereby will suffer an immediate and
substantial dilution of $ per share in the net tangible book value of the
Common Stock from the initial public offering price. In addition, holders of
the Common Stock will suffer future dilution upon the exercise of outstanding
stock options. See "Dilution."
18
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 12,000,000 shares of
Common Stock being offered by the Company hereby are estimated to be
approximately $143,860,000 (approximately $165,739,000 if the U.S.
Underwriters' and International Managers' over-allotment options are exercised
in full) at an assumed initial public offering price of $13.00 per share after
deducting the estimated underwriting discount and offering expenses.
Concurrently with the closing of the Offerings, the Company has agreed to
sell to Philips and Zenrin in the Direct Placement additional shares of Common
Stock at the initial public offering price less the underwriting discount. The
aggregate proceeds from the Direct Placement will be an estimated $29,885,097
($50,081,092 if the U.S. Underwriters' and International Managers' over-
allotment options are exercised in full and if Philips exercises its option in
full to purchase additional shares upon exercise of such over-allotment
options) based on an assumed initial public offering price of $13.00 per
share. See "Sale of Shares to Philips and Zenrin."
The Company intends to use the net proceeds from the Offerings and the
Direct Placement (collectively, the "Net Proceeds") for general corporate
purposes, including working capital. The Company's specific working capital
requirements will depend upon many factors, including the extent and timing of
the introduction of products utilizing the Company's database, unit sales of
such products, the rate of expansion of database coverage, the cost of
updating the database, the ability to generate revenue from the licensing of
its database and operating results. The Company is dependent upon the Net
Proceeds and future financings to continue to fund its operations. The Company
believes that the Net Proceeds, together with other available cash resources,
will be sufficient to meet the Company's cash needs for the next 18 to 24
months. There can be no assurance, however, that the Company will have
adequate funds to finance its operations through such period or thereafter. In
any event, the Company may seek to raise additional capital before 1998. The
Company has no present commitments or arrangements assuring it of any future
debt or equity financing. Although the Company may pursue possible
acquisitions of businesses, technologies or products complementary to those of
the Company in the future, there are no present understandings, commitments or
agreements with respect to any such acquisitions. Pending use of the Net
Proceeds for the above purposes, the Company intends to invest such funds in
short-term, interest-bearing, investment-grade obligations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
DIVIDEND POLICY
The Company has never paid or declared cash dividends on its Common Stock or
other securities. The Company currently anticipates that it will retain all of
its future earnings, if any, for use in the expansion and operation of its
business and does not anticipate paying any cash dividends in the foreseeable
future.
SALE OF SHARES TO PHILIPS AND ZENRIN
Philips has agreed to purchase from the Company in the Direct Placement
concurrently with the closing of the Offerings a number of additional shares
of Common Stock that will result in Philips owning 48% of the outstanding
shares of Common Stock. In addition, Zenrin has agreed to purchase in the
Direct Placement shares of Common Stock at an aggregate purchase price of
$1,000,000. Philips also has an option to purchase from the Company up to an
additional number of shares that would result in Philips owning 48% of the
outstanding shares of Common Stock upon the closing of any exercise of the
U.S. Underwriters' and International Managers' over-allotment options. All of
such shares to be purchased by Philips and Zenrin will be purchased at the
initial public offering price of the shares of Common Stock offered hereby,
less the underwriting discount. Assuming an initial public offering price of
$13.00 per share, Philips will purchase approximately 2,376,400 shares and
Zenrin will purchase 82,270 shares in the Direct Placement. See "Certain
Transactions."
19
<PAGE>
CAPITALIZATION
The following table sets forth the total capitalization of the Company as of
June 30, 1996 (i) on an actual basis, (ii) on a pro forma basis to give effect
to the conversion of all outstanding shares of Preferred Stock of the Company
into Common Stock upon the closing of the Offerings and the issuance of
3,632,099 shares of Common Stock in connection with the SEI Merger (net of
shares exchanged for shares of Common Stock held by SEI that will be accounted
for as treasury stock on the Company's consolidated balance sheet) and (iii)
as adjusted to give effect to the sale of the 12,000,000 shares of Common
Stock offered hereby at an assumed initial public offering price of $13.00 per
share (and after deducting the estimated underwriting discount and offering
expenses), and the sale of 2,458,667 shares of Common Stock in the Direct
Placement (based on an assumed initial public offering price of $13.00 per
share):
<TABLE>
<CAPTION>
JUNE 30, 1996
---------------------
PRO AS
ACTUAL FORMA ADJUSTED
------ ----- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt, less current portion..................... $ $ $
Stockholders' equity (deficit):
Preferred Stock, $0.001 par value; 20,000,000 shares
authorized, 14,592,282 issued and outstanding(1);
5,000,000 shares authorized, none issued and
outstanding pro forma and as adjusted..................
Common Stock, $0.001 par value; 150,000,000 shares
authorized, 11,445,582 issued and outstanding;
32,265,266 shares issued and outstanding pro forma,
46,723,933 shares issued and outstanding as
adjusted(2)(3).........................................
Additional paid-in capital...............................
Treasury stock, at cost, 2,595,303 shares pro forma and
as adjusted(4)..........................................
Cumulative translation adjustment........................
Accumulated deficit......................................
----- ----- -----
Total stockholders' equity (deficit)...................
----- ----- -----
Total capitalization................................. $ $ $
===== ===== =====
</TABLE>
- --------
(1) Includes 2,886,661 shares issued in the Private Financing based upon an
assumed initial public offering price of $13.00 per share.
(2) Excludes shares of Common Stock issuable upon the exercise of outstanding
options. As of June 30, 1996, there were (i) 2,474,769 shares of Common
Stock issuable upon the exercise of outstanding options at a weighted
average exercise price of $8.96 per share, and (ii) 5,332,542 shares of
Common Stock available for grant of options under the Company's stock
option plans, of which the Company has granted options to purchase 833,334
shares of Common Stock with an exercise price of $20.40 per share
contingent on the closing of the SEI Merger. Also, in connection with the
SEI Merger, the Company has agreed to issue, in substitution for shares of
SEI common stock issuable upon exercise of outstanding SEI options, an
aggregate of 333,334 shares of Common Stock at a price of $10.20 per
share. See "Management--Employee Benefit Plans" and Note 7 to the NavTech
Consolidated Financial Statements.
(3) Excludes Common Stock issuable upon exercise of an option held by a
customer to convert up to $6.0 million of license fee credits into shares
of Common Stock on December 31, 1998, at the then current fair market
value of the Common Stock. See Note 5 to the NavTech Consolidated
Financial Statements.
(4) Shares held by SEI and accounted for as treasury stock.
20
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of June 30, 1996 was
$ , or $ per share of Common Stock. Pro forma net tangible book value
per share is determined by dividing the pro forma tangible book value of the
Company (total tangible assets less total liabilities) by the pro forma number
of outstanding shares of Common Stock at that date after giving effect to the
Private Financing, the conversion of all outstanding shares of Preferred Stock
into Common Stock and the SEI Merger. After giving effect to the sale of the
12,000,000 shares of Common Stock offered hereby at an assumed initial public
offering price of $13.00 per share (after deducting the estimated underwriting
discount and offering expenses) and 2,458,667 shares of Common Stock in the
Direct Placement at the assumed initial public offering price per share less
the estimated underwriting discount, the adjusted pro forma net tangible book
value as of June 30, 1996 would have been $ , or $ per share,
representing an immediate increase in pro forma net tangible book value of
$ per share to existing stockholders and an immediate dilution of $
per share to the new public investors. The following table illustrates this
per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $13.00
Pro forma net tangible book value per share before the
Offerings..................................................... $
Increase attributable to purchases in the Direct Placement.....
Increase attributable to new public investors..................
Adjusted pro forma net tangible book value per share after the
Offerings......................................................
------
Dilution per share to new public investors...................... $
======
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1996,
the differences between the existing stockholders, the purchasers in the
Direct Placement (Philips and Zenrin) and the new public investors with
respect to the number of shares of Common Stock purchased from the Company,
the consideration paid to the Company and the average price per share paid:
<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION AVERAGE
------------------ -------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders.... 29,669,963 67.2% $ % $
New purchase by Philips
and Zenrin.............. 2,458,667 5.6 12.16
New public investors..... 12,000,000 27.2 13.00
---------- ----- --- -----
Total................... 44,128,630 100.0% $ 100.0%
========== ===== === =====
</TABLE>
The above computations assume no exercise of stock options outstanding at
June 30, 1996. As of June 30, 1996, there were (i) 2,474,769 shares of Common
Stock issuable upon the exercise of outstanding options at a weighted average
exercise price of $8.96 per share, and (ii) 5,332,542 shares of Common Stock
available for grant of options under the Company's stock option plans of which
the Company has granted options to purchase 833,334 shares of Common Stock
with an exercise price of $20.40 per share contingent upon the closing of the
SEI Merger. The Company has agreed to issue in connection with the SEI Merger,
in substitution for shares of SEI common stock issuable upon exercise of
outstanding options, an aggregate of 333,334 shares of Common Stock at a price
of $10.20 per share. To the extent that any of these options are exercised,
there will be further dilution to the new public investors. See
"Capitalization," "Management--Employee Benefit Plans" and Note 7 to the
NavTech Consolidated Financial Statements. The above computations also exclude
2,595,303 shares of Common Stock exchanged for shares held by SEI which will
be accounted for as treasury stock on the Company's consolidated balance sheet
upon the closing of the SEI Merger.
21
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated statement of operations data for the
years ended December 31, 1993, 1994 and 1995, and consolidated balance sheet
data as of December 31, 1994 and 1995 are derived from the consolidated
financial statements of the Company, which have been audited by KPMG Peat
Marwick LLP, independent certified public accountants and are included
elsewhere in this Prospectus. The following selected consolidated statement of
operations data for the years ended December 31, 1991 and 1992 and
consolidated balance sheet data as of December 31, 1991, 1992 and 1993 are
derived from audited financial statements not included in this Prospectus. The
following selected pro forma combined statement of operations data for the
year ended December 31, 1995 and the three months ended March 31, 1996 and pro
forma balance sheet data as of March 31, 1996 are derived from unaudited pro
forma combined statements of operations and the unaudited pro forma combined
balance sheet included elsewhere in this Prospectus. The data as of March 31,
1996 and for the three months ended March 31, 1995 and 1996 have been derived
from unaudited financial statements that have been prepared on the same basis
as the audited financial statements and in the opinion of the Company, include
all adjustments, consisting only of normal recurring adjustments necessary for
a fair presentation of the consolidated financial position and operating
results for the unaudited periods. The consolidated and pro forma combined
operating results for the three months ended March 31, 1996 are not
necessarily indicative of the results to be expected for any future period.
The following selected data should be read in conjunction with the
consolidated financial statements, related notes and the independent auditors'
report appearing elsewhere in this Prospectus. Such report contains an
explanatory paragraph that states that the Company has had recurring losses
from operations since inception and requires significant additional financing
which raise substantial doubt about the Company's ability to continue as a
going concern. The consolidated financial statements and the following
selected data do not include any adjustments that might result from the
outcome of that uncertainty.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------------- ----------------------------
1995 1996
------------------ ------------------
PRO PRO
1991 1992 1993 1994 ACTUAL FORMA(1) 1995 ACTUAL FORMA(1)
------- -------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenue:
Database license and
distribution.......... $ 923 $ 2,120 $ 1,093 $ 1,721 $ 3,377 $ 3,377 $ 675 $ 577 $ 577
Consulting and contract
services.............. -- -- -- -- -- 25,600 -- -- 6,765
Other.................. 203 202 762 765 296 2,209 80 69 443
------- -------- -------- -------- -------- -------- -------- -------- --------
Total revenue.......... 1,126 2,322 1,855 2,486 3,673 31,186 755 646 7,785
Costs and expenses:
Cost of revenue........ -- -- -- -- -- 22,398 -- -- 6,111
Database production and
updating.............. 2,102 10,589 18,713 31,075 40,359 40,359 9,269 9,842 9,842
Software engineering
and development....... 1,518 2,736 4,506 4,337 8,314 12,186 1,624 3,063 3,785
Selling, general and
administrative........ 1,668 2,481 3,913 7,217 13,444 16,837 2,931 4,050 5,417
Amortization of
goodwill.............. -- -- -- -- -- 7,686 -- -- 1,922
------- -------- -------- -------- -------- -------- -------- -------- --------
Total costs and
expenses............. 5,288 15,806 27,132 42,629 62,117 99,466 13,824 16,955 27,077
------- -------- -------- -------- -------- -------- -------- -------- --------
Loss from operations.... (4,162) (13,484) (25,277) (40,143) (58,444) (68,280) (13,069) (16,309) (19,292)
Other income (expense).. (330) (198) (575) (959) 1,532 1,366 630 (247) (297)
------- -------- -------- -------- -------- -------- -------- -------- --------
Net loss ............... $(4,492) $(13,682) $(25,852) $(41,102) $(56,912) $(66,914) $(12,439) $(16,556) $(19,589)
======= ======== ======== ======== ======== ======== ======== ======== ========
Pro forma net loss per
share ................. $ (2.57) $ (2.68) $ (0.67) $ (0.71)
======== ======== ======== ========
Shares used in per share
computation............ 22,114 24,963 24,782 27,631
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1996
------------------------------------------- ----------------------
1991 1992 1993 1994 1995 ACTUAL PRO FORMA(1)
------- ------- -------- ------- ------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Cash and cash
equivalents............ $ 2,726 $ 5,340 $ 1,433 $30,220 $23,573 $ 8,315 $34,232
Working capital
(deficiency)........... (784) 3,124 (1,070) 26,167 16,784 283 23,188
Total assets............ 3,944 8,027 4,447 36,566 30,026 15,613 85,479
Long-term debt and other
obligations ........... 6,397 7,845 12,525 15,900 20,095 20,342 15,655
Total stockholders'
equity (deficit)....... (6,324) (2,812) (11,568) 14,512 1,803 (14,760) 52,369
</TABLE>
- -------
(1) The pro forma combined statement of operations data for the year ended
December 31, 1995 and the three month period ended March 31, 1996 reflect
the effect of the SEI Merger as if it had occurred at the beginning of the
periods presented. The pro forma combined balance sheet data as of March
31, 1996 reflect (i) the effect of the SEI Merger, (ii) the Private
Financing in June 1996 and (iii) the conversion of Preferred Stock to
Common Stock upon the closing of the Offerings, as if each had occurred on
March 31, 1996. See Unaudited Pro Forma Combined Financial Statements.
22
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 THREE MONTHS ENDED MARCH 31, 1996
-------------------------------------------- --------------------------------------------
PRO FORMA PRO FORMA
------------------------- -------------------------
COMPANY SEI ADJUSTMENTS(1) COMBINED COMPANY SEI ADJUSTMENTS(1) COMBINED
-------- ------- -------------- --------- -------- ------- -------------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PRO FORMA COMBINED STATEMENT OF
OPERATIONS DATA:
Revenue:
Database license and
distribution.......... $ 3,377 $ -- $ -- $ 3,377 $ 577 $ -- $ -- $ 577
Consulting and contract
services.............. -- 25,600 -- 25,600 -- 6,765 -- 6,765
Affiliated consulting
services.............. -- 8,039 (8,039)(a) -- -- 2,976 (2,976)(a) --
Other.................. 296 1,913 -- 2,209 69 374 -- 443
-------- ------- ------- -------- -------- ------- ------- --------
Total revenue.......... 3,673 35,552 (8,039) 31,186 646 10,115 (2,976) 7,785
-------- ------- ------- -------- -------- ------- ------- --------
Costs and expenses:
Cost of revenue........ -- 29,432 (7,034)(a) 22,398 -- 8,609 (2,498)(a) 6,111
Database production and
updating.............. 40,359 -- -- 40,359 9,842 -- -- 9,842
Software engineering
and development....... 8,314 5,018 (1,146)(a) 12,186 3,063 1,161 (439)(a) 3,785
Selling, general and
administrative ....... 13,444 3,252 141 (a) 16,837 4,050 1,406 (39)(a) 5,417
Amortization of
goodwill.............. -- -- 7,686 (b) 7,686 -- -- 1,922 (b) 1,922
-------- ------- ------- -------- -------- ------- ------- --------
Total costs and
expenses.............. 62,117 37,702 (353) 99,466 16,955 11,176 (1,054) 27,077
-------- ------- ------- -------- -------- ------- ------- --------
Loss from operations.... (58,444) (2,150) (7,686) (68,280) (16,309) (1,061) (1,922) (19,292)
Other income (expense).. 1,532 (166) -- 1,366 (247) (50) -- (297)
-------- ------- ------- -------- -------- ------- ------- --------
Net loss................ $(56,912) $(2,316) $(7,686) $(66,914) $(16,556) $(1,111) $(1,922) $(19,589)
======== ======= ======= ======== ======== ======= ======= ========
Pro forma net loss per
share ................. $ (2.57) $ (2.68) $ (0.67) $ (0.71)
======== ======== ======== ========
Shares used in per share
computation............ 22,114 2,849(c) 24,963 24,782 2,849(c) 27,631
======== ======= ======== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------------------------------------------
PRO FORMA
------------------------------------
COMPANY SEI ADJUSTMENTS(1) COMBINED
-------- ------- -------------- --------
(in thousands)
<S> <C> <C> <C> <C>
PRO FORMA COMBINED
BALANCE SHEET DATA:
Cash and cash
equivalents............ $ 8,315 $ 917 $25,000 (d) $34,232
Working capital
(deficiency)........... 283 (2,095) 25,000 (d) 23,188
Total assets............ 15,613 15,925 53,941 (d)(e)(f)(g) 85,479
Long-term debt and other
obligations............ 20,342 395 (5,082)(h) 15,655
Total stockholders'
equity (deficit)....... (14,760) 7,555 59,574 (d)(f)(g)(h)(i) 52,369
</TABLE>
- -------
(1) To arrive at the pro forma combined financial statements, the historical
financial statements were adjusted to reflect:
(a) Elimination of intercompany billings between the Company and SEI.
(b) Amortization of goodwill from the SEI Merger over its estimated useful
life of five years.
(c) An increase in the Company's Common Stock outstanding on an "as if
converted" basis for the 3,632,099 shares of Common Stock issued in the
SEI Merger (net of shares exchanged for shares held by SEI and accounted
for as treasury stock on the Company's consolidated balance sheet).
(d) Issuance of shares of Preferred Stock in the Private Financing for an
aggregate of $30,021,000 (partially paid by conversion of loans payable
to Philips).
(e) Elimination of intercompany receivables and payables between the Company
and SEI.
(f) Exchange of the Company's Common Stock for outstanding shares of SEI
common stock in the SEI Merger and recognition of purchased goodwill.
(g) Exchange of 2,595,303 shares of the Company's Common Stock held by SEI
and accounted for as treasury stock on the Company's consolidated
balance sheet.
(h) Conversion of a loan payable to Philips to Preferred Stock in the
Private Financing.
(i) Conversion of the Company's outstanding Preferred Stock to Common Stock.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company and SEI should be read in conjunction with the
Financial Statements and the Notes thereto included elsewhere in this
Prospectus. This discussion contains forward-looking statements that involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in the forward-looking statements as a result of
certain factors including, but not limited to, those discussed in "Risk
Factors," "Business" and elsewhere in this Prospectus.
OVERVIEW
NavTech is a leading developer and provider of navigable databases in the
United States and Europe. From inception in August 1985 through 1991, the
Company was primarily engaged in developing proprietary database creation
software and methodologies, constructing its database in selected metropolitan
areas for customer evaluations, developing application software to facilitate
the use of its database in Route Guidance Products and establishing strategic
relationships. During this period, NavTech also licensed its database
technology to European Geographic Technologies BV ("EGT"), which had been
formed by Philips and NavTech in 1990 to develop a European navigable
database. In September 1994, the Company acquired EGT and accounted for the
acquisition in a manner similar to a pooling of interests.
From 1992 to the present, the Company has substantially increased its
database construction capabilities, expanded its database coverage to include
additional metropolitan areas and intertown coverage connecting metropolitan
areas, established extensive field data collection and updating methodologies
and organizations, enhanced its proprietary software systems and expanded its
business development efforts. Commercial introductions of Route Guidance
Products incorporating the Company's database commenced in late 1994 in both
the United States and Europe. The Company expects to continue expansion of
field operations to support the development and updating of new database
coverage areas. NavTech also expects to make substantial investments to
establish distribution, customer support and marketing functions to support
commercial product introductions. The Company also plans to make substantial
investments to develop software to facilitate use of the Company's database in
Route Guidance Products and other applications.
Concurrently with the closing of the Offerings, the Company will acquire SEI
in the SEI Merger in exchange for 3,632,099 shares of the Company's Common
Stock (net of shares exchanged for shares held by SEI which will be accounted
for as treasury stock on the Company's consolidated balance sheet). See Note
11 to the NavTech Consolidated Financial Statements. Approximately $38.4
million of the purchase price will be allocated to goodwill and amortized on a
straight-line basis over five years from the date of the SEI Merger. SEI
provides software and systems consulting and contract services to clients in a
variety of industries. Since the Company's inception, SEI has provided
consulting services to NavTech which have formed the basis of the Company's
software engineering efforts, including the creation of its technology
infrastructure and support for customer application development of Route
Guidance Products.
The Company's strategy is to generate licensing and distribution revenue
through use of its database in products developed and marketed by customers,
principally for route guidance applications. The Company typically receives
license fees in connection with its customers' sales of products that
incorporate a portion of the Company's database. For Route Guidance Products,
the Company's general policy is to charge a license fee for each copy of the
database distributed to an end user. The Company also charges fees for
services related to the distribution of copies of the database. To date the
majority of the Company's license fees have been attributable to annual, non-
refundable minimum license fees ("Minimum License Fees") under contracts for
use of the NavTech database. The Company expects that Minimum License Fees
will comprise a decreasing amount and proportion of total license revenue in
the future. The Company also expects to earn revenue from database
distribution and support services and from providing periodic database updates
to end users. Minimum License Fees are recognized as revenue ratably over the
licensing period. License and distribution revenue are recognized when the
Company or its customers ship the database or products incorporating the
NavTech database.
24
<PAGE>
Revenue is also derived from consulting and contract services provided by
SEI. Nearly all of SEI's consulting and contract services are provided under
time and materials contracts. Revenue is recognized as services are performed.
In the near term, the Company expects a substantial majority of its revenue to
be derived from consulting and contract services performed by SEI.
The Company has been unprofitable since inception and as of March 31, 1996,
had an accumulated deficit of $177.7 million. The Company's operating expenses
have increased substantially as the Company made investments related to the
development and commercial introduction of its database. To date, all database
production and updating costs and software engineering and development costs
have been expensed as incurred. The Company anticipates that operating
expenses will continue to increase for the foreseeable future as it continues
to develop and update its database, increase sales and marketing efforts and
establish and expand database distribution capabilities. The Company
anticipates that it will continue to incur annual operating losses for at
least the next five years.
The Company must be evaluated in light of the problems, delays, expenses,
uncertainties and complications frequently encountered in connection with a
business addressing a developing market. To address these risks, the Company
must, among other things, continue to respond to a developing market for its
database, to complications in distributing its database, to future capital
needs and to risks associated with managing the transition from a development
organization to a commercial production organization. No assurance can be
given that the Company's database or its customers' products will achieve
significant unit sales or that the Company will achieve profitable operations
in the future.
The markets for products that use the Company's database are new and
emerging. The Company believes that the most important commercial application
for its database will be Route Guidance Products. The Company's success
depends upon both the development of a market for Route Guidance Products and
upon the utilization of the NavTech database in such Route Guidance Products.
The Company does not intend to develop or market its own Route Guidance
Products. There are significant uncertainties as to whether a large market for
Route Guidance Products will ever develop and if it does, whether it will
develop at a rate and to the extent that will enable the successful
commercialization and significant unit sales of Route Guidance Products
utilizing the NavTech database.
The Company has substantial operations in Europe and expects a significant
portion of its expenses and potential revenue will be generated by NavTech
Europe. All of NavTech Europe's expenses and revenues are denominated in
foreign currencies. Fluctuations in the value of currencies in relation to the
United States dollar have caused and will continue to cause dollar-translated
amounts to vary from one period to another. The Company historically has not
engaged in activities to hedge its foreign currency exposure and has no plans
to do so in the foreseeable future.
NAVTECH RESULTS OF OPERATIONS
Revenue
To date, the Company has not realized any significant revenue from the
licensing or distribution of its database. Total revenue was $1.9 million,
$2.5 million and $3.7 million for 1993, 1994 and 1995, respectively, and $0.8
million and $0.6 million in the three month periods ended March 31, 1995 and
March 31, 1996, respectively. A substantial portion of revenue during these
periods was from Minimum License Fees.
Database License and Distribution. Database license and distribution revenue
consists primarily of license fees charged for use of the Company's database
for route guidance and other applications and fees for database distribution
and related support services. Database license and distribution revenue was
$1.1 million, $1.7 million and $3.4 million for 1993, 1994 and 1995,
respectively, and $0.7 million and $0.6 million for the three month
25
<PAGE>
periods ended March 31, 1995 and March 31, 1996, respectively. Excluding
revenue from Minimum License Fees, database license and distribution fees from
actual database usage were $0.3 million, $0.2 million and $0.8 million for
1993, 1994 and 1995, respectively, and $0.1 million for each of the three
month periods ended March 31, 1995 and March 31, 1996. For 1993 and 1994, such
revenue consisted primarily of test and other non-recurring license fees. The
increase in such revenue for 1995 was due to initial Route Guidance Product
introductions that commenced in late 1994.
Other. Other revenue was $0.8 million, $0.8 million and $0.3 million for
1993, 1994 and 1995, respectively, and $0.1 million for each of the three
month periods ended March 31, 1995 and March 31, 1996. For 1993 and 1994, such
revenue primarily consisted of European government grant income and one-time
software license fees.
Costs and Expenses
Database Production and Updating. These costs consist primarily of research
and acquisition costs to obtain information used to construct the database,
direct costs of database production and validation and ongoing costs for
updating the database. Such costs were $18.7 million, $31.1 million and $40.4
million for 1993, 1994 and 1995, respectively, and $9.3 million and $9.8
million for the three month periods ended March 31, 1995 and March 31, 1996,
respectively. The increases from 1993 to 1995 in these costs reflect expansion
of completed metropolitan database areas from approximately 20 million
aggregate population coverage to approximately 150 million aggregate
population coverage during these years and the addition of substantial
portions of the United States and European intertown databases. The Company
expects the updating component of database production and updating costs to
increase as additional coverage areas are added to the database.
Software Engineering and Development. These costs consist primarily of costs
for development of software used in database production and updating
activities and software to facilitate usage of the NavTech database and
application development by customers. Such costs were $4.5 million, $4.3
million and $8.3 million for 1993, 1994 and 1995, respectively, and $1.6
million and $3.1 million for the three month periods ended March 31, 1995 and
March 31, 1996, respectively. All software engineering work during these
periods was performed by SEI. The increases in such costs from 1994 to 1995
and for such three month periods reflect a substantial staff buildup to
develop tools that are designed to facilitate development of Route Guidance
Products and other products that utilize the NavTech database. The Company
expects software engineering and development costs to continue to increase to
support such activities as well as to support expanded database updating.
Selling, General and Administrative. These expenses consist primarily of
salaries, promotional and travel expenses and professional services. Such
expenses were $3.9 million, $7.2 million and $13.4 million for 1993, 1994 and
1995, respectively, and $2.9 million and $4.1 million for the three month
periods ended March 31, 1995 and March 31, 1996, respectively. The substantial
increase in such expenses during these periods was due to (i) expanded sales
and marketing costs in support of initial customer Route Guidance Product
introductions, (ii) commencement of database distribution activities, (iii)
expanded participation in industry trade groups, (iv) exploration of new
market opportunities for use of the Company's database, (v) additions of
management and staff to support the substantial growth in Company personnel
during the period, (vi) costs related to the integration of EGT and (vii)
legal fees related to patent litigation which commenced in 1995. See
"Business--Litigation." Selling, general and administrative costs are expected
to increase due to planned additions of key management staff and expanded
customer support operations.
Other Income and Expense. This category primarily consists of interest
income and interest expense. Interest income consists of earnings on cash
balances and interest on stock subscriptions receivable. Interest income was
$0.2 million, $1.5 million and $2.8 million for 1993, 1994 and 1995,
respectively, and $0.9 million and $0.2 million for the three month period
ended March 31, 1995 and March 31, 1996, respectively. Interest expense
consists primarily of imputed interest on deferred license revenue payments
from customers and interest on a loan payable to Philips which was converted
into equity in June 1996.
26
<PAGE>
Income Taxes
To date, the Company has not recorded a provision for income taxes due to
incurred losses. As of December 31, 1995, the Company had net operating loss
carryforwards of approximately $67.0 million and $26.0 million for federal and
California state income tax purposes, respectively. The Company had tax credit
carryforwards of approximately $0.9 million and $0.3 million for federal and
California state income tax purposes, respectively. If not utilized, these
federal and California state carryforwards expire beginning in 1996 through
2010. The Company also has foreign operating loss carryforwards of
approximately $85.0 million with no expiration date. Under certain provisions
of the Internal Revenue Code of 1986, as amended, the availability of the
Company's operating loss and credit carryforwards may be subjected to
limitation if it should be determined that there has been a change of
ownership of more than 50% of the value of the Company's stock within any
three year period. The Company does not anticipate that a material limitation
on its ability to use such carryforwards will result from the Offerings. A
valuation allowance has been recorded for the entire deferred tax asset as a
result of uncertainties regarding the realization of the asset due to the lack
of earnings history of the Company. See Note 6 to the NavTech Consolidated
Financial Statements.
SEI RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER SIX MONTHS ENDED
30, MARCH 31,
-------------------------- ------------------
1993 1994 1995 1995 1996
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Consulting and contract
services..................... $19,829 $21,451 $25,289 $ 12,388 $ 12,903
Affiliated consulting
services..................... 4,075 4,276 7,076 2,824 5,130
Other......................... 1,136 2,945 2,543 1,506 566
------- ------- -------- -------- --------
Total revenue................ 25,040 28,672 34,908 16,718 18,599
Costs and expenses:
Cost of revenue............... 21,841 25,475 28,628 13,650 15,979
Software engineering and
development.................. 514 3,152 5,004 2,325 2,251
Selling, general and
administrative .............. 2,279 2,835 3,119 1,477 2,246
------- ------- -------- -------- --------
Total costs and expenses..... 24,634 31,462 36,751 17,452 20,476
------- ------- -------- -------- --------
Income (loss) from operations.. 406 (2,790) (1,843) (734) (1,877)
Other income (expense)......... (187) 236 (174) (69) (55)
------- ------- -------- -------- --------
Income (loss) before
extraordinary item............ 219 (2,554) (2,017) (803) (1,932)
Extraordinary item............. -- 15,969 -- -- --
------- ------- -------- -------- --------
Net income (loss).............. $ 219 $13,415 $ (2,017) $ (803) $ (1,932)
======= ======= ======== ======== ========
</TABLE>
Revenue
Total revenue for SEI was $25.0 million, $28.7 million, and $34.9 million
for fiscal 1993, 1994 and 1995, respectively, representing an increase of 15%
from 1993 to 1994 and 22% from 1994 to 1995. Total revenue increased 11% from
$16.7 million in the six month period ended March 31, 1995 to $18.6 million
for the comparable period in 1996. Total revenue net of affiliated revenue was
$21.0 million, $24.4 million and $27.8 million for fiscal 1993, 1994 and 1995,
respectively, representing an increase of 16% from 1993 to 1994 and 14% from
1994 to 1995. Total revenue net of affiliated revenue decreased 3% from $13.9
million in the six month period ended March 31, 1995 to $13.5 million for the
comparable period in 1996. In addition to NavTech, revenue from SEI's two next
largest customers represented 16% and 13% of total revenue in fiscal 1993, 14%
and 12% of total revenue in fiscal 1994 and 10% and 9% of total revenue in
fiscal 1995, respectively.
27
<PAGE>
Consulting and Contract Services. Revenue from consulting and contract
services consists primarily of time and materials software and system-related
consulting services, and contract services related to software maintenance and
help desk support. Such revenue was $19.8 million, $21.5 million, and $25.3
million for fiscal 1993, 1994 and 1995, respectively, representing an increase
of 8% from 1993 to 1994 and 18% from 1994 to 1995. Such revenue increased 4%
from $12.4 million in the six month period ended March 31, 1995 to $12.9
million for the comparable period in 1996. The revenue increases were due
primarily to demand for technical consulting services from large corporations
and corresponding expansion of SEI's consulting staff. Future growth in
revenue from consulting and contract services will depend upon demand for
consulting services from third parties, the allocation of consulting personnel
to NavTech-related projects and the Company's ability to attract and retain
qualified consulting personnel. The Company is unable to predict what effect,
if any, its acquisition of SEI will have on SEI's ability to maintain its
existing customer relationships, to retain its consulting staff, to attract
qualified personnel, or to secure additional future consulting business.
Affiliated Consulting Services. This revenue consists primarily of software
engineering and related services performed for NavTech. Affiliated revenue was
$4.1 million, $4.3 million, and $7.1 million for fiscal 1993, 1994 and 1995,
respectively, representing an increase of 5% from 1993 to 1994 and 65% from
1994 to 1995. Such revenue increased 82% from $2.8 million in the six month
period ended March 31, 1995 to $5.1 million for the comparable period in 1996.
The increases in revenue reflect an increase in software engineering personnel
assigned to NavTech from 37 at December 31, 1994 to 82 at March 31, 1996.
Other. Other revenue consists primarily of software and computer system
sales for the quick-service restaurant field. Other revenue was $1.1 million,
$2.9 million, and $2.5 million in fiscal 1993, 1994, and 1995, respectively,
representing an increase of 159% from 1993 to 1994 and a decrease of 14% from
1994 to 1995. Such revenue decreased 62% from $1.5 million in the six month
period ended March 31, 1995 to $0.6 million for the comparable period in 1996.
The increase in such revenue from fiscal 1993 to 1994 was due to increased
software sales, and the declines in such revenue from fiscal 1994 to 1995 and
from the March 1995 period to the March 1996 period were due to the reduction
of computer hardware sales.
Costs and Expenses
Total costs and expenses were $24.6 million, $31.5 million and $36.8 million
in fiscal 1993, 1994 and 1995, respectively, representing an increase of 28%
from 1993 to 1994 and 17% from 1994 to 1995. Such expenses increased 17% from
$17.5 million in the six month period ended March 31, 1995 to $20.5 million
for the comparable period in 1996.
Cost of Revenue. Cost of revenue includes primarily employee-related costs
for consulting and support services for third parties and NavTech, and
hardware costs related to other revenue. Such costs were $21.8 million, $25.5
million and $28.6 million in fiscal 1993, 1994 and 1995, respectively,
representing an increase of 17% from 1993 to 1994 and 12% from 1994 to 1995.
Such costs increased 17% from $13.7 million in the six month period ended
March 31, 1995 to $16.0 million for the comparable period in 1996. The
increase in such expenses for all periods was due primarily to increased
personnel costs from staff growth.
Software Engineering and Development. Software engineering and development
costs consist primarily of costs for the development of two software products:
Profit Manager, for the quick service restaurant market, and SEI EnRoute, for
use with the NavTech database. Such costs were $0.5 million, $3.2 million and
$5.0 million in fiscal 1993, 1994 and 1995, respectively, representing an
increase of 513% from 1993 to 1994 and 59% from 1994 to 1995, and $2.3 million
for each of the six month periods ending March 31, 1995 and March 31, 1996.
The substantial increase from fiscal 1993 to 1994 and from fiscal 1994 to
1995, was primarily due to the commencement of the SEI EnRoute development
effort in 1994.
Selling, General and Administrative. Selling, general and administrative
expenses consist principally of marketing expenses related to participation in
trade shows and professional industry associations, and salaries and bonuses
of marketing, financial, administrative and management personnel and related
indirect costs. Such costs were $2.3 million, $2.8 million and $3.1 million in
fiscal 1993, 1994 and 1995, respectively, representing
28
<PAGE>
an increase of 24% from 1993 to 1994 and 10% from 1994 to 1995. Such costs
increased 52% from $1.5 million in the six month period ended March 31, 1995
to $2.2 million for the comparable period in 1996. The increases in such costs
were due primarily to increased personnel and higher incentive compensation
costs in the March 1996 period.
Extraordinary Item
An extraordinary item of $16.0 million in fiscal 1994 reflecting payments to
SEI is described in Note 9 to the SEI Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
NavTech has financed its operations primarily through private placements of
equity securities, debt and, to a lesser extent, from payments under license
agreements. As of March 31, 1996, the Company had an accumulated deficit of
$177.7 million, cash and cash equivalents totaling $8.3 million and working
capital of $0.3 million. The Company expects to experience substantial
negative cash flow from operating activities for the forseeable future.
Net cash used in NavTech's operating activities was $21.8 million, $32.5
million and $48.6 million in 1993, 1994 and 1995, respectively, and $14.1
million for the three month period ended March 31, 1996. The net cash used
during these periods was primarily due to net losses, which were partially
offset by increases in source material obligations. Investing activities for
acquisitions of property and equipment used net cash of $0.7 million, $3.3
million and $3.0 million for 1993, 1994 and 1995, respectively, and $0.9
million for the three month period ended March 31, 1996. Financing activities,
related primarily to the sale of capital stock, generated cash of $18.3
million, $66.3 million and $41.8 million for 1993, 1994 and 1995,
respectively, and $12,000 for the three month period ended March 31, 1996. In
May and June 1996, NavTech borrowed approximately $6.0 million from Philips
which was subsequently converted into Preferred Stock. NavTech raised an
additional $19.0 million in June 1996 through the sale of Preferred Stock to
Philips and others. Another loan payable to Philips with an outstanding
balance of approximately $5.0 million also was converted to Preferred Stock in
June 1996.
NavTech has received license payments from certain customers, as a result of
which the Company has extended credits against future license fees that would
otherwise be due from distribution of copies of the database by these
customers. As of March 31, 1996, the Company had a liability of $8.4 million
relating to these licence payments. This deferred license revenue liability
could increase up to $13.5 million by December 31, 2000, at which time any
liability would be payable in cash. One of the Company's licensees has the
option to convert up to $6.0 million of this liability into the Company's
Common Stock on December 31, 1998 at the fair market value at that time. See
Note 5 to the NavTech Consolidated Financial Statements.
SEI has financed its operations primarily through cash flow from operations,
an extraordinary item and short-term debt. SEI has a revolving bank line of
credit for $3.0 million, secured by all assets of SEI other than its shares of
NavTech Common Stock, with an outstanding balance of $1.7 million at March 31,
1996 which bears interest at a rate of 0.5% over the bank's prime rate. SEI's
other short term debt consists of notes payable to stockholders and employees
and bears interest at 0.5% over the prime rate and amounted to $1.3 million at
March 31, 1996. As of March 31, 1996, SEI had cash and cash equivalents of
$0.4 million and negative working capital of $2.1 million. See Note 9 to the
SEI Financial Statements.
Net cash provided by SEI's operating activities was $2.0 million, $7.7
million and $0.2 million in fiscal 1993, 1994 and 1995, respectively, and net
cash used was $0.3 million for the six month period ended March 31, 1996. This
resulted primarily from increased accrued payroll in fiscal 1993, net income
in fiscal 1994, and a decrease in accounts receivable in fiscal 1995. Cash
used by SEI for investing activities, primarily the purchase of NavTech stock
and property and equipment, was $0.1 million, $7.0 million and $0.7 million in
fiscal 1993, 1994 and 1995, respectively, and $2.1 million for the six month
period ended March 31, 1996. SEI financing activities used cash
29
<PAGE>
of $2.0 million and $0.7 million and provided cash of $1.5 million for fiscal
1993, 1994 and 1995, respectively, and provided cash of $1.4 million for the
six month period ended March 31, 1996. SEI's primary uses of cash were
repayment of long-term debt and repayment of notes payable in fiscal 1993,
dividends paid in fiscal 1994, and the primary sources of cash in fiscal 1995
were notes payable to stockholders and employees, sales of common stock and
bank borrowings. In the six month period ended March 31, 1996, the principal
source of cash was bank borrowings.
At March 31, 1996, NavTech's and SEI's principal commitments consisted of
obligations under operating leases aggregating approximately $9.5 million.
NavTech's operations to date have required substantial amounts of capital.
Through June 30, 1996, the Company has invested more than $200 million in the
development of its business, principally to create and update the NavTech
database, to establish a field organization and to develop technology and
software. The Company expects to require substantial additional infusions of
capital to complete development of its database and to fund its operations.
The Company is dependent upon the net proceeds from the Offerings and the
Direct Placement and from future financings to continue to fund its
operations. The Company believes that the net proceeds from the Offerings and
the Direct Placement, together with other available cash resources, will be
sufficient to meet the Company's cash needs for the next 18 to 24 months.
There can be no assurance, however, that the Company will have adequate funds
to finance its operations through such period.
The Company expects to continue to incur annual operating losses for at
least the next five years. Prior to achieving profitability, in addition to
the funds being raised in the Offerings and the Direct Placement, the Company
expects to require funds currently estimated at approximately $200 million,
although the required amount could be substantially greater. The actual funds
required by the Company will depend upon many factors, including the extent
and timing of the introduction of products utilizing the NavTech database,
unit sales of such products, the rate of expansion of database coverage, the
cost of updating the database, the ability to generate revenue from the
licensing of its database, strategic investment or acquisition opportunities
and operating results. In any event, the Company will need to raise
significant additional funds to support its operations before profitability
can be achieved and may seek to raise such additional capital before 1998.
There can be no assurance that any additional funds will be available to the
Company on acceptable terms, or at all, when required by the Company. Philips,
the Company's largest stockholder, may in the future agree to make additional
investments and may make purchases of Common Stock in the open market, in
negotiated transactions or otherwise in its discretion from time to time.
However, there is no contractual or other commitment by Philips or by any
other third party to provide additional capital, and Philips has indicated to
the Company that it has no present intention to make any additional investment
in the Company. If additional funds are raised by issuing equity securities,
there will be dilution to the ownership interest of existing stockholders and
there may be dilution to the Company's earnings per share, if any. The
inability to obtain financing as needed on reasonable terms would have a
material adverse effect on the Company's business, financial condition and
results of operations. If such financing is not available, the Company may be
required to delay development of portions of its database, to forego market
opportunities, to obtain funds through arrangements with strategic partners or
others that may require the Company to relinquish material rights to certain
of its technologies or potential markets or otherwise to curtail or
discontinue its operations.
30
<PAGE>
BUSINESS
NavTech is a leading developer and provider of a navigable database for use
in Route Guidance Products in the United States and Europe. Route Guidance
Products are in-vehicle software and hardware systems that use global
positioning satellite (GPS) and other technologies. These products provide
dynamic real-time positioning information and turn-by-turn driving directions
enabling accurate and efficient vehicle navigation. A highly accurate and
comprehensive navigable database, such as the NavTech database, is essential
to the successful operation of Route Guidance Products, both for continuously
tracking the vehicle's position and for calculating driving routes. NavTech's
navigable database is a digital representation of road transportation networks
in the United States and selected European countries, constructed to provide
the high level of accuracy and detail necessary to support route guidance and
related applications. The NavTech database includes extensive information,
including the location, shape and arterial classification of roads, details on
ramps, dividers, bridges and overpasses, certain traffic rules and
regulations, street names and addresses and points of interest such as
airports, hotels and restaurants.
In the United States, NavTech has completed detailed city databases for
metropolitan areas representing in aggregate approximately 100 million in
population, and has established nationwide coverage by completing the
intertown database for the continental United States. In Europe, NavTech has
completed detailed city databases for metropolitan areas representing in
aggregate approximately 70 million in population and intertown databases for
Austria, Belgium, southeastern England, France, Germany, northern Italy and
Switzerland.
INDUSTRY BACKGROUND
The demand for time savings, increased safety and security, reduced stress
and hassle, and traffic congestion control is expected to bring many changes
in the way people drive for business, commuting and leisure over the coming
decade. Many drivers waste valuable time and drive unnecessary miles because
of the difficulty of obtaining accurate directions to a desired destination
and following these directions correctly. Drivers using written directions or
paper maps to reach a destination are often distracted as they must not only
read the directions or map but also find and read street signs, make decisions
on lane positioning and evaluate alternative routes to avoid traffic
congestion. Drivers want to reduce travel time and concentrate on the
objective at their destination rather than on how to reach the destination.
Route Guidance Products provide more accurate, efficient and safe vehicle
navigation, and are expected to play a major role in addressing these demands.
In contrast to other navigation products with less functionality, Route
Guidance Products are integrated software and hardware systems located inside
a vehicle that enable accurate and efficient vehicle navigation by providing
dynamic real-time positioning information and turn-by-turn driving directions,
and which typically include an on-board navigable database, a computing and
display unit with a graphical user interface, voice prompts and positioning
and directional sensors. Currently, all Route Guidance Products incorporate
global positioning satellite (GPS) technology. Drivers specify a desired
destination and the navigable database enables the route guidance software to
calculate a route to the requested destination. Route Guidance Products track
a vehicle's location and then deliver real time turn-by-turn driving
directions as the trip progresses, using voice prompts and display graphics.
More than 20 companies in the United States, Europe and Japan are currently
selling or developing Route Guidance Products. To date, most Route Guidance
Products have been sold in the Japanese market. According to an industry
source, approximately 300,000 Route Guidance Products were sold in Japan in
1995. The use of Route Guidance Products is now emerging in the United States
and Europe where the principal initial markets are expected to be luxury cars,
rental cars and vehicles used for business purposes such as sales, delivery
and service. Based upon industry sources, the Company believes that there are
approximately 200 million vehicles in
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the United States and 200 million vehicles in Europe. In 1995, approximately
15 million new vehicles were sold in the United States, of which more than one
million units were luxury or near luxury cars. In Europe, approximately 12
million new vehicles were sold in 1995, of which more than two million units
were luxury or near luxury cars. Approximately 1.5 million of the total
vehicles in the United States are rental cars. Route Guidance Products are
currently available for sale to consumers in certain regions of the United
States in certain Oldsmobile and Acura automobiles. In selected European
countries, Route Guidance Products are currently available in Audi, BMW,
Mercedes Benz and Renault models. Route Guidance Products are currently
available in rental cars in many United States cities through Avis, Hertz and
National, and in Germany through Sixt (Budget) and to a limited extent through
Eurodollar (Dollar) in France. In addition, a number of automotive electronics
manufacturers, including Alpine, Bosch/Blaupunkt, Magneti Marelli, Philips Car
Systems and Rockwell International, currently offer aftermarket route guidance
products in either the United States or Europe.
The Company believes several factors will drive initial demand for Route
Guidance Products in the markets for luxury cars, rental cars and vehicles
used for business purposes. Among consumers, initial purchases of Route
Guidance Products are expected to be made by luxury car buyers and business
users who are early adopters of new consumer electronics products and tend to
be less price sensitive. Penetration of the consumer market is expected to
increase as the price of Route Guidance Products declines from the current
range of approximately $2,000 to $4,500 per unit. Price declines are expected
to result from factors such as higher manufacturing volumes, decreased
electronic component costs, greater integration and sharing of electronics in
the dashboard and increased competition among manufacturers of Route Guidance
Products. In the rental car industry, growth in the utilization of Route
Guidance Products may result in their being perceived as an important
differentiating feature among car rental companies. The potential for
efficiencies resulting from using Route Guidance Products for business
purposes is expected to lead to increased demand for these products in much
the same way that productivity gains have resulted in the adoption of mobile
communications for business.
A highly accurate and comprehensive navigable database, such as the NavTech
database, is essential to the successful operation of Route Guidance Products,
both for continuously tracking the vehicle's position and for calculating
driving routes. Database information must accurately represent ground truth to
enable a route guidance product to deliver accurate, real-time driving
guidance. A navigable database includes extensive information, including the
location, shape and arterial classification of roads, details on ramps,
dividers, bridges and overpasses, certain traffic rules and regulations,
street names and addresses and points of interest such as airports, hotels and
restaurants. The Company believes that the accuracy and completeness of the
navigable database will be an important factor in consumer acceptance of Route
Guidance Products.
Building such a navigable database is costly and presents many challenges.
To achieve the necessary accuracy and completeness, information must be
gathered through a labor intensive process of collecting and verifying
information from multiple sources including aerial photographs, municipal base
maps, government surveys and zoning and sign records. In addition, keeping a
navigable database current is a significant challenge, since many
characteristics of the streets and points of interest covered in a database
change each year, and any change can impact the generation of efficient and
accurate driving routes. The depth and breadth of the information gathered and
maintained requires large-scale data management software. Route guidance is
the first commercial application with the market appeal and potential market
size to justify the cost and effort of navigable database construction and
updating. In addition, there are a number of other navigation applications to
which a navigable database can be applied, including fleet management and
personal navigation.
NAVTECH TODAY
NavTech is a leading developer and provider of navigable databases in the
United States and Europe. Since its founding in 1985, NavTech has developed a
high quality navigable database for the United States and selected regions of
Europe enabling turn-by-turn route guidance. In the United States, NavTech has
completed detailed
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city databases for metropolitan areas representing in aggregate approximately
100 million in population, and by completing the intertown database for the
continental United States has established nationwide coverage. In Europe,
NavTech has completed detailed city databases for metropolitan areas
representing in aggregate approximately 70 million in population and intertown
databases for Austria, Belgium, southeastern England, France, Germany,
northern Italy and Switzerland. The Company believes a majority of the Route
Guidance Products currently available in the United States and Europe
incorporate the NavTech database.
Through June 30, 1996, the Company has invested more than $200 million in
the development of its business, principally to create and update the NavTech
database, to establish a field organization and to develop technology and
software. Since 1988, the Company has had a strategic relationship with
Philips, which has provided approximately $148 million in equity financing to
the Company, as well as assistance with customer and industry relationships.
NavTech has established customer relationships and entered into licensing
agreements with key participants in each of the Company's principal initial
route guidance markets, including luxury cars, rental car fleets and vehicles
used for business purposes in the United States and Europe. The Company
believes there are currently approximately 1,700 vehicles in the United States
and approximately 12,000 in Europe with Route Guidance Products incorporating
the NavTech database. Route Guidance Products using the NavTech database are
currently available in limited quantities in certain Oldsmobile models and
Acura RL automobiles in selected United States markets and in certain BMW 5
Series and 7 Series models in Austria, France, Germany, Italy, Switzerland and
the Benelux countries. Route Guidance Products using the NavTech database are
also available in Avis, Hertz and National rental cars in many of the largest
airport car rental markets in the United States and in Eurodollar (Dollar)
rental cars in France. The Company believes a majority of the Route Guidance
Products currently available in the United States and Europe, including those
manufactured or offered by Aisin AW, Alpine, Magneti Marelli, Philips Car
Systems, Rockwell, Siemens and Zexel, incorporate the NavTech database.
The Company attributes its position as a leading developer and provider of
navigable databases to the following factors:
. Primary focus on route guidance market. From inception, NavTech has
concentrated its efforts on developing a navigable database designed to
meet the rigorous turn-by-turn requirements of route guidance. Accordingly,
the Company believes its database is well positioned to be designed-in to
Route Guidance Products. The Company believes that its navigable database
is provided with all Route Guidance Products currently sold in the United
States.
. Comprehensive high quality database coverage. The Company believes it has
developed the most comprehensive and accurate navigable database available
today, providing the industry's broadest geographic coverage and most
extensive detailed and in-depth content in the United States and Europe.
The Company believes that its database coverage in the United States and
Europe is a significant enabler in the development and commercial
deployment of Route Guidance Products. The Company has developed rigorous
processes that enable it to create a high quality database, and the
Company's goal is to ensure that its database is at least 97% accurate to
ground truth at the time of delivery.
. Extensive field organization. A large amount of detailed, local information
is required to develop and update a comprehensive navigable database. A
permanent local field organization is critical to establishing
relationships with local data sources, gathering detailed, current
information needed to constantly improve and build on its database and
physically verifying the ground truth accuracy and completeness of the
database. The Company believes that its extensive network of local field
offices, linked to the central database, has been a significant factor in
its ability to deliver and continuously update its navigable database.
. Single database specification. The Company's adherence to a single
worldwide database specification is designed to allow each manufacturer of
Route Guidance Products to offer a standard product throughout the
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United States and Europe. This enables automotive electronics manufacturers
to reduce development costs and time-to-market schedules for Route Guidance
Products.
. Comprehensive customer support. The Company believes its customer support
has been critical to the development and initial commercialization of its
customers' Route Guidance Products. The Company provides service and
support to its customers in three principal ways: (i) technical support in
the design, development and testing of their Route Guidance Products to
enable close integration between these products and NavTech's database;
(ii) consulting services related to the development of Route Guidance
Products; and (iii) a set of software tools developed by NavTech to help
customers bring their Route Guidance Products to market faster and at a
lower development cost.
. Industry relationships and leadership. The Company has taken a leadership
role in the development of industry standards, established key
relationships in industry and professional organizations, and developed
relationships with major automotive electronics manufacturers worldwide.
The Company believes that its role on standards committees and its industry
relationships enable it to obtain an earlier and better understanding of
the needs of the major manufacturers producing Route Guidance Products.
Several of the Company's key management and technical personnel have
assumed leadership positions in prominent industry, professional and
standards organizations in the United States, Europe and Japan.
The Company is also exploring use of its navigable database for other
applications outside of route guidance, including fleet management and
personal navigation. NavTech has entered into license agreements with several
developers of advanced fleet management systems, including Lightstone,
Rockwell International and Nukem GmbH. These systems are expected to include
the capability to track, select and dispatch vehicles based on driving time to
a target destination, and to provide door-to-door directions to drivers for
flexible pickup/delivery and service calls. In the personal navigation area,
applications using the NavTech database are incorporated into personal
computer software products including Philips' MetroNavigator and Frommer's
Interactive Travel Guides by GeoSystems and MacMillan Digital U.S.A. For
online delivery of directions, the Company's database is currently being used
by CompuServe for its online directions service, "WayToGo CompuServe," and by
American Automobile Association ("AAA") for its online directions service,
RouteMaster, which is currently being test marketed on America Online.
NAVTECH STRATEGY
NavTech's strategy is to establish its navigable database as the leading
solution for Route Guidance Products and other applications. The Company's
strategy includes the following key elements:
Provide the industry's most complete and current navigable database. The
Company's objective is to provide a comprehensive, up-to-date database
covering all major metropolitan areas and intertown roadways in the United
States, Europe and Canada. The real world road network experiences continuous
change in a variety of ways, such as new construction, changing roadway
attributes, and new points of interest. The NavTech database is continuously
updated to stay abreast of change in the real world and to meet the needs of
NavTech's customers and end users.
Establish strategic relationships with key automotive electronics
manufacturers. The Company's strategy is to establish and maintain
relationships with leading automotive electronics manufacturers of Route
Guidance Products and developers of other related products such as fleet
management systems and personal navigation products. NavTech seeks to
establish long-term relationships with its customers and, where possible,
begin working with them early in their product development cycle to provide a
thorough understanding of the unique capabilities of the NavTech database, to
assist them in successfully designing their products to work with the NavTech
database and to facilitate a high level of customer satisfaction. The Company
supports its customers by offering consulting services and by providing
software development toolkits. NavTech also works to promote
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industry awareness of its navigable database and assists suppliers of Route
Guidance Products by marketing directly to the major vehicle manufacturers.
Generate recurring revenue from database updates. The Company intends to
provide database updates and enhancements to end users to generate recurring
revenue in addition to the revenue from licenses of initial databases provided
with Route Guidance Products. The Company believes that as the installed base
of end users increases, the licensing and distribution of database updates
will be an important source of future revenue. NavTech intends to distribute
database updates to end users both by mail for databases on CD-ROMs and via
PC-based kiosks for updatable media like PCMCIA-compatible removable hard
disks. NavTech has commenced limited initial distribution of database updates
and intends to continue to make significant investments to increase its
distribution capability.
Provide extensive end user support. The Company believes that strong end
user support is important to long-term market acceptance of Route Guidance
Products. NavTech has demonstrated its commitment to end user support by
establishing help desk facilities for North America through which end users
can secure assistance in using the products which incorporate the Company's
database and report problems. The telephone facilities are staffed by trained
technicians who can address a wide variety of technical and non-technical
product and database issues. Besides helping to encourage the market, these
hotlines provide an important source of database update information. NavTech
does not believe that any competitor is currently offering comparable help
desk support.
THE NAVTECH DATABASE
NavTech's navigable database is a digital representation of road
transportation networks in the United States and selected European countries,
constructed to provide the high level of accuracy and detail necessary to
support route guidance and related applications. NavTech devotes significant
resources to creating and updating its database and maintaining quality. The
Company has also made a significant investment in software and tools for
database creation and updating.
Database Content
The NavTech database provides two levels of coverage: detailed city and
intertown. Detailed city coverage provides sufficient detail to allow door-to-
door, turn-by-turn route guidance to addresses and points of interest within
metropolitan areas. Detailed city coverage generally includes a broad, logical
driving area around the named city regardless of city, county and state
boundaries. Intertown coverage includes the major roadways for other areas and
seamlessly connects the detailed city coverages. In the United States,
intertown coverage meets or exceeds the level of detail of roadways included
in AAA state level maps. A particular Route Guidance Product typically
incorporates both detailed city and intertown information for a selected
geographic portion of the NavTech database applicable for the end user, such
as California plus Nevada, the northeastern United States including
metropolitan New York and New England, France or Germany. The end user can
acquire additional geographic portions of the database.
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In the United States, detailed city database coverage is complete for cities
and their respective surrounding areas covering in aggregate approximately 100
million in population, and intertown coverage is complete for the continental
United States. By the end of 1998, the Company is scheduled to complete
detailed city coverage in the continental United States for all metropolitan
areas with a population over one million.
UNITED STATES DETAILED CITY COVERAGE
<TABLE>
<S> <C>
Albuquerque Miami/Ft. Lauderdale/West Palm Beach
Atlanta Minneapolis/St. Paul
Austin* New Orleans*
Baltimore/Washington D.C. area/ New York area/
suburban areas of Virginia/Maryland suburban areas of Long Island/
Boston/Providence/ Connecticut/Westchester/
southeastern New Hampshire northern New Jersey
Chicago/Gary Orlando
Dallas/Ft. Worth Philadelphia/Wilmington/Trenton
Denver/Boulder/ Phoenix
Colorado Ski Resorts and Towns St. Louis*
Detroit/Ann St. Petersburg, FL
Arbor/Flint/Grand Sacramento
Rapids/Lansing San Antonio*
Ft. Meyers/Cape Coral, FL.* San Diego
Fargo, ND San Francisco Bay
Houston Area/Monterey/Napa Valley/
Indianapolis/Kokomo Santa Cruz/Solano/Sonoma
Las Vegas Seattle/Tacoma
Los Angeles area/Orange/ Traverse City, Michigan
Riverside/San Bernardino/
Santa Barbara/Ventura
</TABLE>
*Coverage expected by the end of 1996, subject to change.
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In Europe, detailed city coverage is complete for cities and their
surrounding areas covering in aggregate approximately 70 million in
population. Intertown coverage is complete for Austria, Belgium, southeastern
England, France, Germany, northern Italy and Switzerland, and is expected to
be complete for most of the remainder of Western Europe in 1998. The Company
is scheduled to complete detailed city coverage for an additional 40 million
in population by the end of 1998.
EUROPEAN INTERTOWN AND DETAILED CITY COVERAGE
<TABLE>
<CAPTION>
COUNTRY CURRENT 1996*
---------------------------------------------------------------------------------
<C> <C> <S>
Austria Intertown Vienna
---------------------------------------------------------------------------------
Belgium Intertown Antwerp
Brussels Liege
---------------------------------------------------------------------------------
Great Britain Intertown in southeastern England Intertown in central England
Coventry West Midlands
London
---------------------------------------------------------------------------------
France Intertown Bordeaux
Lille Cote d' Azur
Lyon Monaco
Marseilles Strasbourg
Paris/Ile de France
---------------------------------------------------------------------------------
Most cities over 50,000
Germany Intertown population
Berlin
Hamburg
Hannover
Munich
Rhine/Main area
Ruhr area
Stuttgart
All other cities over 100,000
population
---------------------------------------------------------------------------------
Italy Northern Intertown Central Intertown
Genoa Rome
Milan
Padua
Triest
Turin
Verona
---------------------------------------------------------------------------------
The Netherlands Eindhoven Southern Intertown
---------------------------------------------------------------------------------
Switzerland Intertown Lugano
Basel
Bern
Geneva
Lausanne
Zurich
</TABLE>
*Coverage expected by the end of 1996, subject to change.
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The NavTech database is constructed to a single database specification so
that an automotive electronics manufacturer can design a single product that
can be sold throughout the United States and Europe. NavTech believes that
this is a significant advantage to its customers because it allows reduction
of development and distribution costs and enables a faster time to market.
NavTech's database can be viewed conceptually as six independent but related
layers, consisting of road network geometry, path attributes (permits route
planning), navigation attributes (enables route guidance), geo-political
boundaries and designations, cartography (land use) and points of interest.
The diagram below illustrates the conceptual database layers and provides
examples of the data in each layer. The database is also designed to allow
customers to incorporate customized information specific to their database
application.
CONCEPTUAL DATABASE LAYERS
Points of Interest:
Information on thousands of points of interest in over 40 categories, including
hotels, restaurants, tourist attractions, automated teller machines ("ATMs"),
airports and bus and train terminals
Cartography:
A graphical representation of railroads, rivers, and boundaries for golf
courses, parks, lakes, airports and shopping centers
Geo-political:
Country, state, county, city, settlement and postal code boundaries
Navigation:
Arterial and speed classification, directionality, dividers, turn restrictions,
time of day and flow restrictions and ramp signs
Path:
Street and route names and address ranges
Geometry:
Links, nodes, shape points, relative elevation and connectivity
Database Creation
Creating a comprehensive, high quality navigable database is a multi-step,
labor-intensive process. The major steps in database creation are to:
. Collect data. One of the challenges in collecting data is to find accurate
data sources. In many cases, paper maps may be a decade or more old.
NavTech gathers raw geographic data in both hard copy and digital form.
Aerial photographs are commissioned and digital and paper map data is
acquired from government agencies and other sources. Street name
information is obtained from regional and local governments and other
sources. Highway information, including interchanges and signage is
obtained from regional agencies and other sources. Navigation information
(barriers, one-way restrictions, turn restrictions and other driving rules)
is obtained from municipalities, often from sign maintenance facilities and
other sources. NavTech personnel drive limited access highways and
photograph signs significant for routing, including the text of exit and
entrance signs. Information on points of interest including hotels,
restaurants, ATMs and businesses is obtained from various sources.
. Establish accurate geometry. Road and attribute geometry (a representation
of the shape and location of the roads and how they connect) is created by
digitizing data from paper maps using high resolution digitizing tables and
through the use of digital geographic data files. This information is
cross-checked with recent aerial photographs.
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. Overlay addressing data and validate coverage. Attributes including city
code, postal code, street name and addresses are added to the road geometry
data. Sources of address data include postal authorities, tax assessment
records and other government files. Address data is checked for internal
consistency and is also used to identify discrepancies in the physical
structure of the database.
. Add routing data. Roads are classified both physically and functionally to
provide efficient routing. Physical classifications are based on lane
configurations and other characteristics. Functional classification (how a
road is used) is based on local information gathered by NavTech's field
staff.
. Integrate driving rule information with geographic data. Both manual and
software-based techniques are used to integrate driving rules, such as turn
restrictions and one-way streets (including time-of-day and day-of-week),
with geographic information. NavTech has developed proprietary software
tools for data validation to support and optimize this process.
. Perform test drive. At multiple stages during the database construction
process, major arterials and selected other roads are driven by field
researchers to check address ranges, points of interest and driving
restrictions and to determine that routes generated by computer from the
database are reasonable and efficient.
Database Updating and Quality
The NavTech database is continually updated to reflect the current state of
the roadway network and points of interest so that products using the
Company's database can produce accurate directions. The Company typically
establishes a local research and updating field office for each metropolitan
area early in the initial data-gathering process.
The local research and updating team establishes relationships with agencies
responsible for the roadways throughout the area, gathers information on road
conditions and plans from multiple sources, checks data quality and
continuously validates database information. The Company acquires update
information from a variety of sources. For example, revised government
information, including survey maps, postal addressing information and census
information, is acquired as it becomes available; information regarding new
and planned construction and changes in road characteristics is acquired from
government agencies that authorize road building; changes to point-of-interest
information are collected from various sources; end user feedback identifies
errors and anomalies and is a source of ideas for improving the database; and
driving of the area by local field personnel provides other update
information.
The Company strives to maintain its database quality by: (i) supplementing
and cross-checking information from multiple public and private sources with
aerial photographs and field personnel who obtain and verify information; (ii)
employing proprietary software tools and verification programs; and (iii)
performing periodic real-world tests on samples from each metropolitan area.
Local field office personnel use vehicles equipped with Route Guidance
Products and other tools to drive the roadways to verify the accuracy and
completeness of the database. Software tools are used to simulate the intended
uses of the data and to compare generated results with reality, and to analyze
path structure for logic of navigation attributes, connectivity and proper
traffic flow.
Field Organization
The Company's field organization is the central focus of database
development, updating and management. During initial database creation, field
personnel build relationships with authorities at all levels responsible for
the roadways to gather driving rule and other information and field-verify the
database. Once initial development for a metropolitan area is complete, the
field office assumes primary responsibility for keeping the database up to
date and accurate, including information regarding new construction, changes
to the existing road network and driving rules, updated points of interest,
problem report resolution and ongoing field verification. As of June 30, 1996,
the Company had 35 field offices in the United States and one in Canada with a
total of 148 employees, and 22 field offices in Europe with a total of 147
employees. The Company intends to continue to increase its field organization
to support the continued expansion of its database.
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Technical Services
Database Consulting Services. An important component of NavTech's strategy
is to provide extensive consulting services, customer support, custom software
and software development toolkits to NavTech customers. The Company believes
these services can help NavTech customers reduce the time to market for their
products.
Customer Support. The Company offers customer support managers to work with
customers' product designers and product launch teams. The support managers
are available to facilitate the customer's process of incorporating relevant
database capabilities into products, perform trouble-shooting, provide
technical advice and offer overall product development guidance. The field
staff assists customers in testing their products.
Help Desk. NavTech provides end user support through its help desk
facilities. The help desks enable end users to obtain assistance in using
Route Guidance Products incorporating the Company's database and to report
problems with the Route Guidance Product or the database. The telephone
facilities are staffed by trained technicians who can address database issues.
In addition, these hotlines provide the Company with an important source of
database update information.
TECHNOLOGY
Database Creation and Updating Tools. The Company believes that a
significant factor in its successful creation and updating of its navigable
database is its proprietary software environment. From its inception, the
Company has employed an integrated, large-system approach drawing on the
extensive experience of SEI with large-scale databases and software support
and operations environments. The Company has devoted significant resources and
expertise to the development of a custom data management software and
communications environment that includes a mainframe as a server over a wide
area network for database management and updating and networked UNIX
workstations. The Company has built its workstation software with an easy-to-
use graphical user interface. The interface enables employees to perform
sophisticated database creation and updating tasks in a well-controlled and
efficient environment.
The Company's database creation, updating and management tools include:
. Tools for automated data capture from machine-readable sources, including
post office and public domain government spatial data files
. Comparison and validation tools for merging data from multiple sources
. Verification tools to validate connectivity and consistency
. Integration tools for merging new data into the database structure
. Statistical and reporting tools for extracting information in human
readable form
. Translation software for generating versions of the database in a variety
of formats
Data Access Software and Toolkits. The Company is working with a number of
its customers to develop software known as the shared data access library
("SDAL") which is intended to incorporate a common database format. This
software is intended to help customers develop and deploy their products more
swiftly and incorporate advanced database features into their products more
readily and reliably. At the same time, the common database format is expected
to help the Company by simplifying database distribution and support
logistics. In addition, the Company makes a software development toolkit
available to its customers at little or no cost. The toolkit includes software
for route calculation, route explication, map display, map matching,
destination determination and geocoding.
SEI EnRoute. NavTech is addressing the demand for driving directions and
travel-related information delivered to desktop and hand-held computers via
wired and wireless networks. SEI EnRoute is a database engine
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that delivers turn-by-turn driving instructions, travel information and points
of interest derived from NavTech's database in response to online end user
requests. CompuServe began offering access to SEI EnRoute under the service
mark "WayToGo CompuServe" in late 1995. AAA is currently test marketing a
similar SEI EnRoute-based service, RouteMaster, for selected cities on America
Online. SEI EnRoute routing services are also provided on the Internet's World
Wide Web. Revenues from these applications are not expected to be material for
the foreseeable future. The Company believes that SEI EnRoute may be utilized
as a component of off-board Route Guidance Products in the future.
MARKETING AND DATABASE DISTRIBUTION
NavTech's marketing and distribution strategy is to continue to aggressively
market the NavTech database to automotive electronics manufacturers and
developers of advanced transportation applications and to establish a
distribution function for providing database copies and updates to end users.
For Route Guidance Products, the Company's general policy is to charge a
license fee for each copy of the database distributed to an end user. The
Company also charges fees for services related to the distribution of copies
of the database.
Marketing
The Company uses business development personnel to market the NavTech
database to customers for incorporation in Route Guidance Products, fleet
management and personal navigation products. The Company markets the NavTech
database directly in the United States, Europe and Japan for use in products
to be sold in the United States and Europe. The Company has engaged Nichimen
Corporation, a major Japanese trading company, to assist in sales to companies
based in Japan. A technical customer support organization assists customers
from product inception through testing, market introduction and continuing
through the product's life. A customer support manager is assigned to large
customers and works closely with the Company's database creation and updating
groups to coordinate availability of appropriate database coverage in
conjunction with customer product release and roll-out plans. The Company
participates in industry trade shows and conferences and in professional
organizations that are attempting to expand market awareness and accelerate
adoption of these applications. For example, the Company is regularly
represented in technical sessions, panel discussions and executive briefings
at major industry events.
Database Distribution
The Company believes that the continuing availability to end users of
current database versions for the appropriate geographic area will be an
important factor in market acceptance of Route Guidance Products and other
navigation products. The Company also believes that the ongoing licensing of
database updates to end users will become an important source of its future
revenue. Because automotive electronics manufacturers are primarily focused on
product development and sales, NavTech is making a significant investment to
build an organization, processes and tools for the distribution of initial and
updated databases, both on rewriteable media (e.g., removable PCMCIA-
compatible hard disk drives) and on read-only media (e.g., CD-ROMs). For
rewriteable media, end users are expected to be able to obtain updates,
provided initially at specially configured PCs at car dealerships and other
locations. For read-only media, NavTech expects to provide updates by mailing
new CD-ROMs to end users. NavTech has a distribution relationship with Zenrin,
which is a leading supplier of map data CD-ROMs in the Japanese vehicle
navigation market.
Other Relationships
NavTech has entered into agreements with EL.DA, an Italian digital mapping
company serving Italian industry and government agencies, the Automobile
Association (U.K.), which is the largest provider of travel-related services
in Great Britain, and Institut Geographique National ("IGN"), which is the
government mapping agency of France. Pursuant to such agreements, these
entities provide data to the Company and have certain marketing rights with
respect to the NavTech database.
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CUSTOMERS
NavTech has established customer relationships and entered into licensing
arrangements with automotive electronics manufacturers and others which are
developing Route Guidance, fleet management and personal navigation products.
The Company's customers are selling or developing Route Guidance Products for
factory installation, dealer installation and aftermarket sale. The following
companies have introduced or are test marketing Route Guidance Products using
the NavTech database:
Alpine Alpine has developed aftermarket and factory-
installed Route Guidance Products. The aftermarket
product is currently available in Germany. The
factory-installed product is currently available in
a luxury car model on a limited basis in the United
States. Alpine also sells Route Guidance Products
in Japan utilizing a Japanese-developed database.
Denso Denso has developed an aftermarket Route Guidance
Product which is being test marketed in California.
Denso is an electronics supplier for automobile
manufacturers worldwide. Denso was among the first
companies to introduce a navigation system in
Japan.
Magneti Marelli Magneti Marelli has developed an aftermarket Route
(TECmobility) Guidance Product that is currently available in
France, Germany, Italy and Switzerland and in
Eurodollar (Dollar) rental cars in France. Magneti
Marelli is also developing a factory-installed
product. Magneti Marelli is an Italian automotive
electronics manufacturer and a subsidiary of Fiat.
Philips Car Systems Philips Car Systems has developed the CARiN
aftermarket and factory-installed Route Guidance
Products which are currently available in Europe.
The factory-installed system is offered as an
option on the BMW 5 Series and 7 Series models in
Austria, the Benelux countries, France, Germany,
Italy and Switzerland. Philips Car Systems is an
affiliate of Philips.
Rockwell International Rockwell manufactures a Route Guidance Product
available in Hertz rental cars in major cities
under the name Never Lost. Rockwell also
manufactures and markets its Route Guidance Product
as the Pathmaster.
Siemens Automotive Siemens Automotive sells a Route Guidance Product
to National Car Rental. Siemens is also preparing
to sell an aftermarket product in Europe.
Zexel Zexel sells a Route Guidance Product currently
offered in Avis rental cars and in certain
Oldsmobile models as a dealer-installed option.
Zexel Route Guidance Products are manufactured by
licensees of the route guidance technology
developed by Zexel.
Fleet Management Products
Lightstone Group, a software logistics solutions firm, offers a fleet
routing and scheduling product, RIMMS, incorporating the NavTech database.
Rockwell International in the United States and Nukem GmbH in Europe are
currently test marketing fleet management products incorporating the NavTech
database.
Personal Navigation Products and Services
Travel information and driving direction services incorporating the NavTech
database are being offered online via SEI EnRoute on CompuServe (WayToGo
CompuServe) and test marketed in selected cities by the American Automobile
Association (RouteMaster) on America Online. Self-contained CD-ROM-based
travel
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information and driving direction products incorporating the NavTech database
have been introduced by MacMillan Digital U.S.A. (Frommer's Interactive Travel
Guides) and Philips Media (MetroNavigator).
OTHER APPLICATIONS
NavTech believes there are other potential opportunities to commercialize the
NavTech database. For example, as wireless communications become less expensive
and provide greater bandwidth, off-board route guidance may become economically
and technically feasible as an alternative to self-contained in-vehicle Route
Guidance Products. With off-board route guidance, routes would be calculated on
request by a central facility and transmitted, with basic along-the-route map
information, to relatively simple and inexpensive in-vehicle and portable
products. The Company believes that these applications could extend route
guidance or other navigation capabilities to a larger number of users.
The Company's database could also be used for in-vehicle emergency response
systems to track and report vehicle location and to provide directions to
vehicle occupants. NavTech's database can also be used in automated displays
that would dispense directions, point-of-interest information, and street map
extracts at hotels, travel depots, auto club facilities and service stations.
In addition, the NavTech database could be used in geographic information
systems that could assist a wide range of users whose applications are tied to
the roadway network. These include utility companies that want to track their
facilities (pipelines, junctions) with reference to the street network, and
public agencies responsible for maintaining roadside equipment and monitoring,
analyzing, reporting on and controlling traffic flow.
OTHER SERVICES AND CONSULTING
SEI provides consulting services to NavTech which have formed the basis of
the Company's software engineering efforts, including the creation of its
technology infrastructure and support for development of Route Guidance
Products. SEI also provides software and systems consulting services to clients
in a variety of industries, including telecommunications, finance, electronics
and quick service restaurants. SEI's customers are primarily large corporations
who depend on sophisticated information processing to conduct their businesses.
These customers include: BellSouth, The Capital Group, Market Data Corporation,
McDonald's Corp., Merisel, Motorola, Inc. and Reuters Information Technology.
As part of its support services, SEI operates a telephone help desk in Fargo,
North Dakota which provides support services to clients in the quick service
restaurant industry. Services include providing operational advice on field
systems, handling field requests for new and updated equipment and a wide range
of troubleshooting and problem resolution support.
DATABASE WARRANTY
The Company's license agreements with automotive electronics manufacturers
and other customers typically include a warranty that the Company's database is
97% complete and accurate against ground truth at the time of delivery. A
similar warranty may also be provided to end users. Although certain of the
Company's license agreements limit warranty remedies to replacement of database
copies or refund of license fees, others do not contain such limitations. The
Company has not incurred significant costs in connection with its warranties
and has not established a reserve for future warranty-related costs. Other than
the limited warranty described above, the Company's license agreements
generally disclaim warranties, express and implied, including warranties of
merchantability and fitness for particular purposes. It is the Company's
general policy to require its licensees to include similar disclaimers in end
user license agreements. There can be no assurance that the Company's or its
licensees' disclaimers will be sufficient to protect the Company in connection
with any warranty or other claims that may be asserted against the Company. Any
failure by the Company to comply with its warranty obligations and the absence
or ineffectiveness of warranty or other disclaimers, could expose the Company
to claims for substantial monetary damages and have a material adverse effect
on the Company's business, financial condition and results of operations.
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COMPETITION
The Company's principal map database competitors are Etak in the United
States and the United Kingdom and TeleAtlas in Europe, excluding the United
Kingdom. Sony Corporation recently acquired Etak from News Corporation Limited.
Robert Bosch GmbH owns 50% of TeleAtlas. The Company believes the principal
elements of competition in the market for map databases are the geographical
coverage of the database, the range and specificity of the information in the
database, database accuracy, the price to customers of the database and the
availability of software and hardware products that are compatible with the
database. The Company believes that it competes favorably with respect to each
of the above factors. The Company expects to experience significant competition
from TeleAtlas and Etak. The Company could face competition from additional
competitors in the future. Etak and TeleAtlas, together with their corporate
parents, each may have substantially greater financial resources and research
and development, marketing and other capabilities than the Company. There can
be no assurance that the Company will be able to compete successfully in the
future or that competitive pressures will not result in price reductions for
the Company's database and distribution services that could materially
adversely affect the Company's business, financial condition and results of
operations. SEI's software and systems development and information services
business faces substantial competition from larger consulting firms, including
nationally recognized accounting firms and other professional service
organizations, many of which have substantially greater financial resources and
other capabilities than the Company. The Company's failure to be competitive in
the software and systems development and information services business could
have a material adverse effect on the Company's business, financial condition
and results of operations.
INTELLECTUAL PROPERTY
The Company's success and its ability to compete are dependent, in part, upon
its ability to establish and protect its intellectual property rights. The
Company primarily relies on a combination of copyright laws, trade secrets and
contractual rights to establish and protect its intellectual property rights in
its database, software and related technology. The laws of some foreign
countries do not protect the Company's database, software or related technology
to the same extent as the laws of the United States. There can be no assurance
that the steps taken by the Company to establish and protect its intellectual
property will be sufficient to prevent misappropriations or that the Company's
current or potential competitors will not develop databases, software or
technologies that are substantially equivalent or superior to those of the
Company. While the Company's database and software are protected in part by
copyright and trade secrets protection, copyright protection does not extend to
facts, and thus does not restrict the ability of a competitor to independently
develop substantially the same database. There can be no assurance that the
Company's competitors will not independently create a database containing
substantially the same facts as the Company's database. Also, there can be no
assurance that the Company's trade secrets will not become known or be
independently discovered by competitors.
The Company also protects its database, software and related technology, in
part, by confidentiality agreements with its employees, consultants and certain
contractors. There can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach, or that
the Company's confidential information will not otherwise become known or be
independently discovered by competitors.
The Company's database is a compilation of public domain, licensed,
otherwise-acquired and independently developed information obtained from
various sources such as aerial photographs, commercially available maps and
data, government records, other data sources and field observation. Various
public authorities and private entities claim copyright or other ownership of
or protection with respect to certain data and map information. The
intellectual property laws governing databases, map information and related
technology are unclear and are developing. The Company's general policy is to
seek to obtain licenses or other rights where necessary or appropriate. There
can be no assurance that the Company has obtained or will be successful in
obtaining all such licenses or rights that may be necessary to use such
information on reasonable terms or at all. While the Company believes that its
database, software and related technology do not infringe any intellectual
property
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rights of which it is aware, due to the uncertain and developing nature of this
area of the law, there can be no assurance that claims of infringement or
similar claims will not be asserted against the Company.
The Company claims rights in its trademarks and service marks. Certain marks
of the Company are registered in the United States. The Company has filed
applications to register certain other marks in the United States, and is
investigating its right to use and register certain marks in Europe and
elsewhere. Marks of others that are the same or similar to certain marks of the
Company exist or may exist. There can be no assurance that the Company will be
able to continue using certain marks or that certain of the Company's marks do
not infringe the marks of others in North America, Europe or elsewhere. The
Company has licensed others to use certain of its marks and expects to continue
licensing certain of its marks in the future. No assurance can be given that
others will not take actions that might materially and adversely affect the
value of the Company's marks or reputation.
The Company's database, software and related technologies may be used in a
variety of new and evolving industries and markets. Several participants in
these industries and markets hold patents relating to databases, software and
related subject matter and additional patents may issue in the future. The
validity, scope and enforceability of such patents is unclear. Moreover, since
patent applications in the United States are not publicly disclosed until the
patents issue, applications may have been filed that, if issued, would relate
to the Company's database, software and related technologies. The Company does
not believe that it infringes any patents of which it is aware; however, there
can be no assurance that patent infringement claims, will not be asserted
against the Company. The ability of the Company's customers to develop and
market products using the Company's database and software may also be
materially affected by such patents. The existence and assertion of such
patents may deter current and potential customers of the Company from
developing and introducing products, with a corresponding adverse effect on the
Company's operations. In the event that claims of infringement are asserted
against current or potential customers of the Company, such customers may be
required to obtain one or more licenses from third parties. There can be no
assurance that any necessary licenses from third parties can or will be
obtained at a reasonable cost or at all. Also, in the event that a customer of
the Company is found to have infringed such patents, such customer may be
subject to payment of substantial royalties or damages, or enjoined or
otherwise prevented from marketing products which would incorporate the
Company's database, software or related technologies. The Company's license
agreements with its customers generally include mutual indemnity provisions
which in certain cases may require indemnification by the responsible party for
liabilities, costs and expenses arising out of potential violations of
intellectual property rights. Depending upon the scope and applicability of
such indemnification provisions, indemnity claims may be asserted against the
Company. While the Company does not believe that it infringes any patents of
which it is aware, there can be no assurance that such indemnification
provisions and other actions by the Company will not result in indemnification
claims or claims of direct or contributory patent infringement or patent
infringement inducement. There can be no assurance that the outcome of any such
claim would not have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company has in some cases engaged in negotiations and discussions, and
entered into relationships, with customers regarding its database, software and
related technologies without having executed definitive written agreements. The
parties' respective rights and obligations under such circumstances may be
unclear. In addition, without definitive written agreements, the Company's
ability to develop, protect and exploit its database, software and related
intellectual property may be impaired. There can be no assurance that the
Company will be successful in executing definitive written agreements with all
of its customers, and its failure to do so could have a material adverse effect
on the Company's business, financial condition and results of operations.
The resolution of any claims related to the Company's intellectual property
would generally involve complex legal and factual questions and would
consequently be uncertain. In particular, resolution of such claims would
likely entail considerable cost to the Company and diversion of efforts of
management. The Company is currently involved in litigation with Etak, Zexel
USA Inc. and its parent regarding alleged patent infringement, indemnification
and related issues. See "--Litigation."
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LITIGATION
On November 18, 1994, Etak, the Company's primary competitor in the United
States, filed suit against one of the Company's customers, Zexel USA, Inc.
("Zexel USA"), in the United States District Court for the Northern District of
California, alleging that Zexel USA's Route Guidance Product infringes U.S.
Patent Nos. 4,796,191 and 4,914,605 (the "Etak Patents"), and seeking monetary
damages, the trebling of such damages for willful infringement and injunctive
relief. Subsequently, Etak filed an amended complaint adding the Japanese
parent of Zexel USA, Zexel Corporation ("Zexel Japan"), as a defendant. Etak
has not filed any claims that allege that the Company's database or software
infringes the Etak Patents. The suit is currently scheduled for trial in
October 1996.
On June 30, 1995, Zexel Japan filed a third-party complaint against the
Company, seeking recovery of any and all damages awarded against Zexel Japan,
and for costs and expenses incurred by Zexel Japan, in the litigation with
Etak. The third-party complaint is based on certain alleged representations,
warranties, indemnity and other provisions in license agreements between Zexel
Japan and the Company, pursuant to which the Company provided certain software
products to Zexel Japan which allegedly are used in Zexel USA's Route Guidance
Product. Thereafter, the Company filed an answer to Zexel Japan's complaint,
denying all material allegations thereof and asserting numerous affirmative
defenses, and a counterclaim and cross-claim for indemnification against Zexel
Japan and Zexel USA, respectively. The Company also filed claims against Etak
seeking a declaration that the Etak Patents are invalid, unenforceable and not
infringed by Zexel USA or the Company, and for Etak's violation of the federal
antitrust laws. Proceedings on the antitrust claims against Etak have been
stayed pending the resolution of the underlying patent issues.
If Etak prevails in the litigation, Zexel USA or Zexel Japan (collectively,
"Zexel") could be enjoined from selling products incorporating the Company's
proprietary technology and could be required to pay significant monetary
damages to Etak. If the Etak litigation were to be resolved by a settlement,
Zexel might be required to make substantial payments to Etak. If Zexel were
found liable to Etak and prevailed on its indemnification claim against the
Company, the Company could be required to pay substantial amounts to Zexel.
Zexel and the Company are vigorously contesting all of Etak's claims. It is the
Company's position that the Etak Patents are invalid, unenforceable and not
infringed. However, the Company cannot predict the ultimate outcome of the
lawsuit. Patent litigation is highly complex and can extend for a protracted
time, which can substantially increase the cost of such litigation. In
connection with the Etak litigation, the Company has incurred, and expects to
continue to incur, substantial legal fees and legal expenses. The Etak
litigation has also diverted, and is expected to continue to divert, the
efforts and attention of the Company's management and technical personnel. An
adverse result in the Etak litigation could have a material adverse effect on
the Company's business, financial condition and results of operations,
including, but not limited to, disruption of the Company's business
relationship with Zexel and other customers and impairment of the market
generally for Route Guidance Products.
EMPLOYEES
As of June 30, 1996, and giving effect to the SEI Merger, the Company had
1,103 employees, consisting of 580 in database production and updating, 142 in
software engineering, 241 in services and consulting, 57 in sales, marketing
and customer support, and 83 in general and administrative functions. The
Company's employees are not represented by any collective bargaining
organization and the Company has never experienced a work stoppage.
FACILITIES
The Company's worldwide corporate and North American headquarters are located
in Sunnyvale, California in two buildings aggregating approximately 40,000
square feet. The Company has additional operations aggregating 18,200 square
feet in two buildings in Fargo, North Dakota, 17,600 square feet in Rosemont,
Illinois and 4,000 square feet in Cupertino, California. The Company's European
headquarters occupy approximately 6,200 square feet near Frankfurt, Germany.
The Company's primary European product development operations
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are located in Best, The Netherlands, in an approximately 27,300 square foot
building. All of these buildings are leased under leases expiring from October
1997 to July 2001. The Company also has 35 field offices in the United States,
22 field offices in Europe and one field office in Canada, which are primarily
used for database research and updating activities. In July 1996, the Company
opened an office in Yokahama, Japan to provide technical support to electronics
manufacturers. SEI has offices in the Chicago area, in the Los Angeles area and
in New York. The Company believes its North American and European headquarters,
production and administration facilities are adequate for its current needs,
except for the facilities located in Fargo, North Dakota and Rosemont,
Illinois. The Company is currently seeking additional facilities in Fargo and
Rosemont. The Company will need additional facilities for future field offices
and may need additional facilities for marketing and distribution activities.
The Company believes that additional space will be available on reasonable
terms.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The executive officers and directors of the Company and their ages as of the
date of this Prospectus are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
T. Russell Shields 54 Chairman of the Board of Directors and Chief Executive Officer
Ronald A. Brumback 49 President, Chief Operating Officer and Director
Thomas A. Lerone 47 Vice President, Finance and Administration and Chief Financial Officer
Richard J. Weiland 52 Vice President, Industry Relations, Secretary and Director
Fidelis N. Umeh 56 President and Chief Executive Officer of SEI
William Curran (1)(2) 47 Director
Richard DeLange 51 Director
Michael S. Hasley (1)(2) 42 Director
Shinichi Komeda (1)(2) 59 Director
Stephen C. Tumminello 59 Director
Dr. Klaus Volkholz 60 Director
</TABLE>
- --------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
T. Russell Shields has served as Chief Executive Officer of NavTech since
January 1988, Chairman of the Board of NavTech since January 1989 and a
director of NavTech since June 1987. Mr. Shields founded SEI in 1969. Mr.
Shields serves on numerous industry boards and committees, including the
Intelligent Transportation Society of America, the ITS World Congress Board of
Directors, the Transportation Research Board's Committee on Communications and
the International Standards Organization. Mr. Shields holds a B.S. in
Mathematics from Wichita State University and an M.A. in History and an M.B.A.
from the University of Chicago.
Ronald A. Brumback has served as President and Chief Operating Officer of
the Company since April 1996 and as a director of the Company since March
1995. From February 1995 to April 1996, Mr. Brumback served as Senior Vice
President of Philips Media B.V., a subsidiary of Philips. From March 1992 to
January 1995, he served as Senior Vice President, Information Services Group,
and General Manager of Database Technology Services, a division of R.R.
Donnelley and Sons Company, a printing company. From September 1988 to March
1992, Mr. Brumback served as Senior Manager of The Boston Consulting Group, a
management consulting firm. Mr. Brumback holds a B.A. in Economics from the
University of Richmond and an M.A. and M.Phil. in Economics and an M.B.A. from
Columbia University.
Thomas A. Lerone has served as Vice President, Finance and Administration
and Chief Financial Officer of NavTech since September 1988. Prior to joining
the Company, Mr. Lerone served in a consulting capacity as Chief Financial
Officer of Zoran Corporation, a semiconductor company, as Chief Financial
Officer of Elxsi, a computer manufacturer, and as Vice President, Treasurer
and Secretary of Trilogy Ltd., a computer developer, until its merger with
Elxsi. Mr. Lerone holds a B.S.C. in Business Administration from the
University of Santa Clara.
Richard J. Weiland has been a director of NavTech since March 1986 and
Secretary of NavTech since June 1996. Effective upon the consummation of the
SEI Merger, he will serve as the Company's Vice President, Industry Relations.
Mr. Weiland has served in various capacities with SEI since 1971, most
recently as Vice Chairman of SEI and General Manager of SEI Technology Group.
Mr. Weiland holds a B.S. in Mathematics from the University of Michigan and an
M.S. in Information Science and an M.B.A. from the University of Chicago.
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Fidelis N. Umeh has served as President and Chief Executive Officer of SEI
since 1986 and has served in various operational management positions with SEI
since 1974. Mr. Umeh holds a B.S. in Electrical Engineering from the
University of Minnesota, an M.S. in Applied Mathematics from the Illinois
Institute of Technology and an M.B.A. from the University of Chicago.
William Curran became a director of the Company in April 1996. Mr. Curran is
Senior Vice President, Chief Financial Officer and Director of Philips
Electronics North America Corporation, a subsidiary of Philips, and has served
in various positions with Philips and its affiliates since 1976. Mr. Curran
holds a B.S. in Management Engineering from Rensselaer Polytechnic Institute
and an M.B.A. from the Wharton School of Business.
Richard DeLange became a director of the Company in June 1996. Mr. DeLange
is the President of Philips Media U.K. Ltd., a subsidiary of Philips, and has
been employed in various capacities with Philips since 1970, most recently as
Chairman of Philips U.K. and President of Philips Lighting Europe.
Michael S. Hasley became a director of the Company in September 1987. Mr.
Hasley serves as Vice President of R & D Funding Corp., a general partner of
various limited partnerships involved in research and development, and an
affiliate of Prudential Securities Inc., which he joined in 1986. He is
presently a Senior Vice President of Prudential Securities Inc. Mr. Hasley
holds an A.B. in Political Science from Kenyon College and an M.M. (M.B.A.)
from Northwestern University.
Shinichi Komeda became a director of the Company in June 1993. Since March
1995, Mr. Komeda has served as President and Chief Executive Officer of
Nichimen Electronics Component Corp., an electronics components sales company.
From 1962 to March 1995, Mr. Komeda served in various capacities with Nichimen
Corporation and Nichimen America, Inc., most recently as Senior Vice President
of Nichimen America, Inc. Mr. Komeda holds a B.S. in Economics from Kwansei
Gakuin University.
Stephen C. Tumminello became a director of the Company in June 1996. Mr.
Tumminello has served as the President and Chief Executive Officer and
Director of Philips Electronics North America Corporation, a subsidiary of
Philips, since June 1990. Prior to June 1990, Mr. Tumminello served in various
other capacities at Philips. Mr. Tumminello holds a B.S. in Business
Administration from Fairleigh Dickinson University.
Dr. Klaus Volkholz became a director of the Company in March 1994. Dr.
Volkholz served as Senior Director, Corporate Planning and Strategy of Philips
International B.V., a subsidiary of Philips, from March 1986 to March 1996 and
currently serves as a consultant to Philips. Prior to March 1986, Dr. Volkholz
served in various other capacities at Philips. Dr. Volkholz holds an M.A. in
Economics and a Ph.D. in Electrical Engineering from the University of
Michigan.
All directors hold office until the next annual meeting of stockholders or
until their successors have been elected and qualified. Currently, directors
of the Company do not receive compensation for services provided as a
director. Messrs. Weiland and Hasley have agreed to resign from the Board of
Directors upon the appointment of independent directors to be identified by
the Board of Directors subsequent to the Offerings.
The Board of Directors has established an Audit Committee and a Compensation
Committee. The Audit Committee reviews, acts on and reports to the Board of
Directors with respect to various auditing and accounting matters, including
the selection of the Company's auditors, the scope of the annual audits, fees
to be paid to the auditors, the performance of the Company's auditors and the
accounting practices of the Company. The Compensation Committee establishes
salaries, incentives and other forms of compensation for the officers and
other employees of the Company and administers the incentive compensation,
stock option and benefit plans of the Company. See "--Employment Contracts"
and "--Employee Benefit Plans."
There are no family relationships between any directors or executive
officers of the Company. Philips has agreed to vote its shares to elect Mr.
Shields to the Company's Board of Directors, and the Company has agreed to use
its best efforts to achieve such election, so long as Mr. Shields, together
with his family, beneficially owns at least 10% of the Company's outstanding
Common Stock. Mr. Shields and his family will beneficially own approximately
12.5% of the Company's outstanding Common Stock upon the closing of the
Offerings and the Direct Placement.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors currently
consists of Messrs. Curran, Hasley and Komeda. None of these individuals were
at any time during fiscal 1995 an officer or employee of the Company. No
executive officer of the Company serves as a member of the board of directors
or compensation committee of any entity that has one or more executive
officers serving as a member of the Company's Board of Directors or
Compensation Committee.
EMPLOYMENT CONTRACTS
Each of Messrs. Shields and Brumback have entered into written employment
agreements with the Company. Mr. Shields' agreement, which will be effective
upon closing of the SEI Merger, is for a term of four years and is terminable
by the Company or Mr. Shields upon written notice. Mr. Brumback's is an "at-
will" agreement with no specified term. The agreements provide for annual base
cash compensation of $375,000 for each of Messrs. Shields and Brumback plus a
target bonus of 50% of such annual base compensation payable upon the
achievement of certain milestones and objectives (except for the year 1996
when the bonus will not be linked to any milestones or objectives but instead
will be 50% of base cash compensation paid in 1996), as well as such customary
benefits as NavTech may provide to its executive employees. The agreements
provide that both Mr. Shields and Mr. Brumback report directly to NavTech's
Board of Directors and specify the duties and responsibilities of each of
them.
Pursuant to the agreement with Mr. Shields, NavTech has granted Mr. Shields
options to purchase 833,334 shares of Common Stock at an exercise price of
$20.40 per share, of which options to acquire 104,166 shares of Common Stock
shall vest on January 1, 1997 and the remaining options shall vest in 42 equal
monthly installments starting on February 1, 1997. Once vested, such options
generally are exercisable for ten years, with certain exceptions in the event
that Mr. Shields' employment is terminated.
If NavTech terminates Mr. Shields' employment for cause (as defined in the
agreement) as a result of an act or omission which involves dishonesty or
criminal conduct directed against the Company, vesting of options shall cease,
and all vested but unexercised options shall terminate upon such termination
of employment. If NavTech terminates Mr. Shields' employment for cause for
reasons other than those described in the foregoing sentence, vesting of
options shall cease and all vested but unexercised options shall terminate 90
days after such termination of employment. In the event Mr. Shields'
employment terminates due to his death or disability (as defined in the
agreement) or Mr. Shields terminates his employment other than as a result of
a continuing material breach of the agreement by NavTech, vesting of options
shall cease, but vested options shall remain exercisable for the remainder of
their respective ten year terms.
If NavTech terminates Mr. Shields' employment for cause, if Mr. Shields'
employment terminates due to his death or disability or if Mr. Shields
terminates his employment other than as a result of a material breach of the
agreement by NavTech, Mr. Shields shall not be entitled to severance
compensation other than payment of any earned but unpaid bonus. If Mr.
Shields' employment is terminated by NavTech without cause or by Mr. Shields
as a result of a material breach of the agreement by NavTech, Mr. Shields will
be entitled to severance pay equal to one year's base annual compensation,
plus any earned and unpaid bonus, continuation of his normal benefits for a
one year period, continuation of vesting of non-qualified stock options for a
period of one year and continuation of the right to exercise all vested
options for the remainder of their respective ten year terms.
NavTech has also agreed to use its best efforts to achieve Mr. Shields'
election to the Board of Directors so long as he, together with his family,
beneficially owns at least 10% of NavTech's outstanding shares of Common
Stock. Mr. Shields' employment agreement also contains non-competition
provisions that restrict the activities related to both NavTech's and SEI's
business in which Mr. Shields may engage during the term of his
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employment plus one year, as well as provisions granting NavTech ownership of
all proprietary information and inventions made or conceived by Mr. Shields
during the term of his employment, with certain exceptions.
Pursuant to the terms of the agreement with Mr. Brumback, NavTech has
granted Mr. Brumback options to purchase 416,667 shares of NavTech Common
Stock at an exercise price of $10.20 per share. Subject to Mr. Brumback's
continued employment, such options will vest in equal monthly installments
over a four year period starting April 22, 1996. In the event of termination
without cause (as defined in the agreement), the agreement provides for
severance pay equal to one year base compensation plus any earned and unpaid
bonus as well as the continuation of normal benefits for one year.
Furthermore, the agreement provides for the continuation of vesting of Mr.
Brumback's incentive stock options for a period of three months from the date
of termination, continuation of vesting of non-qualified stock options for a
period of one year from the date of any such termination and extension of the
time period for the exercises of non-qualified stock options to two years from
the date of such termination. The incentive stock options shall convert to
non-qualified stock options if they are not exercised within three months of
such termination. In the event of voluntary termination by Mr. Brumback, the
agreement provides for payment of earned but unpaid bonuses. The agreement
expresses an intent that Mr. Brumback shall be a member of the Board of
Directors so long as he remains employed as President and Chief Operating
Officer.
LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS
The Company's Restated Certificate of Incorporation limits the liability of
directors to the maximum extent permitted by Delaware law, and the Company's
Bylaws provide that the Company shall indemnify its directors and may
indemnify its other officers, employees and agents to the fullest extent
permitted by law. The Company has also entered into agreements to indemnify
its directors and officers, in addition to the indemnification provided for in
the Company's Bylaws. Pursuant to such agreements the Company, subject to
certain conditions, is required to indemnify its officers and directors to the
fullest extent provided by law. The Company is also required, subject to
certain conditions, to advance the out of pocket expenses of its officers and
directors related to certain types of suits, proceedings or similar actions.
Upon timely notice, the Company may terminate such agreements as they relate
to events which arise after such termination. The Company believes that these
provisions and agreements are necessary to attract and retain qualified
directors and executive officers. At present, there is no pending litigation
or proceeding involving any director, officer, employee or agent of the
Company where indemnification will be required or permitted. The Company is
not aware of any threatened litigation or proceeding that might result in a
claim for such indemnification.
51
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by NavTech and SEI
during the year ended December 31, 1995 to the Company's Chief Executive
Officer and each of the Company's three other most highly compensated
executive officers whose salary and bonus for services rendered in all
capacities to the Company and its subsidiaries exceeded $100,000 during such
year (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL SECURITIES
COMPENSATION UNDERLYING
----------------- OPTIONS
NAME AND PRINCIPAL POSITION SALARY BONUS (SHARES)
--------------------------- -------- -------- ------------
<S> <C> <C> <C>
T. Russell Shields(1).................... $303,255 $409,531(2)(3) --
Chairman and Chief Executive Officer
Thomas A. Lerone......................... 166,058 10,000 16,175
Vice President, Finance and
Administration
and Chief Financial Officer
Fidelis N. Umeh(1) ...................... 9,608 725,375(2) --
President and Chief Executive Officer of
SEI
Richard J. Weiland(1) ................... 186,499 134,350(2)(4) --
Vice President, Industry Relations and
Secretary
</TABLE>
- --------
(1) Such Named Executive Officer was employed by SEI during the year ended
December 31, 1995 and received compensation from SEI during such year.
NavTech paid a total of $300,000 and $105,600, respectively, to SEI for
Mr. Shields' and Mr. Weiland's services to NavTech during such year.
(2) Includes payments pursuant to SEI's Profit Participation Plan (the "Profit
Plan"). Under the Profit Plan the participants have their salaries reduced
and SEI pays out approximately 75% of its pretax income from operations
(including salary reductions) and certain special items to Profit Plan
participants. In connection with the SEI Merger, Mr. Shields and Mr.
Weiland agreed not to receive any further payments under the Profit Plan
in excess of their respective contributions to the Profit Plan, such
payments as they each would have been entitled to absent the occurrence of
the SEI Merger and, in the case of Mr. Weiland, an additional payment not
to exceed $150,000. After the SEI Merger, NavTech plans to review,
evaluate and establish the SEI compensation plans in the ordinary course
of business.
(3) Includes $297,421 earned in 1995 but not paid during such year.
(4) Includes $97,572 earned in 1995 but not paid during such year.
OPTION GRANTS DURING 1995
The following table sets forth, as to the Named Executive Officers,
information concerning stock options granted during the year ended December
31, 1995.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS(1) FOR OPTION TERM(4)
------------------------------------------------- ---------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED 1995(1) PRICE($/SH)(2) DATE(3) 5% 10%
---- ---------- ------------ -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
T. Russell Shields...... -- -- -- -- -- --
Thomas A. Lerone........ 16,175 2.4% $10.20 07/01/05 $ 103,758 $ 262,944
Fidelis N. Umeh......... -- -- -- -- -- --
Richard J. Weiland...... -- -- -- -- -- --
</TABLE>
OPTION GRANTS IN 1995
- --------
(1) The Company granted options to purchase 662,305 shares of Common Stock
during 1995.
(2) The exercise price may be paid in cash, check, shares of the Company's
Common Stock (subject to approval of the Board of Directors) or any
combination of such methods.
52
<PAGE>
(3) Options may terminate before their expiration date if the optionee's
status as an employee is terminated or upon the optionee's death or
disability.
(4) Potential realizable values are net of exercise price, but before taxes
associated with exercise. Amounts represent hypothetical gains that could
be achieved for the respective options if exercised at the end of the
option term. The 5% and 10% assumed annual compound rates of stock price
appreciation are mandated by the rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of
future prices of its Common Stock. Actual gain, if any, on stock option
exercises are dependent on the future performance of the Common Stock,
overall market conditions and the option holder's continued employment
through the vesting period. This table does not take into account any
appreciation in the price of the Common Stock from the date of grant to
the present.
Subsequent to December 31, 1995, the Company granted options to purchase
416,667, 16,667 and 33,334 shares, respectively, of Common Stock to Messrs.
Brumback, Lerone and Weiland at an exercise price of $10.20 per share and,
contingent upon the closing of the SEI Merger, options to purchase 833,334
shares of Common Stock to Mr. Shields at an exercise price of $20.40 per
share.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information concerning option holdings for
the year ended December 31, 1995 with respect to each of the Named Executive
Officers. No options were exercised by the Named Executive Officers during
such year. No stock appreciation rights were granted during such year.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1995 DECEMBER 31, 1995
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
T. Russell Shields.......... -- -- -- --
Thomas A. Lerone............ 72,705 31,484 $579,580 $132,545
Fidelis N. Umeh............. -- -- -- --
Richard J. Weiland.......... -- -- -- --
</TABLE>
- --------
(1) Based on the fair market value of the Company's Common Stock at December
31, 1995, $10.20 per share (as determined by the Company's Board of
Directors) less the exercise price payable for such options.
EMPLOYEE BENEFIT PLANS
1988 Stock Option Plan. As of June 30, 1996, options to purchase an
aggregate of 2,137,421 shares of Common Stock were outstanding under the
Company's 1988 Stock Option Plan (the "1988 Plan"). No further options will be
granted under the Company's 1988 Plan, as the Company intends to grant options
pursuant to its 1996 Plan described below. The 1988 Plan provided for the
grant by the Board of Directors of the Company of incentive and nonqualified
stock options to employees and consultants of the Company. The 1988 Plan is
administered by the Board of Directors or a committee thereof. The Board may
interpret the 1988 Plan and, subject to its provisions, may prescribe, amend
and rescind rules and make all other determinations necessary or desirable for
the administration of the 1988 Plan. All options granted under the 1988 Plan
have a term of ten years, and typically vest in equal annual or monthly
installments so that the option is fully vested in four years.
1996 Stock Option Plan. The Company has reserved an aggregate of 5,669,890
shares of Common Stock for issuance under its Amended and Restated 1996 Stock
Option Plan (the "1996 Plan"). As of June 30, 1996, options to purchase an
aggregate of 337,348 shares of Common Stock were outstanding under the 1996
Plan. In addition, options to purchase 833,334 shares of Common Stock were
granted contingent upon the closing of the SEI Merger. The 1996 Plan was
originally adopted by the Board of Directors in April 1996. The 1996 Plan was
amended and restated by the Board of Directors in June 1996 and approved by
the stockholders in ,
53
<PAGE>
1996. The 1996 Plan will be in effect for a term of ten years unless
terminated earlier pursuant to its terms. The 1996 Plan provides for grants of
incentive stock options, nonstatutory stock options and stock purchase rights
to employees (including employees who are officers) of the Company and its
subsidiaries; provided however, that no employee may be granted an option for
more than 1,666,667 shares in any one year. The 1996 Plan also provides for
grants of nonstatutory stock options and stock purchase rights to consultants.
The 1996 Plan may be administered by the Board of Directors or by a committee
appointed by the Board (the "Administrator"), in a manner that satisfies the
legal requirements relating to the administration of stock plans and issuance
of shares under all applicable laws. The 1996 Plan is currently administered
by the Compensation Committee of the Board of Directors.
The exercise price of options granted under the 1996 Plan is determined by
the Administrator. With respect to incentive stock options granted under the
1996 Plan, the exercise price must be at least equal to the fair market value
per share of Common Stock on the date of grant, and the exercise price of any
incentive stock option granted to a participant who owns more than 10% of the
voting power of all classes of the Company's outstanding capital stock of the
Company or a parent or subsidiary corporation of the Company (a "Ten Percent
Stockholder") must be equal to at least 110% of the fair market value of the
Common Stock on the date of grant. The maximum term of an incentive stock
option granted under the 1996 Plan may not exceed ten years from the date of
grant (five years in the case of a Ten Percent Stockholder). The term of a
nonstatutory stock option is determined by the Administrator. In the event of
termination of an optionee's employment or consulting arrangement, options may
only be exercised, to the extent vested as of the date of termination, for a
period specified in the notice of grant. If the optionee commits an act of
misconduct, his or her options terminate as of the day of the act of
misconduct. In addition, the Company has a right to rescind the exercise of
any options which occurred after the act of misconduct or, if the optionee has
sold the shares covered by such option, to recover the net proceeds of the
sale along with interest. Generally, misconduct means any acts affecting the
optionee's employment which involve (1) dishonesty, fraud, or criminal
conduct, (2) knowing and willful violation of a material written company
policy or a lawful direction by an authorized executive officer or the board,
(3) material, competitive activities with the Company or (4) knowing,
unauthorized disclosure of confidential, material, proprietary information or
trade secrets of the Company. If the notice of grant does not specify the
period for exercise, the optionee will have three months following the date of
termination. Unless otherwise specified by the Administrator in the notice of
grant, options and stock purchase rights may not be sold or transferred other
than by will or the laws of descent and distribution, and may be exercised
during the life of the optionee only by the optionee.
A stock purchase right allows an employee or consultant to purchase shares
of the Company's common stock pursuant to a restricted stock agreement. Unless
otherwise determined by the Administrator, the restricted stock purchase
agreement gives the Company an option, exercisable upon termination of the
purchaser's employment for any reason including death or disability, to
repurchase the shares at the original price paid by the purchaser. Such
repurchase option lapses at a rate determined by the Administrator.
In the event of a merger or sale of substantially all of the Company's
assets, all outstanding options and stock purchase rights may be assumed or an
equivalent option or stock purchase right substituted by the successor
corporation or its parent or subsidiary. In the absence of such assumption or
substitution, all options and stock purchase rights will become fully
exercisable and vested. Any options and stock purchase rights not assumed or
substituted for will terminate fifteen days after the Administrator gives
notice.
The Board has the right to amend or terminate the 1996 Plan, provided that
no such action may impair the rights of any optionee without the written
consent of any such optionee, and provided further that certain amendments are
by law subject to stockholder approval. The 1996 Plan will terminate in 2006
unless terminated sooner by the Board.
1996 Netherlands Stock Option Subplan. The 1996 Stock Option Plan for
Netherlands Employees (the "Netherlands Subplan") is a subplan created under
the 1996 Plan to satisfy the requirements for preferential tax
54
<PAGE>
treatment in the Netherlands. All options granted under the Netherlands
Subplan are nonstatutory options. Options granted under the Netherlands
Subplan must comply with all provisions of the 1996 Plan as well as with the
Netherlands Subplan.
1996 French Stock Option Subplan. The 1996 Stock Option Plan for French
Employees (the "French Subplan") is a subplan created under the 1996 Plan to
satisfy the requirements for preferential tax treatment in France. All options
granted under the French Subplan are nonstatutory options and may be granted
only to salaried employees of a participating French subsidiary of the Company
who are residents of France and are not Ten Percent Stockholders. Options
granted under the French Subplan must comply with all provisions of the 1996
Plan as well as with the French Subplan.
SEI 1996 Stock Option Plan. In connection with the SEI Merger, the Company
will assume SEI's stock option plan (the "SEI Plan"). Options granted under
the SEI Plan are incentive stock options with a ten year term that have an
exercise price equal to the fair market value of SEI's shares on the date of
grant. Following the SEI Merger, shares of NavTech Common Stock will be issued
in substitution for shares of SEI common stock upon any exercise of
outstanding options under the SEI Plan. No further options will be granted
under the SEI Plan. A maximum of 333,334 shares of NavTech Common Stock may be
issued to holders of options under the SEI Plan.
55
<PAGE>
CERTAIN TRANSACTIONS
TRANSACTIONS WITH PHILIPS
In September 1994, the Company sold 7,843,137 shares of its Preferred Stock
to Philips at a price of $10.20 per share (the "1994 Philips Investment") that
was paid in installments with interest through November 1995. At the same
time, the Company issued 2,445,390 shares of Preferred Stock to Philips in
exchange for shares of and notes payable by NavTech Europe held by Philips.
Each share of Preferred Stock will automatically convert into one share of
Common Stock upon the closing of the Offerings.
In connection with the 1994 Philips Investment, Philips agreed with the
Company that, for three years following the closing of the Offerings, except
as approved by a majority of the Company's directors other than Philips'
designees, Philips will not own more than 75% of the outstanding Common Stock
of the Company, except for (i) shares acquired in a tender offer or exchange
offer for all of the Company's Common Stock or in a merger, consolidation,
mandatory share exchange or similar transaction where the Company is a party;
(ii) shares acquired pursuant to the exercise of any right of first refusal
held by Philips or (iii) otherwise due to actions by the Company or others
which Philips has no right or ability to prevent. In addition, for five years
following the Offerings, Philips has agreed to give the Company's other
stockholders the right to participate on equal terms in any sale by Philips of
all or substantially all of its equity interest in the Company other than in
an underwritten public offering. Philips also granted to all persons who were
securityholders of the Company on September 2, 1994 and owned as of that date
fewer than 225,000 shares of Common Stock on a fully diluted basis the right
to require Philips to purchase up to the number of shares held by such
securityholder on such date at a per share price of $10.20. These contractual
rights, which relate to an aggregate of 2,782,921 shares of Common Stock,
terminate upon the closing of the Offerings.
The Company also has certain agreements with Philips regarding the licensing
of the Company's products. Specifically, the Company has agreed to extend and
to continue to extend, most favored customer terms and prices to all of its
customers for similar types and quantities of the Company's goods and services
under similar terms and conditions. The description of the terms of the 1994
Philips Investment herein is qualified in its entirety by reference to the
Investor Rights Agreement and Stock Purchase Agreement filed as Exhibits 10.7
and 10.8 to the Registration Statement of which this Prospectus is a part.
In May 1996, the Company entered into agreements with Philips pursuant to
which the Company granted a nonexclusive, nontransferable, nonsublicensible
license to use its navigable database and related software in connection with
certain personal navigation products and services developed by or for Philips.
Philips is obligated to make an initial advance of $25,000 in connection with
such agreements.
NavTech Europe purchases certain computer services from an affiliate of
Philips. In 1993, 1994, 1995 and for the three month period ended March 31,
1996, NavTech Europe incurred charges from such affiliate aggregating $0.9
million, $1.4 million, $2.0 million and $0.5 million, respectively, in
connection with such services.
OTHER STOCK ISSUANCES
In March 1993, the Company sold an aggregate of 285,000 shares of Preferred
Stock to Nichimen Corporation and Nichimen America, Inc. (the "Nichimen
Entities") at a purchase price of $4.68 per share, which shares were converted
into an equal number of shares of Common Stock in December 1993. In February
1994, the Company issued convertible debentures in an aggregate principal
amount of $320,000 to the Nichimen Entities, which debentures were converted
into an aggregate of 32,694 shares of Common Stock in September 1994. Also in
February 1994, the Company sold an aggregate of 100,000 shares of Common Stock
to the Nichimen Entities at a purchase price of $4.80 per share. Shinichi
Komeda, a director of the Company, is President and Chief Executive Officer of
Nichimen Electronics Corp., an affiliate of the Nichimen Entities.
Between April 1993 and September 1994, Fidelis N. Umeh, President and Chief
Executive Officer of SEI, and T. Russell Shields (or trusts affiliated with
Mr. Shields) purchased an aggregate of 17,983 shares and 26,968
56
<PAGE>
shares, respectively, of Common Stock (or Preferred Stock or convertible
debentures that converted into Common Stock) at purchase prices ranging from
$4.68 to $10.20 per share.
In June 1996, pursuant to the Private Financing Philips purchased shares of
Preferred Stock for an aggregate purchase price of $29,283,796 ($18,262,563 of
which was paid in cash and the remainder of which was paid by conversion of
outstanding loans), and T. Russell Shields, together with certain of his
family members, purchased shares of Preferred Stock for an aggregate purchase
price of $189,598, paid in cash. The number of shares of Preferred Stock
issued to each of the purchasers in the Private Financing is subject to
adjustment on the closing of the Offerings made hereby based on the initial
public offering price of the Company's Common Stock. The number of shares of
Preferred Stock to which each purchaser is entitled will be determined by
dividing the aggregate purchase price paid by the purchaser by the "adjustment
price" which will be 80% of the gross price per share at which the Common
Stock is initially offered to the public. After the adjustment is made, the
Company will either issue additional Preferred Stock or the purchaser will
surrender to the Company shares of Preferred Stock so that each purchaser
holds the appropriate number of shares in accordance with the above formula.
Based on an assumed initial public offering price of $13.00 per share, Philips
and Mr. Shields, together with his family, will receive 2,815,750 shares and
18,233 shares of Common Stock, respectively, upon conversion to Common Stock
of the Preferred Stock purchased in the Private Financing.
In connection with the Private Financing, Philips agreed to purchase in the
Direct Placement a number of shares of Common Stock necessary to constitute,
when aggregated with all other shares held by Philips, 48% of the total number
of shares of Common Stock issued and outstanding on the closing date of the
Offerings made hereby. Philips also has an option to purchase directly from
the Company additional shares that would result in Philips owning 48% of the
outstanding shares of Common Stock upon closing of any exercise of the U.S.
Underwriters' and International Managers' over-allotment options. Philips will
purchase such shares at a price per share equal to the price at which the
shares of the Common Stock are initially offered to the public, net of the
underwriters' discounts and commissions.
In June 1996, the Company entered into an Agreement and Plan of
Reorganization (the "Merger Agreement") with SEI pursuant to which SEI will be
merged with a subsidiary of NavTech upon the closing of the Offerings.
Pursuant to the Merger Agreement, each outstanding share of SEI common stock
will be converted into approximately 545.26 shares of NavTech Common Stock. In
addition, outstanding options to purchase approximately 611 shares of SEI
Common Stock will become options to purchase 333,334 shares of NavTech Common
Stock at an exercise price of $10.20 per share. T. Russell Shields, together
with his family members and trusts for the benefit of his family members,
Richard J. Weiland and Fidelis N. Umeh are stockholders of SEI and will
receive 5,237,748 shares, 134,134 shares and 426,938 shares of NavTech Common
Stock, respectively, pursuant to the SEI Merger. Pursuant to an agreement with
SEI, Mr. Umeh will receive 358,235 of these shares in exchange for 657 shares
of SEI Common Stock received in consideration of the termination of previous
compensation arrangements. Philips has also agreed to acquire 250,000 shares
from Mr. Umeh at the initial public offering price, less the underwriting
discount, immediately following the SEI Merger. Mr. Shields has agreed to
indemnify NavTech with respect to certain potential liabilities of SEI,
including liabilities that may arise in connection with the SEI Merger.
From time to time, the Company grants stock options to its executive
officers and directors. See "Management--Option Grants During 1995" and
"Principal Stockholders."
OTHER TRANSACTIONS
Certain holders of shares of the Company's capital stock, including Philips
and Mr. Shields, are entitled to certain rights with respect to the
registration of such shares under the Securities Act so long as such holders,
together with their investment group, hold more than 2% of the Company's
outstanding Common Stock. Currently, only Philips and Mr. Shields meet such
threshold. See "Description of Capital Stock--Registration Rights."
57
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of June 30, 1996 and as adjusted
to reflect the sale of 12,000,000 shares of Common Stock offered hereby, the
sale of 2,458,667 shares of Common Stock to Philips and Zenrin in the Direct
Placement and the issuance of 3,632,099 shares of Common Stock (net of shares
exchanged for shares held by SEI which will be accounted for as treasury stock
on the Company's consolidated balance sheet) in connection with the SEI Merger
for (i) each person who is known by the Company to beneficially own more than
5% of the Common Stock, (ii) each of the Company's directors, (iii) each of
the Named Executive Officers, and (iv) all directors and executive officers as
a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE OWNED AFTER
THE OFFERINGS(1)(2) THE OFFERINGS(1)(3)
----------------------------------------------
NUMBER PERCENT NUMBER PERCENT
BENEFICIAL OWNER ------------ ---------------------- ----------
<S> <C> <C> <C> <C>
Philips Electronics, N.V. (4)...... 18,555,345 71.3% 21,181,742 48.0%
Building VO-p, P.O. Box 218
5600 MD Eindhoven, The Netherlands
T. Russell Shields(5).............. 205,376 * 5,377,691 12.2
740 E. Arques Avenue
Sunnyvale, CA 94086
Ronald A. Brumback(6).............. 34,723 * 34,723 *
Richard J. Weiland(7).............. 102,817 * 236,951 *
William Curran(8).................. -- -- -- --
Richard DeLange(8)................. -- -- -- --
Michael S. Hasley(9)............... 10,417 * 10,417 *
Shinichi Komeda(10)................ -- -- -- --
Dr. Klaus Volkholz(8).............. -- -- -- --
Thomas A. Lerone(11)............... 220,835 * 220,835 *
Stephen C. Tumminello(8)........... -- -- -- --
Fidelis N. Umeh (12)............... 85,588 * 262,526 *
All executive officers and
directors as a group
(11 persons)(13).................. 659,756 2.5 6,143,143 13.9
</TABLE>
- --------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that
person, shares of Common Stock subject to options or warrants held by
that person that are currently exercisable or exercisable within 60 days
of June 30, 1996 are deemed outstanding. Except as indicated in the
footnotes to this table and as provided pursuant to applicable community
property laws, the stockholders named in the table have sole voting and
investment power with respect to the shares set forth opposite each
stockholder's name.
(2) Based on 26,037,864 shares of Common Stock outstanding prior to the
Offerings.
(3) Assumes no exercise of the U.S. Underwriters' and the International
Managers' over-allotment options.
(4) Represents shares held of record by subsidiaries of Philips. The shares
beneficially owned by Philips after the Offerings include 250,000 shares
of Common Stock that are being purchased from Mr. Umeh concurrent with
the Offerings. Excludes shares acquired after June 30, 1996 pursuant to
contractual obligations that require Philips to purchase shares from
certain stockholders at $10.20 per share upon the request of such
stockholders.
(5) Includes shares held of record by trusts for the benefit of Mr. Shields'
children and grandchildren, of which Mr. Shields is trustee. Such trusts
hold 54,072 shares of record prior to the Offerings and will hold
368,142 shares of record after the Offerings. Also includes options to
purchase 5,034 shares of Common Stock exercisable within 60 days of June
30, 1996, which options were purchased from an employee of the Company
and vest subject to the continued employment of such employee. Also
includes 11,730 shares held of record by the trustee of a 401(k) Plan
for the benefit of Mr. Shields.
58
<PAGE>
(6) Represents options to purchase shares of Common Stock exercisable within
60 days of June 30, 1996.
(7) Represents shares held of record by Mr. Weiland and his wife as joint
tenants. Also includes 11,617 shares held of record by the trustee of a
401(k) Plan for the benefit of Mr. Weiland.
(8) Does not include 18,555,345 shares held by Philips, with whom such person
is affiliated, prior to the Offerings, or 21,181,742 shares held by
Philips after the Offerings.
(9) Represents shares held of record by Mr. Hasley and his wife as joint
tenants. Does not include 190,379 shares held by PruTech, with whom Mr.
Hasley is affiliated.
(10) Does not include 735,196 shares held by the Nichimen Entities, with whom
Mr. Komeda is affiliated.
(11) Includes 4,167 shares held of record by a trust for the benefit of Mr.
Lerone. Includes options to purchase 86,206 shares of Common Stock
exercisable within 60 days of June 30, 1996.
(12) Includes 1,070 shares held by Mr. Umeh as trustee of a trust for the
benefit of a minor child. Also includes 37,262 shares held of record by
the trustee of a 401(k) Plan for the benefit of Mr. Umeh. The shares held
by Mr. Umeh after the Offerings do not include 250,000 shares of Common
Stock that are being sold to Philips concurrently with the Offerings.
(13) Includes options to purchase 125,963 shares of Common Stock exercisable
within 60 days of June 30, 1996. See also notes (5) through (12).
59
<PAGE>
DESCRIPTION OF CAPITAL STOCK
After giving effect to the filing of a Restated Certificate of Incorporation
upon the closing of the Offerings, the authorized capital stock of the Company
consists of 150,000,000 shares of Common Stock, $.001 par value, and 5,000,000
shares of Preferred Stock, $.001 par value.
The following summary of certain provisions of the Common Stock and
Preferred Stock does not purport to be complete and is subject to, and
qualified in its entirety by, the provisions of the Company's Restated
Certificate of Incorporation the form of which is included as an exhibit to
the Registration Statement of which this Prospectus is a part and by the
provisions of applicable law.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Subject to
preferences that may be applicable to any outstanding shares of Preferred
Stock, the holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared by the Board of Directors out of funds
legally available for the payment of dividends. See "Dividend Policy." In the
event of a liquidation, dissolution or winding up of the Company, the holders
of Common Stock are entitled to share ratably in all assets remaining after
payment of liabilities and liquidation preferences of any outstanding shares
of Preferred Stock. Holders of Common Stock have no preemptive rights or
rights to convert their Common Stock into any other securities. There are no
redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are fully paid and non-assessable, and the
shares of Common Stock to be issued upon the closing of the Offerings will be
fully paid and non-assessable.
PREFERRED STOCK
Pursuant to the Company's Restated Certificate of Incorporation, the Board
of Directors has the authority, without further action by the stockholders, to
issue up to 5,000,000 shares of Preferred Stock in one or more series and to
fix the designations, powers, preferences, privileges, and relative
participating, optional or special rights and the qualifications, limitations
or restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption and liquidation preferences, any or all of which
may be greater than the rights of the Common Stock. The Board of Directors,
without stockholder approval, can issue Preferred Stock with voting,
conversion or other rights that could adversely affect the voting power and
other rights of the holders of Common Stock. Preferred Stock could thus be
issued quickly with terms calculated to delay or prevent a change in control
of the Company or make removal of management more difficult. Additionally, the
issuance of Preferred Stock may have the effect of decreasing the market price
of the Common Stock, and may adversely affect the voting and other rights of
the holders of Common Stock. At present, there are no shares of Preferred
Stock outstanding and the Company has no plans to issue any of the Preferred
Stock.
REGISTRATION RIGHTS
After the Offerings, Philips and Mr. Shields together with his family, who
hold an aggregate of 26,681,700 shares of Common Stock will be entitled to
certain rights with respect to the registration of such shares under the
Securities Act. Under the terms of the agreement between the Company and these
holders beginning on the third anniversary date of the Offerings if the
Company receives from these holders a written request that the Company effect
a registration, the Company, subject to certain conditions, is required to:
(i) give written notice of the proposed registration to all such holders; and
(ii) use its reasonable best efforts to effect, as soon as practicable, such
registration by filing a registration statement covering the registrable
securities so requested to be registered. In addition, subject to certain
exceptions, whenever the Company determines to register any of its securities,
either for its own account or for the account of a securityholder or
securityholders, these holders are entitled to written notice of the
registration and are entitled to include such shares in such registration.
Further, such holders may require the Company to register their shares on Form
S-3 when such form becomes available
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<PAGE>
to the Company. These rights are subject to certain conditions and
limitations, among them the right of the underwriters of an offering to limit
the number of shares included in such registration in certain circumstances.
ANTI-TAKEOVER EFFECTS OF DELAWARE LAW
The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"). Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless (i) prior to such
date, the board of directors of the corporation approves either the business
combination or the transaction that resulted in the stockholder becoming an
interested stockholder, (ii) upon consummation of the transaction that
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owns at least 85% of the outstanding voting stock, excluding
certain shares held by employee directors and employee stock plans, or (iii)
on or after the consummation date the business combination is approved by the
board of directors and by the affirmative vote of at least 66 2/3% of the
outstanding voting stock that is not owned by the interested stockholder. For
purposes of Section 203, a "business combination" includes, among other
things, a merger, asset sale or other transaction resulting in a financial
benefit to the interested stockholder, and an "interested stockholder" is
generally a person who, together with affiliates and associates, owns (or
within three years, did own) 15% or more of the corporations voting stock. A
"business combination" with Philips would not be subject to Section 203,
because Philips' investments were all approved by the Company's Board of
Directors prior to their consummation.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is .
LISTING
The Company has applied to have the Common Stock approved for quotation and
trading on the Nasdaq National Market under the symbol "NAVT."
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offerings, there has been no market for the Common Stock of the
Company. The amount and timing of any future sales of substantial amounts of
Common Stock in the public market could adversely affect market prices
prevailing from time to time.
The number of shares of Common Stock held by the Company's existing
stockholders that will be available for sale in the public market following
the Offerings is limited by restrictions under the Securities Act and by lock-
up agreements described below. All of the Company's officers and directors and
certain securityholders, who in the aggregate beneficially own shares of
the Common Stock of the Company and vested options to acquire an additional
shares of the Common Stock of the Company, have agreed that they will not,
subject to certain limited exceptions, directly or indirectly, offer, sell or
otherwise dispose of any shares of Common Stock or any securities exercisable
for any such shares for a period of 180 days after the Offerings without the
prior written consent of Lehman Brothers. However, Lehman Brothers may, in its
sole discretion and at any time without notice, release all or any portion of
the securities subject to such lock-up agreements.
As a result of these restrictions (assuming Lehman Brothers does not release
any securities subject to lock-up agreements), based on shares outstanding as
of June 30, 1996, (i) the 12,000,000 shares offered hereby and
additional shares will be eligible for sale on the date of this Prospectus,
(ii) another shares will be eligible for sale 90 days after the date
of this Prospectus, (iii) an additional shares will be eligible for
sale 180 days after the date of this Prospectus (of which shares will be
held by Philips and other affiliates of the Company and therefore subject to
volume limitations pursuant to Rule 144 under the Securities Act) and (iv) a
further shares (including the shares sold in the Direct Placement)
will become eligible for sale thereafter pursuant to Rule 144 under the
Securities Act upon the expiration of their respective two-year holding
periods. In addition, the Company intends to register on a registration
statement on Form S-8 a total of 8,140,645 shares of Common Stock issuable
upon exercise of outstanding options or reserved for issuance under the
Company's stock option plans. Of these 8,140,645 shares, shares which
are not subject to lock-up agreements will be vested and eligible for sale (if
the related options are exercised) beginning 90 days after the date of this
Prospectus and shares will vest and become eligible for sale (if the
related options are exercised) between 90 and 180 days after the date of this
Prospectus. Beginning on the third anniversary date of the Offerings, Philips
and Mr. Shields together with his family, who hold an aggregate of
approximately 26,681,700 shares of Common Stock, have contractual rights to
require registration of such shares. In addition, at any time prior to or
after such three year period, such holders could cause or agree with the
Company to cause registration of their shares of Common Stock. If such
holders, by exercising their registration rights or by otherwise causing the
Company to effect registration of shares, cause a large number of shares to be
registered and sold in the public market, such sales could have a material
adverse effect on the market price for the Company's Common Stock.
Upon completion of the Offerings, the Company will have outstanding
44,128,630 shares of Common Stock, 32,128,630 of which are "restricted shares"
within the meaning of Rule 144 under the Securities Act. In general, under
Rule 144 as currently in effect, a person (or persons whose shares are
aggregated) is entitled to sell any "restricted shares" beneficially owned by
him or her, provided that at least two years have elapsed since such shares
were acquired from the Company or an affiliate of the Company and subject to
certain volume limitations and requirements as to the manner of sale, notice
and the availability of current public information regarding the Company.
Under the volume limitations of Rule 144, a person (or persons whose shares
are aggregated) who has beneficially owned restricted shares for at least two
years (including the holding period of any prior owner except an affiliate)
would be entitled to sell within any three-month period a number of shares
that does not exceed the greater of (i) one percent of the then outstanding
shares of Common Stock (approximately 441,000 shares immediately after the
Offerings) or (ii) the average weekly trading volume of the Common Stock
during the four calendar weeks preceding the filing of a Form 144 with respect
to such sale. However, a person who has not been an "affiliate" of the Company
at any time within three months prior to the sale is entitled to sell his or
her shares without regard to the volume limitations or other requirements of
Rule 144, provided that at least three years have elapsed since such shares
were acquired from the Company or an affiliate of the Company. Pursuant to
Rule 701 under the Securities Act, shares purchased by an employee, officer or
director of the Company pursuant to a written compensatory plan or contract
may be resold under Rule 144 without complying with the holding period
requirement, provided that the Company has been subject to the reporting
requirements of the Exchange Act for at least 90 days.
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<PAGE>
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF COMMON STOCK
The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Common
Stock by a person that, for United States federal income tax purposes, is a
non-resident alien individual, a foreign corporation, a foreign partnership or
an estate or trust, in each case not subject to U.S. federal income tax on a
net income tax basis in respect of income or gain from Common Stock (a "non-
U.S. holder"). This discussion is based on the Internal Revenue Code of 1986,
as amended, Treasury regulations thereunder, and administrative and judicial
interpretations as of the date hereof, all of which may be changed. This
discussion does not address all the aspects of U.S. federal income and estate
taxation that may be relevant to non-U.S. holders in light of their particular
circumstances, or to certain types of holders subject to special treatment
under United States federal income tax laws (such as life insurance companies
and dealers in securities). Nor does it address tax consequences under the
laws of any state, municipality or other taxing jurisdiction or under the laws
of any country other than the United States.
Prospective holders should consult their own tax advisors about the
particular tax consequences to them of holding and disposing of Common Stock.
DIVIDENDS
Generally, dividends paid to a non-U.S. holder of Common Stock will be
subject to United States federal withholding tax at a 30% rate or such lower
rate as may be specified by an applicable income tax treaty, unless the
dividends are effectively connected with the conduct of a trade or business
within the United States (or alternatively are attributable to a United States
permanent establishment of such holder, if an applicable income tax treaty so
requires as a condition for the non-U.S. holder to be subject to United States
income tax on a net income basis in respect of such dividends). Such
"effectively connected" dividends, or dividends attributable to a permanent
establishment, are subject to tax at rates applicable to United States
citizens, resident aliens and domestic United States corporations, and are not
generally subject to withholding. Effectively connected dividends received by
a non-U.S. corporation may be subject to an additional "branch profits tax" at
a 30% rate (or a lower rate under an applicable income tax treaty) when such
dividends are deemed repatriated from the United States.
Under current U.S. Treasury regulations, dividends paid to an address
outside the United States in a foreign country are presumed to be paid to a
resident of such country for purposes of the withholding tax. Under current
interpretation of U.S. Treasury regulations, the same presumption applies to
determine the applicability of a reduced rate of withholding under a tax
treaty. Thus, non-U.S. holders receiving dividends at addresses outside the
United States are not currently required to file tax forms to obtain the
benefit of an applicable treaty rate. Under U.S. Treasury regulations that are
proposed to be effective for distributions after 1997 (the "Proposed
Regulations"), to claim the benefits of a tax treaty a non-U.S. holder of
Common Stock would be required to satisfy applicable certification
requirements. In addition, under the Proposed Regulations, in the case of
Common Stock held by a foreign partnership, (x) the certification requirement
would generally be applied to the partners of the partnership and (y) the
partnership would be required to provide certain information. The Proposed
Regulations also provide look-through rules for tiered partnerships. It is not
certain whether, or in what form, the Proposed Regulations will be adopted as
final regulations.
If there is excess withholding on a person eligible for a treaty benefit,
the person can file for a refund with the United States Internal Revenue
Service.
GAIN ON DISPOSITION OF COMMON STOCK
A non-U.S. holder generally will not be subject to United States federal
income tax in respect of gain recognized on a disposition of Common Stock
unless (i) the gain is effectively connected with a trade or business of the
non-U.S. holder in the United States, (ii) in the case of a non-U.S. holder
who is an individual and holds the Common Stock as a capital asset, such
holder is present in the United States for 183 or more days in the taxable
year of the disposition and certain other conditions are met, (iii) the non-
U.S. holder is subject to tax
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<PAGE>
pursuant to the provisions of United States tax law applicable to certain
United States expatriates, or (iv) the Company is or has been a "U.S. real
property holding corporation" for federal income tax purposes and, if the
Common Stock is regularly traded on an established securities market, the non-
U.S. holder held, directly or indirectly, at any time during the 5-year period
ending on the date of disposition (or such shorter period that such shares
were held) more than 5% of the Common Stock. The Company has not been and does
not anticipate becoming a "U.S. real property holding corporation" for United
States federal income tax purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
Generally, the Company must report to the U.S. Internal Revenue Service the
amount of dividends paid, the name and address of the recipient and the
amount, if any, of tax withheld. A similar report is sent to the holder.
Pursuant to tax treaties or other agreements, the U.S. Internal Revenue
Service may make its reports available to tax authorities in the recipient's
country of residence. Dividends not subject to withholding tax may be subject
to backup withholding if the non-U.S. holder is not an "exempt recipient" and
fails to provide a tax identification number and other information to the
Company. Under the Proposed Regulations, dividend payments generally will be
subject to information reporting and backup withholding unless applicable
certification requirements are satisfied.
If the proceeds of a disposition of Common Stock are paid over by or through
a United States office of a broker, the payment is subject to information
reporting and possible backup withholding at a 31% rate unless the disposing
holder certifies under penalties of perjury as to his name, address, and non-
U.S. holder status or otherwise establishes an exemption. Generally, United
States information reporting and backup withholding requirement will not apply
to a payment of disposition proceeds if the payment is made outside the United
States through a non-United States office of a broker. However, United States
information reporting requirements (but not backup withholding) will apply to
a payment of disposition proceeds outside the United States if (A) the payment
is made through an office outside the United States of a broker that either
(i) is a U.S. person, (ii) derives 50% or more of its gross income for certain
periods from the conduct of a trade or business in the United States or (iii)
is a "controlled foreign corporation" for United States federal income tax
purposes and (B) the broker fails to maintain documentary evidence that the
holder is a non-U.S. holder or that the holder otherwise is entitled to an
exemption.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained.
FEDERAL ESTATE TAXES
Common Stock held by a non-U.S. holder at the time of death will be included
in such holder's gross estate for United States federal estate tax purposes
unless an applicable estate tax treaty provides otherwise.
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<PAGE>
UNDERWRITING
Under the terms of, and subject to the conditions contained in, the U.S.
Underwriting Agreement, the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, each of the
underwriters named below (the "U.S. Underwriters"), for whom Lehman Brothers
Inc., Cowen & Company and Salomon Brothers Inc are acting as representatives
(the "Representatives"), has severally agreed to purchase from the Company,
and the Company has agreed to sell to each U.S. Underwriter, the number of
shares of Common Stock set forth opposite the name of such U.S. Underwriter
below:
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS SHARES
----------------- ---------
<S> <C>
Lehman Brothers Inc................................................
Cowen & Company....................................................
Salomon Brothers Inc...............................................
---------
Total ......................................................... 9,600,000
=========
</TABLE>
Under the terms of, and subject to the conditions contained in, the
International Underwriting Agreement, the form of which is filed as an exhibit
to the Registration Statement of which this Prospectus forms a part, each of
the managers named below (the "International Managers") for whom Lehman
Brothers International (Europe), Cowen & Company and Salomon Brothers
International Limited are acting as lead managers (the "Lead Managers"), has
severally agreed to purchase from the Company, and the Company has agreed to
sell to each International Manager, the number of shares of Common Stock set
forth opposite the name of such International Manager below:
<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL MANAGERS SHARES
---------------------- ---------
<S> <C>
Lehman Brothers International (Europe).............................
Cowen & Company....................................................
Salomon Brothers International Limited.............................
---------
Total ......................................................... 2,400,000
=========
</TABLE>
The U.S. Underwriting Agreement and the International Underwriting Agreement
(collectively, the "Underwriting Agreements") provide that the obligations of
the U.S. Underwriters and the International Managers to purchase shares of
Common Stock are subject to certain conditions, and that, if any of the
foregoing shares of Common Stock are purchased by the U.S. Underwriters
pursuant to the U.S. Underwriting Agreement or by the International Managers
pursuant to the International Underwriting Agreement, all the shares of Common
Stock agreed to be purchased by either the U.S. Underwriters or the
International Managers, as the case may be, pursuant to their respective
Underwriting Agreements must be so purchased. The offering price and
underwriting discounts and commissions for the U.S. Offering and the
International Offering are identical. The closing of the U.S. Offering is a
condition to the closing of the International Offering, and the closing of the
International Offering is a condition to the closing of the U.S. Offering.
The Company has been advised that the U.S. Underwriters and the
International Managers propose to offer the shares of Common Stock directly to
the public initially at the public offering price set forth on the cover page
of this Prospectus, and to certain selected dealers (who may include the U.S.
Underwriters and the International Managers) at such public offering price
less a selling concession not in excess of $ per share.
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<PAGE>
The selected dealers may reallow a concession not in excess of $ per share
to certain brokers and dealers. After the initial public offering, the public
offering price, the concession to selected dealers and reallowance may be
changed by the Representatives and the Lead Managers.
Prior to the Offerings, there has been no public market for the Common
Stock. There can be no assurance that an active trading market will develop
for shares of the Common Stock or as to the price at which shares of the
Common Stock may trade in the public market from time to time subsequent to
the Offerings. The initial public offering price for the Common Stock will be
determined by negotiations among the Company, the Representatives and the Lead
Managers. Among the factors to be considered in determining the initial public
offering price of the Common Stock, in addition to prevailing market
conditions, will be the financial and operating history and condition of the
Company, the Company's business and financial prospects, the prospects for the
industry in which the Company operates, the recent market prices of securities
of companies in businesses similar to that of the Company and other relevant
factors.
The Company has granted to the U.S. Underwriters and the International
Managers options to purchase up to an aggregate of 1,440,000 and 360,000
additional shares of Common Stock, respectively, exercisable solely to cover
over-allotments, at the initial price to the public less the aggregate
underwriting discounts shown on the cover page of this Prospectus. Either or
both options may be exercised at any time up to 30 days after the date of this
Prospectus. To the extent that the U.S. Underwriters or International Managers
exercise such options, each of the U.S. Underwriters or International
Managers, as the case may be, will be committed, subject to certain
conditions, to purchase a number of the additional shares of Common Stock
proportionate to such U.S. Underwriter's or International Manager's initial
commitment.
The U.S. Underwriters and the International Managers have entered into an
Agreement Between U.S. Underwriters and International Managers pursuant to
which each U.S. Underwriter has agreed that, as part of the distribution of
the shares (plus any of the shares to cover over-allotments) of Common Stock
offered in the U.S. Offering, (i) it is not purchasing any of such shares for
the account of anyone other than a U.S. Person (as defined below) and (ii) it
has not offered or sold, and will not offer, sell, resell or deliver, directly
or indirectly, any of such shares or distribute any Prospectus relating to the
U.S. Offering to anyone other than a U.S. Person. In addition, pursuant to the
same Agreement, each International Manager has agreed that, as part of the
distribution of the shares (plus any of the shares to cover over-allotments)
of Common Stock offered in the International Offering, (i) it is not
purchasing any of such shares for the account of a U.S. Person and (ii) it has
not offered or sold, and will not offer, sell, resell or deliver, directly or
indirectly, any of such shares or distribute any Prospectus relating to the
International Offering to any U.S. Person. Each International Manager has also
agreed that it will offer to sell shares only in compliance with all relevant
requirements of any applicable laws.
The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the Underwriting Agreements and the
Agreement Between U.S. Underwriters and International Managers, including (i)
certain purchases and sales between the U.S. Underwriters and International
Managers, (ii) certain offers, sales, resales, deliveries or distributions to
or through investment advisors or other persons exercising investment
discretion, (iii) purchases, offers or sales by a U.S. Underwriter who is also
acting as an International Manager or by an International Manager who is also
acting as a U.S. Underwriter and (iv) other transactions specifically approved
by the Representatives and the Lead Managers. As used herein, "U.S. Person"
means any resident or citizen of the United States or Canada and its
provinces, any corporation or other entity created or organized in or under
the laws of the United States or Canada and its provinces or any estate or
trust the income of which is subject to United States or Canadian federal
income taxation regardless of the source of its income. The term "United
States" means the United States of America (including the District of
Columbia) and its territories, its possessions and other areas subject to its
jurisdiction.
Pursuant to the Agreement Between U.S. Underwriters and International
Managers, sales may be made between the U.S. Underwriters and the
International Managers of such number of shares of Common Stock as may be
mutually agreed upon. The price of any shares so sold shall be the public
offering price as then in effect
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<PAGE>
for Common Stock being sold by the U.S. Underwriters and the International
Managers, less an amount not greater than the selling concession allocable to
such Common Stock. To the extent there are sales between the U.S. Underwriters
and the International Managers pursuant to the Agreement Between U.S.
Underwriters and International Managers, the number of shares initially
available for sale by the U.S. Underwriters or by the International Managers
may be more or less than the amount appearing on the cover page of this
Prospectus.
Each International Manager has represented and agreed that (i) it has not
offered or sold, and will not offer or sell, in the United Kingdom, by means
of any document, any shares of the Common Stock other than to persons whose
ordinary business it is to buy or sell shares or debentures, whether as
principal or agent (except under circumstances which do not constitute an
offer to the public within the meaning of the Companies Act 1985); (ii) it has
complied and will comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to the
Common Stock in, from or otherwise involving the United Kingdom; and (iii) it
has only issued or passed on, and will only issue and pass on to any person in
the United Kingdom, any document received by it in connection with the issue
of the Common Stock if that person is of a kind described in Article 9(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1988 or is a person to whom the document may otherwise be lawfully issued or
passed on.
Purchasers of the shares offered pursuant to the Offerings may be required
to pay stamp taxes and other charges in accordance with the laws and practices
of the country of purchase in addition to the initial public offering price
set forth on the cover page hereof.
The Company has agreed to indemnify the U.S. Underwriters and the
International Managers against certain liabilities, including liabilities
under the Securities Act or to contribute to payments that U.S. Underwriters
and the International Managers may be required to make in respect thereof.
In connection with the Offerings, the officers and directors of the Company
and certain other securityholders, holding in the aggregate shares of
Common Stock and vested options to purchase an additional shares of
Common Stock immediately after the Offerings, and the Company have agreed,
with certain exceptions, not to sell or otherwise dispose of any shares of
Common Stock for a period of 180 days from the date of this Prospectus, in
each case, without the written consent of Lehman Brothers.
The Representatives have informed the Company that the U.S. Underwriters do
not intend to confirm sales of Common Stock to any accounts over which they
exercise discretionary authority.
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of the
shares of Common Stock offered hereby will be passed upon for the Company by
Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California, and for the Underwriters by Gray Cary Ware & Freidenrich, A
Professional Corporation, Palo Alto, California.
EXPERTS
The consolidated financial statements of Navigation Technologies Corporation
as of December 31, 1994 and 1995, and for each of the years in the three year
period ended December 31, 1995 and the financial statements of Shields
Enterprises, Inc. as of September 30, 1994 and 1995, and for each of the years
in the three year period ended September 30, 1995 have been included herein
and in the registration statement in reliance upon the reports of KPMG Peat
Marwick LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.
The report of KPMG Peat Marwick LLP covering the December 31, 1995
consolidated financial statements of Navigation Technologies Corporation
contains an explanatory paragraph that states that the Company has had
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<PAGE>
recurring losses from operations since inception and requires significant
additional financing which raise substantial doubt about the Company's ability
to continue as a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of that
uncertainty.
CHANGE IN INDEPENDENT AUDITOR
At a meeting on December 15, 1995, the Company's Board of Directors decided
to retain KPMG Peat Marwick LLP as the independent auditor for the Company and
to replace the Company's former auditor. KPMG Peat Marwick LLP has served as
independent auditor for SEI since 1992 and for NavTech Europe since 1993.
There were no disagreements with the former auditor regarding any matters with
respect to accounting principles or practices, financial statement disclosure,
or auditing scope or procedure at the time of the change or with respect to
the Company's consolidated financial statements for fiscal 1993 and 1994. The
former auditor's reports for fiscal 1993 and 1994 are not a part of and do not
cover the consolidated financial statements of the Company included in this
Prospectus. Such reports did not contain an adverse opinion or a disclaimer of
an opinion or qualifications as to uncertainty, audit scope or accounting
principles. Prior to retaining KPMG Peat Marwick LLP, NavTech had not
consulted with KPMG Peat Marwick LLP regarding accounting principles, except
as it relates to consultations regarding SEI and NavTech Europe, the Company's
European subsidiary.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C. a Registration Statement on Form S-1 under the Securities Act
with respect to the shares of Common Stock offered hereby. This Prospectus
does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and the Common Stock offered hereby, reference is made
to the Registration Statement and the exhibits and schedules filed therewith.
Statements contained in this Prospectus as to the contents of any contract or
any other document referred to are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. A copy of the Registration
Statement, and the exhibits and schedules thereto, may be inspected without
charge at the public reference facilities maintained by the Securities and
Exchange Commission in Room 1024, 450 Fifth Street, NW, Washington, D.C.
20549, and at the regional offices of the Commission located at Seven World
Trade Center, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and copies of all or any part of
the Registration Statement may be obtained from the Commission upon payment of
a prescribed fee. The Securities and Exchange Commission maintains a World
Wide Web site that contains reports, proxy and information statements and
other information filed electronically with the Commission. The address of the
site is http://www.sec.gov.
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NAVIGATION TECHNOLOGIES CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Navigation Technologies Corporation and Subsidiaries:
Independent Auditors' Report............................................. F-2
Consolidated Balance Sheets.............................................. F-3
Consolidated Statements of Operations.................................... F-4
Consolidated Statements of Stockholders' Equity (Deficit)................ F-5
Consolidated Statements of Cash Flows.................................... F-6
Notes to Consolidated Financial Statements............................... F-7
Shields Enterprises, Inc.:
Independent Auditors' Report............................................. F-18
Balance Sheets........................................................... F-19
Statements of Operations................................................. F-20
Statements of Stockholders' Equity (Deficit)............................. F-21
Statements of Cash Flows................................................. F-22
Notes to Financial Statements............................................ F-23
Unaudited Pro Forma Combined Financial Statements:
Pro Forma Combined Financial Information................................. F-28
Pro Forma Combined Balance Sheet......................................... F-29
Pro Forma Combined Statements of Operations.............................. F-30
Notes to Pro Forma Combined Financial Statements......................... F-32
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Navigation Technologies Corporation:
We have audited the accompanying consolidated balance sheets of Navigation
Technologies Corporation and subsidiaries (the Company) as of December 31,
1994 and 1995, and the related consolidated statements of operations,
stockholders' equity (deficit), and cash flows for each of the years in the
three year period ended December 31, 1995. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Navigation
Technologies Corporation and subsidiaries as of December 31, 1994 and 1995,
and the results of their operations and their cash flows for each of the years
in the three year period ended December 31, 1995, in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 1 to the consolidated financial statements, the Company has had recurring
losses from operations since inception and requires significant additional
financing which raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
KPMG Peat Marwick LLP
Palo Alto, California
June 4, 1996, except for
the description of the
reverse stock split in
Note 7 which is as of July
12, 1996
F-2
<PAGE>
NAVIGATION TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1994 1995 1996
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... $ 30,220 $ 23,573 $ 8,315
Accounts receivable......................... 1,749 990 488
Prepaid expenses and other current assets... 352 349 1,511
--------- --------- ---------
Total current assets....................... 32,321 24,912 10,314
Property and equipment, net.................. 4,192 5,038 5,204
Deposits and other assets.................... 53 76 95
--------- --------- ---------
Total assets............................... $ 36,566 $ 30,026 $ 15,613
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable............................ $ 3,017 $ 2,425 $ 2,122
Accounts payable to affiliate............... 1,158 759 1,011
Accrued payroll and related expenses........ 1,442 2,193 2,656
Other accrued expenses...................... 404 2,115 1,979
Deferred revenue............................ 133 636 2,263
--------- --------- ---------
Total current liabilities.................. 6,154 8,128 10,031
Long-term source material obligations........ 4,404 6,757 6,834
Deferred license revenue..................... 7,153 8,227 8,426
Loan payable to related party................ 4,343 5,111 5,082
--------- --------- ---------
Total liabilities.......................... 22,054 28,223 30,373
Stockholders' equity (deficit):
Convertible preferred stock, $0.001 par
value; 20,000 shares authorized; 10,547,
11,091 and 11,685 shares issued and
outstanding in 1994, 1995 and 1996,
respectively (liquidation preference of
$113,128 in 1995).......................... 11 11 12
Common stock, $0.001 par value; 150,000
shares authorized; 12,488, 12,036 and
11,445 shares issued and outstanding in
1994, 1995 and 1996, respectively.......... 12 12 11
Additional paid-in capital.................. 160,831 161,068 161,080
Stock subscriptions receivable.............. (41,184) -- --
Cumulative translation adjustment........... (962) 1,820 1,801
Accumulated deficit......................... (104,196) (161,108) (177,664)
--------- --------- ---------
Total stockholders' equity (deficit)....... 14,512 1,803 (14,760)
Commitments and contingencies
--------- --------- ---------
Total liabilities and stockholders' equity
(deficit)................................. $ 36,566 $ 30,026 $ 15,613
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
NAVIGATION TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------- -----------------------
1993 1994 1995 1995 1996
-------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Database license and
distribution........... $ 1,093 $ 1,721 $ 3,377 $ 675 $ 577
Other................... 762 765 296 80 69
-------- -------- -------- -------- --------
Total revenue.......... 1,855 2,486 3,673 755 646
-------- -------- -------- -------- --------
Costs and expenses:
Database production and
updating............... 18,713 31,075 40,359 9,269 9,842
Software engineering and
development............ 4,506 4,337 8,314 1,624 3,063
Selling, general and
administrative......... 3,913 7,217 13,444 2,931 4,050
-------- -------- -------- -------- --------
Total costs and
expenses.............. 27,132 42,629 62,117 13,824 16,955
-------- -------- -------- -------- --------
Loss from operations... (25,277) (40,143) (58,444) (13,069) (16,309)
Other income (expense):
Interest income......... 187 1,519 2,768 938 159
Interest expense........ (1,088) (1,715) (1,220) (278) (320)
Other income (expense).. 326 (763) (16) (30) (86)
-------- -------- -------- -------- --------
Net loss............... $(25,852) $(41,102) $(56,912) $(12,439) $(16,556)
======== ======== ======== ======== ========
Pro forma net loss per
share................... $ (2.57) $ (0.67)
======== ========
Shares used in per share
computation............. 22,114 24,782
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
NAVIGATION TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK
------------------ --------------
ADDITIONAL STOCK CUMULATIVE TOTAL
PAID-IN SUBSCRIPTIONS TRANSLATION ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE ADJUSTMENT DEFICIT EQUITY(DEFICIT)
--------- ------- ------ ------ ---------- ------------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances as of
December 31, 1992.... 5,870 $ 6 2,859 $ 3 $ 33,991 $ -- $ 430 $ (37,242) $ (2,812)
Issuance of
convertible preferred
stock................ 1,729 2 -- -- 8,106 -- -- -- 8,108
Exercise of stock
options.............. -- -- 161 -- 83 -- -- -- 83
Issuance of common
stock for services... -- -- 229 -- 2,124 -- -- -- 2,124
Issuance of common
stock for cash....... -- -- 102 -- 950 -- -- -- 950
Issuance of common
stock for stock
subscriptions........ -- -- 127 -- 1,181 (1,181) -- -- --
Conversion of note
payable into
convertible preferred
stock................ 242 -- -- -- 1,130 -- -- -- 1,130
Conversion of
convertible preferred
stock into common
stock................ (7,841) (8) 7,841 8 -- -- -- -- --
Conversion of
convertible
debentures into
common stock......... -- -- 442 -- 4,107 -- -- -- 4,107
Translation
adjustment........... -- -- -- -- -- -- 594 -- 594
Net loss.............. -- -- -- -- -- -- -- (25,852) (25,852)
--------- ------ ------ --- -------- ------- ------ --------- --------
Balances as of
December 31, 1993.... -- -- 11,761 11 51,672 (1,181) 1,024 (63,094) (11,568)
Issuance of
convertible preferred
stock for cash and
stock subscriptions,
net of $601 of
issuance costs....... 8,004 8 -- -- 81,687 (40,000) -- -- 41,695
Exchange of common
stock for convertible
preferred stock...... 1,209 1 (1,209) (1) -- -- -- -- --
Issuance of common
stock for cash....... -- -- 1,601 2 10,212 -- -- -- 10,214
Exercise of stock
options.............. -- -- 5 -- 12 -- -- -- 12
Issuance of common
stock for cash and
stock subscriptions.. -- -- 119 -- 1,236 (1,184) -- -- 52
Issuance of common
stock for services... -- -- 20 -- 204 -- -- -- 204
Conversion of
convertible
debentures into
convertible preferred
stock and common
stock................ 179 -- 191 -- 3,774 -- -- -- 3,774
Conversion of notes
payable into
convertible preferred
stock................ 1,155 2 -- -- 12,034 -- -- -- 12,036
Payment of stock
subscriptions........ -- -- -- -- -- 1,181 -- -- 1,181
Translation
adjustment........... -- -- -- -- -- -- (1,986) -- (1,986)
Net loss.............. -- -- -- -- -- -- -- (41,102) (41,102)
--------- ------ ------ --- -------- ------- ------ --------- --------
Balances as of
December 31, 1994.... 10,547 11 12,488 12 160,831 (41,184) (962) (104,196) 14,512
Exchange of common
stock for convertible
preferred stock...... 544 -- (544) -- -- -- -- -- --
Exercise of stock
options.............. -- -- 92 -- 237 -- -- -- 237
Payment of stock
subscriptions........ -- -- -- -- -- 41,184 -- -- 41,184
Translation
adjustment........... -- -- -- -- -- -- 2,782 -- 2,782
Net loss.............. -- -- -- -- -- -- -- (56,912) (56,912)
--------- ------ ------ --- -------- ------- ------ --------- --------
Balances as of
December 31, 1995.... 11,091 11 12,036 12 161,068 -- 1,820 (161,108) 1,803
Exchange of common
stock for convertible
preferred stock
(unaudited).......... 594 1 (594) (1) -- -- -- -- --
Exercise of stock
options (unaudited).. -- -- 3 -- 12 -- -- -- 12
Translation adjustment
(unaudited).......... -- -- -- -- -- -- (19) -- (19)
Net loss (unaudited).. -- -- -- -- -- -- -- (16,556) (16,556)
--------- ------ ------ --- -------- ------- ------ --------- --------
Balances as of March
31, 1996 (unaudited). 11,685 $ 12 11,445 $11 $161,080 $ -- $1,801 $(177,664) $(14,760)
========= ====== ====== === ======== ======= ====== ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
NAVIGATION TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------- -----------------------
1993 1994 1995 1995 1996
-------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net loss............... $(25,852) $(41,102) $(56,912) $(12,439) $(16,556)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Depreciation and
amortization......... 505 1,233 2,262 516 638
Noncash interest on
refundable license
payments............. 608 707 782 191 199
Noncash interest on
notes payable and
debentures........... 463 968 424 93 112
Long-term source
material obligations. -- 4,302 2,175 345 263
Issuance of common
stock for services... 2,124 204 -- -- --
Other................. 20 -- (27) -- --
Changes in operating
assets and
liabilities:
Accounts receivable.. 464 (1,402) 759 (1,684) 502
Prepaid expenses and
other current
assets.............. (527) 201 3 11 (1,162)
Deposits and other
assets.............. (15) (13) (23) (10) (19)
Note receivable from
related party....... (200) 200 -- -- --
Accounts payable..... 313 1,164 (991) (964) (51)
Accrued payroll and
related expenses.... 288 807 751 851 463
Other accrued
expenses............ 31 221 1,711 966 (136)
Deferred revenue..... -- -- 503 765 1,627
-------- -------- -------- -------- --------
Net cash used in
operating
activities......... (21,778) (32,510) (48,583) (11,359) (14,120)
-------- -------- -------- -------- --------
Cash flows used in
investing activities--
acquisition of property
and equipment.......... (675) (3,288) (2,960) (483) (877)
-------- -------- -------- -------- --------
Cash flows from
financing activities:
Receipts of stock
subscriptions
receivable............ -- 1,181 41,184 -- --
Loans.................. 8,114 12,480 -- -- --
Sale of capital stock.. 9,141 51,973 237 1,995 12
Deferred license
revenue............... 1,000 633 341 -- --
-------- -------- -------- -------- --------
Net cash provided by
financing
activities......... 18,255 66,267 41,762 1,995 12
-------- -------- -------- -------- --------
Effect of exchange rate
changes on cash........ 291 (1,682) 3,134 (1,089) (273)
-------- -------- -------- -------- --------
Net (decrease) increase
in cash and cash
equivalents............ (3,907) 28,787 (6,647) (10,936) (15,258)
Cash and cash
equivalents at
beginning of period.... 5,340 1,433 30,220 30,220 23,573
-------- -------- -------- -------- --------
Cash and cash
equivalents at end of
period................. $ 1,433 $ 30,220 $ 23,573 $ 19,284 $ 8,315
======== ======== ======== ======== ========
Supplemental disclosures
of cash flow
information:
Cash paid during the
period for interest... $ 17 $ 40 $ 14 $ 36 $ 9
Common stock issued for
services.............. $ 2,124 $ 204 $ -- $ -- $ --
Common stock issued for
stock subscriptions
receivable............ $ 1,181 $ 1,184 $ -- $ -- $ --
Convertible preferred
stock issued for stock
subscriptions
receivable............ $ -- $ 40,000 $ -- $ -- $ --
Conversion of
convertible debt,
including accrued
interest, into capital
stock................. $ 5,237 $ 15,810 $ -- $ -- $ --
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
NAVIGATION TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 IS UNAUDITED)
(1) SUMMARY OF THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
The Company
Navigation Technologies Corporation (the Company) was incorporated in
December 1987 and is the successor to Karlin & Collins, Inc., which was
incorporated in August 1985. The Company was a development stage enterprise
prior to the year ended December 31, 1995. The Company, together with its
subsidiaries, develops, maintains and markets a database for route guidance
and other applications in the United States and Europe. The Company's database
is a digital representation of road transportation networks that includes the
information necessary to determine accurate and efficient routes for vehicle
navigation. The Company's database is licensed to leading automotive
electronics manufacturers that are developing products for route guidance.
These systems electronically calculate an efficient route within the
geographic coverage area of the database and provide real-time positioning and
turn-by-turn audible and/or graphical directions to guide the driver at each
turn.
In September 1994, the Company acquired European Geographic Technologies
B.V. (EGT), a Netherlands-based company that develops, maintains, and markets
a database for route guidance and other applications in Europe. As the Company
and EGT were entities under common control, the acquisition has been accounted
for in a manner similar to a pooling of interests and, accordingly, the
accompanying consolidated financial statements have been retroactively
restated to include the accounts of EGT for all periods presented.
The Company has been primarily engaged in development of software and
methodologies for the production, updating and use of its database and in the
production and updating of database coverage for parts of the United States
and Europe. The Company is currently realizing revenue primarily from license
fees from customers developing applications which incorporate the Company's
database.
The consolidated financial statements have been prepared on a going concern
basis. Continuance of the Company as a going concern is dependant upon the
Company's ability to raise substantial additional financing. The Company
believes that the net proceeds from its proposed initial public offering (IPO)
and a direct placement of its common stock to be consummated concurrently with
the IPO, together with its other available cash resources, will be sufficient
to meet the Company's cash needs through at least the first quarter of 1998.
Significant additional financing will be required in order for the Company to
continue funding its operations.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.
Cash Equivalents
The Company considers all highly liquid debt instruments purchased with
original maturities of three months or less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization are
computed using the straight-line method over the estimated useful lives of the
assets, ranging from three to five years. Leasehold improvements are amortized
over the lesser of their estimated useful lives or the lease terms.
F-7
<PAGE>
NAVIGATION TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Revenue Recognition
The Company recognizes revenue in accordance with the provisions of American
Institute of Certified Public Accountants Statement of Position No. 91-1,
Software Revenue Recognition. Annual nonrefundable minimum license fees are
recognized as revenue ratably over the licensing period. License and
distribution revenue are recognized when the Company or its customers ship the
Company's database or products incorporating the Company's database.
Database Production and Updating Costs
Database production and updating costs consist primarily of research and
acquisition costs to obtain information used to construct the database, direct
costs of database production and validation and ongoing costs for updating the
database. Database production and updating costs are being charged to
operations as incurred.
Software Engineering and Development Costs
Software engineering and development costs consist primarily of costs for
development of software used in database production and updating activities
and software to facilitate usage of the Company's database and application
development by customers. Software engineering and development costs are
charged to operations as incurred until such time as both technological
feasibility is established and future economic benefit is assured. To date,
such conditions have not been satisfied and, accordingly, all software
engineering and development costs have been expensed as incurred.
Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in operations in the period that includes
the enactment date. A valuation allowance is recorded for deferred tax assets
whose realization is not more likely than not.
Financial Instruments
The carrying amount of the Company's financial instrument assets and
liabilities approximates fair value because of the short maturity of those
instruments.
Foreign Currency Translation
The financial statements for the Company's foreign subsidiaries are measured
using the local currency as the functional currency. Foreign assets and
liabilities in the accompanying consolidated balance sheets have been
translated at the rate of exchange as of the balance sheet date. Revenue and
expenses are translated at the average exchange rate for the year. Translation
adjustments are reported as a separate component of stockholders' equity.
Foreign currency transaction gains and losses are included in the results of
operations.
Use of Estimates
The Company's management has made estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent assets
and liabilities to prepare these consolidated financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
F-8
<PAGE>
NAVIGATION TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Pro Forma Net Loss Per Share
Pro forma net loss per share is computed using net loss and is based on the
weighted average number of outstanding shares of common stock, convertible
preferred stock (on an "as if converted" basis) and dilutive common equivalent
shares using the treasury stock method. In accordance with certain Securities
and Exchange Commission (SEC) Staff Accounting Bulletins, such computations
include all common and common equivalent shares issued 12 months prior to the
IPO date as if they were outstanding for all periods presented, using the
treasury stock method and the anticipated IPO price.
Unaudited Interim Consolidated Financial Statements
The unaudited interim consolidated financial statements as of March 31, 1996
and for the three month periods ended March 31, 1995 and 1996 have been
prepared on substantially the same basis as the audited consolidated financial
statements, and in the opinion of management include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial information set forth therein.
Recent Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of.
SFAS No. 121 is effective for fiscal years beginning after December 15, 1995,
and requires long-lived assets to be evaluated for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. The Company adopted SFAS No. 121 in 1996. Such adoption
did not have a material effect on the Company's consolidated financial
position or results of operations.
(2) RELATED PARTY TRANSACTIONS
Philips
As of December 31, 1995, Philips held 11,027,000 shares of the Company's
convertible preferred stock and 4,098,000 shares of its common stock,
representing approximately 37% of the Company's voting stock and 68% of the
Company's total equity. The convertible preferred stock held by Philips will
be converted into voting common stock upon the closing of the IPO.
In 1994, Philips agreed with the Company that, for the three year period
following the IPO, except as approved by a majority of the Company's directors
other than Philips' designees, Philips will not own more than 75% of the
outstanding common stock of the Company, except for (i) shares acquired in a
tender offer or exchange offer for all of the Company's common stock or in a
merger, consolidation, mandatory share exchange or similar transaction where
the Company is a party; (ii) shares acquired pursuant to the exercise of any
right of first refusal held by Philips or (iii) otherwise due to actions by
the Company or others which Philips has no right or ability to prevent.
Philips also granted to all persons who were shareholders of the Company on
September 2, 1994 and owned as of that date fewer than 225,000 shares of the
Company's common stock on a fully diluted basis the right to require Philips
to purchase up to the number of shares held by such shareholder on such date
at a per share price of $10.20. This contractual right terminates upon the
closing of the IPO.
F-9
<PAGE>
NAVIGATION TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In September 1994, Philips, a significant stockholder of both EGT and the
Company, entered into agreements with the Company that resulted in the
Company's acquisition of Philips' interest in EGT in exchange for 2,445,000
shares of the Company's convertible preferred stock.
In prior years, the Company borrowed funds from Philips in the form of a
loan denominated in Dutch guilders, of which $4,343,000 and $5,111,000,
including accrued interest, remained outstanding as of December 31, 1994 and
1995, respectively. The loan bore interest at a rate of 9% per annum. In June
1996, the loan, including accumulated interest, was converted to convertible
preferred stock.
In 1993, the Company borrowed $3,027,000 from Philips. The loan and accrued
interest was converted into shares of the Company's convertible preferred
stock during 1994.
The Company purchases data processing services from an affiliate of Philips
in Europe. Total fees charged for these services of $878,000, $1,422,000 and
$2,006,000 are included in database production and updating costs for the
years ended December 31, 1993, 1994 and 1995, respectively.
In June 1996, the Company issued shares of convertible preferred stock to
Philips for $29,284,000 ($11,021,000 of which was paid by conversion of
outstanding loans). Approximately 2,816,000 shares will be issued to Philips
based on the IPO price of $13.00 per share. The number of shares of
convertible preferred stock will be adjusted upward or downward depending on
the actual IPO price.
Shields Enterprises, Inc.
As of December 31, 1995, Shields Enterprises, Inc. (SEI ) held approximately
11% of the Company's total stock outstanding, representing 21% of the
Company's voting stock. SEI provided technical support to the Company on a
contract basis for development of proprietary software and systems for
database construction and updating. The Company also contracted with SEI for
development of software that utilizes the Company's database. The Company
retains all rights in the software and any modifications or enhancements to
the software developed under these agreements. SEI provided the services of
the Company's chairman and another director from SEI for compensation approved
by non-SEI directors. Total fees charged to the Company by SEI of $4,383,000,
$4,456,000 and $8,039,000 are included in operating expenses for the years
ended December 31, 1993, 1994 and 1995, respectively.
Prior to 1994, SEI was granted options for the purchase of 33,000 shares of
the Company's common stock at $1.20 per share and 133,000 shares of the
Company's common stock at $2.40 per share. The options expire by their terms
in March and October 2002, respectively. As of December 31, 1995, options held
by SEI covering 133,000 shares were vested, with the remaining options
covering 33,000 shares vesting monthly through December 1996, subject to the
continued full-time service of the Chairman of SEI as Chairman and chief
executive officer (CEO) of the Company. During 1994, the Company entered into
an agreement with SEI under which the Chairman of SEI will continue to serve
as Chairman and CEO of the Company. The agreement provides that additional
options will be granted beginning in January 1997 based on the Chairman of
SEI's continued service to the Company. In May 1996, the Company's board of
directors approved the principal terms of an agreement with SEI to cancel the
above agreement and options upon the merger with SEI (see Note 11).
Other Related Party
Long-term source material obligations of $2,252,000 and $3,269,000 as of
December 31, 1994 and 1995, respectively, represent an obligation to a
stockholder who provided contract services and electronic source material used
in building a portion of the European database. The obligation is interest
free and payable as a percentage of revenue from licensing the database
incorporating the material provided.
F-10
<PAGE>
NAVIGATION TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(3) PROPERTY AND EQUIPMENT
The components of property and equipment are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1994 1995
------ ------
<S> <C> <C>
Machinery and equipment....................................... $4,449 $6,971
Furniture and fixtures........................................ 1,120 1,613
Purchased software............................................ 911 1,021
Leasehold improvements........................................ 258 314
------ ------
6,738 9,919
Less accumulated depreciation and amortization................ 2,546 4,881
------ ------
$4,192 $5,038
====== ======
</TABLE>
(4) LONG-TERM SOURCE MATERIAL OBLIGATIONS
Long-term source material obligations represent the Company's obligations
for (1) contract services and electronic source materials used in building a
portion of the European database and (2) minimum fees payable to European
government entities related to the use of source materials in the construction
of the Company's database. These obligations are interest free and generally
payable as a percentage of revenue from licensing the database incorporating
the material provided.
(5) DEFERRED LICENSE REVENUE
In 1989 and 1991, the Company entered into agreements with two unaffiliated
companies for use of the Company's database and related navigation software in
route guidance products and other applications. Under these agreements, the
Company received $5,250,000 and $5,591,000 through December 31, 1994 and 1995,
respectively, in exchange for aggregate future credits of $13,500,000, which
can be utilized by such companies as follows:
. Credits against 50% of future license obligations subject to a maximum
of $2,000,000 per company in any one year.
. Credits toward purchase of nonexclusive, nontransferable licenses to
use the Company's navigation software source code.
Any portion of the $13,500,000 in credits that is unused as of December 31,
2000 is to be paid in cash by the Company. In addition, one of the companies
has the option to convert up to $6,000,000 in unused credits into the
Company's common stock on December 31, 1998 at the fair market value of the
Company's common stock at that time. Due to the repayment contingencies
discussed above, amounts received were recorded as deferred license revenue.
The total amount initially recorded of $5,591,000 is being accreted to the
maximum amount repayable of $13,500,000 through December 31, 2000, at rates
ranging 9% to 14% per annum. The charge for the accretion is recorded as
interest expense. In the event the companies use the credits, the liabilities
will be reduced and revenue will be recognized. As of December 31, 1995, the
maximum future credits available have been reduced to $13,451,000.
F-11
<PAGE>
NAVIGATION TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(6) INCOME TAXES
The domestic and foreign components of net loss before income taxes are as
follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
-----------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Domestic............................................. $11,519 $20,530 $25,447
Foreign.............................................. 14,333 20,572 31,465
------- ------- -------
Net loss........................................... $25,852 $41,102 $56,912
======= ======= =======
</TABLE>
Deferred tax assets are summarized as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1994 1995
------- -------
<S> <C> <C>
Research and development credits carryforwards.............. $ 855 $ 1,195
Imputed interest............................................ 764 1,077
Prepaid license fees........................................ 2,107 2,200
Capitalized research and development........................ 1,711 1,144
Net operating loss carryforwards............................ 33,570 55,213
Other deductible temporary differences...................... 127 862
------- -------
Gross deferred tax assets................................. 39,134 61,691
Less valuation allowance.................................... 39,134 61,691
------- -------
Net deferred tax assets................................... $ -- $ --
======= =======
</TABLE>
The total valuation allowance for the years ended December 31, 1994 and
1995, increased by $4,595,000 and $22,557,000, respectively. The Company has
provided a valuation allowance due to the uncertainty of generating future
profits that would allow for the realization of such deferred tax assets.
As of December 31, 1995, the Company had net operating loss carryforwards
for federal and state tax purposes of approximately $67,000,000 and
$26,000,000, respectively. The difference between the federal loss
carryforward and the state loss carryforward results primarily from a 50%
limitation on California loss carryforwards. The Company also had available
tax credit carryforwards of approximately $900,000 and $300,000 for federal
and California tax purposes, respectively. There is no expiration date for
California tax credit carryforwards. The Company had foreign operating loss
carryforwards in Europe of approximately $85,000,000 with no expiration date.
If not utilized, the other federal and California carryforwards expire through
2010 as follows (in thousands):
F-12
<PAGE>
NAVIGATION TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
FEDERAL NET CALIFORNIA
OPERATING NET OPERATING FEDERAL TAX
LOSS LOSS CREDIT
YEAR OF EXPIRATION CARRYFORWARDS CARRYFORWARDS CARRYFORWARDS
------------------ ------------- ------------- -------------
<S> <C> <C> <C>
1996............................ $ -- $ 1,840 $ --
1997............................ -- 3,673 --
1998............................ -- 7,223 --
1999............................ -- 2,411 --
2000............................ 123 10,853 --
Thereafter...................... 66,877 -- 900
------- ------- ----
$67,000 $26,000 $900
======= ======= ====
</TABLE>
(7) STOCKHOLDERS' EQUITY
Convertible Preferred Stock
The convertible preferred stock has the following rights:
Voting
The convertible preferred stock has no voting rights except on
matters relating to the certificate of incorporation, bylaws, exchange
of shares, merger of the Company, sales of assets, and plans for
liquidation or dissolution of the Company. In such cases, each share of
convertible preferred stock has voting rights equal to an equivalent
number of shares of common stock into which it is convertible.
Dividends
Holders of convertible preferred stock are entitled to receive
noncumulative dividends, when and if declared by the board of
directors. The Company shall make no distribution to holders of common
stock until the convertible preferred stock dividends have been paid.
No dividends were declared by the board of directors through December
31, 1995.
Liquidation
In the event of any liquidation, dissolution, or winding up of the
Company, the holders of convertible preferred stock are entitled to
receive an amount of $10.20 per share, and any declared but unpaid
dividends prior to and in preference to any distribution to the holders
of common stock. The remaining assets, if any, shall be distributed
ratably among the holders of the common and convertible preferred
stock, based on the number of shares held (assuming conversion of
convertible preferred stock).
Conversion and Registration
Each share of convertible preferred stock is convertible, at the
option of the holder, into one share of common stock, subject to
adjustment for dilution. The convertible preferred stock held by
Philips is subject to certain restrictions related to conversion. Each
share of convertible preferred stock automatically converts into common
stock upon the closing of a public offering of common stock with gross
proceeds of at least $40,000,000. The Company has reserved shares of
common stock in the event of conversion.
F-13
<PAGE>
NAVIGATION TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Stock Option Plan
In 1988, the Company adopted a stock option plan (the 1988 Plan). The total
authorized shares under the 1988 Plan are 2,975,000. Options to purchase a
total of 322,000 and 417,000 shares of common stock were exercisable as of
December 31, 1994 and 1995, respectively.
Options granted under the 1988 Plan are for periods not to exceed 10 years
and may be either incentive stock options as that term is used in Section 422
of the Internal Revenue Code (Incentive Stock Options), or options which do
not qualify as Incentive Stock Options (Supplemental Stock Options). All
grants under the 1988 Plan must be at prices of not less than 100% of the fair
market value of the common stock as determined by the board of directors at
the date of grant in the case of Incentive Stock Options and 85% of fair
market value in the case of Supplemental Stock Options. Options granted after
July 1995 generally vest monthly over 48 months and options granted prior to
July 1995 generally vest at 25% per year from the date of employment or grant
and are adjusted pro rata for any stock splits or dividends.
The following summarizes activity under the 1988 Plan:
<TABLE>
<CAPTION>
SHARES
AVAILABLE OPTIONS PRICE
FOR GRANT OUTSTANDING PER SHARE
--------- ----------- -----------
<S> <C> <C> <C>
Balances, December 31, 1992............... 184,000 516,000 $ 0.48-2.40
Additional shares reserved............... 83,000 --
Options granted.......................... (229,000) 229,000 4.20-4.68
Options exercised........................ -- (161,000) 0.48-1.20
Options canceled......................... 29,000 (29,000) 0.48-4.68
--------- --------- -----------
Balances, December 31, 1993............... 67,000 555,000 0.48-4.68
Additional shares reserved............... 1,892,000
Options granted.......................... (345,000) 345,000 4.80-10.20
Options exercised........................ -- (5,000) 0.48-4.68
Options canceled......................... 44,000 (44,000) 0.48-10.20
--------- --------- -----------
Balances, December 31, 1994............... 1,658,000 851,000 0.48-10.20
Options granted.......................... (662,000) 662,000 10.20
Options exercised........................ -- (92,000) 0.48-10.20
Options canceled......................... 195,000 (195,000) 1.20-10.20
--------- --------- -----------
Balances, December 31, 1995............... 1,191,000 1,226,000 0.48-10.20
Options granted (unaudited).............. (11,000) 11,000 10.20
Options exercised (unaudited)............ -- (3,000) 0.48-10.20
Options canceled (unaudited)............. 57,000 (57,000) 2.40-10.20
--------- --------- -----------
Balances, March 31, 1996 (unaudited)...... 1,237,000 1,177,000 $0.48-10.20
========= =========
</TABLE>
In April 1996, the Company's board of directors approved the 1996 Stock
Option Plan (1996 Plan). The 1996 Plan was amended and restated by the
Company's board of directors in June 1996, subject to shareholder approval.
The 1996 Plan, as amended, provides for grants of incentive stock options,
nonstatutory stock options, and stock purchase rights to employees (including
employees who are officers) of the Company and its subsidiaries; provided
however, that no employee may be granted an option for more than 1,667,000
shares in any one fiscal year. The 1996 Plan also provides for grants of
nonstatutory stock options and stock purchase rights to consultants. The
Company has reserved 5,670,000 shares of common stock for issuance under the
1996 plan.
F-14
<PAGE>
NAVIGATION TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Stock Split
In July 1996, the Company's board of directors approved a one-for-twelve
reverse stock split of its common and convertible preferred stock, subject to
shareholder approval. All references in the consolidated financial statements
to the number of shares of stock have been retroactively restated to reflect
this reverse stock split. In July 1996, the Company's board of directors also
approved a decrease in the authorized number of shares of common stock to
150,000,000 shares, the elimination of the convertible preferred stock and the
authorization of 5,000,000 shares of a new class of preferred stock, all to be
effective concurrently with the IPO.
(8) EMPLOYEE BENEFIT PLAN
In 1991, the Company implemented a savings and investment plan (the 401(k)
Plan) which qualifies as a thrift plan under Section 401(k) of the Internal
Revenue Code. All of the Company's employees who have completed three months
of service are eligible to participate in the 401(k) Plan. The 401(k) Plan
allows participants to contribute up to 20% of eligible compensation but no
more than the amount applicable under the Internal Revenue Service guidelines.
The 401(k) Plan permits, but does not require, additional matching
contributions to the 401(k) Plan by the Company. The Company made no
contributions to the 401(k) Plan through December 31, 1995.
(9) SEGMENT REPORTING
The following summarizes, on a geographic basis, revenue, operating losses
and identifiable assets (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Revenue:
United States................................. $ 1,075 $ 2,101 $ 2,756
Europe........................................ 780 385 917
-------- -------- --------
$ 1,855 $ 2,486 $ 3,673
======== ======== ========
Operating loss:
United States................................. $(13,540) $(19,584) $(25,986)
Europe........................................ (11,737) (20,559) (32,458)
-------- -------- --------
$(25,277) $(40,143) $(58,444)
======== ======== ========
Identifiable assets:
United States.......................................... $ 18,460 $ 11,537
Europe................................................. 18,106 18,489
-------- --------
$ 36,566 $ 30,026
======== ========
</TABLE>
Approximately 44% of the Company's revenue for the year ended December 31,
1993 was from two customers, accounting for 27% and 17% of total revenue.
Approximately 75% of the Company's revenue for the year ended December 31,
1994 was from three customers, accounting for 37%, 19% and 19% of total
revenue. Approximately 81% of the Company's revenue for the year ended
December 31, 1995 was from five customers, accounting for 23%, 21%, 13%, 12%
and 12% of total revenue.
F-15
<PAGE>
NAVIGATION TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(10) COMMITMENTS AND CONTINGENCIES
Lease Obligations
The Company leases its facilities and certain equipment under leases
expiring through 2003. Pursuant to an agreement for software engineering
services, the Company is also responsible for reimbursement of SEI facility
lease costs under a lease expiring in 1998. Monthly payments under certain
facility leases are subject to fixed increases. For accounting purposes, rent
expense is based on a straight-line amortization of the total payments
required over the lease term. The leases require the Company to pay property
taxes, insurance, maintenance, and repair costs.
The aggregate future minimum lease obligations as of December 31, 1995 are
as follows (in thousands):
<TABLE>
<CAPTION>
YEAR
ENDING
DECEMBER 31,
------------
<S> <C>
1996............................................................. $2,633
1997............................................................. 2,015
1998............................................................. 1,498
1999............................................................. 622
2000............................................................. 546
Thereafter....................................................... 98
------
$7,412
======
</TABLE>
Total rent expense under operating leases for facilities and equipment was
$522,000, $1,135,000, and $2,343,000 for the years ended December 31, 1993,
1994 and 1995, respectively.
Contingencies
On November 18, 1994, Etak, the Company's primary competitor in the United
States, filed suit against one of the Company's customers, Zexel USA, Inc.
(Zexel USA), in the United States District Court for the Northern District of
California alleging that Zexel USA's route guidance product infringes U.S.
Patent Nos. 4,796,191 and 4,914,605 (the Etak Patents), and seeking monetary
damages, the trebling of such damages for willful infringement and injunctive
relief. Subsequently, Etak filed an amended complaint adding the Japanese
parent of Zexel USA, Zexel Corporation (Zexel Japan), as a defendant. Etak has
not filed any claims that allege that the Company's database or software
infringes the Etak Patents. The suit is currently scheduled for trial in
October 1996.
On June 30, 1995, Zexel Japan filed a third-party complaint against the
Company, seeking recovery of any and all damages awarded against Zexel Japan,
and for costs and expenses incurred by Zexel Japan, in the litigation with
Etak. The third-party complaint is based on certain alleged representations,
warranties, indemnity and other provisions in license agreements between Zexel
Japan and the Company, pursuant to which the Company provided certain software
products to Zexel Japan which allegedly are used in Zexel USA's route guidance
product. Thereafter, the Company filed an answer to Zexel Japan's complaint,
denying all material allegations thereof and asserting numerous affirmative
defenses, and a counterclaim and cross-claim for indemnification against Zexel
Japan and Zexel USA, respectively. The Company also filed claims against Etak
seeking a declaration that the Etak Patents are invalid, unenforceable and not
infringed by Zexel USA or the Company, and for Etak's violation of the federal
antitrust laws. Proceedings on the antitrust claims against Etak have been
stayed pending the resolution of the underlying patent issues.
If Etak prevails in the litigation, Zexel USA and Zexel Japan (collectively
Zexel) could be enjoined from selling products incorporating the Company's
proprietary technology and could be required to pay significant
F-16
<PAGE>
NAVIGATION TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
monetary damages to Etak. If the Etak litigation were to be resolved by a
settlement, Zexel might be required to make substantial payments to Etak. If
Zexel were found liable to Etak and prevailed on its indemnification claim
against the Company, the Company could be required to pay substantial amounts
to Zexel. Zexel and the Company are vigorously contesting all of Etak's
claims. It is the Company's position that the Etak Patents are invalid,
unenforceable and not infringed. However, the Company cannot predict the
ultimate outcome of the lawsuit. Patent litigation is highly complex and can
extend for a protracted time, which can substantially increase the cost of
such litigation. In connection with the Etak litigation, the Company has
incurred, and expects to continue to incur, substantial legal fees and legal
expenses. The Etak litigation has also diverted, and is expected to continue
to divert, the efforts and attention of the Company's management and technical
personnel. An adverse result in the Etak litigation could have a material
adverse effect on the Company's business, financial condition and results of
operations, including, but not limited to, disruption of the Company's
business relationship with Zexel and other customers and impairment of the
market generally for route guidance products.
(11) ACQUISITION OF SHIELDS ENTERPRISES, INC. (UNAUDITED)
In May 1996, the Company's board of directors approved the principal terms
of an agreement to merge with SEI, a provider of software consulting services,
concurrent with the closing of the IPO. Pursuant to the agreement, all of the
shares of outstanding common stock of SEI will be exchanged for approximately
3,632,000 shares of the Company's common stock (net of 2,595,000 shares of the
Company's common stock exchanged for shares held by SEI which will be
accounted for as treasury stock on the Company's consolidated balance sheet).
The merger will be accounted for as a purchase with the results of SEI
included from the acquisition date. The purchase price of $37,047,000 (based
on a $10.20 value per share for the Company's common stock and net of
$26,472,000 of common stock exchanged for shares held by SEI and accounted for
as treasury stock on the Company's consolidated balance sheet) was assigned to
the fair value of the net assets acquired, including approximately $1,384,000
to the net liabilities assumed and $38,431,000 to goodwill. Goodwill will be
amortized on a straight-line basis over five years from the date of
acquisition.
The following summary prepared on an unaudited pro forma basis combines the
consolidated results of operations as if SEI had been acquired as of the
beginning of the periods presented (in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1995 1996
------------ ------------
<S> <C> <C>
Revenue............................................ $ 31,186 $ 7,785
Pro forma loss from operations..................... (68,280) (19,292)
Pro forma loss per share from operations........... (2.74) (0.70)
</TABLE>
The pro forma results are not necessarily indicative of what would have
occurred if the acquisition had been in effect during the periods presented.
In addition, they are not intended to be a projection of future results and do
not reflect any synergies that might be achieved from combined operations.
F-17
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Shields Enterprises, Inc.:
We have audited the accompanying balance sheets of Shields Enterprises, Inc.
(SEI) as of September 30, 1994 and 1995, and the related statements of
operations, stockholders' equity (deficit), and cash flows for each of the
years in the three year period ended September 30, 1995. These financial
statements are the responsibility of SEI'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, the financial statements referred to above present fairly,
in all material respects, the financial position of Shields Enterprises, Inc.
as of September 30, 1994 and 1995, and the results of its operations and its
cash flows for each of the years in the three year period ended September 30,
1995, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
November 22, 1995, except for the descriptions of the settlement
in Note 10, the merger in Note 11 and the NavTech stock
split in Note 2, which are as of December 28, 1995,
May 14, 1996 and July 12, 1996, respectively
F-18
<PAGE>
SHIELDS ENTERPRISES, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------- MARCH 31,
1994 1995 1996
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 315 $ 1,359 $ 409
Accounts receivable:
Trade............................................ 3,759 4,252 4,121
Affiliate........................................ 530 573 1,059
Other............................................ 2,500 2,500 --
Prepaid expenses and other current assets......... 272 347 291
------- ------- -------
Total current assets............................ 7,376 9,031 5,880
Investment in affiliate............................ 6,761 6,939 8,939
Property and equipment, net........................ 1,088 1,068 1,106
Other receivables.................................. 2,500 -- --
------- ------- -------
Total assets.................................... $17,725 $17,038 $15,925
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable to bank.............................. $ -- $ 438 $ 1,714
Current maturities of long-term debt.............. 134 137 109
Notes payable to stockholders and employees....... 404 902 1,303
Notes payable to others........................... 49 159 --
Accounts payable.................................. 608 367 585
Accrued payroll and related expenses.............. 3,706 3,775 3,493
Customer claim.................................... -- 600 --
Other accrued expenses............................ 404 412 457
Deferred revenue.................................. 263 273 314
------- ------- -------
Total current liabilities....................... 5,568 7,063 7,975
Long-term debt, less current maturities............ 487 429 395
Customer claim..................................... 600 -- --
Deferred income taxes.............................. -- -- --
------- ------- -------
Total liabilities............................... 6,655 7,492 8,370
------- ------- -------
Stockholders' equity:
Common stock, stated value $125 per share; 20,000
shares authorized; 9,500 and 10,764 shares issued
and outstanding in 1994 and 1995, respectively... 1,188 1,345 1,345
Additional paid-in capital........................ 195 3,594 3,594
Common stock subscribed........................... 3,063 -- --
Retained earnings................................. 6,624 4,607 2,616
------- ------- -------
Total stockholders' equity...................... 11,070 9,546 7,555
Commitments and contingencies
------- ------- -------
Total liabilities and stockholders' equity...... $17,725 $17,038 $15,925
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-19
<PAGE>
SHIELDS ENTERPRISES, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER SIX MONTHS ENDED
30, MARCH 31,
-------------------------- -----------------------
1993 1994 1995 1995 1996
------- ------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Consulting and contract
services................. $19,829 $21,451 $25,289 $12,388 $12,903
Affiliated consulting
services................. 4,075 4,276 7,076 2,824 5,130
Other..................... 1,136 2,945 2,543 1,506 566
------- ------- -------- ------- -------
Total revenue............ 25,040 28,672 34,908 16,718 18,599
------- ------- -------- ------- -------
Costs and expenses:
Cost of consulting and
contract services........ 18,242 20,016 21,027 10,162 11,354
Cost of affiliated
consulting services...... 3,067 3,707 6,196 2,527 4,411
Cost of other revenue..... 532 1,752 1,405 961 214
Software engineering and
development.............. 514 3,152 5,004 2,325 2,251
Selling, general and
administrative........... 2,279 2,835 3,119 1,477 2,246
------- ------- -------- ------- -------
Total costs and expenses. 24,634 31,462 36,751 17,452 20,476
------- ------- -------- ------- -------
Income (loss) from
operations.............. 406 (2,790) (1,843) (734) (1,877)
Other income (expense):
Interest income........... 4 59 4 4 51
Interest expense.......... (220) (82) (178) (73) (106)
Gain on sale of
investments.............. 29 259 -- -- --
------- ------- -------- ------- -------
Income (loss) before
extraordinary item...... 219 (2,554) (2,017) (803) (1,932)
Extraordinary item......... -- 15,969 -- -- --
------- ------- -------- ------- -------
Net income (loss)........ $ 219 $13,415 $ (2,017) $ (803) $(1,932)
======= ======= ======== ======= =======
Pro forma net loss data
(unaudited):
Net loss as reported..... $ (2,017) $(1,932)
Pro forma income tax
benefit................. 797 763
-------- -------
Pro forma net loss....... $ (1,220) $(1,169)
======== =======
</TABLE>
See accompanying notes to financial statements.
F-20
<PAGE>
SHIELDS ENTERPRISES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
-------------- RETAINED TOTAL
NUMBER ADDITIONAL COMMON EARNINGS STOCKHOLDERS'
OF PAID-IN STOCK (ACCUMULATED EQUITY
SHARES AMOUNT CAPITAL SUBSCRIBED DEFICIT) (DEFICIT)
------ ------ ---------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balances as of September
30, 1992............... 9,688 $1,211 $ 527 $ -- $(3,784) $(2,046)
Retirement of common
stock.................. (208) (25) (375) -- -- (400)
Dividends paid.......... -- -- -- -- (72) (72)
Net income.............. -- -- -- -- 219 219
------ ------ ------ ------- ------- -------
Balances as of September
30, 1993............... 9,480 1,186 152 -- (3,637) (2,299)
Issuance of common stock
for cash............... 20 2 43 -- -- 45
Common stock subscribed. -- -- -- 3,063 -- 3,063
Dividends paid.......... -- -- -- -- (3,154) (3,154)
Net income.............. -- -- -- -- 13,415 13,415
------ ------ ------ ------- ------- -------
Balances as of September
30, 1994............... 9,500 1,188 195 3,063 6,624 11,070
Issuance of common stock
subscribed............. 660 83 2,980 (3,063) -- --
Issuance of common
stock.................. 604 74 419 -- -- 493
Net loss................ -- -- -- -- (2,017) (2,017)
------ ------ ------ ------- ------- -------
Balances as of September
30, 1995............... 10,764 1,345 3,594 -- 4,607 9,546
Net loss (unaudited).... -- -- -- -- (1,932) (1,932)
Dividends paid (unau-
dited)................. -- -- -- -- (59) (59)
------ ------ ------ ------- ------- -------
Balances as of March 31,
1996 (unaudited)....... 10,764 $1,345 $3,594 $ -- $ 2,616 $ 7,555
====== ====== ====== ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-21
<PAGE>
SHIELDS ENTERPRISES, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER SIX MONTHS ENDED
30, MARCH 31,
------------------------ -----------------------
1993 1994 1995 1995 1996
------ ------- ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)........... $ 219 $13,415 $(2,017) $ (803) $(1,932)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation and
amortization.............. 106 112 495 232 33
Gain on sale of
investments............... (29) (259) -- -- --
Changes in operating assets
and liabilities:
Accounts receivable....... 141 (6,581) 1,964 (1,754) 2,145
Prepaid expenses and other
current assets........... (128) (44) (75) 5 56
Accounts payable.......... 262 148 (241) (36) 218
Accrued payroll and other
expenses................. 1,004 740 77 111 (237)
Customer claim............ 600 -- -- -- (600)
Deferred revenue.......... (146) 164 10 32 41
------ ------- ------- ------- -------
Net cash provided by
(used in) operating
activities.............. 2,029 7,695 213 (2,213) (276)
------ ------- ------- ------- -------
Cash flows from investing ac-
tivities:
Acquisition of property and
equipment.................. (210) (992) (475) (255) (71)
Purchase of stock and
exercise of warrants of
affiliate.................. (62) (6,336) (178) (112) (2,000)
Proceeds from sale of
investments................ 192 369 -- -- --
------ ------- ------- ------- -------
Net cash used in
investing activities.... (80) (6,959) (653) (367) (2,071)
------ ------- ------- ------- -------
Cash flows from financing ac-
tivities:
Proceeds from long-term
debt....................... 3,494 621 38 83 --
Repayment of long-term debt. (4,264) (672) (93) (32) (62)
Proceeds from notes payable
to bank, net............... 550 -- 438 1,087 1,276
Repayment of notes payable
to affiliate............... (1,350) (200) -- -- --
Proceeds from notes payable
to stockholders and
employees.................. 348 228 606 728 242
Repayment of notes payable
to stockholders and
employees.................. (398) (586) (108) -- --
Proceeds from notes payable
to others.................. 56 -- 110 -- --
Repayment of notes payable
to others.................. -- (49) -- -- --
Dividends paid.............. (72) (3,154) -- -- (59)
Sale of common stock........ -- 45 493 493 --
Common stock subscribed..... -- 3,063 -- -- --
Retirement of common stock.. (400) -- -- -- --
------ ------- ------- ------- -------
Net cash provided by
(used in) financing
activities.............. (2,036) (704) 1,484 2,359 1,397
------ ------- ------- ------- -------
Net increase (decrease) in
cash and cash equivalents... (87) 32 1,044 (221) (950)
Cash and cash equivalents at
beginning of period......... 370 283 315 315 1,359
------ ------- ------- ------- -------
Cash and cash equivalents at
end of period............... $ 283 $ 315 $ 1,359 $ 94 $ 409
====== ======= ======= ======= =======
Supplemental disclosures of
cash flow information:
Cash paid during the period:
Interest................... $ 220 $ 83 $ 178 $ 73 $ 70
Income taxes............... $ 6 $ 7 $ 11 $ -- $ 2
</TABLE>
See accompanying notes to financial statements.
F-22
<PAGE>
SHIELDS ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED MARCH 31, 1996 IS UNAUDITED)
(1) DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Shields Enterprises, Inc. (SEI) provides software and systems consulting
services to clients for diversified customers across the United States and
provides in-store and back office software, installation, training and support
services. SEI also provides development and support services to Navigation
Technologies Corporation (NavTech). In addition to NavTech, revenue from SEI's
two largest customers was 16% and 13% of total revenue in 1993, 14% and 12% of
total revenue in 1994, and 10% and 9% of total revenue in 1995, respectively.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents
SEI considers all highly liquid debt instruments purchased with original
maturities of three months or less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost. Provisions for depreciation are
computed using accelerated methods to amortize the cost of depreciable assets
over their estimated useful lives. Leasehold improvements are amortized over
the lesser of their estimated useful lives or the lease term.
Revenue Recognition
Revenue from consulting and contract services under time and materials
contracts is recognized as services are performed. SEI also provides services
through maintenance contracts on proprietary software. Revenue related to the
maintenance contracts is recognized ratably over the term of the agreement.
SEI recognizes revenue in accordance with the provisions of the American
Institute of Certified Public Accountants Statement of Position No. 91-1,
Software Revenue Recognition.
Income Taxes
The stockholders of SEI have elected under Subchapter S of the Internal
Revenue Code to include SEI's income in their own income for federal and state
income tax purposes. Accordingly, SEI is not subject to federal and most state
income taxes.
Financial Instruments
The carrying amount of SEI's financial instrument assets and liabilities
approximates fair value because of the short maturity of those instruments.
Use of Estimates
SEI's management has made estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent assets
and liabilities to prepare these financial statements in conformity with
generally accepted accounting principles. Actual results could differ from
those estimates.
F-23
<PAGE>
SHIELDS ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Unaudited Interim Financial Statements
The unaudited interim financial statements as of March 31, 1996 and for the
six month periods ended March 31, 1995 and 1996 have been prepared on
substantially the same basis as the audited financial statements, and in the
opinion of management include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
information set forth therein.
(2) NAVTECH
Description and Relationship
NavTech, together with its subsidiaries, was established in 1985 to develop,
maintain and market a database for route guidance products and other
applications in the United States and Europe. NavTech's database is a digital
representation of road transportation networks that includes the information
necessary to determine efficient routes for vehicle guidance. NavTech's
database is licensed to leading automotive electronics manufacturers that are
developing products for route guidance. These products electronically
calculate an efficient route and provide real-time positioning and turn-by-
turn audible and/or graphical directions to guide the driver at each turn.
NavTech has been primarily engaged in development of software and
methodologies for the production, updating and use of its database and in the
production and updating of database coverage for parts of the United States
and Europe.
As of September 30, 1995, SEI held 2,332,000 shares of NavTech's common
stock which represented 10.5% of the outstanding stock of NavTech. (NavTech
share amounts have been restated to reflect a one-for-twelve reverse stock
split.)
SEI's Chairman has served as Chairman and Chief Executive Officer (CEO) of
NavTech since May 1987. SEI has an agreement with NavTech under which SEI's
Chairman will continue to serve as Chairman and CEO of NavTech for a base
annual compensation to SEI plus incentive compensation based on NavTech's
gross revenue and operating income. SEI Chairman's and the other directors'
compensation is approved by non-SEI directors. Such agreement will terminate
upon the merger with NavTech.
SEI was granted options for the purchase of 33,000 shares of NavTech common
stock at $1.20 per share and 133,000 shares of NavTech common stock at $2.40
per share during fiscal 1992 and 1993, respectively. The options expire by
their terms in March and October 2002, respectively. As of September 30, 1995,
options held by SEI covering 125,000 shares were vested, with the remaining
options covering 41,000 shares vesting monthly through December 1996, subject
to the continued full-time services of the Chairman of SEI as Chairman and CEO
of NavTech. During 1994, SEI entered into an agreement that provides that
additional options will be granted beginning in January 1997 based on the
Chairman and CEO's continuing service to NavTech. In May 1996, SEI's board of
directors approved the principal terms of an agreement with NavTech to cancel
the above agreement and options upon the merger with NavTech (see Note 11).
During fiscal 1992, SEI and NavTech entered into an agreement whereby SEI
performs substantially all database software engineering services for NavTech.
Under the agreement, SEI charges NavTech for actual direct costs incurred for
the services provided plus a markup for SEI's overhead and fees. Total revenue
from NavTech during fiscal 1993, 1994 and 1995 was $4,075,000, $4,276,000 and
$7,076,000, respectively.
F-24
<PAGE>
SHIELDS ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Pursuant to a 1994 agreement, SEI has the option to require Philips Media
B.V. to purchase up to 605,000 shares of NavTech common stock held by SEI at a
per share price of $10.20. Such rights have been waived by SEI through October
1, 1996 and will terminate upon the closing of an initial public offering by
NavTech.
Accounting for Investment in NavTech
SEI records its investment in NavTech using the cost method. Prior to April
30, 1993, SEI recorded its investment in NavTech using the equity method.
(3) ACCOUNTS RECEIVABLE
Included in accounts receivable are unbilled accounts receivable (work in
progress) and unbilled expenses of $877,000 and $948,000 as of September 30,
1994 and 1995, respectively, representing recoverable costs and accrued
profits which will be billed in accordance with contract terms and delivery
schedules.
Accounts receivable "other" represents amounts to be paid to SEI for
settlement of litigation (see Note 9).
(4) PROPERTY AND EQUIPMENT
The components of property and equipment as of September 30, 1994 and 1995
are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
------ ------
<S> <C> <C>
Furniture..................................................... $ 323 $ 392
Equipment..................................................... 1,204 1,602
Leasehold improvements........................................ 14 19
------ ------
1,541 2,013
Less accumulated depreciation and amortization................ 453 945
------ ------
$1,088 $1,068
====== ======
</TABLE>
(5) FINANCING ARRANGEMENTS
Note Payable to Bank
As of September 30, 1994 and 1995, SEI had a line of credit under which it
could borrow 80% of eligible accounts receivable, as defined, up to
$3,000,000. The line bears interest at a rate of 0.5% over prime (8.25% and
9.25% as of September 30, 1994 and 1995, respectively). As of September 30
1995, $438,000 was outstanding under this line. The line expires on January
15, 1997, is secured by substantially all assets of SEI other than its shares
of NavTech common stock, and is personally guaranteed by T. Russell Shields,
the Chairman of SEI.
Long-Term Debt
During 1994, SEI entered into loan agreements with the Fargo-Cass County
Growth Initiative Fund and the Future Fund of North Dakota under which SEI
borrowed $720,000 at an interest rate of 1% per annum. Amounts outstanding
under the two loan agreements aggregated $621,000 and $566,000 as of September
30, 1994 and 1995, respectively. The loans are secured by certain office
furniture, equipment, fixtures and 125,000 shares of
F-25
<PAGE>
SHIELDS ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NavTech stock held by SEI. The aggregate maturities of long-term debt as of
September 30, 1995 are as follows: 1996--$137,000; 1997--$138,000; 1998--
$139,000; 1999--$141,000; 2000--$11,000.
Notes Payable to Stockholders, Employees and Others
SEI has multiple outstanding notes to stockholders, employees and others.
The notes are due on various dates during 1995 and on December 31, 1995
(short-term), and December 31, 1996 (long-term). The amount of interest paid
to stockholders, employees and others for the years ended September 30, 1993,
1994 and 1995 was $78,000, $59,000 and $100,000, respectively. These notes
bear interest at prime plus 0.5% or prime plus 1.25%, depending on the
maturity of the notes.
(6) LEASES
SEI leases office space in several locations. The future minimum lease
obligations under lease agreements with initial terms in excess of one year as
of September 30, 1995 were as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30,
-------------
<S> <C>
1996................................................................. $ 683
1997................................................................. 638
1998................................................................. 641
1999................................................................. 389
2000................................................................. 233
Thereafter........................................................... 528
------
$3,112
======
</TABLE>
Several office leases provide for adjustment of base rentals for subsequent
increases in the lessor's operating costs. Total rent expense under all leases
amounted to $343,000, $500,000 and $719,000, in fiscal 1993, 1994 and 1995,
respectively.
(7) EMPLOYEE INCENTIVE PLANS
SEI's profit sharing plan covers substantially all of its employees. SEI
contributes the lesser of 50% of operating profits above 9% of operating
revenue or 15% of total compensation paid in the year to all participants, or
an amount determined by the board of directors. During the years ended
September 30, 1993, 1994 and 1995, SEI made no contributions to the plan.
Effective October 1, 1985, SEI established a Profit Participation Plan. This
plan compensates senior employees based on SEI's performance. Under the terms
of this plan, SEI is to pay out approximately 75% of the pretax income from
operations (including salary reductions) and certain special items. The
accrued payroll and related expense liabilities include employee salary
reductions and company contributions. SEI contributions in excess of salary
reductions were $136,000, $2,105,000 and $820,000 in 1993, 1994 and 1995,
respectively.
(8) STOCK SPLIT
On June 1, 1995, SEI's board of directors declared a twenty-for-one stock
split. Stated value was reduced from $2,500 to $125 per share. All references
in the accompanying financial statements to the number of SEI's shares
outstanding have been retroactively restated to reflect the split.
F-26
<PAGE>
SHIELDS ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(9) EXTRAORDINARY ITEM
In March 1994, SEI arrived at a settlement of outstanding litigation which
provided for payments to SEI aggregating $20,000,000 ($15,969,000, net of
legal fees). The settlement called for certain amounts to be paid to SEI
during fiscal 1994 and additional amounts to be paid in future periods.
(10) CUSTOMER CLAIM
As of September 30, 1995, SEI accrued $600,000 representing a judgment on a
claim by a customer, which SEI appealed. In December 1995, SEI entered into an
agreement to settle the action for approximately the amount accrued as of
September 30, 1995.
(11) SUBSEQUENT EVENT
In May 1996, SEI's board of directors approved the principal terms of an
agreement to merge with NavTech. In connection with the merger, all of the
outstanding common stock of SEI will be exchanged for NavTech's common stock.
(12) PRO FORMA ADJUSTMENT TO FINANCIAL STATEMENTS (UNAUDITED)
The pro forma provision for income taxes reflects the income tax benefit
that would have been reported if SEI had been a C corporation using the asset
and liability method. Under this approach, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis. The components of unaudited pro
forma income taxes were as follows (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
SEPTEMBER 30, MARCH 31,
1995 1996
------------- ----------
<S> <C> <C>
Current:
Federal........................................... $(28) $ (193)
State............................................. (5) (64)
---- ------
(33) (257)
---- ------
Deferred:
Federal........................................... 714 850
State............................................. 116 170
---- ------
830 1,020
---- ------
Pro forma income tax benefit........................ $797 $ 763
==== ======
</TABLE>
The pro forma income tax benefit differs from the amounts computed by
applying the U.S. federal statutory income tax rate to pro forma loss before
taxes as a result of the following (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
SEPTEMBER 30, MARCH 31,
1995 1996
------------- ----------
<S> <C> <C>
Computed "expected" tax benefit..................... $686 $657
State income taxes, net of federal tax effect....... 111 106
---- ----
$797 $763
==== ====
</TABLE>
As of September 30, 1995, the tax basis of SEI's investment in NavTech
differed from the financial statement carrying amount, which would have
resulted in a deferred tax liability of $4,450,000 on a pro forma basis.
F-27
<PAGE>
NAVIGATION TECHNOLOGIES CORPORATION AND SHIELDS ENTERPRISES, INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined balance sheet and statements of
operations have been derived from Navigation Technologies Corporation's (the
Company) financial statements for the year ended December 31, 1995, and as of
and for the three month period ended March 31, 1996, included elsewhere herein
and the Shields Enterprises, Inc. (SEI) financial statements for the year
ended September 30, 1995, and as of and for the six month period ended March
31, 1996, included elsewhere herein.
Adjustments have been made to the pro forma combined balance sheet to give
effect to the merger with SEI, the issuance of convertible preferred stock in
a private financing, (partially paid by conversion of loans payable to
Philips), and the conversion of convertible preferred stock to common stock in
connection with the Company's initial public offering as if each had occurred
on March 31, 1996.
Adjustments have been made to the pro forma combined statements of
operations to give effect to the acquisition of SEI as if it had occurred at
the beginning of each of the respective periods presented and to present the
data consistently using a December 31 year end.
The following unaudited pro forma combined balance sheet and statements of
operations are not necessarily indicative of the future results of operations
of the Company or the results of operations which would have resulted had the
Company and SEI been combined during the periods presented. In addition, the
pro forma results are not intended to be a projection of future results.
The unaudited pro forma combined balance sheet and statements of operations
should be read in conjunction with the consolidated financial statements of
the Company and SEI, including the notes thereto, contained elsewhere in this
Prospectus.
F-28
<PAGE>
PRO FORMA FINANCIAL INFORMATION
NAVIGATION TECHNOLOGIES CORPORATION AND SHIELDS ENTERPRISES, INC.
PRO FORMA COMBINED BALANCE SHEET--UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------------------------------------
COMPANY SEI PRO FORMA PRO FORMA
ACTUAL ACTUAL ADJUSTMENTS COMBINED
--------- ------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents............. $ 8,315 $ 917 $25,000 (a) $ 34,232
Accounts receivable...... 488 4,121 -- 4,609
Accounts receivable from
affiliate............... -- 551 (551)(b) --
Prepaid expenses and
other current assets.... 1,511 291 -- 1,802
--------- ------- ------- ---------
Total current assets.... 10,314 5,880 24,449 40,643
Property and equipment,
net...................... 5,204 1,106 -- 6,310
Purchased intangibles..... -- -- 38,431 (c) 38,431
Deposits and other assets. 95 8,939 (8,939)(d) 95
--------- ------- ------- ---------
Total assets............ $ 15,613 $15,925 $53,941 $ 85,479
========= ======= ======= =========
LIABILITIES AND
STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Note payable to bank..... $ -- $ 1,714 $ -- $ 1,714
Current maturities of
long-term debt.......... -- 109 -- 109
Notes payable to
stockholders, employees,
and others.............. -- 1,303 -- 1,303
Accounts payable......... 2,122 585 -- 2,707
Accounts payable to
affiliate............... 1,011 -- (551)(b) 460
Accrued payroll and
related expenses........ 2,656 3,493 -- 6,149
Other accrued expenses... 1,979 457 -- 2,436
Deferred revenue......... 2,263 314 -- 2,577
--------- ------- ------- ---------
Total current
liabilities............ 10,031 7,975 (551) 17,455
Long-term debt, less
current maturities....... -- 395 -- 395
Long-term source material
obligations.............. 6,834 -- -- 6,834
Deferred license revenue.. 8,426 -- -- 8,426
Loan payable to related
party.................... 5,082 -- (5,082)(e) --
--------- ------- ------- ---------
Total liabilities....... 30,373 8,370 (5,633) 33,110
--------- ------- ------- ---------
Stockholders' equity
(deficit):
Convertible preferred
stock................... 12 -- (12)(a)(f) --
Common stock............. 11 1,345 (1,324)(c)(e)(f) 32
Additional paid-in
capital................. 161,080 3,594 89,998 (a)(c)(d)(e) 254,672
Treasury stock........... -- -- (26,472)(d) (26,472)
Cumulative translation
adjustment.............. 1,801 -- -- 1,801
Accumulated deficit...... (177,664) 2,616 (2,616)(c) (177,664)
--------- ------- ------- ---------
Total stockholders'
equity (deficit)....... (14,760) 7,555 59,574 52,369
--------- ------- ------- ---------
Total liabilities and
stockholders' equity
(deficit).............. $ 15,613 $15,925 $53,941 $ 85,479
========= ======= ======= =========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-29
<PAGE>
PRO FORMA FINANCIAL INFORMATION
NAVIGATION TECHNOLOGIES CORPORATION AND SHIELDS ENTERPRISES, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS--UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------
COMPANY SEI PRO FORMA PRO FORMA
ACTUAL ACTUAL ADJUSTMENTS COMBINED
-------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Revenue:
Database license and distribution.. $ 3,377 $ -- $ -- $ 3,377
Consulting and contract services... -- 25,600 -- 25,600
Affiliated consulting services..... -- 8,039 (8,039)(g) --
Other.............................. 296 1,913 -- 2,209
-------- ------- ------- --------
Total revenue..................... 3,673 35,552 (8,039) 31,186
-------- ------- ------- --------
Costs and expenses:
Cost of revenue.................... -- 29,432 (7,034)(g) 22,398
Database production and updating... 40,359 -- -- 40,359
Software engineering and
development....................... 8,314 5,018 (1,146)(g) 12,186
Selling, general and
administrative.................... 13,444 3,252 141 (g) 16,837
Amortization of goodwill........... -- -- 7,686 (h) 7,686
-------- ------- ------- --------
Total costs and expenses.......... 62,117 37,702 (353) 99,466
-------- ------- ------- --------
Loss from operations................ (58,444) (2,150) (7,686) (68,280)
Other income (expense).............. 1,532 (166) -- 1,366
-------- ------- ------- --------
Net loss............................ $(56,912) $(2,316) $(7,686) $(66,914)
======== ======= ======= ========
Pro forma net loss per share........ $ (2.57) $ (2.68)
======== ========
Shares used in per share
computation........................ 22,114 2,849 (i) 24,963
======== ======= ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-30
<PAGE>
PRO FORMA FINANCIAL INFORMATION
NAVIGATION TECHNOLOGIES CORPORATION AND SHIELDS ENTERPRISES, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS--UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1996
------------------------------------------
COMPANY SEI PRO FORMA PRO FORMA
ACTUAL ACTUAL ADJUSTMENTS COMBINED
-------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Revenue:
Database license and distribution.. $ 577 $ -- $ -- $ 577
Consulting and contract services... -- 6,765 -- 6,765
Affiliated consulting services..... -- 2,976 (2,976)(g) --
Other.............................. 69 374 -- 443
-------- ------- ------- --------
Total revenue..................... 646 10,115 (2,976) 7,785
-------- ------- ------- --------
Costs and expenses:
Cost of revenue.................... -- 8,609 (2,498)(g) 6,111
Database production and updating... 9,842 -- -- 9,842
Software engineering and
development....................... 3,063 1,161 (439)(g) 3,785
Selling, general and
administrative.................... 4,050 1,406 (39)(g) 5,417
Amortization of goodwill........... -- -- 1,922 (h) 1,922
-------- ------- ------- --------
Total costs and expenses.......... 16,955 11,176 (1,054) 27,077
-------- ------- ------- --------
Loss from operations................ (16,309) (1,061) (1,922) (19,292)
Other income (expense).............. (247) (50) -- (297)
-------- ------- ------- --------
Net loss............................ $(16,556) $(1,111) $(1,922) $(19,589)
======== ======= ======= ========
Pro forma net loss per share........ $ (0.67) $ (0.71)
======== ========
Shares used in per share
computation........................ 24,782 2,849 (i) 27,631
======== ======= ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-31
<PAGE>
PRO FORMA FINANCIAL INFORMATION
NAVIGATION TECHNOLOGIES CORPORATION AND SHIELDS ENTERPRISES, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
All of the shares of outstanding common stock of SEI were exchanged for
3,632,000 shares of the Company's common stock (net of exchange of
2,595,000 shares of the Company's common stock held by SEI which will be
accounted for as treasury stock on the Company's consolidated balance
sheet). The purchase price of $37,047,000, (based on a $10.20 value per
share for the Company's common stock and net of $26,472,000 of common stock
exchanged for shares held by SEI and accounted for as treasury stock on the
Company's consolidated balance sheet) was assigned to the fair value of the
net assets acquired, including approximately $1,384,000 to the net
liabilities assumed and $38,431,000 to goodwill.
To arrive at the pro forma combined financial statements, the historical
financial statements were adjusted to reflect:
(a) Issuance of shares of preferred stock in a private financing for an
aggregate of $30,021,000 (partially paid by conversion of loans payable
to Philips).
(b) Elimination of intercompany receivables and payables between the
Company and SEI.
(c) Exchange of the Company's common stock for outstanding shares of SEI's
common stock in the SEI merger and recognition of purchased goodwill.
(d) Exchange of 2,595,000 shares of the Company's common stock held by SEI
and accounted for as treasury stock on the Company's consolidated
balance sheet.
(e) Conversion of a loan payable to Philips to preferred stock in a private
financing.
(f) Conversion of the Company's outstanding preferred stock to common
stock.
(g) Elimination of intercompany billings between the Company and SEI.
(h) Amortization of goodwill from the SEI merger over its estimated useful
life of five years.
(i) An increase in the Company's common stock outstanding on an "as if
converted" basis for the 3,632,000 shares of common stock issued in the
SEI merger (net of shares exchanged for shares held by SEI and
accounted for as treasury stock on the Company's consolidated balance
sheet).
Certain amounts have been reclassified to conform to the pro forma
presentation.
F-32
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE U.S. UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN
THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION
WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE IN-
FORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
----
Prospectus Summary...................................................... 3
Risk Factors............................................................ 7
Use of Proceeds......................................................... 19
Dividend Policy......................................................... 19
Sale of Shares to Philips and Zenrin.................................... 19
Capitalization.......................................................... 20
Dilution................................................................ 21
Selected Consolidated Financial Data.................................... 22
Management's Discussion and Analysis of
Financial Condition and Results of Operations.......................... 24
Business................................................................ 31
Management.............................................................. 48
Certain Transactions.................................................... 56
Principal Stockholders.................................................. 58
Description of Capital Stock............................................ 60
Shares Eligible for Future Sale......................................... 62
Certain United States Federal Tax Considerations
for Non-U.S. Holders of Common Stock................................... 63
Underwriting............................................................ 65
Legal Matters........................................................... 67
Experts................................................................. 67
Change in Independent Auditor........................................... 68
Additional Information.................................................. 68
Index to Financial Statements........................................... F-1
</TABLE>
-------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICI-
PATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
12,000,000 SHARES
[LOGO OF NAVIGATION TECHNOLOGIES]
COMMON STOCK
-------------------
PROSPECTUS
, 1996
-------------------
LEHMAN BROTHERS
COWEN & COMPANY
SALOMON BROTHERS INC
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated July 19, 1996
PROSPECTUS
12,000,000 SHARES [INT'L VERSION]
[LOGO OF NAVIGATION TECHNOLOGIES]
COMMON STOCK
------------
Of the 12,000,000 shares of Common Stock, $.001 par value ("Common Stock"),
of Navigation Technologies Corporation ("NavTech" or the "Company") being
offered hereby, 2,400,000 shares are being offered initially outside the United
States and Canada by the International Managers (the "International Offering")
and 9,600,000 shares are being offered initially in the United States and
Canada by the U.S. Underwriters (the "U.S. Offering"). Such offerings are
referred to collectively as the "Offerings".
Prior to the Offerings, there has been no public market for the Common Stock.
It is currently estimated that the initial public offering price will be
between $12.00 and $14.00 per share. See "Underwriting" for a discussion of the
factors to be considered in determining the initial public offering price.
Application has been made to have the Common Stock approved for quotation on
the Nasdaq National Market under the symbol "NAVT."
Philips Electronics N.V. ("Philips") has agreed to purchase directly from the
Company, concurrently with the closing of the Offerings, a number of shares of
Common Stock that will result in Philips owning 48% of the outstanding shares
of Common Stock (assuming no exercise of the over-allotment options described
below). In addition, Zenrin Co. Ltd. ("Zenrin") has agreed to purchase directly
from the Company shares of Common Stock having an aggregate purchase price of
$1,000,000. All of such shares to be purchased by Philips and Zenrin will be
purchased at the initial public offering price of the Common Stock offered
hereby, less the underwriting discount. See "Sale of Shares to Philips and
Zenrin" and "Certain Transactions."
------------
THE COMMON STOCK OFFERED HEREBY INCLUDES A HIGH DEGREE OF RISK.SEE "RISK
FACTORS" BEGINNING ON PAGE 7.
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share............................... $ $ $
- --------------------------------------------------------------------------------
Total(3)................................ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company has agreed to indemnify the U.S. Underwriters and the
International Managers against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting estimated expenses of the Offerings of $2,000,000 payable
by the Company.
(3) The Company has granted the International Managers a 30-day option to
purchase up to 360,000 additional shares of Common Stock on the same terms
and conditions as set forth above solely to cover over-allotments, if any.
The U.S. Underwriters have been granted a similar option to purchase up to
1,440,000 additional shares solely to cover over-allotments, if any. If
such options are exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
------------
The shares of Common Stock offered by this Prospectus are offered by the
International Managers subject to prior sale, to withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by the
International Managers and to certain further conditions. It is expected that
delivery of the shares will be made at the offices of Lehman Brothers Inc., New
York, New York, on or about , 1996.
------------
LEHMAN BROTHERS
COWEN & COMPANY
SALOMON BROTHERS INTERNATIONAL LIMITED
, 1996
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE INTERNATIONAL MAN-
AGERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER
THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OF-
FER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION
WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE IN-
FORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 7
Use of Proceeds........................................................... 19
Dividend Policy........................................................... 19
Sale of Shares to Philips and Zenrin...................................... 19
Capitalization............................................................ 20
Dilution.................................................................. 21
Selected Consolidated Financial Data...................................... 22
Management's Discussion and Analysis of
Financial Condition and Results of Operations............................ 24
Business.................................................................. 31
Management................................................................ 48
Certain Transactions...................................................... 56
Principal Stockholders.................................................... 58
Description of Capital Stock.............................................. 60
Shares Eligible for Future Sale........................................... 62
Certain United States Federal Tax Considerations
for Non-U.S. Holders of Common Stock..................................... 63
Underwriting.............................................................. 65
Legal Matters............................................................. 67
Experts................................................................... 67
Change in Independent Auditor............................................. 68
Additional Information.................................................... 68
Index to Financial Statements............................................. F-1
</TABLE>
-------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDI-
TION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UN-
DERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
12,000,000 SHARES
[INT'L VERSION]
[LOGO OF NAVIGATION TECHNOLOGIES]
COMMON STOCK
-------------------
PROSPECTUS
, 1996
-------------------
LEHMAN BROTHERS
COWEN & COMPANY
SALOMON BROTHERS
INTERNATIONAL LIMITED
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
This page contains the text "NavTech United States" together with a map of the
continental United States with lines depicting the coverage of the NavTech
database and a map legend. The page also contains the following text:
In the United States, NavTech has completed detailed city databases for many
metropolitan areas, representing in aggregate over 100 million in population.
The map displayed illustrates the detailed city and intertown coverage currently
provided by the NavTech database in the United States
The NavTech logo appears at the bottom of the page.
This page contains the text "NavTech Europe" together with a map of parts of
Europe with lines depicting the coverage of the NavTech database and a map
legend. The page also contains the following text:
In Europe, NavTech has completed detailed city databases for metropolitan areas
representing in aggregate over 60 million in population and intertown databases
for Austria, Belgium, Germany, France, Northern Italy and Switzerland. The above
map illustrates NavTech's detailed city and intertown coverage currently
provided by the NavTech database in Europe.
The NavTech logo appears at the bottom of the page.
This page contains the text "The NavTech Navigable Database for Route Guidance."
The page also contains 14 pictures of Route Guidance Products that utilize the
NavTech database together with captions identifying the particular products. The
page also contains the following captions:
ACCURATE DETAILED COMPREHENSIVE
NavTech's customers include leading automotive and consumer electronics
manufacturers from around the world. Their route guidance products are now
appearing in the U.S. and Europe as factory and dealer installed new car
options, in rental cars, and in the automotive after-market.
As each turn approaches, voice prompts and user-friendly graphics in a route
guidance product inform the driver of the next action to be taken. NavTech's
navigable database works with sensors and software to determine vehicle
location and when to deliver the next direction.
In a route guidance product, map displays of the local area, created from
NavTech's navigable database, can be displayed at various levels of detail to
help orient the driver and provide an overview of the calculated route. On
this screen, the vehicle's current location and heading are shown.
This page contains the caption
"NavTech Selected Relationships for Route Guidance Products"
together with logos for Alpine, Avis, Magneti Marelli, Renault, Acura, Siemens,
Oldsmobile, Zexel, National, EuroDollar, Philips and Hertz.
The NavTech logo appears at the bottom of the page above the following text:
"NavTech is a trademark of Navigation Technologies Corporation. All other
trademarks are the property of respective owners"
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in
connection with the sale of Common Stock being registered. All amounts are
estimates except the registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
----------
<S> <C>
Registration Fee.............................................. $ 66,621
NASD Filing Fee............................................... 19,820
Nasdaq National Market Listing Fee............................ 50,000
Printing and Engraving........................................ *
Legal Fees and Expenses....................................... *
Accounting Fees and Expenses.................................. *
Blue Sky Fees and Expenses.................................... *
Transfer Agent Fees........................................... *
Officers' and Directors' Liability Insurance.................. *
Miscellaneous................................................. *
----------
Total....................................................... $2,000,000
==========
</TABLE>
- --------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to Section 102(b)(7) of the Delaware General Corporation Law (the
"DGCL"), Article X of the Company's Restated Certificate of Incorporation (the
"Restated Certificate of Incorporation") (filed as Exhibit 3.1 to this
Registration Statement) eliminates the liability of the Company's directors to
the Company or its stockholders, except for liabilities related to breach of
duty of loyalty, actions not in good faith and certain other liabilities.
Section 145 of the DGCL provides for indemnification by the Company of its
directors and officers. In addition, Article VI of the Company's Bylaws (filed
as Exhibit 3.2 to this Registration Statement) requires the Company to
indemnify any current or former director or officer to the fullest extent
permitted by the DGCL. In addition, the Company has entered into indemnity
agreements with its directors and executive officers (a form of which is filed
as Exhibit 10.1 to this Registration Statement) that obligate the Company to
indemnify such directors and executive officers to the fullest extent
permitted by the DGCL. The Company also maintains officers' and directors'
liability insurance, which insures against liabilities that officers and
directors of the Company may incur in such capacities.
Reference is made to the forms of Underwriting Agreements filed as Exhibit
1.1 and Exhibit 1.2 to this Registration Statement, which provide for
indemnification of the directors and officers of the Company signing the
Registration Statement and certain controlling persons of the Company against
certain liabilities, including those arising under the Securities Act of 1933,
as amended (the "Securities Act"), in certain instances by the U.S.
Underwriters and the International Managers.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(a) Since June 1, 1993, the Registrant has issued and sold the following
securities (as adjusted to reflect the Registrant's one-for-twelve reverse
stock split to be effected prior to the Offerings):
(i) The Registrant issued and sold an aggregate of 132,000 shares of
Common Stock to employees and consultants for an aggregate price of
approximately $342,000 pursuant to exercises of options under its 1988
Stock Option Plan.
(ii) On December 31, 1993, the Registrant issued an aggregate of
7,841,000 shares of Common Stock to a total of 207 stockholders upon
conversion of all then-outstanding Preferred Stock.
(iii) In February and March 1994, the Registrant issued and sold an
aggregate of 1,132,000 shares of Common Stock to a total of 91 investors
for aggregate cash consideration of approximately $5,433,000 and
convertible debentures in the aggregate principal and accrued interest in
the amount of approximately $3,774,000, which debentures, together with
accrued interest, converted into an aggregate of 179,000 shares of
Convertible Preferred Stock and 191,000 shares of Common Stock on September
2, 1994.
(iv) In September 1994, the Registrant issued and sold 7,843,000 shares
of Preferred Stock to an accredited investor at a price of $10.20 per share
that was paid in installments with interest through November 1995. At the
same time, the Registrant issued 2,445,000 shares of Preferred Stock to
such investor in exchange for shares of and notes payable by NavTech Europe
held by such investor.
(v) On September 30, 1994, the Registrant issued 57,000 shares of
Preferred Stock and 468,000 shares of Common Stock to a total of 18
accredited investors for aggregate cash consideration in the amount of
$5,354,000.
(vi) Pursuant to the Registrant's acquisition of NavTech Europe in 1994
and an exchange rate in accordance with that transaction, since December
1994, an aggregate of 1,004,000 shares of Common Stock have been deemed
issued to a total of five investors in exchange for their minority holdings
in such subsidiary valued at $9,079,000.
(vii) In June 1996, the Registrant issued to a total of 20 accredited
investors shares of Preferred Stock that will be converted into 2,887,000
shares of Common Stock upon the closing of the Offerings for aggregate cash
consideration in the amount of $19,000,000 and conversion of debt in the
amount of $11,021,000. The number of such shares of Preferred Stock issued
was determined with reference to an assumed initial public offering price
of $13.00 per share of Common Stock and is subject to adjustment based on
the actual initial public offering price.
(viii) Concurrently with the closing of the Offerings, the Registrant
will issue an aggregate of 6,227,000 shares of Common Stock to a total of
28 persons in connection with the acquisition of SEI.
(ix) Concurrently with the closing of the Offerings, the Registrant will
issue an aggregate of 2,459,000 shares of Common Stock to two accredited
investors for aggregate cash consideration in the amount of $29,885,000
(4,120,000 shares for $50,081,000 if the U.S. Underwriters' and
International Managers' over-allotment options are exercised in full and if
Philips exercises its option in full to purchase additional shares upon
exercise of such over-allotment options).
The issuances described in Items 15(a)(i) were deemed exempt from
registration under the Securities Act in reliance upon Rule 701. The issuances
described in Items 15(a)(iv), (v) and (viii) were deemed exempt from
registration under the Securities Act in reliance upon Rule 506 of Regulation
D. The issuances described in Item 15(a)(ii) were deemed exempt from
registration under the Securities Act in reliance upon Section 3(a)(9)
thereof. The issuances described in Items 15(a)(iii), (vi) and (ix) were
deemed exempt from registration under the Securities Act in reliance upon
Section 4(2) thereof. In addition, the recipients of securities in the
transactions described in Items 15(a)(ii)-(ix) represented their intentions to
acquire the securities for investment only and not with a view to or for sale
in connection with any distribution thereof and appropriate legends were
affixed to the share certificates and warrants issued in such transactions.
All recipients had adequate access, through their relationships with the
Registrant, to information about the Registrant.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
1.1* Form of U.S. Underwriting Agreement.
1.2* Form of International Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant, as amended.
3.2 Form of Certificate of Amendment of Certificate of Incorporation of the
Registrant to be adopted prior to the closing.
3.3 Form of Amended and Restated Certificate of Incorporation to be filed
upon the closing.
3.4 Bylaws of the Registrant.
3.5 Form of Amended and Restated Bylaws of the Registrant to be effective
upon the closing.
4.1* Form of the Registrant's Common Stock Certificate.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, P.C. regarding legality of
the securities being issued.
10.1 Form of Indemnification Agreement Entered into with the Registrant's
officers and directors.
10.2 1988 Stock Option Plan and related agreements.
10.3 1996 Stock Option Plan and related agreements.
10.4 1996 Stock Option Plan for Netherlands Employees and related agreements.
10.5 1996 Stock Option Plan for French Employees and related agreements.
10.6 SEI 1996 Stock Option Plan and related agreements.
10.7 Investor Rights Agreement dated as of September 1, 1994.
10.8 Stock Purchase Agreement dated as of September 1, 1994.
10.9 Stock Purchase Agreement dated as of June 24, 1996, as amended.
10.10 Supplementary Purchase Agreement dated as of September 1, 1994.
10.11 Employment Agreement between the Registrant and T. Russell Shields dated
June 24, 1996.
10.12 Employment Agreement between the Registrant and Ronald Brumback dated
April 18, 1996.
10.13 Lease Agreement between the Registrant and the Bianchi Joint Venture,
dated October 1991, as amended March 24, 1995, relating to the premises
at 740 E. Arques Avenue, Sunnyvale, CA.
10.14 Lease Agreement between Shields Enterprises, Inc. and First Bank System,
Inc. dated June 1, 1994 relating to the premises at Dakota Center, 51
Broadway, Fargo, ND.
10.15 Lease Agreement between Planoform Vastgard B.V. and European Geographic
Technologies B.V. relating to the premises at De Waal 15, 56884 PH Best,
The Netherlands.
10.16 Agreement and Plan of Reorganization among the Registrant, Shields
Enterprises, Inc., NT Acquisitions Corp. and T. Russell Shields, dated
June 24, 1996.
10.17 Agreement between Shields Enterprises, Inc. and Fidelis N. Umeh, dated
June 21, 1996.
10.18 Principal Shareholder Agreement dated June 24, 1996.
10.19 Agreement and Plan of Merger between NT Acquisitions Corp. and Shields
Enterprises, Inc. dated June 24, 1996.
11.1 Statement of computation of net loss per share.
16.1 Letter from predecessor auditor regarding change in the certifying
accountant of the Registrant, dated July 12, 1996.
21.1 Subsidiaries of the Registrant.
23.1* Consent of Wilson Sonsini Goodrich & Rosati, P.C. (included in Exhibit
5.1).
23.2 Consent of KPMG Peat Marwick LLP.
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule.
- --------
* To be filed by amendment.
(b) Financial Statement Schedules
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the
financial statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned hereby undertakes to provide to the U.S. Underwriters and
the International Managers at the closing specified in the U.S. Underwriting
Agreement and the International Underwriting Agreement, respectively,
certificates in such denominations and registered in such names as required by
the U.S. Underwriters and the International Underwriting Agreement,
respectively, to permit prompt delivery to each purchaser.
II-3
<PAGE>
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions referenced in Item 14 of this Registration
Statement or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer, or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered
hereunder, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-1 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Sunnyvale, State of California, on this 18th day of July, 1996.
NAVIGATION TECHNOLOGIES CORPORATION
By: /s/ Ronald A. Brumback
---------------------------------
Ronald A. Brumback, President and
Chief Operating Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints, jointly and severally, Ronald A. Brumback,
Thomas A. Lerone and Richard J. Weiland and each one of them, his true and
lawful attorney-in-fact and agents, each with full power of substitution, for
him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to sign any registration statement for the same offering
covered by this Registration Statement that is to be effective upon filing
pursuant to Rule 462(b) promulgated under the Securities Act of 1933, and all
post-effective amendments thereto, and to file the same, with all exhibits
thereto and all other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that each of said attorneys-in-fact and agents or
any of them, or his or their substitute or substitutes, may lawfully do or
cause to be done or by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on the 18th day of July, 1996 by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ T. Russell Shields Chairman of the Board and Chief
____________________________________ Executive Officer (Principal
T. Russell Shields Executive Officer)
/s/ Ronald A. Brumback President, Chief Operating
____________________________________ Officer and Director
Ronald A. Brumback
/s/ Thomas A. Lerone Vice President, Finance and
____________________________________ Administration and Chief
Thomas A. Lerone Financial Officer (Principal
Financial and Accounting
Officer)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Richard DeLange Director
____________________________________
Richard DeLange
/s/ Richard J. Weiland Director
____________________________________
Richard J. Weiland
/s/ William Curran Director
____________________________________
William Curran
/s/ Michael S. Hasley Director
____________________________________
Michael S. Hasley
/s/ Shinichi Komeda Director
____________________________________
Shinichi Komeda
/s/ Stephen C. Tumminello Director
____________________________________
Stephen C. Tumminello
/s/ Dr. Klaus Volkholz Director
____________________________________
Dr. Klaus Volkholz
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ----------
<C> <S> <C>
1.1* Form of Underwriting Agreement.
1.2* Form of International Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant, as
amended.
3.2 Form of Certificate of Amendment of Certificate of
Incorporation of the Registrant.
3.3 Form of Amended and Restated Certificate of Incorporation
to be filed upon the closing.
3.4 Bylaws of the Registrant.
3.5 Form of Amended and Restated Bylaws of the Registrant to
be effective upon the closing.
4.1* Form of the Registrant's Common Stock Certificate.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, P.C.
regarding legality of the securities being issued.
10.1 Form of Indemnification Agreement Entered into with the
Registrant's Officers and Directors
10.2 1988 Stock Option Plan and related agreements.
10.3 1996 Stock Option Plan and related agreements.
10.4 1996 Stock Option Plan for Netherlands Employees and
related agreements.
10.5 1996 Stock Option Plan for French Employees and related
agreements.
10.6 SEI 1996 Stock Option Plan and related agreements.
10.7 Investor Rights Agreement dated as of September 1, 1994.
10.8 Stock Purchase Agreement dated as of September 1, 1994.
10.9 Stock Purchase Agreement dated as of June 24, 1996, as
amended.
10.10 Supplementary Purchase Agreement dated as of September 1,
1994.
10.11 Employment Agreement between the Registrant and T.
Russell Shields dated June 24, 1996.
10.12 Employment Agreement between the Registrant and Ronald
Brumback dated April 18, 1996.
10.13 Lease Agreement between the Registrant and the Bianchi
Joint Venture, dated October 1991, as amended March 24,
1995, relating to the premises at 740 E. Arques Avenue,
Sunnyvale, CA.
10.14 Lease Agreement between Shields Enterprises, Inc. and
First Bank System, Inc. dated June 1, 1994 relating to
the premises at Dakota Center, 51 Broadway, Fargo, ND.
10.15 Lease Agreement between Planoform Vastgard B.V. and
European Geographic Technologies B.V. relating to the
premises at De Waal 15, 56884 PH Best, The Netherlands.
10.16 Agreement and Plan of Reorganization among the
Registrant, Shields Enterprises, Inc., NT Acquisitions
Corp. and T. Russell Shields, dated as of June 24, 1996.
10.17 Agreement between Shields Enterprises, Inc. and Fidelis
N. Umeh, dated June 21, 1996.
10.18 Principal Shareholder Agreement dated June 24, 1996.
10.19 Agreement and Plan of Merger between NT Acquisitions
Corp., and Shields Enterprises, Inc. dated June 24, 1996.
11.1 Statement of computation of net loss per share.
16.1 Letter from predecessor auditor regarding change in the
certifying accountant of the Registrant, dated July 12,
1996.
21.1 Subsidiaries of the Registrant.
23.1* Consent of Wilson Sonsini Goodrich & Rosati, P.C.
(included in Exhibit 5.1).
23.2 Consent of KPMG Peat Marwick LLP.
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
<PAGE>
Exhibit 3.1
RESTATED
CERTIFICATE OF INCORPORATION
OF
NAVIGATION TECHNOLOGIES CORPORATION
Navigation Technologies Corporation, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware
(the "Corporation"), originally incorporated on December 18,1987, does hereby
certify:
FIRST: That the Board of Directors of the Corporation, acting in
-----
accordance with the applicable provisions of the General Corporation Law of the
State of Delaware, adopted resolutions to amend and restate the Certificate of
Incorporation pursuant to Section 245 of such law to read in its entirety as
set forth on Exhibit A.
SECOND: That thereafter, pursuant to resolution of its Board of
------
Directors, the Certificate of Incorporation, as so amended and restated, was
submitted to the stockholders for their approval, which approval was given by
written consent by the required vote of the stockholders pursuant to
Section 228 of the General Corporation Law of the State of Delaware and the
Certificate of Incorporation.
THIRD: That prompt written notice was duly given pursuant to Section 228
-----
of the General Corporation Law of the State of Delaware to those stockholders
who did not approve the Certificate of Incorporation, as an amended, by
written consent.
FOURTH: That said amendment and restatement was duly adopted in accordance
------
with the provisions of Section 242 and 245 of the General Corporation Law of
the State of Delaware.
1.
<PAGE>
IN WITNESS WHEREOF, Navigators Technologies Corporation has caused this
certificate to be signed by its Vice President, Administration and Finance,
Chief Financial Officer and Secretary this 1st Day of September, 1994.
NAVIGATION TECHNOLOGIES CORPORATION
/s/ Thomas A. Lerone
-------------------------------------
Thomas A. Lerone
Vice President, Administration and
Finance, Chief Financial Officer
and Secretary
2.
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
NAVIGATION TECHNOLOGIES CORPORATION
FIRST: The name of the corporation is NAVIGATION TECHNOLOGIES CORPORATION
-----
("Company"). Its original Certificate of Incorporation was filed with the
Secretary of State on December 18, 1987. This restated certificate was duly
adopted in accordance with Section 245 of the General Corporation Law of
Delaware.
SECOND: The address of the registered office of the Company in the State
------
of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of the registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Company is to engage in any lawful act or
-----
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
FOURTH: The Company is authorized to issue two classes of shares
------
designated (a) common stock, of which the Company is authorized to issue
350,000,000 shares, par value $.001 per share ("Common Stock"), and (b)
preferred stock, of which the Company is authorized to issue 170,000,000 shares,
par value $.001 per share ("Preferred Stock"). The rights, preferences,
privileges and restrictions granted to or imposed upon the Preferred Stock are
as follows:
(a) Preference on Liquidation.
-------------------------
(1) Preference Price.
----------------
(A) In the event of any liquidation, dissolution or winding up of
the Company, whether voluntary or involuntary, the holders of the Preferred
Stock then outstanding shall be paid ratably from the entire assets of the
Company legally available for distribution to its stockholders, whether from
capital, surplus or earnings, before any payment shall be made in respect of the
Common Stock of the Company, an amount equal to $0.85 per share plus any and all
declared but unpaid dividends on the shares held by such holder ("Preference
Price").
(B) Thereafter, all assets remaining available for distribution
shall be distributed to the holders of the Common Stock and Preferred Stock in
proportion to the number of shares held by them.
(b) Voting Rights.
-------------
(1) Except as otherwise required by law and as provided in Paragraph
(b)(2), the holders of outstanding Preferred Stock shall not be entitled to vote
upon any matter submitted to the stockholders for a vote.
(2) The holders of the Preferred Stock shall be entitled to vote
together with the holders of Common Stock as a single voting class on the
matters listed below, with each share of
<PAGE>
Preferred Stock and each share of Common Stock having one vote per share.
Whenever at least 20,000,000 shares of Preferred Stock (as adjusted for splits,
recombinations and the like) are outstanding, a vote on such matters shall
require an eighty percent majority:
(i) to adopt, amend or repeal any provision of this Certificate
of Incorporation;
(ii) whenever the stockholders vote to adopt, amend or repeal any
provision of the Bylaws;
(iii) to authorize any mandatory or statutory exchange of shares
of the Company;
(iv) to merge the Company into another corporation or another
corporation into the Company or consolidate the Company with any other
corporation (even if not consolidated for financial reporting purposes) in a
single transaction or a series of transactions;
(v) to sell all or substantially all of the assets of the
Company in a single transaction or a series of transactions; and
(vi) to adopt any plan or proposal for the liquidation or
dissolution of the Company.
(c) Conversion. The holders of the Preferred Stock shall have conversion
----------
rights as follows:
(1) Right to Convert. Each share of Preferred Stock shall be
----------------
convertible, without the payment of any additional consideration by the holder
thereof and at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the Company or any transfer agent for
the Preferred Stock, into one share of Common Stock. The Company shall pay to
the holders of the Preferred Stock at the time of such conversion all accrued
but unpaid dividends with respect to such stock, if any, out of such funds
legally available therefor and, if such funds are not available therefor, at
such time as such funds are available.
(2) Automatic Conversion. Each share of Preferred Stock shall
--------------------
automatically be converted into a share of Common Stock upon any consolidation
or merger of the Company into another corporation or corporations, upon any
mandatory or statutory exchange of Common Stock, upon any acquisition of the
Company, upon any acquisition of all or substantially all of the assets of the
Company, or upon the closing of a firm commitment underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale to the public of Common Stock for
the account of the Company or stockholders of the Company or both having an
aggregate offering price to the public of not less than $40,000,000 or, if such
aggregate public offering price is less, in which the aggregate number of shares
of Common Stock sold in the offering equals at least twenty percent of the total
number of shares of Common Stock
-2-
<PAGE>
and Preferred Stock of the Company outstanding (exclusive of treasury shares)
immediately after the closing of such offering ("Initial Public Offering").
Such conversion shall be deemed to have occurred simultaneously with such event.
The Company shall pay to the holders of the Preferred Stock at the time of such
conversion all accrued but unpaid dividends with respect to such stock.
(3) Conversion Procedures. In order for a holder to convert shares of
---------------------
Preferred Stock into shares of Common Stock, such holder shall comply with the
procedure established by the Company's Board of Directors, which shall be
reasonable and provide for prompt conversion. Shares of Preferred Stock duly
presented to the Company for conversion will be deemed to be converted to Common
Stock immediately upon such presentation.
(d) Participation in Distributions. The holders of Preferred Stock shall
------------------------------
participate equally and ratably, share for share, with the holders of Common
Stock and on identical terms and conditions, in the event the Company at any
time or from time to time shall make, issue or fix a date for any dividend or
other distribution whether payable in cash or in other assets, shares of capital
stock, other securities, subscription rights, other rights convertible into or
entitling the holder to acquire or receive additional shares of capital stock,
or any other form, or any combination of the foregoing. No such payment,
dividend or distribution may be declared paid or made on or in respect of the
Common Stock unless a simultaneous and identical payment, dividend or
distribution is also declared, paid or made on or in respect of the Preferred
Stock.
(e) Subdivisions, Combinations of Stock; Reorganizations or
-------------------------------------------------------
Reclassification. In the event the outstanding shares of Common Stock shall be
- ----------------
subdivided or combined by reclassification or otherwise, into a greater or
lesser number of shares of Common Stock, the Preferred Stock shall
simultaneously and on identical terms and conditions be subdivided or combined
by reclassification or otherwise in the same manner and with the same effect as
the Common Stock. In the case of any capital reorganization or any
reclassification of the capital stock of the Company, each share of Preferred
Stock shall thereafter be convertible into the number of shares of stock or
other securities, rights or assets (including cash) to which a holder of a share
of Common Stock would have been entitled upon the record date for (or date of,
if no record date is fixed) such reorganization or reclassification. In such
subdivision or combination, the Preference Price of the Preferred Stock shall be
revised proportionally.
(f) Notice. Each holder of Preferred Stock shall be entitled to the same
------
notices sent to holders of Common Stock.
(g) Common Stock Reserved. The Company shall at all times reserve and keep
---------------------
available, out of its authorized but unissued Common Stock, solely for the
purpose of effecting the conversion of the shares of Preferred Stock, the full
number of shares of Common Stock deliverable upon the conversion of all shares
of Preferred Stock from time to time outstanding. The Company shall from time
to time (subject to obtaining necessary stockholder action, which the Company
shall use its best efforts to obtain), in accordance with the laws of the State
of Delaware, increase the authorized amount of its Common Stock if the remaining
unissued Common Stock shall not be sufficient to permit all persons who have a
contractual right to acquire shares of Common Stock, whether upon
-3-
<PAGE>
the exercise of stock options, conversion of Preferred Stock in a name other
than that in which the shares of Preferred Stock to which such issuance relates
were registered, and no such issuance or delivery shall be made unless and until
the person requesting such issuance has paid to the Company the amount of any
such tax or it is established to the satisfaction of the Company that such tax
has been paid.
(h) Reissue. Any shares of Preferred Stock acquired by the Company shall
-------
not be reissued, other than to a stockholder who surrendered the shares for
conversion, and such shares shall be cancelled on the 100th day after such
acquisition if not so reissued.
FIFTH: The following provisions are inserted for the management of the
-----
business and the conduct of the affairs of the Company, and for further
definition, limitation and regulation of the powers of the Company and of its
directors and stockholders:
(a) The business and affairs of the Company shall be managed by or under
the direction of the Board of Directors. In addition to the powers and
authority expressly conferred upon them by Statute or by this Certificate of
Incorporation or the Bylaws, and to the extent not inconsistent with said
Certificate or Bylaws, the directors are hereby empowered to exercise all such
powers and do all such acts and things as may be exercised or done by the
Company.
(b) The directors of the Company need not be elected by written ballot.
(c) Special meetings of the stockholders may be called as set forth in the
Bylaws.
SIXTH:
-----
(a) The number of directors shall be fixed as provided in the Bylaws.
(b) Any vacancies in the Board of Directors may be filled as specified in
the Bylaws.
SEVENTH: Bylaws may be adopted, amended or repealed as set forth in the
-------
Bylaws, with holders of Preferred Stock voting as provided in Article Fourth
hereof on any such adoption, amendment or repeal by the stockholders of the
Company.
EIGHTH: A director of the Company shall not be personally liable to the
------
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director, except for liability (a) for any breach of the director's duty of
loyalty to the Company or its stockholders, (b) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (c) under Section 174 of the Delaware General Corporation Law, or (d) for
any transaction from which the director derived an improper personal benefit.
Any repeal or modification of the foregoing provisions of this Article EIGHTH by
the stockholders of the Company shall not adversely affect any right or
protection of a director of the Company existing at the time of such repeal or
modification.
-4-
<PAGE>
NINTH: The Company reserves the right to amend or repeal any provision
-----
contained in this Certificate of Incorporation so long as such amendment or
repeal is effected in the manner prescribed herein and by the laws of the State
of Delaware and all rights conferred upon the stockholders are granted subject
to this reservation.
-5-
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
NAVIGATION TECHNOLOGIES CORPORATION
Thomas A. Lerone and Richard Weiland certify that:
1. They are the Vice President and Chief Financial Officer and Secretary,
respectively, of Navigation Technologies Corporation, a corporation
organized and existing under the General Corporation Law of the State of
Delaware (the "Corporation").
2. The first sentence of Article Fourth of the Certificate of Incorporation
of this Corporation is amended and restated to read as follows:
"The Company is authorized to issue two classes of shares designated
(a) common stock, of which the Company is authorized to issue
350,000,000 shares, par value $.001 per shares ("Common
Stock"), and (b) preferred stock, of which the Company is authorized
to issue 210,000,000 shares, par value $.001 per share
("Preferred Stock")."
3. Section c(2) of Article Fourth of the Certificate of Incorporation of
this Corporation is amended and restated to read as follows:
"(2) Automatic Conversion. Each share of Preferred Stock shall
--------------------
automatically be converted into a share of Common Stock upon the earlier of (i)
any consolidation or merger of the Company into another corporation or
corporations, (ii) any mandatory or statutory exchange of Common Stock, (iii)
any acquisition of the Company, (iv) any acquisition of all or substantially all
of the assets of the Company, (v) October 1, 1996 or (vi) the closing of a firm
commitment underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer and
sale to the public of Common Stock for the account of the Company or
stockholders of the Company or both having an aggregate offering price to the
public of not less than $40,000,000 or, if such aggregate public offering price
is less, in which the aggregate number of shares of Common Stock sold in the
offering equals at least twenty percent of the total number of shares of Common
Stock and Preferred Stock of the Company outstanding (exclusive of treasury
shares) immediately after the closing of such offering ("Initial Public
Offering'). Such conversion shall be deemed to have occurred simultaneously with
such event. The Company shall pay to the holders of the Preferred Stock at the
time of such conversion all accrued but unpaid dividends with respect to such
stock."
4. The foregoing Amendment of the Certificate of Incorporation has been
duly approved by the Board of Directors.
5. The foregoing Amendment of the Certificate of Incorporation has been
duly approved by the written consent of the requisite stockholders in
accordance with Sections 228 and 242 of the Delaware General Corporation
Law ("DGCL") and notice has been given to all those stockholders who
have not consented in writing in accordance with Section 228(d) of the
DGCL.
<PAGE>
We further declare under penalty of perjury under the laws of the State of
Delaware that the matters set forth in this certificate are true and correct of
our knowledge.
Executed this 24th day of June, 1996.
/s/ Thomas A. Lerone
------------------------------------
Thomas A. Lerone
Vice President and Chief Financial Officer
/s/ Richard J. Weiland
-----------------------------------
Richard Weiland
Secretary
-2-
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
NAVIGATION TECHNOLOGIES CORPORATION
Thomas A. Lerone and Richard Weiland certify that:
1. They are the Vice President and Chief Financial Officer and Secretary,
respectively, of Navigation Technologies Corporation, a corporation
organized and existing under the General Corporation Law of the State of
Delaware (the "Corporation").
2. The first sentence of Article Fourth of the Certificate of Incorporation
of this Corporation is amended and restated to read as follows:
"The Company is authorized to issue two classes of shares designated (a)
common stock, of which the Company is authorized to issue 150,000,000
(post combination) shares, par value $.001 per shares ("Common Stock"),
and (b) preferred stock, of which the Company is authorized to issue
20,000,000 shares (post combination), par value $.001 per share
("Preferred Stock")."
3. The following two sentences shall be inserted after the first sentence
of Article Fourth of the Certificate of Incorporation of this
Corporation:
"Immediately upon the filing of this Certificate of Amendment each
twelve (12) outstanding shares of the Company's Common stock will be
exchanged and combined, automatically and without further action, into
one (1) share of Common Stock and each twelve (12) outstanding shares of
the Company's Preferred Stock will be exchanged and combined,
automatically and without further action, into one (1) share of
Preferred Stock. Such combination shall be effected on a holder by
holder basis, and any fractional shares resulting from such combination
shall be rounded up to the nearest whole share."
4. The foregoing Amendment of the Certificate of Incorporation has been
duly approved by the Board of Directors.
5. The foregoing Amendment of the Certificate of Incorporation has been
duly approved by the written consent of the requisite stockholders in
accordance with Sections 228 and 242 of the Delaware General Corporation
Law ("DGCL") and notice has been given to all those stockholders who
have not consented in writing in accordance with Section 228(d) of the
DGCL.
<PAGE>
We further declare under penalty of perjury under the laws of the State of
Delaware that the matters set forth in this certificate are true and correct of
our knowledge.
Executed this ____ day of ____, 1996.
------------------------------------
Thomas A. Lerone
Vice President and Chief Financial Officer
-----------------------------------
Richard Weiland
Secretary
-2-
<PAGE>
EXHIBIT 3.3
NAVIGATION TECHNOLOGIES CORPORATION
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Navigation Technologies Corporation, a Delaware corporation, hereby
certifies as follows:
The Certificate of Incorporation for Navigation Technologies Corporation
(the "CORPORATION") was originally filed in the office of the Secretary of State
of the State of Delaware on December 18, 1987. The Certificate of Incorporation
is hereby amended and restated pursuant to Section 242 and Section 245 of the
Delaware General Corporation Law ("DGCL"). This Amended and Restated
Certificate of Incorporation (the "RESTATED CERTIFICATE") has been duly approved
by the Board of Directors in accordance with Section 242 of the DGCL. This
Restated Certificate has been duly approved by the written consent of the
requisite stockholders in accordance with Sections 228 and 242 of the DGCL and
notice has been given to all those stockholders who have not consented in
writing in accordance with Section 228(d) of the DGCL.
This Restated Certificate of Incorporation restates and integrates and
further amends the Certificate of Incorporation of the Corporation. The text of
the Certificate of Incorporation is amended hereby to read as herein set forth
in full:
ARTICLE I
The name of the corporation (the "CORPORATION") is:
NAVIGATION TECHNOLOGIES CORPORATION
ARTICLE II
The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE III
The nature of the business and purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of Delaware.
<PAGE>
ARTICLE IV
This Corporation is authorized to issue two classes of stock to be
designated, respectively, Common Stock and Preferred Stock. The total number of
shares of Common Stock this Corporation is authorized to issue is 150,000,000
shares, par value $0.001, and the total number of shares of Preferred Stock this
Corporation is authorized to issue is 5,000,000 shares, par value $0.001. Pre
ferred Stock may be issued from time to time in one or more series.
The Board of Directors of the Corporation is authorized to determine or
alter the powers, preferences, privileges and relative participating, optional
or special rights granted to and the qualifications, limitations or restrictions
imposed upon any wholly unissued series of Preferred Stock and, within the
limitations or restrictions stated in any resolution or resolutions of the Board
of Directors originally fixing the number of shares constituting any series, to
increase or decrease (but not below the number of shares of any series then
outstanding) the number of shares of any such series subsequent to the issuance
of shares of that series, to determine the designation of any series and to fix
the number of shares of any series. In case the number of shares of any series
shall be so decreased, the shares constituting such decrease shall resume the
status that they had prior to the adoption of the resolution originally fixing
the number of shares of such series.
ARTICLE V
In furtherance and not in limitation of the powers conferred by statute,
the Bylaws of the Corporation may be made, altered, amended or repealed by the
stockholders or by the Board of Directors.
ARTICLE VI
The number of directors shall be determined as provided in the Bylaws.
Elections of directors need not be by written ballot.
ARTICLE VII
A. To the fullest extent permitted by the Delaware General Corporation
Law as the same exists or as may hereafter be amended, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
B. The Corporation may indemnify to the fullest extent permitted by law
any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil,
-2-
<PAGE>
administrative or investigative, by reason of the fact that he, his testator or
intestate is or was a director, officer, employee or agent of the Corporation or
any predecessor of the Corporation or serves or served at any other enterprise
as a director, officer, employee or agent at the request of the Corporation or
any predecessor to the Corporation.
C. Neither any amendment nor repeal of this Article VII, nor the adoption
of any provision of this Corporation's Certificate of Incorporation inconsistent
with this Article VII, shall eliminate or reduce the effect of this Article VII,
in respect of any matter occurring, or any action or proceeding accruing or
arising or that, but for this Article VII, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
ARTICLE VIII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE IX
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in any manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
-3-
<PAGE>
IN WITNESS WHEREOF, said Corporation has caused this Certificate to be
signed by Thomas A. Lerone, the Vice President and Chief Financial Officer of
the Corporation, and attested by Richard Weiland, the Secretary of the
Corporation. The signatures below shall constitute the affirmation or
acknowledgment, under penalties of perjury, that the facts herein stated are
true.
Dated: ________________________, 1996
NAVIGATION TECHNOLOGIES CORPORATION
___________________________________________
Thomas A. Lerone
Vice President and Chief Financial Officer
ATTEST:
- ----------------------------
Richard Weiland
Secretary
-4-
<PAGE>
EXHIBIT 3.4
BYLAWS
OF
NAVIGATION TECHNOLOGIES CORPORATION
(a Delaware corporation)
As Amended September, 1994
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I - Offices.......................................................... 1
Section 1. Registered Office........................................... 1
Section 2. Other Offices............................................... 1
ARTICLE II - Corporate Seal.................................................. 1
Section 3. Corporate Seal.............................................. 1
ARTICLE III - Stockholders' Meetings......................................... 1
Section 4. Place of Meetings........................................... 1
Section 5. Annual Meeting.............................................. 1
Section 6. Special Meetings; Initial Public Offering................... 2
Section 7. Notice of Meetings.......................................... 2
Section 8. Quorum...................................................... 2
Section 9. Adjournment and Notice of Adjourned Meetings................. 3
Section 10. Voting Rights............................................... 3
Section 11. Joint Owners of Stock....................................... 3
Section 12. List of the Stockholders.................................... 4
Section 13. Action without Meeting...................................... 4
Section 14. Organization................................................ 5
ARTICLE IV - Directors....................................................... 5
Section 15. Number and Term of Office.................................... 5
Section 16. Powers...................................................... 5
Section 17. Vacancies................................................... 5
Section 18. Resignation................................................. 6
Section 19. Removal..................................................... 6
Section 20. Meetings.................................................... 6
Section 21. Quorum and Voting........................................... 7
Section 22. Action Without Meeting....................................... 7
Section 23. Fees and Compensation....................................... 7
Section 24. Committees.................................................. 8
Section 25. Organization................................................ 9
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
PAGE
----
ARTICLE V - Officers......................................................... 9
Section 26. Officers Designated......................................... 9
Section 27. Tenure and Duties of Officers............................... 9
Section 28. Delegation of Authority..................................... 11
Section 29. Resignations................................................ 11
Section 30. Removal..................................................... 11
ARTICLE VI - Execution of Corporate Instruments and Voting
of Securities Owned by the Company......................... 11
Section 31. Execution of Corporate Instruments.......................... 11
Section 32. Voting of Securities Owned by the Company................... 12
ARTICLE VII - Shares of Stock................................................ 12
Section 33. Form and Execution of Certificates.......................... 12
Section 34. Lost Certificates........................................... 12
Section 35. Transfers................................................... 13
Section 36.............................................................. 13
Section 37. Registered Stockholders..................................... 14
ARTICLE VIII - Other Securities of the Company............................... 14
Section 38. Execution of Other Securities............................... 14
ARTICLE IX - Dividends....................................................... 14
Section 39. Declaration of Dividends.................................... 14
Section 40. Dividend Reserve............................................ 15
ARTICLE X - Fiscal Year...................................................... 15
Section 41. Fiscal Year................................................. 15
ARTICLE XI - Indemnification................................................. 15
Section 42. Indemnification of Officers, Directors, Employees
and Other Agents......................................... 15
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
PAGE
----
ARTICLE XII - Right of First Refusal......................................... 18
Section 43. Right of First Refusal...................................... 18
ARTICLE XIII - Interested Party Transactions................................. 21
Section 44. Interested Party Transactions............................... 21
ARTICLE XIV - Notices........................................................ 21
Section 45. Notices..................................................... 21
ARTICLE XV - Amendments...................................................... 23
Section 46. Amendments.................................................. 23
-iii-
<PAGE>
BYLAWS
OF
NAVIGATION TECHNOLOGIES CORPORATION
(a Delaware corporation)
ARTICLE I
Offices
Section 1. Registered Office. The registered office of the Company in the
-----------------
State of Delaware shall be in the City of Wilmington, County of New Castle.
Section 2. Other Offices. The Company shall also have and maintain an
-------------
office or principal place of business in Sunnyvale, California, or at such other
place as may be fixed by the Board of Directors, and may also have offices at
such other places, both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Company may
require.
ARTICLE II
Corporate Seal
Section 3. Corporate Seal. The Corporate seal shall consist of a die
--------------
bearing the name of the Company and the inscription, "Corporate Seal-Delaware."
Said seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
ARTICLE III
Stockholders' Meetings
Section 4. Place of Meetings. Meetings of the stockholders shall be held
-----------------
at such place, either within or without the State of Delaware, as may be
designated from time to time by the Board of Directors, or, if not so
designated, then at the office of the Company required to be maintained pursuant
to Section 2.
Section 5. Annual Meeting. The annual meeting of the stockholders, for
--------------
the purpose of election of Directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors, or, if not so designated, then at
10 o'clock A.M. on the third Tuesday in March in each year if not a legal
holiday, and, if a legal holiday, at the same hour and place on the next
succeeding day not a holiday.
<PAGE>
Section 6. Special Meetings; Initial Public Offering. Special meetings of
-----------------------------------------
the stockholders may be called at any time, for any purpose or purposes, by the
Board of Directors or by the holders of outstanding stock of the Company
representing at least twenty-five percent of the shares entitled to vote at an
election of Directors; provided, however, that following the closing of a firm
commitment underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer and
sale to the public of Common Stock for the account of the Company or
stockholders of the Company or both having an aggregate offering price to the
public of not less than $40,000,000 or, if such aggregate public offering price
is less, in which the aggregate number of shares of Common Stock sold in the
offering equals at least twenty per cent of the total number shares of Common
Stock and Preferred Stock of the Company outstanding (exclusive of treasury
shares) immediately after the closing of such offering (such event being
referred to herein as the "Initial Public Offering"), special meetings of the
stockholders may only be called by the Board of Directors or the holders of
outstanding stock of the Company representing at least fifty percent of the
shares entitled to vote at an election of Directors. Business transacted at
special meetings shall be confined to the purpose or purposes stated in the
notice. The definition of Initial Public Offering may be changed to require a
smaller dollar amount or aggregate number of shares by an amendment to this
Bylaw only by a majority vote of the Board of Directors which majority shall
include a majority of directors not designated by Philips Media B.V. and
affiliated companies under common control.
Section 7. Notice of Meetings. Except as otherwise provided by law or the
------------------
Certificate of Incorporation, written notice of each meeting of the stockholders
shall be given not less than ten days nor more than sixty days before the date
of the meeting to each stockholder entitled to vote at such meeting, such notice
to specify the place, date and hour and purpose or purposes of the meeting.
Notice of the time, place and purpose of any meeting of the stockholders may be
waived in writing, signed by the person entitled to notice thereof, either
before or after such meeting, and will be waived by any stockholder by his
attendance thereat in person or by proxy, except when the stockholder attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Any stockholder so waiving notice of such meeting shall be bound by
the proceedings of any such meeting in all respects as if due notice thereof had
been given.
Section 8. Quorum. At all meetings of the stockholders, except where
------
otherwise provided by statute, the presence, in person or by proxy duly
authorized, of the holders of a majority of the outstanding shares of stock
entitled to vote shall constitute a quorum for the transaction of business. Any
shares, the voting of which at said meeting has been enjoined, or which for any
reason cannot be lawfully voted at such meeting, shall not be counted to
determine a quorum at such meeting. In the absence of a quorum, any meeting of
the stockholders may be adjourned, from time to time, by vote of the holders of
a majority of the shares represented thereat, but no other business shall be
transacted at such meeting. The stockholders present at a duly called or
convened meeting, at which a quorum is present, may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum. Except as otherwise provided by law or
the Certificate of Incorporation, all action taken by the holders of a majority
of the voting power represented at any meeting at which a quorum is present
shall be valid and binding upon the
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Company; provided, however, that Directors shall be elected by a plurality of
the votes of the shares present in person or represented by proxy at the meeting
and entitled to vote on the election of Directors. Where a separate vote by a
class or classes is required, a majority of the outstanding shares of such class
or classes, present in person or represented by proxy, shall constitute a quorum
entitled to take action with respect to that vote on that matter and, except as
otherwise provided in the Certificate of Incorporation the affirmative vote of
the majority (plurality, in the case of the election of Directors) of shares of
such class or classes present in person or represented by proxy at the meeting
shall be the act of such class.
Section 9. Adjournment and Notice of Adjourned Meetings. Any meeting of
--------------------------------------------
the stockholders, whether annual or special, may be adjourned from time to time
by the vote of a majority of the shares, the holders of which are present either
in person or by proxy. When a meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting if the time and place thereof
are announced at the meeting at which the adjournment is taken. At the
adjourned meeting, the Company may transact any business that might have been
transacted at the original meeting. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
Section 10. Voting Rights. For the purpose of determining those
-------------
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the Company on the record date, as provided in Section 12, shall be
entitled to vote at any meeting of the stockholders. Except as may be otherwise
provided in the Certificate of Incorporation, each stockholder shall be entitled
to one vote for each share of capital stock held by such stockholder. Every
person entitled to vote or execute consents shall have the right to do so either
in person or by an agent or agents authorized by a written proxy executed by
such person or his duly authorized agent, which proxy shall be filed with the
Secretary at or before the meeting at which it is to be used. An agent so
appointed need not be a stockholder. No proxy shall be voted after three years
from its date of creation unless the proxy provides for a longer period.
Section 11. Joint Owners of Stock. If shares or other securities having
---------------------
voting power stand of record in the names of two or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two or more persons have the same fiduciary
relationship respecting the same shares, unless the Secretary is given written
notice to the contrary and is furnished with a copy of the instrument or order
appointing them or creating the relationship wherein it is so provided, their
acts with respect to voting shall have the following effect:
(a) if only one votes, his act binds all;
(b) if more than one votes, the act of the majority so voting binds
all;
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(c) if more than one votes, but the vote is evenly split on any
particular matter, each faction may vote the securities in question
proportionally, or may apply to the Delaware Court of Chancery for relief as
provided in Section 217(b) of the General Corporation Law of Delaware. If the
instrument filed with the Secretary shows that any such tenancy is held in
unequal interests, a majority or even-split for the purpose of this Paragraph
11(c) shall be a majority or even-split in interest.
Section 12. List of the Stockholders. The Secretary shall prepare and
------------------------
make, at least ten days before every meeting of the stockholders, a complete
list of the stockholders entitled to vote at said meeting, arranged in
alphabetical order, showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 13. Action without Meeting.
----------------------
(a) Any action required by statute to be taken at any annual or
special meeting of the stockholders, or any action which may be taken at any
annual or special meeting of the stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent or consents in writing,
setting forth the action so taken, are signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted and shall be delivered to the Company by
delivery to its registered office in the State of Delaware, its principal place
of business or an officer or agent of the Company having custody of the book in
which proceedings of meetings of the stockholders are recorded. Delivery made
to the Company's registered office shall be by hand or by certified or
registered mail, return receipt requested.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty days of the
earliest dated consent delivered to the Company in the manner herein required,
written consents signed by a sufficient number of stockholders to take action
are delivered to the Company by delivery to its registered office in the State
of Delaware, its principal place of business or an officer or agent of the
Company having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a Company's registered office shall
be by hand or by certified or registered mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is
consented to is such as would have required the filing of a certificate under
any section of the General Corporation Law of Delaware if such action had been
voted on by
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the stockholders at a meeting thereof, then the certificate filed under such
section shall state, in lieu of any statement required by such section
concerning any vote of stockholders, that written notice and written consent
have been given as provided in Section 228 of the General Corporation Law of
Delaware.
(d) No such action by written consent may be taken following the
Initial Public Offering.
Section 14. Organization. At every meeting of the stockholders, the
------------
Chairman of the Board, or, if a Chairman has not been appointed or is absent,
the President, or, if the President is absent, the most senior Vice President
present, or in the absence of any such officer, a chairman of the meeting chosen
by a majority in interest of the stockholders entitled to vote, present in
person or by proxy, shall act as chairman. The Secretary, or, in the absence of
the Secretary, an Assistant Secretary or any other person in the absence of such
officer directed to do so by the chairman of the meeting, shall act as secretary
of the meeting.
ARTICLE IV
Directors
Section 15. Number and Term of Office. The number of Directors which
-------------------------
shall constitute the whole of the Board of Directors shall be eight. Except as
provided in Section 17, the Directors shall be elected by the stockholders at
their annual meeting in each year and shall hold office until the next annual
meeting and until their successors shall be duly elected and qualified, or until
their death, resignation or removal. Directors need not be stockholders. If
for any cause, the Directors shall not have been elected at an annual meeting,
they may be elected as soon thereafter as convenient at a special meeting of the
stockholders called for that purpose in the manner provided in these Bylaws.
Section 16. Powers. The powers of the Company shall be exercised, its
------
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
Section 17. Vacancies. Vacancies and newly created directorships
---------
resulting from any increase in the authorized number of Directors may be filled
by a majority of the Directors then in office, although less than a quorum, or
by a sole remaining Director, and each Director so elected shall hold office for
the unexpired portion of the term of the Director whose place shall be vacant
and until his successor shall have been duly elected and qualified. A vacancy
in the Board of Directors shall be deemed to exist under this Section 17 in the
case of the death, removal or resignation of any Director, or if the
stockholders fail at any meeting of the stockholders at which directors are to
be elected (including any meeting referred to in Section 19) to elect the number
of Directors then constituting the whole Board of Directors.
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<PAGE>
Section 18. Resignation. Any Director may resign at any time by
-----------
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When
one or more Directors shall resign from the Board of Directors, effective at a
future date, a majority of the Directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until a
successor shall have been duly elected and qualified.
Section 19. Removal. At a special meeting of stockholders called
-------
according to the provisions of Section 6 for the purpose of removal of
Directors, subject to the limitation set forth in Section 141(k) of the General
Corporation Law of Delaware, the Board of Directors, or any individual Director,
may be removed from office, with or without cause, and a new Director or
Directors elected by a vote of the stockholders.
Section 20. Meetings.
--------
(a) Annual Meetings. The annual meeting of the Board of Directors
---------------
shall be held immediately after the annual meeting of the stockholders and at
the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(b) Regular Meetings. Regular meetings of the Board of Directors may
----------------
be held at any place within or without the State of Delaware which has been
designated by resolution of the Board of Directors or the written consent of all
Directors.
(c) Special Meetings. Special meetings of the Board of Directors may
----------------
be held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board, the President, the Secretary or any two
Directors.
(d) Telephone Meetings. Any member of the Board of Directors, or of
------------------
any Candidate thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(e) Notice of Meetings. Notice of the date, time and place of all
------------------
meetings of the Board of Directors shall be delivered personally, orally or in
writing, or by telephone or telefax to each Director, at least forty-eight hours
before the meeting. Such notice may be given by the Secretary or by the person
or persons who called a meeting. Such notice need not specify the
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purpose of the meeting. Notice of any meeting may be waived in writing at any
time before or after the meeting and will be waived by any Director by
attendance thereat, except when the Director attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
(f) Waiver of Notice. The transaction of all business at any meeting
----------------
of the Board of Directors, or any committee thereof, however called or noticed,
or wherever held, shall be as valid as though at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
the meeting, each of the Directors not present shall sign a written waiver of
notice, or a consent to holding such meeting, or an approval of the minutes
thereof. All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Section 21. Quorum and Voting.
-----------------
(a) Quorum. A quorum of the Board of Directors shall consist of a
------
majority of the exact number of Directors fixed from time to time in accordance
with Section 15, but not less than one. At any meeting whether a quorum be
present or otherwise, a majority of the Directors present may adjourn from time
to time until the time fixed for the next regular meeting of the Board of
Directors, without notice other than by announcement at the meeting.
(b) Approving Vote. Subject to the provisions of the Stock Purchase
--------------
Agreement between the Company and Philips Media B.V., dated as of September 1,
1994 (the "Stock Purchase Agreement"), at each meeting of the Board of Directors
at which a quorum is present, all questions and business, including, without
limitation, adoption, amendment or repeal of these Bylaws shall be determined by
a vote of a majority of the Directors present, unless a different vote be
required by law, the Certificate of Incorporation, or these Bylaws.
Section 22. Action Without Meeting. Any action required or permitted to
----------------------
be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 23. Fees and Compensation. Directors shall be entitled to such
---------------------
compensation for their services as may be approved by the Board of Directors,
including, if so approved by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors or any meeting of a committee of directors,
equity incentives and other compensation and incentives for their services as
directors. Nothing herein contained shall be construed to preclude any Director
from serving the Company in any other capacity as an officer, agent, employee,
or otherwise and receiving compensation therefor.
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<PAGE>
Section 24. Committees.
----------
(a) Executive Committee. The Board of Directors may, by resolution
-------------------
passed by a majority of the whole Board of Directors, appoint an Executive
Committee to consist of one or more members of the Board of Directors. The
Executive Committee, to the extent permitted by law and specifically granted by
the Board of Directors, shall have and may exercise when the Board of Directors
is not in session all powers of the Board of Directors in the management of the
business and affairs of the Company, including, without limitation, the power
and authority to declare a dividend or to authorize the issuance of stock,
except such committee shall not have the power or authority to amend the
Certificate of Incorporation, to adopt an agreement of merger or consolidation,
to recommend to the stockholders the sale, lease or exchange of all or
substantially all of the Company's property and assets, to recommend to the
stockholders of the Company a dissolution of the Company or a revocation of a
dissolution or to amend these Bylaws.
(b) Other Committees. The Board of Directors may, by resolution
----------------
passed by a majority of the whole Board of Directors, from time to time appoint
such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one or more members of the
Board of Directors, and shall have such powers and perform such duties as may be
prescribed by the resolution or resolutions creating such committees, but in no
event shall such committee have the powers denied to the Executive Committee in
these Bylaws.
(c) Term. The members of all committees of the Board of Directors
----
shall serve a term coexistent with that of the Board of Directors which shall
have appointed such committee. The Board of Directors may at any time increase
or decrease the number of members of a committee or terminate the existence of a
committee. The membership of a committee member shall terminate on the date of
his death or voluntary resignation. The Board of Directors may at any time for
any reason remove any individual committee member and the Board of Directors may
fill any committee vacancy created by death, resignation, removal or increase in
the number of members of the committee. The Board of Directors may designate
one or more Directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee, and, in addition,
in the absence or disqualification of any member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
(d) Meetings. Unless the Board of Directors shall otherwise provide,
--------
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 24 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee may be held at any place which has been designated from time to time
by resolution of such committee or by written consent of all members thereof,
and may be called by any Director who is a member of such committee, upon
written notice to the members of such committee of the time and
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<PAGE>
place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of
any committee may be waived in writing at any time before or after the meeting
and will be waived by any Director by attendance thereat, except when the
Director attends such special meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. A majority of the authorized number
of members of any such committee shall constitute a quorum for the transaction
of business, and the act of a majority of those present at any meeting at which
a quorum is present shall be the act of such committee.
Section 25. Organization. At every meeting of the Directors, the Chairman
------------
of the Board, or, if a Chairman has not been appointed or is absent, the
President, or if the President is absent, the most senior Vice President, or, in
the absence of any such officer, a chairman of the meeting chosen by a majority
of the Directors present, shall preside over the meeting. The Secretary, or in
the absence of the Secretary, an Assistant Secretary or any other person in the
absence of such officer directed to do so by the chairman of the meeting, shall
act as secretary of the meeting.
ARTICLE V
Officers
Section 26. Officers Designated. The officers of the Company shall
-------------------
consist of a Chief Executive Officer, a President, a Secretary and a Chief
Financial Officer. The Company may also have, at the discretion of the Board of
Directors, a Chairman of the Board, one or more Vice Presidents, and such other
offices as may from time to time be appointed by the Board of Directors.
Officers shall be elected by the Board of Directors, which shall consider that
subject at its first meeting after every annual meeting of the stockholders.
The Board of Directors may also appoint such other officers and agents with such
powers and duties as it shall deem necessary. The Board of Directors may assign
such additional titles to one or more of the officers as it shall deem
appropriate. Any one person may hold any number of offices of the Company at
any one time unless specifically prohibited therefrom by law. The salaries and
other compensation of the officers of the Company shall be fixed by or in the
manner designated by the Board of Directors.
Section 27. Tenure and Duties of Officers.
-----------------------------
(a) General. All officers shall hold office at the pleasure of the
-------
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. If the office of any officer becomes vacant
for any reason, the vacancy may be filled by the Board of Directors.
(b) Duties of Chairman of the Board. The Chairman of the Board, when
-------------------------------
present, shall preside at all meetings of the stockholders and the Board of
Directors. The Chairman of the
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Board shall perform the duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. If there is no Chief Executive Officer, the
Chairman shall have the powers and duties prescribed in Paragraph 27.(c). If
there is no President, the Chairman of the Board shall have the powers and
duties prescribed in Paragraph 27.(d).
(c) Duties of Chief Executive Officer. The Chief Executive Officer
---------------------------------
shall preside at all meetings of the stockholders and at all meetings of the
Board of Directors, unless the Chairman of the Board has been appointed and is
present. The Chief Executive Officer shall perform the duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors and the Chairman of the Board, if one has been
appointed, shall designate from time to time.
(d) Duties of President. The President shall preside at all meetings
-------------------
of the stockholders and at all meetings of the Board of Directors, unless the
Chairman of the Board or Chief Executive Officer has been appointed and is
present. The President shall perform the duties commonly incident to his office
and shall also perform such other duties and have such other powers as the Board
of Directors and the Chairman of the Board, if one has been appointed, shall
designate from time to time.
(e) Duties of Vice Presidents. The Vice Presidents, in the order of
-------------------------
their seniority, may assume and perform the duties of the President in the
absence or disability of the President or whenever the offices of President and
Chairman of the Board are vacant. The Vice Presidents shall perform other
duties commonly incident to their office and shall also perform such other
duties and have such other powers as the Board of Directors or the President
shall designate from time to time.
(f) Duties of Secretary. The Secretary shall be invited to attend
-------------------
all meetings of the stockholders and of the Board of Directors, and, if present,
shall record all acts and proceedings thereof in the minute book of the Company.
The Secretary shall give notice in conformity with these Bylaws of all meetings
of the stockholders, and of all meetings of the Board of Directors and any
committee thereof requiring notice. The Secretary shall perform all other
duties provided for in these Bylaws and other duties commonly incident to the
office and shall also perform such other duties and have such other powers as
the Board of Directors shall designate from time to time. The President may
direct any Assistant Secretary to assume and perform the duties of the Secretary
in the absence or disability of the Secretary.
(g) Duties of Chief Financial Officer. The Chief Financial Officer
---------------------------------
shall keep or cause to be kept the books of account of the Company in a thorough
and proper manner, and shall render statements of the financial affairs of the
Company in such form and as often as required by the Board of Directors or the
President. The Chief Financial Officer, subject to the order of the Board of
Directors, shall have the custody of all funds and securities of the Company.
The Chief Financial Officer shall perform other duties commonly incident to the
office and shall also perform such other duties and have such other powers as
the Board of Directors or the President shall designate from
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<PAGE>
time to time. The President may direct any Assistant Chief Financial Officer to
assume and perform the duties of the Chief Financial Officer in the absence or
disability of the Chief Financial Officer, and each Assistant Chief Financial
Officer shall perform other duties commonly incident to the office and shall
also perform such other duties and have such other powers as the Board of
Directors or the President shall designate from time to time.
(h) Duties of Assistant Secretary. The Assistant Secretary, if there
-----------------------------
shall be such an officer, shall have all the powers, and perform all the duties
of, the Secretary in the absence or inability of the Secretary to act. The
Assistant Secretary shall also perform such other duties as the Board of
Directors may from time to time prescribe.
Section 28. Delegation of Authority. The Board of Directors may from time
-----------------------
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.
Section 29. Resignations. Any officer may resign at any time by giving
------------
written notice to the Board of Directors, the President or the Secretary. Any
such resignation shall be effective when received by the person or persons to
whom such notice is given, unless a later time is specified therein, in which
event the resignation shall become effective at such later time. Unless
otherwise specified in such notice, the acceptance of any such resignation shall
not be necessary to make it effective.
Section 30. Removal. Any officer may be removed from office at any time,
-------
either with or without cause, by the vote or written consent of a majority of
the Directors in office at the time, or by any committee or any superior officer
upon whom such power of removal may have been conferred by the Board of
Directors.
ARTICLE VI
Execution of Corporate Instruments and Voting
of Securities Owned by the Company
Section 31. Execution of Corporate Instruments. The Board of Directors
----------------------------------
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the Company any
corporate instrument or document, or to sign on behalf of the Company the
corporate name without limitation, or to enter into contracts on behalf of the
Company, except where otherwise provided by law or these Bylaws, and such
execution or signature shall be binding upon the Company.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the Company, and other corporate instruments or
documents requiring the corporate seal, and certificates
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<PAGE>
of shares of stock owned by the Company, shall be executed, signed or endorsed
by the Chairman of the Board, the President or any Vice President, and by the
Secretary, the Chief Financial Officer, any Assistant Secretary or any Assistant
Chief Financial Officer. All other instruments and documents requiring the
corporate signature, but not requiring the corporate seal, may be executed as
aforesaid or in such other manner as may be directed by the Board of Directors.
Any signature may be a facsimile.
All checks and drafts drawn on banks or other depositories on funds to the
credit of the Company or in special accounts of the Company shall be signed by
such person or persons as the Board shall authorize so to do.
Section 32. Voting of Securities Owned by the Company. All stock and
-----------------------------------------
other securities of other Companies owned or held by the Company for itself, or
for other parties in any capacity, shall be voted, and all proxies with respect
thereto shall be executed, by the person authorized so to do by resolution of
the Board of Directors, or, in the absence of such authorization, by the
Chairman of the Board, the President, any Vice President, the Secretary or the
Chief Financial Officer.
ARTICLE VII
Shares of Stock
Section 33. Form and Execution of Certificates. Certificates for the
----------------------------------
shares of stock of the Company shall be in such form as is consistent with the
Certificate of Incorporation and applicable law. Every holder of stock in the
Company shall be entitled to have a certificate signed by or in the name of the
Company by the Chairman of the Board, the President or any Vice President and by
the Chief Financial Officer, any Assistant Chief Financial Officer, the
Secretary or any Assistant Secretary, certifying the number of shares owned by
him in the Company. Any signature on the certificate may be a facsimile. In
case any officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it may
be issued with the same effect as if he/she were such officer, transfer agent,
or registrar at the date of issue. Each certificate shall state upon the face
or back thereof, in full or in summary, all of the designations, preferences,
limitations, restrictions on transfer and relative rights of the shares
authorized to be issued.
Section 34. Lost Certificates. A new certificate or certificates shall be
-----------------
issued in place of any certificate or certificates theretofore issued by the
Company alleged to have been lost, stolen, or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The Company may require, as a condition precedent
to the issuance of a new certificate or certificates, the owner of such lost,
stolen, or destroyed certificate or certificates, or his legal representative to
give the Company a surety bond in such form and amount as it may direct as
indemnity against any claim that may be made against the Company with respect to
the certificate alleged to have been lost, stolen, or destroyed.
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Section 35. Transfers. Transfers of record of shares of stock of the
---------
Company shall be made only upon its books upon request of the holders thereof,
in person or by attorney duly authorized, and upon the surrender of a properly
endorsed certificate or certificates for a like number of shares.
Section 36. Fixing Record Dates.
-------------------
(a) In order that the Company may determine the stockholders entitled
to notice of or to vote at any meeting of the stockholders or any adjournment
thereof, the Board of Directors may fix, in advance, a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall not be more
than sixty nor less than ten days before the date of such meeting. If no record
date is fixed by the Board of Directors, the record date for determining the
stockholders entitled to notice of or to vote at a meeting of the stockholders
shall be at the close of business on the day next preceding the day on which
notice is given, or if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held. A determination of the
stockholders of record entitled to notice of or to vote at a meeting of the
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b) In order that the Company may determine the stockholders entitled
to consent to a corporate action in writing without a meeting, the Board of
Directors may fix, in advance, a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted by
the Board of Directors, and which date shall not be more than ten days after the
date upon which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining the stockholders entitled to consent to a corporate
action in writing without a meeting, when no prior action by the Board of
Directors is required by law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the Company by delivery to its registered office in the State of Delaware, its
principal place of business or an officer or agent of the Company having custody
of the book in which proceedings of meetings of the stockholders are recorded.
Delivery made to the Company's registered office shall be by hand or by
certified or registered mail, return receipt requested. If no record date has
been fixed by the Board of Directors and prior action by the Board of Directors
is required by law, the record date for determining the stockholders entitled to
consent to corporate action in writing without a meeting shall be at the close
of business on the day on which the Board of Directors adopts the resolution
taking such prior action.
(c) In order that the Company may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted, and which record date shall be not more than sixty days prior to
such action. If no record date is fixed, the
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<PAGE>
record date for determining the stockholders for any such purpose shall be at
the close of business on the day on which the Board of Directors adopts the
resolution relating thereto.
Section 37. Registered Stockholders. The Company shall be entitled to
-----------------------
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
Other Securities of the Company
Section 38. Execution of Other Securities. All bonds, debentures and
-----------------------------
other corporate securities of the Company, other than stock certificates, may be
signed by the Chairman of the Board, the President or any Vice President, or
such other person as may be authorized by the Board of Directors, and the
corporate seal impressed thereon or a facsimile of such seal imprinted thereon
and attested by the signature of the Secretary, an Assistant Secretary, the
Chief Financial Officer or an Assistant Chief Financial Officer. The signatures
of the persons signing and attesting the corporate seal on such bond, debenture
or other corporate security may be the imprinted facsimile of the signatures of
such persons. Interest coupons appertaining to any such bond, debenture or
other corporate security, authenticated by a trustee as aforesaid, shall be
signed by the Chief Financial Officer, an Assistant Chief Financial Officer or
such other person as may be authorized by the Board of Directors, or bear
imprinted thereon the facsimile signature of such person. In case any officer
who shall have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any such
interest coupon, shall have ceased to be such officer before the bond, debenture
or other corporate security so signed or attested shall have been delivered,
such bond, debenture or other corporate security nevertheless may be adopted by
the Company and issued and delivered as though the person who signed the same or
whose facsimile signature shall have been used thereon had not ceased to be such
officer of the Company.
ARTICLE IX
Dividends
Section 39. Declaration of Dividends. Dividends upon the capital stock of
------------------------
the Company, subject to any provisions of the Certificate of Incorporation, may
be declared by the Board of Directors pursuant to law at any regular or special
meeting. Dividends may be paid in cash, in property, or in shares of the
capital stock, subject to any provisions of the Certificate of Incorporation.
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<PAGE>
Section 40. Dividend Reserve. Before payment of any dividend, there may
----------------
be set aside out of any funds of the Company available for dividends such sum or
sums as the Board of Directors from time to time, in their absolute discretion,
think proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Company, or for
such other purpose as the Board of Directors shall determine is conducive to the
interests of the Company, and the Board of Directors may modify or abolish any
such reserve in the manner in which it was created.
ARTICLE X
Fiscal Year
Section 41. Fiscal Year. The fiscal year of the Company shall end on the
-----------
last day of September.
ARTICLE XI
Indemnification
Section 42. Indemnification of Officers, Directors, Employees and Other
-----------------------------------------------------------
Agents.
- ------
(a) Directors. The Company shall indemnify its directors to the
---------
fullest extent not prohibited by the General Corporation Law of Delaware.
(b) Officers, Employees and Other Agents. The Company shall have
------------------------------------
power to indemnify its officers, employees and other agents as set forth in the
General Corporation Law of Delaware.
(c) Good Faith.
----------
(1) For purposes of any determination under this Section, a
Director, or any member of a committee designated by the Board of Directors,
shall be deemed to have acted in good faith and in a manner reasonably believed
to be in or not opposed to the best interests of the Company, and, with respect
to any criminal action or proceeding, to have had no reasonable cause to believe
that his/her conduct was unlawful, if he/she relied in good faith upon the
records of the Company and upon such information, opinions, reports or
statements presented to the Company by any of the Company's officers or
employees, or committees of the Board of Directors, or by any other person as to
matters the Director reasonably believes are within such other person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Company.
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<PAGE>
(2) The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contenders or its equivalent shall
not, of itself, create a presumption that the person did not act in good faith
and in a manner which he/she reasonably believed to be in or not opposed to the
best interests of the Company, and, with respect to any criminal proceeding,
that he/she had reasonable cause to believe that his/her conduct was unlawful.
(3) The provisions of this Paragraph 42(c) shall not be deemed
to be exclusive or to limit in any way the circumstances in which a person may
be deemed to have met the applicable standards of conduct set forth by the
General Corporation Law of Delaware.
(d) Expenses. The Company shall advance, prior to the final
--------
disposition of any proceeding, promptly following request therefor, all expenses
incurred by any Director in connection with such proceeding upon receipt of an
undertaking by or on behalf of such person to repay said amounts if it should be
determined ultimately that such person is not entitled to be indemnified under
this Section or otherwise.
(e) Enforcement. Without the necessity of entering into an express
-----------
contract, all rights to indemnification and advances under this Section shall be
deemed to be contractual rights and be effective to the same extent and as if
provided for in a contract between the Company and the Director. Any right to
indemnification or advances granted by this Section to a Director shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety days of request therefor. The claimant in such enforcement action, if
successful in whole or in part, shall be entitled to be paid also the expense of
prosecuting the claim. The Company shall be entitled to raise by pleading as an
affirmative defense to any such action (other than an action brought to enforce
a claim for expenses incurred in connection with any proceeding in advance of
its final disposition when the required undertaking has been tendered to the
Company) that the claimant has not met the standards of conduct which make it
permissible under the General Corporation Law of Delaware for the Company to
indemnify the claimant for the amount claimed. Neither the failure of the
Company (including its Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because the claimant has met the applicable standard of conduct set forth in the
General Corporation Law of Delaware, nor an actual determination by the Company
(including its Board of Directors, independent legal counsel or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that claimant has not
met the applicable standard of conduct.
(f) Non-Exclusivity of Rights. The rights conferred on any person by
-------------------------
this Section shall not be exclusive of any other right which such person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
Directors or otherwise, both as to action in his/her official capacity and as to
action in another capacity while holding office. The Company is specifically
authorized to enter into individual contracts with any or all of its Directors,
officers, employees or agents respecting
-16-
<PAGE>
indemnification and advances, to the fullest extent permitted by the General
Corporation Law of Delaware.
(g) Survival of Rights. The rights conferred on any person by this
------------------
Section shall continue as to a person who has ceased to be a Director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
(h) Insurance. The Company, upon approval by the Board of Directors,
---------
may purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this Section.
(i) Amendments. Any repeal or modification of this Section shall
----------
only be prospective and shall not affect the rights under this Section in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the Company.
(j) Saving Clause. If this Section or any portion hereof shall be
-------------
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify each Director to the full extent permitted
by any applicable portion of this Section that shall not have been invalidated,
or by any other applicable law.
(k) Certain Definitions. For the purposes of this Section, the
-------------------
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement and appeal of any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, arbitrative or
investigative.
(2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.
(3) The term the "Company" shall include any constituent
corporation (including any constituent of a constituent) so that any person who
is or was a director, officer, employee or agent of such constituent company, or
is or was serving at the request of such constituent company as a director,
officer, employee or agent of another company, partnership, joint venture, trust
or other enterprise, shall stand in the same position under the provisions of
this Section with respect to the Company as if the service was with the Company.
(4) References to a "Director," "officer," "employee," or
"agent" of the Company shall include, without limitation, situations where such
person is serving at the request of
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<PAGE>
the Company as a director, officer, employee, trustee or agent of another
corporation, partnership, joint venture, trust or other enterprise.
(5) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the Company" shall include any service as a director, officer,
employee or agent of the Company which imposes duties on, or involves services
by, such director, officer, employee, or agent with respect to an employee
benefit plan, its participants, or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the Company" as
referred to in this Section.
ARTICLE XII
Right of First Refusal
Section 43. Right of First Refusal. No securityholder shall sell, assign,
----------------------
pledge, or in any manner transfer any of the securities of the Company or any
right or interest therein, whether voluntarily or by operation of law, or by
gift or otherwise, except by a transfer which meets the requirements hereinafter
set forth in this Section:
(a) If the securityholder receives from anyone a bona fide offer
acceptable to the securityholder to purchase any of his securities, then the
securityholder shall first give written notice thereof to the Company. The
notice shall name the proposed transferee and state the securities to be
transferred, the price per security and all other terms and conditions of the
offer.
(b) For fifteen days following receipt of such notice, the Company
shall have the option to purchase all or any lesser part of the securities
specified in the notice at the price and upon the terms set forth in such bona
fide offer. In the event the Company elects to purchase all the securities, it
shall give written notice to the selling securityholder of its election and
settlement for said securities shall be made as provided in Paragraph 43(d).
(c) In the event the Company does not elect to acquire all of the
shares specified in the selling securityholder's notice, the Secretary shall,
within fifteen days of receipt of said selling securityholder's notice, give
written notice thereof to the securityholders holding more than one percent of
the outstanding shares entitled to vote at an election of Directors ("Large
Securityholders") of the Company other than the selling securityholder. Said
written notice shall state the securities that the Company has elected to
purchase, if any, and the securities remaining available for purchase (which
shall be the same as the number contained in said selling securityholder's
notice, less any such securities that the Company has elected to purchase).
Each of the Large Securityholders shall have the option to purchase that
proportion of the securities available for purchase as the number of
shares owned by each of said Large Securityholders bears to the total issued and
outstanding shares of the
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<PAGE>
Company owned by Large Securityholders, excepting those shares owned by the
selling securityholder. A Large Securityholder electing to exercise such option
shall, within ten days after receipt of the Company's notice, give written
notice to the Company specifying the number of securities such Large
Securityholder will purchase. Within such ten day period, each of said Large
Securityholders shall give written notice stating how many additional securities
such Large Securityholder will purchase if additional securities are made
available. Failure to respond in writing within said ten day period to the
notice given by the Secretary shall be deemed a rejection of such Large
Securityholder's right to acquire a proportionate part of the securities of the
selling securityholder. In the event one or more Large Securityholders do not
elect to acquire the securities available to them, said securities shall be
allocated on a pro rata basis to the Large Securityholders who requested
securities in addition to their pro rata allotment.
(d) In the event the Company and/or its Large Securityholders, other
than the selling securityholder, elect to acquire all of the securities of the
selling securityholder as specified in said selling securityholder's notice, the
Secretary shall so notify the selling securityholder and settlement thereof
shall be made in cash within thirty days after the Secretary receives said
selling securityholder's notice; provided that if the terms of payment set forth
in said selling securityholder's notice were other than cash against delivery,
the Company and/or its Large Securityholders shall pay for said securities on
the same terms and conditions set forth in said selling securityholder's notice.
(e) In the event the Company and/or its Large Securityholders do not
elect to acquire all of the securities specified in the selling securityholder's
notice, the Company and/or its Large Securityholders shall have no right to
purchase any of such securities and said selling securityholder may, within the
sixty day period following the expiration of the option rights granted to the
Company and Large Securityholders herein, sell elsewhere the securities
specified in said selling securityholder's notice, provided that said sale shall
not be on terms and conditions more favorable to the purchaser than those
contained in the bona fide offer set forth in said selling securityholder's
notice. AR securities so sold by said selling securityholder shall continue to
be subject to the provisions of this Bylaw in the same manner as before said
transfer.
(f) Anything to the contrary contained herein notwithstanding,
Permitted Transactions shall be exempt from the provisions of this Section.
Permitted Transactions are:
(1) A securityholder's transfer of any or all securities held
either during such securityholders' lifetime or on death by will or intestacy to
such securityholder's immediate family. "Immediate family" as used herein shall
mean spouse, lineal descendant, father, mother, brother, or sister of the
securityholder making such transfer and shall include any trust established
primarily for the benefit of the securityholder or his immediate family.
(2) A securityholder's bona fide pledge or mortgage of any
securities with a commercial lending institution, provided that any subsequent
transfer of said securities by said institution shall be conducted in
conformance with all restrictions on the securityholder.
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<PAGE>
(3) A securityholder's transfer of any or all of such
securityholder's securities to the Company or to any other securityholder.
(4) A securityholder's transfer of any or all of such
securityholder's securities to a person who, at the time of such transfer, is
an officer or Director.
(5) A corporate securityholder's transfer of any or all of its
securities pursuant to and in accordance with the terms of any merger,
consolidation, reclassification of securities or capital reorganization of the
corporate securityholder, or pursuant to a sale of all or substantially all of
the assets of the corporate securityholder.
(6) A corporate securityholder's transfer of any or all of its
shares to any or all of its securityholders, subsidiaries, parent corporations,
corporations under common control with the securityholder, or employees, or a
partnership, trust, or corporation whose interest holders are, in the majority,
employees or securityholders.
(7) A transfer by a securityholder which is a limited or general
partnership to any or all of its partners or to any other partnership having the
same general partner.
(g) Any sale or transfer, or purported sale or transfer, of
securities of the Company shall be null and void unless the terms, conditions,
and provisions of this Section are strictly observed and followed.
(h) The right of first refusal in this Section shall terminate upon
the Initial Public Offering.
(i) The provisions of this Section may be waived by the Board of
Directors with respect to any transfer.
(j) The certificates representing shares of stock of the Company
shall bear on their face the following legend so long as the foregoing right of
first refusal remains in effect:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION AND ITS
OTHER STOCKHOLDERS, AS PROVIDED IN THE BYLAWS OF THE CORPORATION."
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<PAGE>
ARTICLE XIII
Interested Party Transactions
Section 44. Interested Party Transactions.
-----------------------------
(a) Applicable Transactions. Any transaction or series of related
-----------------------
transactions that represents more than ten percent of the outstanding securities
of the Company (on a fully diluted basis excluding treasury stock) or an amount
in excess of ten percent of the budgeted expenses of the Company for the fiscal
year and that involves a securityholder or securityholders of shares
representing, in the aggregate, more than five percent of the outstanding shares
entitled to vote at an election of Directors and which have one or more
designees on the Board of Directors ("Interested Party") shall be subject to the
provisions of this Section.
(b) Process. The members of the Board of Directors not designated by
-------
an Interested Party shall review the proposed transaction in any manner they
deem appropriate including, but not limited to, meetings of the Board of
Directors excluding the Directors designated by an Interested Party, securing
consultants or counsel to review the proposed transaction and provide advice,
and negotiating with the Interested Party directly or through a designee.
(c) Approval. The affirmative vote of a majority of the Directors not
--------
affiliated with an Interested Party shall be necessary to approve the
transaction.
(d) Termination on IPO. The provisions of this Article XIII shall
------------------
terminate and be of no further force or effect upon the completion of the
Initial Public Offering.
ARTICLE XIV
Notices
Section 45. Notices.
-------
(a) Notice to Stockholders. Whenever, under any provisions of these
----------------------
Bylaws, notice is required to be given to any stockholder, it shall be given in
writing, personally or timely and duly deposited in the United States mail,
postage prepaid, and addressed to his last known post office address as shown by
the stock record of the Company or its transfer agent.
(b) Notice to Directors. Any notice required to be given to any
-------------------
Director may be given by the method stated in Paragraph 20(e) except that such
notice other than one which is delivered personally shall be sent to such
address as such Director shall have filed in writing with the Secretary or, in
the absence of such filing, to the last known post office address of such
Director.
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<PAGE>
(c) Address Unknown. If no address of a stockholder or Director be
---------------
known, notice may be sent to the office of the Company required to be maintained
pursuant to Section 2.
(d) Affidavit of Mailing. An affidavit of mailing, executed by a
--------------------
duly authorized and competent employee of the Company or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
Director or Directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall be conclusive evidence of the
statements therein contained.
(e) Time Notices Deemed Given. All notices given by mail, as above
-------------------------
provided, shall be deemed to have been given as at the time of mailing and all
notices given by telegram shall be deemed to have been given as at the sending
time recorded by the telegraph company transmitting the notices.
(f) Methods of Notice. It shall not be necessary that the same
-----------------
method of giving notice be employed in respect of all noticees, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
(g) Failure to Receive Notice. The period or limitation of time
-------------------------
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any Director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such Director to receive such
notice.
(h) Notice to Person with Whom Communication Is Unlawful. Whenever
----------------------------------------------------
notice is required to be given, under any provision of law, the Certificate of
Incorporation or these Bylaws, to any person with whom communication is
unlawful, the giving of such notice to such person shall not be required and
there shall be no duty to apply to any governmental authority or agency for a
license or permit to give such notice to such person. Any action or meeting
which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the Company is such
as to require the filing of a certificate under any provision of the General
Corporation Law of Delaware, the certificate shall state, if such is the fact
and if notice is required, that notice was given to all persons entitled to
receive notice except such persons with whom communication is unlawful.
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<PAGE>
ARTICLE XV
Amendments
Section 46. Amendments. These Bylaws may be repealed or amended or
----------
new Bylaws adopted by the stockholders. In addition to any vote of the holders
of any class or series of stock of this Company required by law and any vote
provided for in the Certificate of Incorporation, the affirmative vote of a
majority of the voting power of all of the then-outstanding shares of the
capital stock of the Company entitled to vote generally in the election of
Directors, voting together as a single class, shall be required to adopt, amend
or repeal any provisions of these Bylaws. The Board of Directors shall also
have the authority to adopt, amend or repeal these Bylaws subject to the power
of the stockholders to adopt, amend or repeal such Bylaws and provided that the
Board of Directors shall not adopt, amend or repeal any Bylaws fixing the
qualifications, classifications, term of office, or compensation of Directors.
No Director who is a designee of an Interested Party or of a party who is then
actively giving substantive attention to a transaction in which it would be an
Interested Party may vote to repeal or amend Section 44 hereof.
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<PAGE>
CERTIFICATE OF AMENDMENT OF BYLAWS
OF
NAVIGATION TECHNOLOGIES CORPORATION
The undersigned hereby certifies that he is the duly elected, qualified,
and acting Assistant Secretary of Navigation Technologies Corporation and that
the following amendment to the Bylaws was duly adopted by the Board of Directors
at a meeting on June 17, 1996 and is hereby incorporated into the Bylaws of said
corporation:
The first sentence of Section 15 of the Bylaws of Navigation Technologies
Corporation is hereby amended and restated to read as follows: "The number of
directors which shall constitute the whole of the Board of Directors shall be
nine."
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day
of June 1996.
/s/ Steven M Young
------------------------------------
Steven M. Young, Assistant Secretary
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<PAGE>
EXHIBIT 3.5
AMENDED AND RESTATED BYLAWS
OF
NAVIGATION TECHNOLOGIES CORPORATION
(a Delaware corporation)
As Amended June 1996
(Effective as of its Initial Public Offering)
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I OFFICES ..................................................1
Section 1. Registered Office .................................1
Section 2. Other Offices .....................................1
ARTICLE II CORPORATE SEAL ..........................................1
Section 3. Corporate Seal ....................................1
ARTICLE III STOCKHOLDERS' MEETINGS .................................1
Section 4. Place of Meetings .................................1
Section 5. Annual Meetings ...................................1
Section 6. Special Meetings ..................................2
Section 7. Notice of Meetings ................................2
Section 8. Quorum ............................................2
Section 9. Adjournment and Notice of Adjourned Meeting .......3
Section 10. Voting Rights .....................................3
Section 11. Joint Owners of Stock .............................3
Section 12. List of the Stockholders ..........................3
Section 13. Action without Meeting ............................4
Section 14. Organization ......................................5
ARTICLE IV DIRECTORS ...............................................5
Section 15. Number and Term of Office .........................5
Section 16. Powers ............................................5
Section 17. Vacancies .........................................5
Section 18. Resignation .......................................5
Section 19. Removal ...........................................6
Section 20. Meetings ..........................................6
Section 21. Quorum and Voting .................................7
Section 22. Action without Meeting ............................7
Section 23. Fees and Compensation .............................7
Section 24. Committees ........................................7
Section 25. Organization ......................................9
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<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
ARTICLE V Officers.........................................................9
Section 26. Officers Designated.....................................9
Section 27. Tenure and Duties of Officers...........................9
Section 28. Delegation of Authority................................11
Section 29. Resignations...........................................11
Section 30. Removal................................................11
ARTICLE VI Execution Of Corporate Instruments And Voting Of Securities
Owned By The Company...........................................11
Section 31. Execution of Corporate Instruments.....................11
Section 32. Voting of Secutities Owned by the Company..............12
ARTICLE VII Shares Of Stock...............................................12
Section 33. Form and Execution of Certificates.....................12
Section 34. Lost Certificates......................................12
Section 35. Transfers..............................................13
Section 36. Fixing Record Dates....................................13
Section 37. Registered Stockholders................................14
ARTICLE VIII Other Securities Of The Company..............................14
Section 38. Execution of Other Securities..........................14
ARTICLE IX Dividends......................................................14
Section 39. Declaration of Dividends...............................14
Section 40. Dividend Reserve.......................................15
ARTICLE X Fiscal Year.....................................................15
Section 41. Fiscal Year............................................15
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<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE XI INDEMNIFICATION .......................................................... 15
Section 42. Indemnification of Officers, Directors, Employers and Other
Agents .......................................................... 15
ARTICLE XII NOTICES ................................................................. 18
Section 43. Notices ......................................................... 18
ARTICLE XIII AMENDMENTS ............................................................. 19
Section 44. Amendments ...................................................... 19
</TABLE>
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<PAGE>
AMENDED AND RESTATED BYLAWS
OF
NAVIGATION TECHNOLOGIES CORPORATION
(a Delaware corporation)
ARTICLE I
Offices
Section 1. Registered Office. The registered office of the Company
in the State of Delaware shall be in the City of Wilmington, County of New
Castle.
Section 2. Other Offices. The Company shall also have and maintain
an office or principal place of business in Sunnyvale, California, or at such
other place as may be fixed by the Board of Directors, and may also have offices
at such other places, both within and without the State of Delaware as the Board
of Directors may from time to time determine or the business of the Company may
require.
ARTICLE II
Corporate Seal
Section 3. Corporate Seal. The Corporate seal shall consist of a die
bearing the name of the Company and the inscription, "Corporate Seal-Delaware."
Said seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
ARTICLE III
Stockholders' Meetings
Section 4. Place of Meetings. Meetings of the stockholders shall be
held at such place, either within or without the State of Delaware, as may be
designated from time to time by
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the Board of Directors, or, if not so designated, then at the office of the
Company required to be maintained pursuant to Section 2.
Section 5. Annual Meetings. The annual meeting of the stockholders,
for the purpose of election of Directors and for such other business as may
lawfully come before it, shall be held on such date and at such time as may be
designated from time to time by the Board of Directors, or, if not so
designated, then at 10 o'clock a.m. on the fourth Tuesday in April in each year
if not a legal holiday, and, if a legal holiday, at the same hour and place on
the next succeeding day not a holiday.
Section 6. Special Meetings. Special meetings of the stockholders
may be called at any time, for any purpose or purposes, by the Board of
Directors or by the holders of outstanding stock of the Company representing at
least 25% of the shares entitled to vote at an election of Directors.
Section 7. Notice of Meetings. Except as otherwise provided by law
or the Certificate of Incorporation, written notice of each meeting of the
stockholders shall be given not less than ten days nor more than sixty days
before the date of the meeting to each stockholder entitled to vote at such
meeting, such notice to specify the place, date and hour and purpose or purposes
of the meeting. Notice of the time, place and purpose of any meeting of the
stockholders may be waived in writing, signed by the person entitled to notice
thereof, either before or after such meeting, and will be waived by any
stockholder by his attendance thereat in person or by proxy, except when the
stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Any stockholder so waiving notice of such
meeting shall be bound by the proceedings of any such meeting in all respects as
if due notice thereof had been given.
Section 8. Quorum. At all meetings of the stockholders, except where
otherwise provided by statute, the presence, in person or by proxy duly
authorized, of the holders of a majority of the outstanding shares of stock
entitled to vote shall constitute a quorum for the transaction of business. Any
shares, the voting of which at said meeting has been enjoined, or which for any
reason cannot be lawfully voted at such meeting, shall not be counted to
determine a quorum at such meeting. In the absence of a quorum, any meeting of
the stockholders may be adjourned, from time to time, by vote of the holders of
a majority of the shares represented thereat, but no other business shall be
transacted at such meeting. The stockholders present at a duly called or
convened meeting, at which a quorum is present, may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum. Except as otherwise provided by law
or the Certificate of Incorporation, all action taken by the holders of a
majority of the voting power represented at any meeting at which a quorum is
present shall be valid and binding upon the Company; provided, however, that
Directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy at the meeting and entitled vote on the election
of Directors. Where a vote by a class or classes is
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required, a majority of the outstanding shares of such class or classes, present
in person or represented by proxy, shall constitute a quorum entitled to take
action with respect to that vote on that matter and, except as otherwise
provided in the Certificate of Incorporation the affirmative vote of the
majority (plurality, in the case of the election of Directors) of shares of such
class or classes present in person or represented by proxy at the meeting shall
be the act of such class.
Section 9. Adjournment and Notice of Adjourned Meeting. Any meeting
of the stockholders, whether annual or special, may be adjourned from time to
time by the vote of a majority of the shares, the holders of which are present
either in person or by proxy. When a meeting is adjourned to another time or
place, notice need not be given of the adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting, the Company may transact any business that might have been
transacted at the original meeting. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
Section 10. Voting Rights. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the Company on the record date, as provided in Section 12, shall be
entitled to vote at any meeting of the stockholders. Except as may be otherwise
provided in the Certificate of Incorporation, each stockholder shall be entitled
to one vote for each share of capital stock held by such stockholder. Every
person entitled to vote or execute consents shall have the right to do so either
in person or by an agent or agents authorized by a written proxy executed by
such person or his duly authorized agent, which proxy shall be filed with the
Secretary at or before the meeting at which it is to be used. An agent so
appointed need not be a stockholder. No proxy shall be voted after five years
from its date of creation unless the proxy provides for a longer period.
Section 11. Joint Owners of Stock. If shares or other securities
having voting power stand of record in the names of two or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two or more persons have the same fiduciary
relationship respecting the same shares, unless the Secretary is given written
notice to the contrary and is furnished with a copy of the instrument or order
appointing them or creating the relationship wherein it is so provided, their
acts with respect to voting shall have the following effect:
(a) if only one votes, his act binds all;
(b) if more than one votes, the act of the majority so voting
binds all;
(c) if more than one votes, but the vote is evenly split on any
particular matter, each faction may vote the securities in question
proportionally, or may apply to the Delaware Court of Chancery for relief as
provided in Section 217(b) of the General Corporation Law of
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Delaware. If the instrument filed with the Secretary shows that any such
tenancy is held in unequal interests, a majority or even-split for the purpose
of this Paragraph 11(c) shall be a majority or even-split in interest.
Section 12. List of the Stockholders. The Secretary shall prepare
and make, at least ten days before every meeting of the stockholders, a complete
list of the stockholders entitled to vote at said meeting, arranged in
alphabetical order, showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 13. Action without Meeting.
(a) Any action required by statute to be taken at any annual
or special meeting of the stockholders, or any action which may be taken at any
annual or special meeting of the stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent or consents in writing,
setting forth the action so taken, are signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted and shall be delivered to the Company by
delivery to its registered office in the State of Delaware, its principal place
of business or an officer or agent of the Company having custody of the book in
which proceedings of meetings of the stockholders are recorded. Delivery made to
the Company's registered office shall be by hand or by certified or registered
mail, return receipt requested.
(b) Every written consent shall bear the date of signature of
each stockholder who signs the consent, and no written consent shall be
effective to take the corporate action referred to therein unless, within sixty
days of the earliest dated consent delivered to the Company in the manner herein
required, written consents signed by a sufficient number of stockholders to take
action are delivered to the Company by delivery to its registered office in the
State of Delaware, its principal place of business or an officer or agent of the
Company having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a Company's registered office shall
be by hand or by certified or registered mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the General Corporation Law of Delaware if such action had been
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voted on by the stockholders at a meeting thereof, then the certificate filed
under such section shall state, in lieu of any statement required by such
section concerning any vote of stockholders, that written notice and written
consent have been given as provided in Section 228 of the General Corporation
Law of Delaware.
Section 14. Organization. At every meeting of the stockholders, the
Chairman of the Board, or, if a Chairman has not been appointed or is absent,
the President, or, if the President is absent, the most senior Vice President
present, or in the absence of any such officer, a chairman of the meeting chosen
by a majority in interest of the stockholders entitled to vote, present in
person or by proxy, shall act as chairman. The Secretary, or, in the absence of
the Secretary, an Assistant Secretary or any other person in the absence of such
officer directed to do so by the chairman of the meeting, shall act as secretary
of the meeting.
ARTICLE IV
Directors
Section 15. Number and Term of Office. The number of Directors which
shall constitute the whole of the Board of Directors shall be designated by
resolution of the Board of Directors or the stockholders. Except as provided in
Section 17, the Directors shall be elected by the stockholders at their annual
meeting in each year and shall hold office until the next annual meeting and
until their successors shall be duly elected and qualified, or until their
death, resignation or removal. Directors need not be stockholders. If for any
cause, the Directors shall not have been elected at an annual meeting, they may
be elected as soon thereafter as convenient at a special meeting of the
stockholders called for that purpose in the manner provided in these Bylaws.
Section 16. Powers. The powers of the Company shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation.
Section 17. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of Directors may be filled
by a majority of the Directors then in office, although less than a quorum, or
by a sole remaining Director, and each Director so elected shall hold office for
the unexpired portion of the term of the Director whose place shall be vacant
and until his successor shall have been duly elected and qualified. A vacancy
in the Board of Directors shall be deemed to exist under this Section 17 in the
case of the death, removal or resignation of any Director, or if the
stockholders fail at any meeting of the stockholders at which directors are to
be elected (including any meeting referred to in Section 19) to elect the number
of Directors then constituting the whole Board of Directors.
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Section 18. Resignation. Any Director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When
one or more Directors shall resign from the Board of Directors, effective at a
future date, a majority of the Directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until a
successor shall have been duly elected and qualified.
Section 19. Removal. By written consent or at a special meeting of
stockholders called according to the provisions of Section 6 for the purpose of
removal of Directors, subject to the limitation set forth in Section 141(k) of
the General Corporation Law of Delaware, the Board of Directors, or any
individual Director, may be removed from office, with or without cause, and a
new Director or Directors elected by written consent or a vote of the
stockholders, as the case may be.
Section 20. Meetings.
(a) Annual Meetings. The annual meeting of the Board of
Directors shall be held immediately after the annual meeting of the stockholders
and at the place where such meeting is held. No notice of an annual meeting of
the Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(b) Regular Meetings. Regular meetings of the Board of Directors
may be held at any place within or without the State of Delaware which has been
designated by resolution of the Board of Directors or the written consent of all
Directors.
(c) Special Meetings. Special meetings of the Board of Directors
may be held at any time and place within or without the State of Delaware
whenever called by the Chairman of the Board, the President, the Secretary or
any two Directors
(d) Telephone Meetings. Any member of the Board of Directors, or
of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(e) Notice of Meetings. Notice of the date, time and place of
all meetings of the Board of Directors shall be delivered personally, orally or
in writing, or by telephone or telefax to each Director, at least forty-eight
hours before the meeting. Such notice may be given
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by the Secretary or by the person or persons who called a meeting. Such notice
need not specify the purpose of the meeting. Notice of any meeting may be
waived in writing at any time before or after the meeting and will be waived by
any Director by attendance thereat, except when the Director attends the meeting
for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(f) Waiver of Notice. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though at a meeting duly held
after regular call and notice, if a quorum be present and if, either before or
after the meeting, each of the Directors not present shall sign a written waiver
of notice, or a consent to holding such meeting, or an approval of the minutes
thereof. All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Section 21. Quorum and Voting.
(a) Quorum. A quorum of the Board of Directors shall consist of a
majority of the exact number of Directors fixed from time to time in accordance
with Section 15, but not less than one. At any meeting whether a quorum be
present or otherwise, a majority of the Directors present may adjourn from time
to time until the time fixed for the next regular meeting of the Board of
Directors, without notice other than by announcement at the meeting.
(b) Approving Vote. At each meeting of the Board of Directors at
which a quorum is present, all questions and business, including, without
limitation, adoption, amendment or repeal of these Bylaws shall be determined by
a vote of a majority of the Directors present, unless a different vote be
required by law, the Certificate of Incorporation, or these Bylaws.
Section 22. Action Without Meeting. Any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 23. Fees and Compensation. Directors shall be entitled to
such compensation for their services as may be approved by the Board of
Directors, including, if so approved by resolution of the Board of Directors, a
fixed sum and expenses of attendance, if any, for attendance at each regular or
special meeting of the Board of Directors or any meeting of a committee of
directors, equity incentives and other compensation and incentives for their
services as directors. Nothing herein contained shall be construed to preclude
any Director from serving the Company in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
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Section 24. Committees.
(a) Executive Committee. The Board of Directors may, by
resolution passed by a majority of the whole Board of Directors, appoint an
Executive Committee to consist of one or more members of the Board of Directors.
The Executive Committee, to the extent permitted by law and specifically granted
by the Board of Directors, shall have and may exercise when the Board of
Directors is not in session all powers of the Board of Directors in the
management of the business and affairs of the Company, including, without
limitation, the power and authority to declare a dividend or to authorize the
issuance of stock, except such committee shall not have the power or authority
to amend the Certificate of Incorporation, to adopt an agreement of merger or
consolidation, to recommend to the stockholders the sale, lease or exchange of
all or substantially all of the Company's property and assets, to recommend to
the stockholders of the Company a dissolution of the Company or a revocation of
a dissolution or to amend these Bylaws.
(b) Other Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, from time to time appoint
such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one or more members of the
Board of Directors, and shall have such powers and perform such duties as may be
prescribed by the resolution or resolutions creating such committees, but in no
event shall such committee have the powers denied to the Executive Committee in
these Bylaws.
(c) Term. The members of all committees of the Board of
Directors shall serve a term coexistent with that of the Board of Directors
which shall have appointed such committee. The Board of Directors may at any
time increase or decrease the number of members of a committee or terminate the
existence of a committee. The membership of a committee member shall terminate
on the date of his death or voluntary resignation. The Board of Directors may at
any time for any reason remove any individual committee member and the Board of
Directors may fill any committee vacancy created by death, resignation, removal
or increase in the number of members of the committee. The Board of Directors
may designate one or more Directors as alternate members of any committee, who
may replace any absent or disqualified member at any meeting of the committee,
and, in addition, in the absence or disqualification of any member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
(d) Meetings. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 24 shall be held at such times and places as
are determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings of
any such committee may be held at any place which has been designated from time
to time by resolution of
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such committee or by written consent of all members thereof, and may be called
by any Director who is a member of such committee, upon written notice to the
members of such committee of the time and place of such special meeting given in
the manner provided for the giving of written notice to members of the Board of
Directors of the time and place of special meetings of the Board of Directors.
Notice of any special meeting of any committee may be waived in writing at any
time before or after the meeting and will be waived by any Director by
attendance thereat, except when the Director attends such special meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. A majority of the authorized number of members of any such committee
shall constitute a quorum for the transaction of business, and the act of a
majority of those present at any meeting at which a quorum is present shall be
the act of such committee.
Section 25. Organization. At every meeting of the Directors, the
Chairman of the Board, or, if a Chairman has not been appointed or is absent,
the President, or if the President is absent, the most senior Vice President,
or, in the absence of any such officer, a chairman of the meeting chosen by a
majority of the Directors present, shall preside over the meeting. The
Secretary, or in the absence of the Secretary, an Assistant Secretary or any
other person in the absence of such officer directed to do so by the chairman of
the meeting, shall act as secretary of the meeting.
ARTICLE V
Officers
Section 26. Officers Designated. The officers of the Company shall
consist of a Chief Executive Officer, a President, a Secretary and a Chief
Financial Officer. The Company may also have, at the discretion of the Board of
Directors, a Chairman of the Board, one or more Vice Presidents, and such other
offices as may from time to time be appointed by the Board of Directors.
Officers shall be elected by the Board of Directors, which shall consider that
subject at its first meeting after every annual meeting of the stockholders.
The Board of Directors may also appoint such other officers and agents with such
powers and duties as it shall deem necessary. The Board of Directors may assign
such additional titles to one or more of the officers as it shall deem
appropriate. Any one person may hold any number of offices of the Company at
any one time unless specifically prohibited therefrom by law. The salaries and
other compensation of the officers of the Company shall be fixed by or in the
manner designated by the Board of Directors.
Section 27. Tenure and Duties of Officers.
(a) General. All officers shall hold office at the pleasure of
the Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. If the office of any officer becomes
vacant for any reason, the vacancy may be filled by the Board of Directors.
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(b) Duties of Chairman of the Board. The Chairman of the Board,
when present, shall preside at all meetings of the stockholders and the Board of
Directors. The Chairman of the Board shall perform the duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors shall designate from time to time. If there is
no Chief Executive Officer, the Chairman shall have the powers and duties
prescribed in Paragraph 27(c). If there is no President, the Chairman of the
Board shall have the powers and duties prescribed in Paragraph 27(d).
(c) Duties of Chief Executive Officer. The Chief Executive
Officer shall preside at all meetings of the stockholders and at all meetings of
the Board of Directors, unless the Chairman of the Board has been appointed and
is present. The Chief Executive Officer shall perform the duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors and the Chairman of the Board, if one has
been appointed, shall designate from time to time.
(d) Duties of President. The President shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board or Chief Executive Officer has been appointed
and is present. The President shall perform the duties commonly incident to his
office and shall also perform such other duties and have such other powers as
the Board of Directors and the Chairman of the Board, if one has been appointed,
shall designate from time to time.
(e) Duties of Vice Presidents. The Vice Presidents, in the order
of their seniority, may assume and perform the duties of the President in the
absence or disability of the President or whenever the offices of President and
Chairman of the Board are vacant. The Vice Presidents shall perform other duties
commonly incident to their office and shall also perform such other duties and
have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) Duties of Secretary. The Secretary shall be invited to
attend all meetings of the stockholders and of the Board of Directors, and, if
present, shall record all acts and proceedings thereof in the minute book of the
Company. The Secretary shall give notice in conformity with these Bylaws of all
meetings of the stockholders, and of all meetings of the Board of Directors and
any committee thereof requiring notice. The Secretary shall perform all other
duties provided for in these Bylaws and other duties commonly incident to the
office and shall also perform such other duties and have such other powers as
the Board of Directors shall designate from time to time. The President may
direct any Assistant Secretary to assume and perform the duties of the Secretary
in the absence or disability of the Secretary.
(g) Duties of Chief Financial Officer. The Chief Financial
Officer shall keep or cause to be kept the books of account of the Company in a
thorough and proper manner, and shall render statements of the financial affairs
of the Company in such form and as often as required by the Board of Directors
or the President. The Chief Financial Officer, subject to the
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order of the Board of Directors, shall have the custody of all funds and
securities of the Company. The Chief Financial Officer shall perform other
duties commonly incident to the office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time. The President may direct any Assistant Chief
Financial Officer to assume and perform the duties of the Chief Financial
Officer in the absence or disability of the Chief Financial Officer, and each
Assistant Chief Financial Officer shall perform other duties commonly incident
to the office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time.
(h) Duties of Assistant Secretary. The Assistant Secretary, if
there shall be such an officer, shall have all the powers, and perform all the
duties of, the Secretary in the absence or inability of the Secretary to act.
The Assistant Secretary shall also perform such other duties as the Board of
Directors may from time to time prescribe.
Section 28. Delegation of Authority. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officer
or agent, notwithstanding any provision hereof.
Section 29. Resignations. Any officer may resign at any time by
giving written notice to the Board of Directors, the President or the Secretary.
Any such resignation shall be effective when received by the person or persons
to whom such notice is given, unless a later time is specified therein, in which
event the resignation shall become effective at such later time. Unless
otherwise specified in such notice, the acceptance of any such resignation shall
not be necessary to make it effective.
Section 30. Removal. Any officer may be removed from office at any
time, either with or without cause, by the vote or written consent of a majority
of the Directors in office at the time, or by any committee or any superior
officer upon whom such power of removal may have been conferred by the Board of
Directors.
ARTICLE VI
Execution of Corporate Instruments and
Voting of Securities Owned by the Company
Section 31. Execution of Corporate Instruments. The Board of
Directors may, in its discretion, determine the method and designate the
signatory officer or officers, or other person or persons, to execute on behalf
of the Company any corporate instrument or document, or to sign on behalf of the
Company the corporate name without limitation, or to enter into contracts on
behalf of the Company, except where otherwise provided by law or these Bylaws,
and such execution or signature shall be binding upon the Company.
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Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the Company, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the Company, shall be executed, signed or endorsed by the Chairman of
the Board, the President or any Vice President, and by the Secretary, the Chief
Financial Officer, any Assistant Secretary or any Assistant Chief Financial
Officer. All other instruments and documents requiring the corporate signature,
but not requiring the corporate seal, may be executed as aforesaid or in such
other manner as may be directed by the Board of Directors. Any signature may be
a facsimile.
All checks and drafts drawn on banks or other depositories on funds to
the credit of the Company or in special accounts of the Company shall be signed
by such person or persons as the Board shall authorize so to do.
Section 32. Voting of Securities Owned by the Company. All stock and
other securities of other Companies owned or held by the Company for itself, or
for other parties in any capacity, shall be voted, and all proxies with respect
thereto shall be executed, by the person authorized so to do by resolution of
the Board of Directors, or, in the absence of such authorization, by the
Chairman of the Board, the President, any Vice President, the Secretary or the
Chief Financial Officer.
ARTICLE VII
Shares of Stock
Section 33. Form and Execution of Certificates. Certificates for the
shares of stock of the Company shall be in such form as is consistent with the
Certificate of Incorporation and applicable law. Every holder of stock in the
Company shall be entitled to have a certificate signed by or in the name of the
Company by the Chairman of the Board, the President or any Vice President and by
the Chief Financial Officer, any Assistant Chief Financial Officer, the
Secretary or any Assistant Secretary, certifying the number of shares owned by
him in the Company. Any signature on the certificate may be a facsimile. In
case any officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it may
be issued with the same effect as if he/she were such officer, transfer agent,
or registrar at the date of issue. Each certificate shall state upon the face
or back thereof, in full or in summary, all of the designations, preferences,
limitations, restrictions on transfer and relative rights of the shares
authorized to be issued.
Section 34. Lost Certificates. A new certificate or certificates
shall be issued in place of any certificate or certificates theretofore issued
by the Company alleged to have been lost, stolen, or destroyed, upon the making
of an affidavit of that fact by the person claiming the
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certificate of stock to be lost, stolen, or destroyed. The Company may require,
as a condition precedent to the issuance of a new certificate or certificates,
the owner of such lost, stolen, or destroyed certificate or certificates, or his
legal representative to give the Company a surety bond in such form and amount
as it may direct as indemnity against any claim that may be made against the
Company with respect to the certificate alleged to have been lost, stolen, or
destroyed.
Section 35. Transfers. Transfers of record of shares of stock of the
Company shall be made only upon its books upon request of the holders thereof,
in person or by attorney duly authorized, and upon the surrender of a properly
endorsed certificate or certificates for a like number of shares.
Section 36. Fixing Record Dates.
(a) In order that the Company may determine the stockholders
entitled to notice of or to vote at any meeting of the stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall not be more than sixty nor less than ten days before the date of such
meeting. If no record date is fixed by the Board of Directors, the record date
for determining the stockholders entitled to notice of or to vote at a meeting
of the stockholders shall be at the close of business on the day next preceding
the day on which notice is given, or if notice is waived, at the close of
business on the day next preceding the day on which the meeting is held. A
determination of the stockholders of record entitled to notice of or to vote at
a meeting of the stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
(b) In order that the Company may determine the stockholders
entitled to consent to a corporate action in writing without a meeting, the
Board of Directors may fix, in advance, a record date, which record date shall
not precede the date upon which the resolution filing the record date is adopted
by the Board of Directors, and which date shall not be more than ten days after
the date upon which the resolution fixing the record date is adopted by the
Board of Directors. If no record date has been fixed by the Board of Directors,
the record date for determining the stockholders entitled to consent to a
corporate action in writing without a meeting, when no prior action by the Board
of Directors is required by law, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the Company by delivery to its registered office in the State of
Delaware, its principal place of business or an officer or agent of the Company
having custody of the book in which proceedings of meetings of the stockholders
are recorded. Delivery made to the Company's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by law, the record date for determining the stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
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(c) In order that the Company may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted, and which record date shall be not more than sixty days prior to
such action. If no record date is fixed, the record date for determining the
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
Section 37. Registered Stockholders. The Company shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
Other Securities of the Company
Section 38. Execution of Other Securities. All bonds, debentures and
other corporate securities of the Company, other than stock certificates, may be
signed by the Chairman of the Board, the President or any Vice President, or
such other person as may be authorized by the Board of Directors, and the
corporate seal impressed thereon or a facsimile of such seal imprinted thereon
and attested by the signature of the Secretary, an Assistant Secretary, the
Chief Financial Officer or an Assistant Chief Financial Officer. The signatures
of the persons signing and attesting the corporate seal on such bond, debenture
or other corporate security may be the imprinted facsimile of the signatures of
such persons. Interest coupons appertaining to any such bond, debenture or
other corporate security, authenticated by a trustee as aforesaid, shall be
signed by the Chief Financial Officer, an Assistant Chief Financial Officer or
such other person as may be authorized by the Board of Directors, or bear
imprinted thereon the facsimile signature of such person. In case any officer
who shall have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any such
interest coupon, shall have ceased to be such officer before the bond, debenture
or other corporate security so signed or attested shall have been delivered,
such bond, debenture or other corporate security nevertheless may be adopted by
the Company and issued and delivered as though the person who signed the same or
whose facsimile signature shall have been used thereon had not ceased to be such
officer of the Company.
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ARTICLE IX
Dividends
Section 39. Declaration of Dividends. Dividends upon the capital
stock of the Company, subject to any provisions of the Certificate of
Incorporation, may be declared by the Board of Directors pursuant to law at any
regular or special meeting. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to any provisions of the Certificate of
Incorporation.
Section 40. Dividend Reserve. Before payment of any dividend, there
may be set aside out of any funds of the Company available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Company, or for such other purpose as the Board of Directors shall determine is
conducive to the interests of the Company, and the Board of Directors may modify
or abolish any such reserve in the manner in which it was created.
ARTICLE X
Fiscal Year
Section 41. Fiscal Year. The fiscal year of the Company shall be
fixed by resolution of the Board of Directors and may be changed by the Board of
Directors.
ARTICLE XI
Indemnification
Section 42. Indemnification of Officers, Directors, Employees and
Other Agents.
(a) Directors. The Company shall indemnify its Directors and
officers to the fullest extent not prohibited by the General Corporation Law of
Delaware.
(b) Employees and Other Agents. The Company shall have power to
indemnify its employees and other agents as set forth in the General Corporation
Law of Delaware.
15
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(c) Good Faith.
(1) For purposes of any determination under this
Section, a Director, any member of a committee designated by the Board of
Directors or officer, shall be deemed to have acted in good faith and in a
manner reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, to have had no
reasonable cause to believe that his/her conduct was unlawful, if he/she relied
in good faith upon the records of the Company and upon such information,
opinions, reports or statements presented to the Company by any of the Company's
officers or employees, or committees of the Board of Directors, or by any other
person as to matters the Director or officer reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Company.
(2) The termination of any proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contenders or its
equivalent shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he/she reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal proceeding, that he/she had reasonable cause to believe that his/her
conduct was unlawful.
(3) The provisions of this Paragraph 42(c) shall not be
deemed to be exclusive or to limit in any way the circumstances in which a
person may be deemed to have met the applicable standards of conduct set forth
by the General Corporation Law of Delaware.
(d) Expenses. The Company shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by any Director or officer in connection with such proceeding upon
receipt of an undertaking by or on behalf of such person to repay said amounts
if it should be determined ultimately that such person is not entitled to be
indemnified under this Section or otherwise.
(e) Enforcement. Without the necessity of entering into an
express contract, all rights to indemnification and advances under this Section
shall be deemed to be contractual rights and be effective to the same extent and
as if provided for in a contract between the Company and the Director or
officer. Any right to indemnification or advances granted by this Section to a
Director or officer shall be enforceable by or on behalf of the person holding
such right in any court of competent jurisdiction if (i) the claim for
indemnification or advances is denied, in whole or in part, or (ii) no
disposition of such claim is made within ninety days of request therefor. The
claimant in such enforcement action, if successful in whole or in part, shall be
entitled to be paid also the expense of prosecuting the claim. The Company shall
be entitled to raise by pleading as an affirmative defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
connection with any proceeding in advance of its final disposition when the
required undertaking has been tendered to the Company) that the claimant has not
met the standards of conduct which make it permissible under the General
Corporation
16
<PAGE>
Law of Delaware for the Company to indemnify the claimant for the amount
claimed. Neither the failure of the Company (including its Board of Directors,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because the claimant has met the applicable standard
of conduct set forth in the General Corporation Law of Delaware, nor an actual
determination by the Company (including its Board of Directors, independent
legal counsel or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that claimant has not met the applicable standard of conduct.
(f) Non-Exclusivity of Rights. The rights conferred on any
person by this Section shall not be exclusive of any other right which such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, Bylaws, agreement, vote of stockholders or
disinterested Directors or otherwise, both as to action in his/her official
capacity and as to action in another capacity while holding office. The Company
is specifically authorized to enter into individual contracts with any or all of
its Directors, officers, employees or agents respecting indemnification and
advances, to the fullest extent permitted by the General Corporation Law of
Delaware.
(g) Survival of Rights. The rights conferred on any person by
this Section shall continue as to a person who has ceased to be a Director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(h) Insurance. The Company, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this Section.
(i) Amendments. Any repeal or modification of this Section shall
only be prospective and shall not affect the rights under this Section in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the Company.
(j) Saving Clause. If this Section or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify each Director and officer to the full
extent Permitted by any applicable portion of this Section that shall not have
been invalidated, or by any other applicable law.
(k) Certain Definitions. For the purposes of this Section, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed and
shall include, without limitation, the investigation, preparation, prosecution,
defense, settlement and appeal of
17
<PAGE>
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative or investigative.
(2) The term "expenses" shall be broadly construed and
shall include, without limitation, court costs, attorneys' fees, witness fees,
fines, amounts paid in settlement or judgment and any other costs and expenses
of any nature or kind incurred in connection with any proceeding.
(3) The term the "Company" shall include any constituent
corporation (including any constituent of a constituent) so that any person who
is or was a director, officer, employee or agent of such constituent company, or
is or was serving at the request of such constituent company as a director,
officer, employee or agent of another company, partnership, joint venture, trust
or other enterprise, shall stand in the same position under the provisions of
this Section with respect to the Company as if the service was with the Company.
(4) References to a "Director," "officer," "employee,"
or "agent" of the Company shall include, without limitation, (i) any person who
is or was a director, officer, employee or agent of the Company, (ii) any person
who is or was serving at the request of the Company as a director, officer,
employee, trustee or agent of another corporation, partnership, joint venture,
trust or other enterprise, or (iii) any person who is or was a director or
officer of a corporation or enterprise which was a predecessor of the Company at
the request of such predecessor.
(5) References to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and references to
"serving at the request of the Company" shall include any service as a director,
officer, employee or agent of the Company which imposes duties on, or involves
services by, such director, officer, employee, or agent with respect to an
employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
Company" as referred to in this Section.
ARTICLE XII
Notices
Section 43. Notices.
(a) Notice to Stockholders. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, personally or timely
18
<PAGE>
and duly deposited in the United States mail, postage prepaid, and addressed to
his last known post office address as shown by the stock record of the Company
or its transfer agent.
(b) Notice to Directors. Any notice required to be given to any
Director may be given by the method stated in Paragraph 20(e) except that such
notice other than one which is delivered personally shall be sent to such
address as such Director shall have filed in writing with the Secretary or, in
the absence of such filing, to the last known post office address of such
Director.
(c) Address Unknown. If no address of a stockholder or Director
be known, notice may be sent to the office of the Company required to be
maintained pursuant to Section 2.
(d) Affidavit of Mailing. An affidavit of mailing, executed by a
duly authorized and competent employee of the Company or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
Director or Directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall be conclusive evidence of the
statements therein contained.
(e) Time Notices Deemed Given. All notices given by mail, as
above provided, shall be deemed to have been given as at the time of mailing and
all notices given by telegram shall be deemed to have been given as at the
sending time recorded by the telegraph company transmitting the notices.
(f) Methods of Notice. It shall not be necessary that the same
method of giving notice be employed in respect of all notices, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
(g) Failure to Receive Notice. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any Director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such Director to receive such
notice.
(h) Notice to Person with Whom Communication Is Unlawful.
Whenever notice is required to be given, under any provision of law, the
Certificate of Incorporation or these Bylaws, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the Company is such
as to require the filing of a certificate under any provision of
19
<PAGE>
the General Corporation Law of Delaware, the certificate shall state, if such is
the fact and if notice is required, that notice was given to all persons
entitled to receive notice except such persons with whom communication is
unlawful.
ARTICLE XIII
Amendments
Section 44. Amendments. These Bylaws may be repealed or amended or
new Bylaws adopted by the stockholders. In addition to any vote of the holders
of any class or series of stock of this Company required by law and any vote
provided for in the Certificate of Incorporation, the affirmative vote of a
majority of the voting power of all of the then outstanding shares of the
capital stock of the Company entitled to vote generally in the election of
Directors, voting together as a single class, shall be required to adopt, amend
or repeal any provisions of these Bylaws. The Board of Directors shall also
have the authority to adopt, amend or repeal these Bylaws subject to the power
of the stockholders to adopt, amend or repeal such Bylaws and provided that the
Board of Directors shall not adopt, amend or repeal any Bylaws fixing the
qualifications, classifications, term of office, or compensation of Directors.
20
<PAGE>
EXHIBIT 10.1
NAVIGATION TECHNOLOGIES CORPORATION
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is effective as of
______________________ by and between Navigation Technologies Corporation, a
Delaware corporation (the "Company"), and __________________ ("Indemnitee"), who
is either a director or officer, the General Counsel or an assistant counsel of
the Company or one of its subsidiaries.
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and its related
entities;
WHEREAS, in order to induce Indemnitee to continue to provide services to
the Company, the Company wishes to provide for the indemnification of, and the
advancement of expenses to, Indemnitee to the maximum extent permitted by law;
WHEREAS, the Company and Indemnitee recognize the continued difficulty in
obtaining liability insurance for the Company's directors and officers, the
significant increases in the cost of such insurance and the general reductions
in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors and officers
to expensive litigation risks at the same time as the availability and coverage
of liability insurance has been severely limited; and
WHEREAS, the Company and Indemnitee desire to have in place the additional
protection provided by an indemnification agreement and to provide
indemnification and advancement of expenses to the Indemnitee to the maximum
extent permitted by Delaware law;
WHEREAS, in view of the considerations set forth above, the Company desires
that Indemnitee shall be indemnified and advanced expenses by the Company as set
forth herein;
NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth below.
1. Certain Definitions.
-------------------
(a) "Change in Control" shall mean, and shall be deemed to have
occurred if, on or after the date of this Agreement Philips Electronics N.V. and
its affilitates do not control the Company through ownership of more than 45% of
the total voting power represented by the Company's then outstanding voting
securities or otherwise, and (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than
a trustee or other fiduciary holding securities under an employee benefit plan
of the Company acting in such capacity or a corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, becomes the "beneficial
owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of
securities of the
<PAGE>
Company representing more than 50% of the total voting power represented by the
Company's then outstanding Voting Securities, (ii) during any period of two
consecutive years, during which Philips Electronics N.V. does not control the
Company as aforesaid, individuals who at the beginning of such period constitute
the Board of Directors of the Company and any new director whose election by the
Board of Directors or nomination for election by the Company's stockholders was
approved by a vote of at least two thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof, (iii) the stockholders of the Company
approve a merger or consolidation of the Company with any other corporation
other than a merger or consolidation which would result in the Voting Securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into Voting Securities of
the surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (iv) the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series of
related transactions) all or substantially all of the Company's assets.
(b) "Claim" shall mean with respect to a Covered Event: any
threatened, pending or completed action, suit, proceeding or alternative dispute
resolution mechanism, or any hearing, inquiry or investigation that Indemnitee
in good faith believes might lead to the institution of any such action, suit,
proceeding or alternative dispute resolution mechanism, whether civil, criminal,
administrative, investigative or other.
(c) References to the "Company" shall include, in addition to
Navigation Technologies Corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger to which
Navigation Technologies Corporation (or any of its wholly owned subsidiaries) is
a party which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees, agents or
fiduciaries, so that if Indemnitee is or was a director, officer, employee,
agent or fiduciary of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee, agent
or fiduciary of another corporation, partnership, joint venture, employee
benefit plan, trust or other enterprise, Indemnitee shall stand in the same
position under the provisions of this Agreement with respect to the resulting or
surviving corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.
(d) "Covered Event" shall mean any event or occurrence related to the
fact that Indemnitee is or was a director or officer (including the General
Counsel and assistant counsels) of the Company, or any subsidiary of the
Company, or is or was serving at the request of the Company as a director or
officer (including the General Counsel and assistant counsels) of another
corporation, partnership, joint venture, trust or other enterprise, or by reason
of any action or inaction on the part of Indemnitee while serving in such
capacity.
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<PAGE>
(e) "Expenses" shall mean any and all out of pocket expenses
(including reasonable attorneys' fees and all other reasonable costs, expenses
and obligations incurred in connection with investigating, defending, being a
witness in or participating in (including on appeal), or preparing to defend, to
be a witness in or to participate in, any action, suit, proceeding, alternative
dispute resolution mechanism, hearing, inquiry or investigation), judgments,
fines, penalties and amounts paid in settlement (if such settlement is approved
in advance by the Company, which approval shall not be unreasonably withheld) of
any Claim and any federal, state, local or foreign taxes imposed on the
Indemnitee as a result of the actual or deemed receipt of any payments under
this Agreement.
(f) "Expense Advance" shall mean a payment to Indemnitee pursuant to
Section 3 of Expenses in advance of the settlement of or final judgement in any
action, suit, proceeding or alternative dispute resolution mechanism, hearing,
inquiry or investigation which constitutes a Claim.
(g) "Independent Legal Counsel" shall mean an attorney or firm of
attorneys, selected in accordance with the provisions of Section 2(d) hereof,
who shall not have otherwise performed services for the Company or Indemnitee
within the last three years (other than with respect to matters concerning the
rights of Indemnitee under this Agreement, or of other Indemnitees under similar
indemnity agreements).
(h) References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on
Indemnitee with respect to an employee benefit plan; and references to "serving
at the request of the Company" shall include any service as a director, officer,
employee, agent or fiduciary of the Company which imposes duties on, or involves
services by, such director, officer, employee, agent or fiduciary with respect
to an employee benefit plan, its participants or its beneficiaries; and if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan, Indemnitee shall be deemed to have acted in a manner "not opposed to the
best interests of the Company" as referred to in this Agreement.
(i) "Reviewing Party" shall mean, subject to the provisions of
Section 2(d), any person or body appointed by the Board of Directors in
accordance with applicable law to review the Company's obligations hereunder and
under applicable law, which may include a member or members of the Company's
Board of Directors, Independent Legal Counsel or any other person or body not a
party to the particular Claim for which Indemnitee is seeking indemnification.
(j) "Section" refers to a section of this Agreement unless otherwise
indicated.
(k) "Voting Securities" shall mean any securities of the Company that
vote generally in the election of directors.
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<PAGE>
2. Indemnification.
---------------
(a) Indemnification of Expenses. Subject to the provisions of
---------------------------
Section 2(b) below, the Company shall indemnify Indemnitee for Expenses to the
fullest extent permitted by law if Indemnitee was or is or becomes a party to or
witness or other participant in, or is threatened to be made a party to or
witness or other participant in, any Claim (whether by reason of or arising in
part out of a Covered Event), including all interest, assessments and other
charges paid or payable in connection with or in respect of such Expenses.
(b) Review of Indemnification Obligations. Notwithstanding the
-------------------------------------
foregoing, in the event any Reviewing Party shall have determined (in a written
opinion, in any case in which Indepen dent Legal Counsel is the Reviewing Party)
that Indemnitee is not entitled to be indemnified hereunder under applicable
law, (i) the Company shall have no further obligation under Section 2(a) to make
any payments to Indemnitee not made prior to such determination by such
Reviewing Party, and (ii) the Company shall be entitled to be reimbursed by
Indemnitee (who hereby agrees to reimburse the Company) for all Expenses
theretofore paid to Indemnitee to which Indemnitee is not entitled hereunder
under applicable law; provided, however, that if Indemnitee has commenced or
-------- -------
thereafter commences legal proceedings in a court of competent jurisdiction to
secure a determination that Indemnitee is entitled to be indemnified hereunder
under applicable law, any determination made by any Reviewing Party that
Indemnitee is not entitled to be indemnified hereunder under applicable law
shall not be binding and Indemnitee shall not be required to reimburse the
Company for any Expenses theretofore paid in indemnifying Indemnitee until a
final judicial determination is made with respect thereto (as to which all
rights of appeal therefrom have been exhausted or lapsed). Indemnitee's
obligation to reimburse the Company for any Expenses shall be unsecured and no
interest shall be charged thereon.
(c) Indemnitee Rights on Unfavorable Determination; Binding Effect.
--------------------------------------------------------------
If any Reviewing Party determines that Indemnitee substantively is not entitled
to be indemnified hereunder in whole or in part under applicable law, Indemnitee
shall have the right to commence litigation seeking an initial determination by
the court or challenging any such determination by such Reviewing Party or any
aspect thereof, including the legal or factual bases therefor, and, subject to
the provisions of Section 17, the Company hereby consents to service of process
by delivery to its principal executive offices directed to the attention of its
general counsel and to appear in any such proceeding in a Federal or State court
in Chicago, Illinois or the State of Delaware. Absent such litigation, any
determination by any Reviewing Party shall be conclusive and binding on the
Company and Indemnitee. The Company shall have comparable right of review in the
case of a determination by a Reviewing Party that Indemnitee is entitled to be
indemnified hereunder.
(d) Selection of Reviewing Party; Change in Control. If there has
-----------------------------------------------
not been a Change in Control, any Reviewing Party shall be selected by the Board
of Directors, and if there has been such a Change in Control (other than a
Change in Control which has been approved by a majority of the Company's Board
of Directors who were directors immediately prior to such Change in Control),
any Reviewing Party with respect to all matters thereafter arising concerning
the rights of
-4-
<PAGE>
Indemnitee to indemnification of Expenses under this Agreement or any other
agreement or under the Company's Certificate of Incorporation or Bylaws as now
or hereafter in effect, or under any other applicable law, if desired by
Indemnitee, shall be Independent Legal Counsel of recognized stature selected by
Indemnitee and approved by the Company (which approval shall not be unreasonably
withheld). Such counsel, among other things, shall render its written opinion
to the Company and Indemnitee as to whether and to what extent Indemnitee would
be entitled to be indemnified hereunder under applicable law. The Company
agrees to pay the reasonable fees of the Independent Legal Counsel referred to
above and to indemnify fully such counsel against any and all expenses
(including attorneys' fees), claims, liabilities and damages arising out of or
relating to this Agreement or its engagement pursuant hereto. Notwithstanding
any other provision of this Agreement, the Company shall not be required to pay
Expenses of more than one Independent Legal Counsel in connection with all
matters concerning a single Indemnitee, and such Independent Legal Counsel shall
be the Independent Legal Counsel for any or all other Indemnitees unless (i) the
employment of separate counsel by one or more Indemnitees has been previously
authorized by the Company in writing, or (ii) an Indemnitee shall have provided
to the Company a written statement that such Indemnitee has reasonably concluded
that there may be a conflict of interest between such Indemnitee and the other
Indemnitees with respect to the matters arising under this Agreement.
(e) Mandatory Payment of Expenses. Notwithstanding any other
-----------------------------
provision of this Agreement other than Section 10 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
Claim arising out of a Covered Event, Indemnitee shall be indemnified against
all Expenses incurred by Indemnitee in connection therewith.
3. Expense Advances.
----------------
(a) Obligation to Make Expense Advances. Upon receipt of a written
-----------------------------------
undertaking by or on behalf of the Indemnitee to repay such amounts if it shall
ultimately be determined that the Indemnitee is not entitled to be indemnified
therefore by the Company hereunder under applicable law, the Company shall make
Expense Advances to Indemnitee.
(b) Form of Undertaking. Any obligation to repay any Expense
-------------------
Advances hereunder pursuant to a written undertaking by the Indemnitee shall be
unsecured and no interest shall be charged thereon.
(c) Determination of Reasonable Expense Advances. The parties
--------------------------------------------
agree that for the purposes of any Expense Advance for which Indemnitee has made
written demand to the Company in accordance with this Agreement, all Expenses
included in such Expense Advance that are certified by affidavit of Indemnitee's
counsel as being reasonable shall be considered reasonable for purposes of being
advanced but without prejudice to a later determination otherwise.
-5-
<PAGE>
4. Procedures for Indemnification and Expense Advances.
---------------------------------------------------
(a) Timing of Payments. All payments of Expenses (including without
------------------
limitation Expense Advances) by the Company to the Indemnitee pursuant to this
Agreement shall be made to the fullest extent permitted by law as soon as
practicable after written demand by Indemnitee therefor is presented to the
Company, but in no event later than thirty (30) business days after such written
demand by Indemnitee is presented to the Company, except in the case of Expense
Advances, which shall be made no later than ten (10) business days after such
written demand by Indemnitee is presented to the Company with such information
and substantiation as is reasonably requested by the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
--------------------------------
condition precedent to Indemnitee's right to be indemnified or Indemnitee's
right to receive Expense Advances under this Agreement, give the Company notice
in writing as soon as practicable of any Claim made against Indemnitee for which
indemnification will or could be sought under this Agreement. Notice to the
Company shall be directed to the General Counsel of the Company at the address
shown on the signature page of this Agreement (or such other address as the
Company shall designate in writing to Indemnitee). In addition, Indemnitee shall
give the Company such information and cooperation as it may reasonably require
and as shall be within Indemnitee's power.
(c) No Presumptions; Burden of Proof. For purposes of this
--------------------------------
Agreement, the termination of any Claim by settlement (whether with or without
court approval), or upon a plea of nolo contendere, or its equivalent, shall not
---------------
create a presumption that Indemnitee did not meet any particular standard of
conduct or have any particular belief or that a court has determined that
indemnification is not permitted by this Agreement or applicable law. In
addition, neither the failure of any Reviewing Party to have made a
determination as to whether Indemnitee has met any particular standard of
conduct or had any particular belief, nor an actual determination by any
Reviewing Party that Indemnitee has not met such standard of conduct or did not
have such belief, prior to the commencement of legal proceedings by Indemnitee
to secure a judicial determination that Indemnitee should be indemnified under
this Agreement under applicable law, shall be a defense to Indemnitee's claim or
create a presumption that Indemnitee has not met any particular standard of
conduct or did not have any particular belief. In connection with any
determination by any Reviewing Party or otherwise as to whether the Indemnitee
is entitled to be indemnified hereunder under applicable law, the burden of
proof shall be on the Company to establish that Indemnitee is not so entitled.
(d) Notice to Insurers. If, at the time of the receipt by the
------------------
Company of a notice of a Claim pursuant to Section 4(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim to the insurers in accordance
with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of the Indemnitee, all amounts payable as a result of such Claim in
accordance with the terms of such policies.
-6-
<PAGE>
(e) Selection of Counsel. In the event the Company shall be
--------------------
obligated hereunder to provide indemnification for or make any Expense Advances
with respect to the Expenses of any Claim, the Company, if appropriate, shall be
entitled to assume the defense of such Claim with counsel approved by Indemnitee
(which approval shall not be unreasonably withheld) upon the delivery to
Indemnitee of written notice of the Company's election to do so. After delivery
of such notice, approval of such counsel by Indemnitee and the retention of such
counsel by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees or expenses of separate counsel subsequently retained by
or on behalf of Indemnitee with respect to the same Claim; provided that, (i)
Indemnitee shall have the right to employ Indemnitee's separate counsel in any
such Claim at Indemnitee's expense and (ii) if (A) the employment of separate
counsel by Indemnitee has been previously authorized by the Company, (B)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense,
or (C) the Company shall not continue to retain such counsel to defend such
Claim, then the fees and expenses of Indemnitee's separate counsel shall be
Expenses for which Indemnitee may receive indemnification or Expense Advances
hereunder.
5. Additional Indemnification Rights; Nonexclusivity.
-------------------------------------------------
(a) Scope. The Company hereby agrees to indemnify the Indemnitee
-----
against claims arising out of a Covered Event to the fullest extent permitted by
law, notwithstanding that such indemnification is not specifically authorized by
the other provisions of this Agreement, the Company's Certificate of
Incorporation, the Company's Bylaws or by statute. In the event of any change
after the date of this Agreement in any applicable law, statute or rule which
expands the right of a Delaware corporation to indemnify a member of its board
of directors or an officer, employee, agent or fiduciary, it is the intent of
the parties hereto that Indemnitee shall enjoy by this Agreement the greater
benefits afforded by such change. In the event of any change in any applicable
law, statute or rule which narrows the right of a Delaware corporation to
indemnify a member of its board of directors or an officer, employee, agent or
fiduciary, such change, to the extent not otherwise required by such law,
statute or rule to be applied to this Agreement, shall have no effect on this
Agreement or the parties' rights and obligations hereunder except as set forth
in Section 10(a) hereof.
(b) Nonexclusivity. The indemnification and the payment of Expense
--------------
Advances provided by this Agreement shall be in addition to any rights to which
Indemnitee may be entitled under the Company's Certificate of Incorporation, its
Bylaws, any other agreement, any vote of stockholders or disinterested
directors, the General Corporation Law of the State of Delaware, or otherwise.
The indemnification and the payment of Expense Advances provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though subsequent thereto
Indemnitee may have ceased to serve in such capacity.
6. No Duplication of Payments. The Company shall not be liable under
--------------------------
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee
-7-
<PAGE>
has otherwise actually received payment (under any insurance policy, provision
of the Company's Certificate of Incorporation, Bylaws or otherwise) of the
amounts otherwise payable hereunder.
7. Partial Indemnification. If Indemnitee is entitled under any
-----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses incurred in connectin with any Claim, but not, however, for
all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
8. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
---------------------
that in certain instances, federal law or applicable public policy may prohibit
the Company from indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.
9. Liability Insurance. To the extent the Company maintains liability
-------------------
insurance applicable to directors, officers, employees, agents or fiduciaries,
Indemnitee shall be covered by such policies in such a manner as to provide
Indemnitee the same rights and benefits as are provided to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee
is not an officer or director but is a key employee, agent or fiduciary.
10. Exceptions. Notwithstanding any other provision of this Agreement,
----------
the Company shall not be obligated pursuant to the terms of this Agreement:
(a) Excluded Action or Omissions. To indemnify or make Expense
----------------------------
Advances to Indemnitee with respect to Claims arising out of acts, omissions or
transactions for which Indemnitee is prohibited from receiving indemnification
under applicable law.
(b) Claims Initiated by Indemnitee. To indemnify or make Expense
------------------------------
Advances to Indemnitee with respect to Claims initiated or brought voluntarily
by Indemnitee and not by way of defense, counterclaim or crossclaim, except (i)
with respect to actions or proceedings brought to establish or enforce a right
to indemnification under this Agreement or any other agreement or insurance
policy or under the Company's Certificate of Incorporation or Bylaws now or
hereafter in effect relating to Claims for Covered Events, (ii) in specific
cases if the Board of Directors has approved the initiation or bringing of such
Claim, or (iii) as otherwise required under Section 145 of the Delaware General
Corporation Law, regardless of whether Indemnitee ultimately is determined to be
entitled to such indemnification, Expense Advances, or insurance recovery, as
the case may be.
(c) Lack of Good Faith. To indemnify Indemnitee for any Expenses
------------------
incurred by the Indemnitee with respect to any action instituted (i) by
Indemnitee to enforce or interpret this
-8-
<PAGE>
Agreement, if a court having jurisdiction over such action determines as
provided in Section 13 that each of the material assertions made by the
Indemnitee as a basis for such action was not made in good faith or was
frivolous, or (ii) by or in the name of the Company to enforce or interpret this
Agreement, if a court having jurisdiction over such action determines as
provided in Section 13 that each of the material defenses asserted by Indemnitee
in such action was made in bad faith or was frivolous.
(d) Claims Under Section 16(b). To indemnify Indemnitee for
--------------------------
Expenses and the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
11. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall constitute an original.
12. Binding Effect; Successors and Assigns. This Agreement shall be
--------------------------------------
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns (including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), spouses, heirs and
personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect, and whether by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial part, of
the business or assets of the Company, by written agreement, expressly to assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform if no such succession had taken
place. Subject to Section 13, this Agreement shall continue in effect
regardless of whether Indemnitee continues to serve as a director, officer,
employee, agent or fiduciary (as applicable) of the Company or of any other
enterprise at the Company's request.
13. Termination. This Agreement may be terminated by the Company by not
-----------
less than 60 days notice to Indemnitee as to Covered Events occurring after
termination.
14. Expenses Incurred in Action Relating to Enforcement or Interpretation.
---------------------------------------------------------------------
In the event that any action is instituted by Indemnitee under this Agreement or
under any liability insurance policies maintained by the Company to enforce or
interpret any of the terms hereof or thereof, Indemnitee shall be entitled to be
indemnified for all reasonable Expenses incurred by Indemnitee with respect to
such action (including without limitation reasonable attorneys' fees),
regardless of whether Indemnitee is ultimately successful in such action, unless
as a part of such action a court having jurisdiction over such action makes a
final judicial determination (as to which all rights of appeal therefrom have
been exhausted or lapsed) that each of the material assertions made by
Indemnitee as a basis for such action was not made in good faith or was
frivolous; provided, however, that until such final judicial determination is
made, Indemnitee shall be entitled under Section 3 to receive payment of Expense
Advances hereunder with respect to such action. In the event of an action
instituted by or in the name of the Company under this Agreement to enforce or
interpret any of the terms of this Agreement, Indemnitee shall be entitled to be
indemnified for all reasonable Expenses
-9-
<PAGE>
incurred by Indemnitee in defense of such action (including without limitation
costs and expenses incurred with respect to Indemnitee's counterclaims and
cross-claims made in such action), unless as a part of such action a court
having jurisdiction over such action makes a final judicial determination (as to
which all rights of appeal therefrom have been exhausted or lapsed) that each of
the material defenses asserted by Indemnitee in such action was made in bad
faith or was frivolous; provided, however, that until such final judicial
determination is made, Indemnitee shall be entitled under Section 3 to receive
payment of Expense Advances hereunder with respect to such action.
15. Period of Limitations. No legal action shall be brought and no cause
---------------------
of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action or, if later, the time when the Company should reasonably
have become aware of its claim, and any claim or cause of action of the Company
shall be extinguished and deemed released unless asserted by the timely filing
of a legal action within such two year period; provided, however, that if any
-------- -------
shorter period of limitations is otherwise applicable to any such cause of
action, such shorter period shall govern.
16. Notice. All notices, requests, demands and other communications under
------
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered on the date of such delivery, (ii) if mailed by domestic certified or
registered mail with postage prepaid, on the third business day after the date
postmarked, (iii) if mailed postage prepaid by air mail from outside the United
States, on the fifth business day after the date mailed or (iv) if delivered by
facsimile transmission on the date of such delivery. Addresses for notice to
either party are as shown on the signature page of this Agreement, or as
subsequently modified by written notice.
17. Consent to Jurisdiction. The Company and Indemnitee each hereby
-----------------------
irrevocably consent to the jurisdiction of Federal or State courts in Chicago,
Illinois or the State courts of the State of Delaware for all purposes in
connection with any action or proceeding which arises out of or relates to this
Agreement and agree that any action instituted under this Agreement shall be
commenced, prosecuted and continued only in either the Federal or State courts
located in Chicago, Illinois or the Court of Chancery of the State of Delaware
in and for New Castle County, which shall be the exclusive and only proper
forums for adjudicating such a claim.
18. Severability. The provisions of this Agreement shall be severable in
------------
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including without limitation each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
-10-
<PAGE>
19. Choice of Law. This Agreement, and all rights, remedies, liabilities,
-------------
powers and duties of the parties to this Agreement, shall be governed by and
construed in accordance with the laws of the State of Delaware as applied to
contracts between Delaware residents entered into and to be performed entirely
in the State of Delaware without regard to principles of conflicts of laws.
20. Subrogation. In the event of payment under this Agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
21. Amendment and Termination. No amendment, modification, termination or
-------------------------
cancellation of this Agreement shall be effective unless it is in writing signed
by both the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed to be or shall constitute a waiver of any other
provisions hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver.
22. Integration and Entire Agreement. This Agreement sets forth the
--------------------------------
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
23. No Construction as Employment Agreement. Nothing contained in this
---------------------------------------
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries or affiliated entities.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Indemnification
Agreement as of the date first above written.
NAVIGATION TECHNOLOGIES CORPORATION
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Address: ---------------------------
- ------------------------------------
- ------------------------------------
Telephone:
--------------------------
AGREED TO AND ACCEPTED
Fax No:
----------------------------- INDEMNITEE:
-----------------------------------
(signature)
-----------------------------------
-----------------------------------
Address
-----------------------------------
-----------------------------------
Telephone:
----------------------------
Fax No:
--------------------------------
-12-
<PAGE>
EXHIBIT 10.2
NAVIGATION TECHNOLOGIES CORPORATION
1988 STOCK OPTION PLAN
Adopted December 18, 1987
Amended April 2, 1990
Amended December 13, 1993
Amended July 7, 1994
Amended September 29, 1994
Amended November 30, 1994
1. PURPOSE
-------
(a) The purpose of the Plan is to provide a means by which selected
employees, consultants, officers and directors (if declared eligible under
paragraph 4) of Navigation Technologies Corporation, a Delaware Corporation (the
"Company"), and its Affiliates, as defined in subparagraph 1(b), may be given an
opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
from time to time (the "Code).
(c) The Company, by means of the Plan, seeks to retain the services of
persons now employed by or serving as employees, consultants, officers,
directors or other service providers to the Company, to secure and retain the
services of persons capable of filling such positions, and to provide incentives
for such persons to exert maximum efforts for the success of the Company.
(d) The Company intends that the options issued under the Plan shall, in
the discretion of the Board of Directors of the Company (the "Board") or any
committee to which responsibility for administration of the Plan has been
delegated pursuant to subparagraph 2(c), be either incentive stock options as
that term is used in Section 422 of the Code ("Incentive Stock Options"), or
options which do not qualify as incentive stock options ("Supplemental Stock
Options"). All options shall be separately
<PAGE>
designated Incentive Stock Options or Supplemental Stock Options at the time of
grant, and in such form as issued pursuant to paragraph 5, and a separate
certificate or certificates shall be issued for shares purchased on exercise of
each type of option. An option designated as a Supplemental Stock Option shall
not be treated as an incentive stock option.
2. ADMINISTRATION
--------------
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a committee, as provided in subparagraph 2(c).
Whether or not the Board has delegated administration, the Board shall have the
final power to determine all questions of policy and expediency that may arise
in the administration of the Plan.
(b) The Board shall have the power, subject to, and within the
limitations of the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible
under the Plan shall be granted options; when and how the option shall be
granted; whether the option will be an Incentive Stock Option or a Supplemental
Stock Option; the provisions of each option granted (which need not be
identical), including the time or times during the term of each option within
which all or portions of such option may be exercised; and the number of shares
for which an option shall be granted to each person.
(ii) To construe and interpret the Plan and options granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any option agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.
(iii) To amend the Plan as provided in paragraph 10.
-2-
<PAGE>
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"), all of the members
of which Committee shall be disinterested persons, if required and as defined by
the provisions of subparagraph 2(d). If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board, subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan. Additionally,
prior to the date of the first registration of an equity security of the Company
under Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and notwithstanding anything to the contrary contained herein,
the Board may expressly determine that the requirement that the Committee be
composed of two (2) members be waived and may delegate administration of the
Plan to any person or persons and the term "Committee" shall apply to any person
or persons to whom such authority has been delegated.
(d) The term "disinterested person," as used in this Plan, shall mean an
administrator of the Plan, whether a member of the Board or of any Committee
to which responsibility for administration of the Plan has been delegated
pursuant to subparagraph 2(c): (i) who is not at the time he or she exercises
discretion in administering the Plan eligible and has not at any time within one
year prior thereto been eligible for selection as a person to whom stock may be
allocated or to whom stock options or stock appreciation rights may be granted
pursuant to the Plan or any other plan of the Company or any of its affiliates
entitling the participants therein to acquire stock, stock options or stock
appreciation rights of the Company or any of its affiliates; or (ii) who is
otherwise considered to be a "disinterested person" in accordance with the
rules, regulations or interpretations of the Securities and Exchange
Commission.
-3-
<PAGE>
Any such person shall otherwise comply with the requirements of Rule 16b-3
promulgated under the Exchange Act.
(e) Any requirement that an administrator of the Plan be a "disinterested
person" shall not apply prior to the date of the first registration of an equity
security of the Company under Section 12 of the Exchange Act.
3. SHARES SUBJECT TO THE PLAN
--------------------------
(a) Subject to the provisions of paragraph 9 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to options granted under
the Plan shall not exceed in the aggregate Thirty-Five Million Seven Hundred
Thousand (35,700,000) shares of the Company's common stock. If any options
granted under the Plan shall for any reason expire or otherwise terminate
without having been exercised in full, the stock not purchased under such option
shall again become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares bought on the market or otherwise.
(c) An Incentive Stock Option may be granted to an eligible person under
the Plan only if the aggregate fair market value (determined at the time the
option is granted) of the stock with respect to which incentive stock options
(as defined in the Code) granted after 1986 are exercisable for the first time
by such optionee during any calendar year under all incentive stock option plans
of the Company and its Affiliates does not exceed One Hundred Thousand Dollars
($100,000). Should it be determined that an option granted under the Plan
exceeds such maximum for any reason other than the failure of a good faith
attempt to value the stock subject to the option, such option shall be
considered a Supplemental Stock Option to the extent, but only to the extent, of
such excess; provided, however, that should it be determined that an entire
option or any portion thereof does not qualify for treatment as an incentive
-4-
<PAGE>
stock option by reason of exceeding such maximum, such option or the applicable
portion shall be considered a Supplemental Stock Option.
4. ELIGIBILITY
-----------
(a) Incentive Stock Options may be granted only to employees (including
officers) of the Company or its Affiliates. A director of the Company shall not
be eligible to receive Incentive Stock Options unless such director is also an
employee (including an officer) of the Company or any Affiliate. Supplemental
Stock Options may be granted only to employees, consultants, officers,
directors, or other service providers to the Company or its Affiliates.
(b) Subject to the limitations contained elsewhere herein, no director of
the Company who is not an employee of the Company or an Affiliate may be
granted options to purchase more than one-half of one percent (0.5%) of the
capital stock of the Company over any five-year period; and no director of the
Company who is an employee of the Company or any Affiliate may be granted
options to purchase more than five percent (5%) of the outstanding capital stock
of the Company over any five-year period. The Board shall otherwise comply with
the requirements of Rule 16b-3 promulgated under the Exchange Act, as from time
to time in effect. This subparagraph 4(b) shall not apply prior to the date of
the first registration of an equity security of the Company under Section 12 of
the Exchange Act.
(c) No person shall be eligible for the grant of an option under the Plan
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any of
its Affiliates unless the exercise price of such option is at least one hundred
ten percent (110%) of the fair market value of such stock at the date of grant
and the term of the option does not exceed five (5) years from the date of
grant.
-5-
<PAGE>
5. OPTION PROVISIONS
-----------------
Each option shall be in such form and shall contain such terms and
conditions as the Board or the Committee shall deem appropriate. The provisions
of separate options need not be identical, but each option shall include
(through incorporation of provisions hereof by reference in the option or
otherwise) the substance of each of the following provisions:
(a) The term of any option shall not be greater than ten (10) years from
the date it was granted.
(b) The exercise price of each Incentive Stock Option shall be not less
than one hundred percent (100%) of the fair market value of the stock subject to
the option on the date the option is granted. The exercise price of each
Supplemental Stock Option shall be not less than eighty-five percent (85%) of
the fair market value of the stock subject to the option on the date the option
is granted.
(c) The purchase price of stock acquired pursuant to an option shall be
paid, to the extent permitted by applicable statutes and regulations, either (i)
in cash at the time the option is exercised, or (ii) at the discretion of the
Board or the Committee, either at the time of the grant or exercise of the
option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other common stock of the
Company) with the person to whom the option is granted or to whom the option is
transferred pursuant to subparagraph 5(d), or (C) in any other form of legal
consideration that may be acceptable to the Board or the Committee.
Notwithstanding the foregoing, an option may not be exercised by tender to
the Company of shares of the Company's stock to the extent such tender of stock
would constitute a violation of the provisions of any law, regulation and/or
agreement restricting the redemption of the Company's stock.
-6-
<PAGE>
Furthermore, no promissory note shall be permitted if an exercise using a
promissory note would be a violation of any law.
In the case of any deferred payment arrangement, interest shall be payable
at least annually and shall be charged at the minimum rate of interest necessary
to avoid the treatment as interest, under any applicable provisions of the Code,
of any amounts other than amounts stated to be interest under the deferred
payment arrangement. The Board or Committee shall have the authority to permit
or require the optionee to secure any promissory note used to exercise an option
with the shares of stock acquired on exercise of the option and/or with other
collateral acceptable to the Company.
Unless otherwise provided by the Board or the Committee, in the event the
Company at any time is subject to the regulations promulgated by the Board of
Governors of the Federal Reserve System or any other governmental entity
affecting the extension of credit in connection with the Company's securities,
any promissory note shall comply with such applicable regulations, and the
optionee shall pay the unpaid principal and accrued interest, if any, to the
extent necessary to comply with such applicable regulations.
(d) An option shall not be transferable except by will or by the laws of
descent and distribution, and shall be exercisable during the lifetime of the
person to whom the option is granted only by such person.
(e) The total number of shares of stock subject to an option may, but need
not, be allotted in periodic installments (which may, but need not, be equal).
From time to time during each of such installment periods, the option may become
exercisable ("vest") with respect to some or all of the shares allotted to that
period, and may be exercised with respect to some or all of the shares allotted
to such period and/or any prior period as to which the option was not fully
exercised. During the remainder of
-7-
<PAGE>
the term of the option (if its term extends beyond the end of the installment
periods), the option may be exercised from time to time with respect to any
shares then remaining subject to the option. The vesting provisions of
individual options may vary but in each case will provide for vesting of at
least twenty percent (20%) per year of the total number of shares subject to the
option. The provisions of this subparagraph 5(e) are subject to any option
provisions governing the minimum number of shares as to which an option may be
exercised.
(f) The Company may require any optionee, or any person to whom an option
is transferred under subparagraph 5(d), as a condition of exercising any such
option, (1) to give written assurances satisfactory to the Company as to the
optionee's knowledge and experience in financial and business matters and/or to
employ a purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the option; and (2) to give
written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the option for such person's own account and not
with any present intention of selling or otherwise distributing the stock.
These requirements, and any assurances given pursuant to such requirements,
shall be inoperative if (i) the issuance of the shares upon the exercise of the
option has been registered under a then currently effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
or (ii) as to any particular requirement, a determination is made by the Company
that such requirement need not be met in the circumstances under the then
applicable securities laws.
(g) An option shall terminate three (3) months after termination of the
optionee's employment or relationship as a director or consultant with the
Company or an Affiliate, unless (i) termination is due
-8-
<PAGE>
to such person's disability, in which case the option may be exercised within
one (1) year following such termination of employment or relationship as a
director or consultant (or such longer or shorter period, which in no event
shall be less than six (6) months, specified in the option); or (ii) the
optionee dies while in the employ of or while serving as a director or
consultant to the Company or an Affiliate, or not more than three (3) months
after termination of such relationship, in which case the option may be
exercised within eighteen (18) months following the death of the optionee (or
such longer or shorter period, which in no event shall be less than six (6)
months, specified in the option) by the person or persons to whom the optionee's
rights under such option pass by will or by the laws of descent and
distribution; or (iii) the optionee commits an act of Misconduct (defined in
subparagraph 5(h) below), in which case the option shall immediately terminate
as of and at the time of such act, and the shares covered by the unexercised
portion of such option shall revert to the Plan, or if this option has been
exercised subsequent to such Misconduct and the optionee has received shares of
the Company's common stock, the Company may, within ninety (90) days after the
Board or the Company's chief executive officer has knowledge of the act of
Misconduct, (A) rescind such exercise and recover such shares issued to optionee
upon returning to optionee the exercise price for such shares or (B) if the
optionee has sold such shares, recover from optionee the net proceeds from the
sale of such shares less the exercise price and plus interest on such difference
at 8% per annum from the exercise date to the date such difference is paid by
optionee to the Company; or (iv) the option by its terms specifies either (A)
that it shall terminate sooner than three (3) months after termination of the
optionee's employment or relationship as a director or consultant, but, except
as stated above in subparagraph 5(g)(iii), no less than thirty (30) days
thereafter, or (B) that it may be exercised more than three (3) months after
termination of such relationship with the Company or an Affiliate. This
subparagraph 5(g) shall not be construed to extend the term of any option or to
permit
-9-
<PAGE>
anyone to exercise the option after expiration of its term, nor shall it
be construed to increase the number of shares as to which any option is
exercisable from the amount exercisable on the date of termination of the
optionee's employment or relationship as a director or consultant.
(h) "Misconduct" means the commission of any act affecting employment
----------
which involves (1) dishonesty, fraud or criminal conduct by optionee, (2)
optionee's knowing and willful violation of a material Company written policy or
a lawful direction by an authorized executive officer or the Board, (3)
optionee's engaging in any activity in competition with the Company or its
Affiliates in a material manner (excluding a less than 5% investment in any
public company), or (4) optionee's knowing unauthorized disclosure of
confidential material, proprietary information or trade secrets of the Company.
(i) The option may, but need not, include a provision whereby the optionee
may elect at any time during the term of his or her employment or relationship
as a director or consultant with the Company or any Affiliate to exercise the
option as to any part or all of the shares subject to the option prior to the
stated vesting date of the option or of any installment or installments
specified in the option. Any shares so purchased from any unvested installment
or option may be subject to a repurchase right in favor of the Company, with the
repurchase price to be equal to the original purchase price of the stock, or to
any other restriction the Board or the Committee determines to be appropriate;
provided, however, that (i) the right to repurchase at the original purchase
price shall lapse at a minimum rate of twenty percent (20%) per year over five
(5) years from the date the option was granted, and (ii) such right shall be
exercisable only within (A) the ninety (90) day period following the termination
of employment or the relationship as a director or consultant, or (B) such
longer period as may be agreed to by the Company and the optionee (for example,
for purposes of satisfying the requirements of Section 1202(c)(3) of the Code
(regarding "qualified small business stock")), and (iii) such right shall be
exercisable only for cash
-10-
<PAGE>
or cancellation of purchase money indebtedness for the shares. Should the right
of repurchase be assigned by the Company, the assignee shall pay the Company
cash equal to the difference between the original purchase price and the stock's
fair market value if the original purchase price is less than the stock's fair
market value.
(j) The option may, but need not, include a provision whereby any tax
withholding obligation of the Company, whether federal, state or local arising
by reason of the exercise of an option, the lapse of a substantial risk of
forfeiture with respect to shares acquired upon such exercise, or the
disposition of shares acquired upon such exercise may be satisfied by the
retention by the Company of shares otherwise issuable by reason of the exercise
of the option.
(k) Options granted to directors of the Company (i) must be granted at or
above the fair market price of the underlying stock on the date of grant; (ii)
shall not be exercisable for at least one year following the date of grant; and
(iii) shall only be exercised during the period commencing with the third
business day and ending on the eighteenth business day following the Company's
release of quarterly or annual financial information; provided, however, that
such restriction on exercise shall not apply (A) after a person ceases to be a
director of the Company or an affiliate or (B) in the event of a change in
control of the Company. The provisions of this subparagraph 5(j) shall not apply
prior to the date of the first registration of an equity security of the Company
under Section 12 of the Exchange Act.
(l) The option may, but need not, include a provision granting the Company
the right to purchase any options and/or shares issued upon exercise of options
proposed to be sold or otherwise transferred by an optionee.
-11-
<PAGE>
6. COVENANTS OF THE COMPANY
------------------------
(a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan or any stock issued or issuable pursuant to any such option. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such options unless and until such authority is obtained.
7. USE OF PROCEEDS FROM STOCK
--------------------------
Proceeds from the sale of stock pursuant to options granted under the Plan
shall constitute general funds of the Company.
8. MISCELLANEOUS
-------------
(a) Neither an optionee nor any person to whom an option is transferred
under subparagraph 5(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
(b) Throughout the term of any option granted pursuant to the Plan, the
Company shall deliver to the holder of such option, not later than one hundred
twenty (120) days after the close of each
-12-
<PAGE>
of the Company's fiscal years during the option term, upon request, such
financial and other information regarding the Company as comprises the annual
report to the stockholders of the Company provided for in the bylaws of the
Company.
(c) Nothing in the Plan or any instrument executed or option granted
pursuant thereto shall confer upon any eligible employee or optionee any right
to continue in the employ of the Company or any Affiliate (or to continue acting
as a consultant or director) or shall affect the right of the Company or any
Affiliate to terminate the employment or directorship of any eligible employee
or optionee with or without cause.
(d) The Board or the Committee shall have the authority to effect, at any
time and from time to time (i) the repricing of any outstanding Options under
the Plan and/or (ii) with the consent of the affected holders of options, the
cancellation of any outstanding options and the grant in substitution therefor
of new options under the Plan covering the same or different numbers of shares
of common stock, but having an exercise price per share not less than eighty-
five percent (85%) of the fair market value (one hundred percent (100%) of the
fair market value in the case of an Incentive Stock Option or, in the case of a
ten percent (10%) stockholder (as defined in subsection 4(c)), not less than one
hundred and ten percent (110%) of the fair market value) per share of Common
Stock on the new grant date.
9. ADJUSTMENTS UPON CHANGES IN STOCK
---------------------------------
(a) If any change is made in the stock subject to the Plan, or subject to
any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Plan and outstanding
options will be appropriately
-13-
<PAGE>
adjusted in the class(e's) and maximum number of shares subject to the Plan and
the class(es) and number of shares and price per share of stock subject to
outstanding options.
(b) In the event of: (1) a merger or consolidation in which the Company is
not the surviving corporation; or (2) a reverse merger in which the Company is
the surviving corporation but the shares of the Company's common stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or otherwise
then to the extent permitted by applicable law: (i) any surviving corporation
shall assume any options outstanding under the Plan or shall substitute similar
options for those outstanding under the Plan, or (ii) such options shall
continue in full force and effect. In the event any surviving corporation
refuses to assume or continue such options, or to substitute similar options for
those outstanding under the Plan, then, such options shall be terminated if not
exercised prior to such event. In the event of a dissolution or liquidation of
the Company, any options outstanding under the plan shall terminate if not
exercised prior to such event.
10. AMENDMENT OF THE PLAN
---------------------
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 9 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the vote or written
consent of the holders of the outstanding shares of the company entitled to
vote, to the degree necessary under applicable laws to obtain incentive stock
option treatment under Section 422 of the Code, within twelve (12) months before
or after the adoption of the amendment, where the amendment will:
(i) Increase the number of shares reserved for options under the
Plan;
(ii) Modify the requirements as to eligibility for participation in
the Plan; or
(iii) Materially increase the benefits accruing to participants under
the Plan.
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<PAGE>
(b) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee incentive stock
options and/or to bring the Plan and/or incentive stock options granted under it
into compliance therewith.
(c) Rights and obligations under any option granted before amendment of
the Plan shall not be altered or impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the option was
granted and (ii) such person consents in writing.
11. ARBITRATION
-----------
Each stock option agreement shall contain a provision submitting to
arbitration all claims, disputes, or controversies arising out of, relating to,
or in connection with such stock option agreement.
12. TERMINATION OR SUSPENSION OF THE PLAN
-------------------------------------
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate ten (10) years from the date the
Plan is adopted by the Board or approved by the stockholders of the Company,
whichever is earlier. No options may be granted under the Plan while the Plan is
suspended or after it is terminated.
(b) Rights and obligations under any option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the option was granted.
13. EFFECTIVE DATE OF PLAN
----------------------
The Plan shall become effective as determined by the Board, but no options
granted under the Plan shall be exercised unless and until the Plan has been
approved by the vote of the holders of a
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<PAGE>
majority of the outstanding shares of the Company entitled to vote, or by the
written consent of the holders of the outstanding shares of the Company entitled
to vote to the extent necessary under applicable laws to obtain incentive stock
option treatment under Section 422 of the Code, and if required, an appropriate
permit has been issued by the Commissioner of Corporations of the State of
California.
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<PAGE>
IT IS UNLAWFUL TO CONSUMMATE A SALE
OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE
COMMISSIONER OF CORPORATIONS OF
THE STATE OF CALIFORNIA, EXCEPT AS
PERMITTED IN THE COMMISSIONER'S
RULES.
INCENTIVE STOCK OPTION
Optionee:
Navigation Technologies Corporation (the "Company"), pursuant to its 1988
Stock Option Plan (the "Plan") has this day granted to you, the optionee named
above, an option to purchase shares of the common stock of the company ("Common
Stock"). This option is intended to qualify as an "incentive stock option"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended from time to time (the "Code").
The details of your options are as follows:
1. The total number of shares of Common Stock subject to this option is
[__________]. Subject to the limitations contained herein, six forty-eighths
(6/48ths) of the Common Stock subject to this option shall vest on January 1,
1997 and one forty-eighth (1/48th) of this option shall vest on the first day of
each month thereafter, rounded down to the nearest whole share. All or part of
the vested portion of this option may be exercised at any time subject to the
limitations set forth on sections 3 and 5 hereof.
2. (a) The exercise price of this option is [__________] per share,
being not less than fair market value of the common Stock on the date of grant
of this option.
(b) Payment of the exercise price per share is due in full in cash
upon exercise of all or any part of each installment which has become
exercisable by you.
3. The minimum number of shares with respect to which this option may be
exercised at any one time is one hundred (100), except (a) as to an installment
subject to exercise, as set forth in paragraph 1, which amounts to fewer than
one hundred (100) shares, in which case, as to the exercise of that installment,
the number of shares in such installment shall be the minimum number of shares,
and (b) with respect to the final exercise of this option this paragraph 3 shall
not apply.
<PAGE>
4. Notwithstanding anything to the contrary contained herein, this option
may not be exercised unless the shares issuable upon exercise of this option are
then registered under the Securities Act of 1933, as amended (the "Act"), or, if
such shares are not then so registered, the Company has determined that such
exercise and issuance would be exempt from the registration requirements of the
Act.
5. The term of this option commences on the date hereof and, unless
sooner terminated as set forth below or in the Plan, terminates on
[__________] (which date shall be no more than ten (10) years from the date
this option is granted). This option shall terminate prior to the expiration of
its term three (3) months after the termination of your employment with the
Company or an affiliate of the Company (as defined in the Plan) for any reason
or for no reason unless (a) such termination of employment is due to your
voluntary termination, in which event the option shall terminate thirty (30)
days after the termination of your employment with the Company; or (b) such
termination of employment is due to your permanent and total disability (within
the meaning of Section 22(e)(3) of the Code), in which event the option shall
terminate on the earlier of the termination date set forth above or one (1) year
following such termination of employment; or (c) such termination of employment
is due to your death, in which event the option shall terminate on the earlier
of the termination date set forth above or eighteen (18) months after your
death; or (d) optionee commits an act of Misconduct (as defined in the Plan), in
which case the option shall terminate immediately as of and at the time of such
act of Misconduct and the shares covered by such option shall revert to the Plan
or if the option has been exercised subsequent to such Misconduct, the Company
may, within ninety (90) days after the Board or the Company's chief executive
officer has knowledge of the act of Misconduct, (A) rescind such exercise and
recover the shares issued to optionee upon returning to optionee the exercise
price for such shares or (B) if optionee has already disposed of such shares,
recover from optionee the net proceeds from the sale of such shares less the
exercise price and including interest on the difference between the sales
proceeds and the exercise price at a rate of eight percent (8%) per annum from
the exercise date until the date such difference is paid by optionee to the
Company, or (e) during any part of such three (3) month period or lesser
applicable period provided above the option is not exercisable solely because of
the condition set forth in paragraph 4 above, in which event the option shall
not terminate, except as provided in (d) above, until the earlier of the
termination date set forth above or until it shall have been exercisable for an
aggregate period of three (3) months or such lesser applicable period after the
termination of employment; or (f) exercise of the option within three (3) months
or a lesser applicable period after termination of your employment with the
Company or with an affiliate would result in liability under section 16(b) of
the Securities Exchange Act of 1934, in which case, unless (d) above is
applicable, the option will terminate on the earlier of (i) the tenth (10th) day
after the last date upon which exercise would result in such liability or (ii)
six (6) months and ten (10) days after the termination of your employment with
the Company or an affiliate. However this option may be exercised following
termination of employment only as to that number of shares as to which it was
exercisable on the date of termination of employment under the provisions of
paragraph 1 of this option.
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<PAGE>
6. (a) This option may be exercised, to the extent specified above, by
delivering a notice of exercise together with the exercise price to the
Secretary of the Company, or to such other person as the Company may designate,
during regular business hours, together with such additional documents as the
Company may then require pursuant to subparagraph 5(f) of the Plan.
(b) As a condition to the issuance of shares upon exercise of this
option the Company may require you to enter an arrangement providing for the
payment by you to the Company of any tax withholding obligation of the Company
arising by reason of your exercise of this option or the lapse of any
substantial risk of forfeiture to which the shares are subject at the time of
exercise. The form of payment shall be in cash or, with the consent of the
Company, in other common stock of the Company including shares otherwise
issuable by reason of the exercise of this option.
7. This option is not transferable, except by will or by the laws of
descent and distribution, and is exercisable during your life only by you.
8. This option is not an employment contract and nothing in this option
shall be deemed to create in any way whatsoever any obligation on your part to
continue in the employ of the Company, or of the Company to continue your
employment with the Company.
9. Any notices provided for in this option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by the Company to you, five (5) days after deposit in the
United States mail, postage prepaid, addressed to you at the address specified
below or at such other address as you hereafter designate by written notice to
the Company.
10. This option is subject to all the provisions of the Plan, a copy of
which is attached hereto and its provisions are hereby made a part of this
option, including without limitation the provisions of paragraph 5 of the Plan
relating to option provisions, and is further subject to all interpretations,
amendments, rules and regulations which may from time to time be promulgated and
adopted pursuant to he Plan. In the event of any conflict between the
provisions of this option and those of the Plan, the provisions of the Plan
shall control.
11. Optionee agrees that any claim, dispute or controversy arising out of,
relating to, or in connection with this stock option agreement shall be settled
by binding arbitration pursuant to the Commercial Arbitration Rules and the
Supplemental Procedures for Large, Complex Disputes of the American Arbitration
Association by one arbitrator appointed in accordance with said rules. The
arbitrator may grant injunctions or other relief in such dispute or controversy.
The decision of the arbitrator shall be final, conclusive and binding on the
parties to the arbitration. Judgment may be entered on the award of the
arbitration in any court having jurisdiction thereof.
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<PAGE>
(a) The arbitrator shall apply Delaware law to the merits of any
dispute or claim, without reference to rules of conflicts of law. The
arbitration proceedings shall be governed by federal arbitration law, without
reference to state arbitration law.
(b) The Company and optionee shall each pay one-half of the costs and
expenses of such arbitration, and each shall separately pay its counsel fees and
expenses.
(c) Optionee understands that nothing in this Section 11 modifies
optionee's at-will status. Either optionee or the Company can terminate the
employment relationship at any time, with or without cause.
12. All certificates representing any shares in the Company acquired upon
exercise of this Option shall be stamped or otherwise imprinted with legends in
the following forms (in addition to any legends required under any other
applicable Securities Laws):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR ANY STATE OR OTHER GOVERNMENTAL SECURITIES LAWS. THEY MAY NOT BE SOLD
OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
AS TO THE SECURITIES UNDER SAID ACT AND ANY OTHER APPLICABLE CORPORATION
SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST
REFUSAL OPTION IN FAVOR OF THE CORPORATION AND ITS OTHER STOCKHOLDERS AS
PROVIDED IN THE BYLAWS OF THE CORPORATION.
Dated the [__________].
Very truly yours,
NAVIGATION TECHNOLOGIES CORPORATION
By
------------------------------------
Duly authorized on behalf of the
Board of Directors
The undersigned:
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<PAGE>
(a) Acknowledges receipt of a copy of Section 260.141.11 of Title 10 of
the California Administrative Code;
(b) Acknowledges receipt of the foregoing option and the attachments
referenced therein and understands that all rights and liabilities with respect
to this option are set forth in the option and the Plan; and
(c) Acknowledges that as of the date of grant of this option, it sets
forth the entire understanding between the undersigned optionee and the Company
and its affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of the following agreements only: [if none, so state]
NONE
(d) OPTIONEE HAS READ AND UNDERSTANDS SECTION 11, WHICH DISCUSSES
ARBITRATION. OPTIONEE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, OPTIONEE
AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION
WITH THIS AGREEMENT TO BINDING ARBITRATION, AND THAT THIS ARBITRATION
CLAUSE CONSTITUTES A WAIVER OF OPTIONEE'S RIGHT TO A JURY TRIAL AND RELATES
TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THIS
RELATIONSHIP.
----------------------------------
Optionee
Address:
----------------------------------
----------------------------------
Attachments:
1988 Stock Option Plan
Regulation 260.141.11
Form of Exercise
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<PAGE>
EXHIBIT 10.3
NAVIGATION TECHNOLOGIES CORPORATION
1996 STOCK OPTION PLAN
(AS AMENDED AND RESTATED June 17, 1996)
1. Purposes of the Plan. The purposes of this Plan are:
--------------------
. to attract and retain the best available personnel for
positions of substantial responsibility,
. to provide additional incentive to Employees and Consultants, and
. to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Supplemental Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees as
-------------
shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to the
---------------
administration of stock option plans and the issuance of Shares thereunder
pursuant to U. S. state corporate laws, U.S. federal and state securities laws,
the Code and the applicable laws of any foreign country or jurisdiction where
Options or Stock Purchase Rights are, or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means a Committee appointed by the Board in accordance
---------
with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
------------
(g) "Company" means Navigation Technologies Corporation, a Delaware
-------
corporation.
(h) "Consultant" means any person, including an advisor, engaged by the
----------
Company or a Parent or Subsidiary to render services and who is compensated for
such services. The term "Consultant" shall not include Directors who are paid
only a director's fee by the Company or who are not compensated by the Company
for their services as Directors.
(i) "Continuous Status as an Employee or Consultant" means that the
----------------------------------------------
employment or consulting relationship with the Company, any Parent, or
Subsidiary, is not interrupted or terminated.
<PAGE>
Continuous Status as an Employee or Consultant shall not be considered
interrupted in the case of (i) any leave of absence approved by the Company or
(ii) transfers between locations of the Company or between the Company, its
Parent, any Subsidiary, or any successor. A leave of absence approved by the
Company shall include sick leave, military leave, or any other personal leave
approved by an authorized representative of the Company. For purposes of
Incentive Stock Options, no such leave may exceed ninety days, unless
reemployment upon expiration of such leave is guaranteed by statute or contract.
If reemployment upon expiration of a leave of absence approved by the Company is
not so guaranteed, on the 181st day of such leave any Incentive Stock Option
held by the Optionee shall cease to be treated as an Incentive Stock Option and
shall be treated for tax purposes as a Supplemental Stock Option.
(j) "Director" means a member of the Board.
--------
(k) "Disability" means total and permanent disability as defined in
----------
Section 22(e)(3) of the Code.
(l) "Employee" means any person, including Officers and Directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. Neither
service as a Director nor payment of a director's fee by the Company shall be
sufficient to constitute "employment" by the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(n) "Fair Market Value" means, as of any date, the value of Common Stock
-----------------
determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value shall be determined in good faith by the Administrator.
-2-
<PAGE>
(o) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(p) "Misconduct" means the commission of any act affecting employment
----------
which involves (1) dishonesty, fraud or criminal conduct by Optionee, (2)
Optionee's knowing and willful violation of a material Company written policy or
a lawful direction by an authorized executive officer or the Board, (3)
Optionee's engaging in any activity in competition with the Company or its
subsidiaries in a material manner (excluding a less than 5% investment in any
public company), or (4) Optionee's knowing unauthorized disclosure of
confidential material, proprietary information or trade secrets of the Company.
(q) "Supplemental Stock Option" means an Option not intended to qualify
-------------------------
as an Incentive Stock Option.
(r) "Notice of Grant" means a written notice evidencing certain terms and
---------------
conditions of an individual Option or Stock Purchase Right grant. The Notice of
Grant is part of the Option Agreement.
(s) "Officer" means a person who is an officer of the Company within the
-------
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(t) "Option" means a stock option granted pursuant to the Plan.
------
(u) "Option Agreement" means a written agreement between the Company and
----------------
an Optionee evidencing the terms and conditions of an individual Option grant.
The Option Agreement is subject to the terms and conditions of the Plan.
(v) "Option Exchange Program" means a program whereby outstanding options
-----------------------
are surrendered in exchange for options with a lower exercise price.
(w) "Optioned Stock" means the Common Stock subject to an Option or
--------------
Stock Purchase Right.
(x) "Optionee" means an Employee or Consultant who holds an outstanding
--------
Option or Stock Purchase Right.
(y) "Parent" means a "parent corporation", whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(z) "Plan" means this 1996 Stock Option Plan.
----
-3-
<PAGE>
(aa) "Restricted Stock" means shares of Common Stock acquired pursuant to a
----------------
grant of Stock Purchase Rights under Section 11 below.
(bb) "Restricted Stock Purchase Agreement" means a written agreement
-----------------------------------
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
(cc) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
----------
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
(dd) "Section 16(b)" means Section 16(b) of the Securities Exchange Act
-------------
of 1934, as amended.
(ee) "Share" means a share of the Common Stock, as adjusted in accordance
-----
with Section 13 of the Plan.
(ff) "Stock Purchase Right" means the right to purchase Common Stock
--------------------
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(gg) "Subsidiary" means a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is [_________] Shares. The Shares may be authorized, but
unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
--------
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, and the original purchaser of such Shares did not
receive any benefits of ownership of such Shares, such Shares shall become
available for future grant under the Plan. For purposes of the preceding
sentence, voting rights shall not be considered a benefit of Share ownership.
-4-
<PAGE>
4. Administration of the Plan.
--------------------------
(a) Procedure.
---------
(i) Multiple Administrative Bodies. If permitted by
------------------------------
Rule 16b-3, the Plan may be administered by different bodies with respect to
Directors, Officers who are not Directors, and Employees who are neither
Directors nor Officers.
(ii) Administration With Respect to Directors and Officers
-----------------------------------------------------
Subject to Section 16(b). With respect to Option or Stock Purchase Right grants
- ------------------------
made to Employees who are also Officers or Directors subject to Section 16(b) of
the Exchange Act, the Plan shall be administered by (A) the Board, if the Board
may administer the Plan in a manner complying with the rules under Rule 16b-3
relating to the disinterested administration of employee benefit plans under
which Section 16(b) exempt discretionary grants and awards of equity securities
are to be made, or (B) a committee designated by the Board to administer the
Plan, which committee shall be constituted to comply with the rules under Rule
16b-3 relating to the disinterested administration of employee benefit plans
under which Section 16(b) exempt discretionary grants and awards of equity
securities are to be made. Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of the Committee and appoint
additional members, remove members (with or without cause) and substitute new
members, fill vacancies (however caused), and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by the rules under Rule 16b-3 relating to the disinterested
administration of employee benefit plans under which Section 16(b) exempt
discretionary grants and awards of equity securities are to be made.
(iii) Administration With Respect to Other Persons. With
--------------------------------------------
respect to Option or Stock Purchase Right grants made to Employees or
Consultants who are neither Directors nor Officers of the Company, the Plan
shall be administered by (A) the Board or (B) a committee designated by the
Board, which committee shall be constituted to satisfy Applicable Laws. Once
appointed, such Committee shall serve in its designated capacity until otherwise
directed by the Board. The Board may increase the size of the Committee and
appoint additional members, remove members (with or without cause) and
substitute new members, fill vacancies (however caused), and remove all members
of the Committee and thereafter directly administer the Plan, all to the extent
permitted by Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value of the Common Stock,
in accordance with Section 2(n) of the Plan;
-5-
<PAGE>
(ii) to select the Consultants and Employees to whom Options
and Stock Purchase Rights may be granted hereunder;
(iii) to determine whether and to what extent Options and
Stock Purchase Rights or any combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options or Stock Purchase Rights may be exercised (which may be based
on performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or Stock
Purchase Right or the shares of Common Stock relating thereto, based in each
case on such factors as the Administrator, in its sole discretion, shall
determine;
(vii) to reduce the exercise price of any Option or Stock
Purchase Right to the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;
(viii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(xi) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xii) to institute an Option Exchange Program;
(xiii) to make all other determinations deemed necessary or
advisable under or for administering the Plan.
-6-
<PAGE>
(c) Effect of Administrator's Decision. The Administrator's
----------------------------------
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Supplemental Stock Options and Stock Purchase Rights may
-----------
be granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. If otherwise eligible, an Employee or Consultant who has
been granted an Option or Stock Purchase Right may be granted additional Options
or Stock Purchase Rights.
6. Limitations.
-----------
(a) Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Supplemental Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Supplemental Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted. If
an Option is granted hereunder that is part Incentive Stock Option and part
Supplemental Stock Option due to becoming first exercisable in any calendar year
in excess of $100,000, the Incentive Stock Option portion of such Option shall
become exercisable first in such calendar year, and the Supplemental Stock
Option portion shall commence becoming exercisable once the $100,000 limit has
been reached.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
employment or consulting relationship with the Company, nor shall they interfere
in any way with the Optionee's right or the Company's right to terminate such
employment or consulting relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options to
Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than 20,000,000 Shares.
(ii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 13.
(iii) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 13), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
-7-
<PAGE>
7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall
------------
become effective upon the earlier to occur of its adoption by the Board or its
approval by the shareholders of the Company as described in Section 19 of the
Plan. It shall continue in effect for a term of ten (10) years unless terminated
earlier under Section 15 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Notice
--------------
of Grant; provided, however, that in the case of an Incentive Stock Option, the
term shall be ten (10) years from the date of grant or such shorter term as may
be provided in the Notice of Grant. Moreover, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Incentive Stock Option shall be five (5) years from the date of grant or
such shorter term as may be provided in the Notice of Grant.
9. Option Exercise Price and Consideration.
---------------------------------------
(a) Exercise Price. The per share exercise price for the Shares
--------------
to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Supplemental Stock Option, the per Share
exercise price shall be determined by the Administrator.
(b) Waiting Period and Exercise Dates. At the time an Option is
---------------------------------
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised. In so doing, the Administrator may specify that an
Option may not be exercised until the completion of a service period.
(c) Form of Consideration. The Administrator shall determine the
---------------------
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
-8-
<PAGE>
(i) cash;
(ii) check;
(iii) other Shares which (A) in the case of Shares acquired
upon exercise of an option, have been owned by the Optionee for more than six
months on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(iv) delivery of a properly executed exercise notice together
with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price;
(v) a reduction in the amount of any Company liability to
the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vi) any combination of the foregoing methods of payment; or
(vii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives:
(i) written notice of exercise (in accordance with the Option Agreement) from
the person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan. Shares issued upon exercise of
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the stock
certificate evidencing such Shares is issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be issued) such
stock certificate promptly after the Option is exercised. No adjustment
-9-
<PAGE>
will be made for a dividend or other right for which the record date is prior to
the date the stock certificate is issued, except as provided in Section 13 of
the Plan.
Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Employment or Consulting Relationship. Upon
----------------------------------------------------
termination of an Optionee's Continuous Status as an Employee or Consultant, the
Optionee may exercise his or her Option ,only if and within such period of time
as is specified in the Notice of Grant and only to the extent that he or she was
entitled to exercise it on the date of termination (but in no event later than
the expiration of the term of such Option as set forth in the Notice of Grant).
To the extent that the Notice of Grant permits the Optionee to exercise his or
her Option after the termination of Optionee's Continuous Status as an Employee
or Consultant, different periods of time may be specified in the Notice of Grant
for terminations resulting from death, Disability, or any other reason specified
in the Notice of Grant. In the absence of a specified time in the Notice of
Grant, the Option shall remain exercisable for three (3) months following the
Optionee's termination. In the case of an Incentive Stock Option, such period
of time for exercise shall not exceed three (3) months from the date of
termination. If, on the date of termination, the Optionee is not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified by the
Administrator, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.
Notwithstanding the above, in the event of an Optionee's change in
status from Consultant to Employee or Employee to Consultant, the Optionee's
Continuous Status as an Employee or Consultant shall not automatically terminate
solely as a result of such change in status. In such event, an Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Supplemental Stock Option
three months and one day following such change of status.
(c) Buyout Provisions. The Administrator may at any time offer to
-----------------
buy out for a payment in cash or Shares, an Option previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
(d) Rule 16b-3. Options granted to individuals subject to Section
----------
16 of the Exchange Act ("Insiders") must comply with the applicable provisions
of Rule 16b-3 and shall contain such additional conditions or restrictions as
may be required thereunder to qualify for the maximum exemption from Section 16
of the Exchange Act with respect to Plan transactions.
-10-
<PAGE>
11. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. Stock Purchase Rights may be issued either
------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing, by means of a Notice of Grant, of the terms, conditions and
restrictions related to the offer, including the number of Shares that the
offeree shall be entitled to purchase, the price to be paid, and the time within
which the offeree must accept such offer, which shall in no event exceed six (6)
months from the date upon which the Administrator made the determination to
grant the Stock Purchase Right. The offer shall be accepted by execution of a
Restricted Stock Purchase Agreement in the form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines
-----------------
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
(c) Rule 16b-3. Stock Purchase Rights granted to Insiders, and
----------
Shares purchased by Insiders in connection with Stock Purchase Rights, shall be
subject to any restrictions applicable thereto in compliance with Rule 16b-3. An
Insider may only purchase Shares pursuant to the grant of a Stock Purchase
Right, and may only sell Shares purchased pursuant to the grant of a Stock
Purchase Right, during such time or times as are permitted by Rule 16b-3.
(d) Other Provisions. The Restricted Stock Purchase Agreement shall
----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock Purchase Agreements need not be the
same with respect to each purchaser.
(e) Rights as a Shareholder. Once the Stock Purchase Right is
-----------------------
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights. Unless
--------------------------------------------------------
otherwise specified by the Administrator in the Notice of Grant, an Option or
Stock Purchase Right may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
-11-
<PAGE>
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
------------------------------------------------------------------
Asset Sale.
- ----------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously exercised, an
Option will terminate immediately prior to the consummation of such proposed
action.
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall have the right to exercise the Option
or Stock Purchase Right as to all of the Optioned Stock, including Shares as to
which it would not otherwise be exercisable. If an Option or Stock Purchase
Right is exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Administrator shall notify the Optionee that the
Option or Stock Purchase Right shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the Option or Stock Purchase
Right shall terminate upon the expiration of such period. For the purposes of
this paragraph, the Option or Stock Purchase Right shall be considered assumed
if, following the merger
-12-
<PAGE>
or sale of assets, the option or right confers the right to purchase or receive,
for each Share of Optioned Stock subject to the Option or Stock Purchase Right
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
14. Date of Grant. The date of grant of an Option or Stock Purchase Right
-------------
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall
be provided to each Optionee within a reasonable time after the date of such
grant.
15. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
--------------------
approval of any Plan amendment to the extent necessary and desirable to comply
with Rule 16b-3 or with Section 422 of the Code (or any successor rule or
statute or other applicable law, rule or regulation, including the requirements
of any exchange or quotation system on which the Common Stock is listed or
quoted). Such shareholder approval, if required, shall be obtained in such a
manner and to such a degree as is required by the applicable law, rule or
regulation.
(c) Effect of Amendment or Termination. No amendment, alteration,
----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
16. Conditions Upon Issuance of Shares.
----------------------------------
(a) Legal Compliance. Shares shall not be issued pursuant to the
----------------
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with all relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, Applicable Laws, and the requirements of any stock
exchange or
-13-
<PAGE>
quotation system upon which the Shares may then be listed or quoted, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.
(b) Investment Representations. As a condition to the exercise of an
--------------------------
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
17. Liability of Company.
--------------------
(a) Inability to Obtain Authority. The inability of the Company to
-----------------------------
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
(b) Grants Exceeding Allotted Shares. If the Optioned Stock covered
--------------------------------
by an Option or Stock Purchase Right exceeds, as of the date of grant, the
number of Shares which may be issued under the Plan without additional
shareholder approval, such Option or Stock Purchase Right shall be void with
respect to such excess Optioned Stock, unless shareholder approval of an
amendment sufficiently increasing the number of Shares subject to the Plan is
timely obtained in accordance with Section 15(b) of the Plan.
18. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. Shareholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the manner and to the degree required under Applicable Laws and the rules of
any stock exchange upon which the Common Stock is listed.
20. Arbitration. Each stock option agreement and restricted stock
-----------
purchase agreement shall contain a provision submitting to arbitration all
claims, disputes, or controversies arising out of, relating to, or in connection
with such stock option agreement or restricted stock purchase agreement.
-14-
<PAGE>
NAVIGATION TECHNOLOGIES CORPORATION
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number
---------------------------
Date of Grant
---------------------------
Vesting Commencement Date
---------------------------
Exercise Price per Share
---------------------------
Total Number of Shares Granted
---------------------------
Total Exercise Price
---------------------------
Type of Option: Incentive Stock Option
-----
Supplemental Stock Option
-----
Term/Expiration Date: , 2006
---------------------------
Vesting Schedule:
----------------
This Option may be exercised, in whole or in part, in accordance with the
following schedule:
1/48 of the Shares subject to the Option shall vest each month after the
Vesting Commencement Date.
Termination Period:
------------------
Except as provided herein, this Option, to the extent vested, may be
exercised for three (3) months after termination of your employment or
consulting relationship. In the event that you have voluntarily terminated your
employment, this Option shall be exercisable for thirty (30) days after
<PAGE>
termination of your Continuous Status as an Employee or Consultant. In the
event of your death, this Option may be exercised for a period of eighteen (18)
months, or in the event you have a Disability, this Option may be exercised for
a period of twelve (12) months. In the event of your change in status from
Employee to Consultant or Consultant to Employee, this Option Agreement shall
remain in effect; provided, however, that three months and one day after your
status changes from an Employee to a Consultant all Incentive Stock Options will
become Supplemental Stock Options. In no event may this Option be exercised
later than the Term/Expiration Date as provided above. If you commit an act of
Misconduct, the Option shall immediately terminate as of and at the time of such
act of Misconduct, and the Shares covered by the unexercised portion of such
Option shall revert to the Plan, or if this Option has been exercised subsequent
to such Misconduct, the Company may within ninety (90) days after the Board or
the Company's chief executive officer has knowledge of the Misconduct, (i)
rescind such exercise and recover the Shares issued to you upon returning to you
the exercise price for such Shares or (ii) if you have sold the Shares, recover
from you the net proceeds from the sale of such Shares less such exercise price
and plus interest on such difference at an annual rate of the then prime rate on
commercial loans plus one percent (1%) from the exercise date to the date such
difference is paid by you to the Company .
II. AGREEMENT
---------
1. Grant of Option. The Plan Administrator of the Company hereby grants
---------------
to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee") an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan, which is incorporated herein by reference. Subject to
Section 15(c) of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Supplemental Stock Option ("SSO").
2. Exercise of Option.
------------------
(a) Right to Exercise. This Option is exercisable during its term in
-----------------
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement. In the event of
Optionee's death, Disability or other termination of Optionee's employment or
consulting relationship, the exercisability of the Option is governed by the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an
------------------
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise
-2-
<PAGE>
the Option, the number of Shares in respect of which the Option is being
exercised (the "Exercised Shares"), and such other representations and
agreements as may be required by the Company pursuant to the provisions of the
Plan. The Exercise Notice shall be signed by the Optionee and shall be
delivered in person or by certified mail to the Secretary of the Company. The
Exercise Notice shall be accompanied by payment of the aggregate Exercise Price
as to all Exercised Shares. This Option shall be deemed to be exercised upon
receipt by the Company of such fully executed Exercise Notice accompanied by
such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with all relevant provisions of law
and the requirements of any stock exchange or quotation service upon which the
Shares are then listed. Assuming such compliance, for income tax purposes the
Exercised Shares shall be considered transferred to the Optionee on the date the
Option is exercised with respect to such Exercised Shares.
3. Method of Payment. Payment of the aggregate Exercise Price shall be
-----------------
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash; or
(b) check; or
(c) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price; or
(d) surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, AND (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
4. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The
terms of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
5. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.
6. Tax Consequences. Some of the federal and state tax consequences
----------------
relating to this Option, as of the date of this Option, are set forth below.
THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE.
-3-
<PAGE>
THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.
(a) Exercising the Option.
---------------------
(i) Supplemental Stock Option. The Optionee may incur
-------------------------
regular federal income tax and state income tax liability upon exercise of a
SSO. The Optionee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the Fair
Market Value of the Exercised Shares on the date of exercise over their
aggregate Exercise Price. If the Optionee is an Employee or a former Employee,
the Company will be required to withhold from his or her compensation or collect
from Optionee and pay to the applicable taxing authorities an amount in cash
equal to a percentage of this compensation income at the time of exercise, and
may refuse to honor the exercise and refuse to deliver Shares if such
withholding amounts are not delivered at the time of exercise.
(ii) Incentive Stock Option. If this Option qualifies as an
----------------------
ISO, the Optionee will have no regular federal income tax or state income tax
liability upon its exercise, although the excess, if any, of the Fair Market
Value of the Exercised Shares on the date of exercise over their aggregate
Exercise Price will be treated as an adjustment to alternative minimum taxable
income for federal tax purposes and may subject the Optionee to alternative
minimum tax in the year of exercise. In the event that the Optionee undergoes a
change of status from Employee to Consultant, any Incentive Stock Option of the
Optionee that remains unexercised shall cease to qualify as an Incentive Stock
Option and will be treated for tax purposes as a Supplemental Stock Option on
the ninety-first (91st) day following such change of status.
(b) Disposition of Shares.
---------------------
(i) SSO. If the Optionee holds SSO Shares for at least one
---
year, any gain realized on disposition of the Shares will be treated as long-
term capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least one
---
year after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the lesser of (A) the difference
between the Fair Market Value of the Shares acquired on the date of exercise and
the aggregate Exercise Price, or (B) the difference between the sale price of
such Shares and the aggregate Exercise Price. Any additional gain will be taxed
as capital gain, short-term or long-term depending on the period that the ISO
Shares were held.
(c) Notice of Disqualifying Disposition of ISO Shares. If the
-------------------------------------------------
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
an ISO on or before the later of (i) two
-4-
<PAGE>
years after the grant date, or (ii) one year after the exercise date, the
Optionee shall immediately notify the Company in writing of such disposition.
The Optionee agrees that he or she may be subject to income tax withholding by
the Company on the compensation income recognized from such early disposition of
ISO Shares by payment in cash or out of the current earnings paid to the
Optionee.
7. Entire Agreement; Governing Law. The Plan is incorporated herein by
-------------------------------
reference. The Plan, the Notice of Grant, and this Option Agreement constitute
the entire agreement of the parties with respect to the subject matter hereof
and supersede in their entirety all prior undertakings and agreements of the
Company and Optionee with respect to the subject matter hereof, and may not be
modified adversely to the Optionee's interest except by means of a writing
signed by the Company and Optionee. This agreement is governed by Delaware law
except for that body of law pertaining to conflict of laws.
8. Arbitration. Optionee agrees that any claim, dispute or controversy
-----------
arising out of, relating to, or in connection with this stock option agreement
shall be settled by binding arbitration pursuant to the Commercial Arbitration
Rules and the Supplemental Procedures for Large, Complex Disputes of the
American Arbitration Association by one arbitrator appointed in accordance with
said rules. The arbitrator may grant injunctions or other relief in such
dispute or controversy. The decision of the arbitrator shall be final,
conclusive and binding on the parties to the arbitration. Judgment may be
entered on the award of the arbitration in any court having jurisdiction
thereof.
(a) The arbitrator shall apply Delaware law to the merits of any
dispute or claim, without reference to rules of conflicts of law. The
arbitration proceedings shall be governed by federal arbitration law, without
reference to state arbitration law.
(b) The Company and optionee shall each pay one-half of the costs and
expenses of such arbitration, and each shall separately pay its counsel fees and
expenses.
(c) Optionee understands that nothing in this Section 8 modifies
optionee's at-will status. Either optionee or the Company can terminate the
employment relationship at any time, with or without cause.
9. NO GUARANTEE OF EMPLOYMENT. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE
--------------------------
VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY
CONTINUING SERVICE AS AN EMPLOYEE OR CONSULTANT AT THE WILL OF THE COMPANY (AND
NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN
EMPLOYEE OR CONSULTANT FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND
SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
OPTIONEE'S
-5-
<PAGE>
EMPLOYMENT OR CONSULTING RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.
OPTIONEE HAS READ AND UNDERSTANDS SECTION 8, WHICH DISCUSSES
ARBITRATION. OPTIONEE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, OPTIONEE
AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH
THIS AGREEMENT TO BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE
CONSTITUTES A WAIVER OF OPTIONEE'S RIGHT TO A JURY TRIAL AND RELATES TO THE
RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THIS RELATIONSHIP.
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: NAVIGATION TECHNOLOGIES
CORPORATION
_________________________________ _________________________________
Signature By
_________________________________ _________________________________
Print Name Title
_________________________________
Residence Address
_________________________________
-6-
<PAGE>
CONSENT OF SPOUSE
-----------------
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Option Agreement. In consideration of the
Company's granting his or her spouse the right to purchase Shares as set forth
in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
_______________________________________
Spouse of Optionee
-7-
<PAGE>
EXHIBIT A
---------
NAVIGATION TECHNOLOGIES CORPORATION
EXERCISE NOTICE
Navigation Technologies Corporation
740 East Arques Avenue
Sunnyvale, California 94086-3833
Attention: Secretary
1. Exercise of Option. Effective as of today, ________________, 199__,
------------------
the undersigned ("Purchaser") hereby elects to purchase ______________ shares
(the "Shares") of the Common Stock of Navigation Technologies Corporation (the
"Company") under and pursuant to the 1996 Stock Plan (the "Plan") and the Stock
Option Agreement dated _____________, 19___ (the "Option Agreement"). The
purchase price for the Shares shall be $_____________, as required by the Option
Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
-------------------
full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that
----------------------------
Purchaser has received, read and understood the Plan and the Option Agreement
and agrees to abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance (as evidenced by the
---------------------
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the stock certificate is issued, except as provided in Section 13 of
the Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
----------------
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
-------------------------------
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all
<PAGE>
prior undertakings and agreements of the Company and Purchaser with respect to
the subject matter hereof, and may not be modified adversely to the Purchaser's
interest except by means of a writing signed by the Company and Purchaser. This
agreement is governed by Delaware law except for that body of law pertaining to
conflict of laws.
Submitted by: Accepted by:
PURCHASER: NAVIGATION TECHNOLOGIES CORPORATION
_________________________________ _________________________________
Signature By
_________________________________ _________________________________
Print Name Title
Address: Address:
- ------- -------
___________________________ 740 East Arques Avenue
___________________________ Sunnyvale, California 94086-3833
-2-
<PAGE>
NAVIGATION TECHNOLOGIES CORPORATION
1996 STOCK OPTION PLAN
NOTICE OF GRANT OF STOCK PURCHASE RIGHT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Notice of Grant.
[Grantee's Name and Address]
You have been granted the right to purchase Common Stock of the Company,
subject to the Company's Repurchase Option and your ongoing Continuous Status as
an Employee or Consultant (as described in the Plan and the attached Restricted
Stock Purchase Agreement), as follows:
Grant Number _________________________
Date of Grant _________________________
Price Per Share $________________________
Total Number of Shares Subject _________________________
to This Stock Purchase Right
Expiration Date: _________________________
YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE OR IT
WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES. By
your signature and the signature of the Company's representative below, you and
the Company agree that this Stock Purchase Right is granted under and governed
by the terms and conditions of the 1996 Stock Option Plan and the Restricted
Stock Purchase Agreement, attached hereto as Exhibit A-1, both of which are made
a part of this document. You further agree to execute the attached Restricted
Stock Purchase Agreement as a condition to purchasing any shares under this
Stock Purchase Right.
GRANTEE: NAVIGATION TECHNOLOGIES CORPORATION
_________________________________ _________________________________
Signature By
_________________________________ _________________________________
Print Name Title
<PAGE>
EXHIBIT A-1
-----------
1996 STOCK OPTION PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Restricted Stock Purchase Agreement.
WHEREAS the Purchaser named in the Notice of Grant, (the "Purchaser") is an
Employee or Consultant of the Company, and the Purchaser's continued
participation is considered by the Company to be important for the Company's
continued growth; and
WHEREAS in order to give the Purchaser an opportunity to acquire an equity
interest in the Company as an incentive for the Purchaser to participate in the
affairs of the Company, the Admin istrator has granted to the Purchaser a Stock
Purchase Right subject to the terms and conditions of the Plan and the Notice of
Grant, which are incorporated herein by reference, and pursuant to this
Restricted Stock Purchase Agreement (the "Agreement").
NOW THEREFORE, the parties agree as follows:
1. Sale of Stock. The Company hereby agrees to sell to the Purchaser and
-------------
the Purchaser hereby agrees to purchase shares of the Company's Common Stock
(the "Shares"), at the per Share purchase price and as otherwise described in
the Notice of Grant.
2. Payment of Purchase Price. The purchase price for the Shares may be
-------------------------
paid by delivery to the Company at the time of execution of this Agreement of
cash, a check, or some combination thereof.
3. Repurchase Option.
-----------------
(a) In the event the Purchaser's Continuous Status as an Employee or
Consultant terminates for any or no reason (including death or disability)
before all of the Shares are released from the Company's Repurchase Option (see
Section 4), the Company shall, upon the date of such termination (as reasonably
fixed and determined by the Company) have an irrevocable, exclusive option (the
"Repurchase Option") for a period of sixty (60) days from such date to
repurchase up to that number of shares which constitute the Unreleased Shares
(as defined in Section 4) at the original purchase price per share (the
"Repurchase Price"). The Repurchase Option shall be exercised by the Company by
delivering written notice to the Purchaser or the Purchaser's executor (with a
copy to the Escrow Holder) and, at the Company's option, (i) by delivering to
the Purchaser or the Purchaser's executor a check in the amount of the aggregate
Repurchase Price, or (ii) by cancelling an amount of the Purchaser's
indebtedness to the Company equal to the aggregate Repurchase Price, or (iii) by
a combination of (i) and (ii) so that the combined payment and cancellation of
indebtedness equals the aggregate Repurchase Price. Upon delivery of such
notice and the payment of the aggregate Repurchase Price, the Company shall
become the legal and beneficial owner of the Shares being
<PAGE>
repurchased and all rights and interests therein or relating thereto, and the
Company shall have the right to retain and transfer to its own name the number
of Shares being repurchased by the Company.
(b) Whenever the Company shall have the right to repurchase Shares
hereunder, the Company may designate and assign one or more employees, officers,
directors or shareholders of the Company or other persons or organizations to
exercise all or a part of the Company's purchase rights under this Agreement and
purchase all or a part of such Shares. If the Fair Market Value of the Shares
to be repurchased on the date of such designation or assignment (the "Repurchase
FMV") exceeds the aggregate Repurchase Price of such Shares, then each such
designee or assignee shall pay the Company cash equal to the difference between
the Repurchase FMV and the aggregate Repurchase Price of such Shares.
4. Release of Shares From Repurchase Option.
----------------------------------------
(a) _______________________ percent (______%) of the Shares shall be
released from the Company's Repurchase Option [one year] after the Date of
----------------
Grant and __________________ percent (______%) of the Shares [at the end of each
------------------
month thereafter], provided that the Purchaser's Continuous Status as an
- ----------------
Employee or Consultant has not terminated prior to the date of any such release.
(b) Any of the Shares that have not yet been released from the
Repurchase Option are referred to herein as "Unreleased Shares."
(c) The Shares that have been released from the Repurchase Option
shall be delivered to the Purchaser at the Purchaser's request (see Section 6).
5. Restriction on Transfer. Except for the escrow described in Section 6
-----------------------
or the transfer of the Shares to the Company or its assignees contemplated by
this Agreement, none of the Shares or any beneficial interest therein shall be
transferred, encumbered or otherwise disposed of in any way until such Shares
are released from the Company's Repurchase Option in accordance with the provi
sions of this Agreement, other than by will or the laws of descent and
distribution.
6. Escrow of Shares.
----------------
(a) To ensure the availability for delivery of the Purchaser's
Unreleased Shares upon repurchase by the Company pursuant to the Repurchase
Option, the Purchaser shall, upon execution of this Agreement, deliver and
deposit with an escrow holder designated by the Company (the "Escrow Holder")
the share certificates representing the Unreleased Shares, together with the
stock assignment duly endorsed in blank, attached hereto as Exhibit A-2. The
Unreleased Shares and stock assignment shall be held by the Escrow Holder,
pursuant to the Joint Escrow Instructions of the Company and Purchaser attached
hereto as Exhibit A-3, until such time as the Company's Repurchase Option
expires. As a further condition to the Company's obligations under this
Agreement, the
-3-
<PAGE>
Company may require the spouse of Purchaser, if any, to execute and deliver to
the Company the Consent of Spouse attached hereto as Exhibit A-4.
(b) The Escrow Holder shall not be liable for any act it may do or
omit to do with respect to holding the Unreleased Shares in escrow while acting
in good faith and in the exercise of its judgment.
(c) If the Company or any assignee exercises the Repurchase Option
hereunder, the Escrow Holder, upon receipt of written notice of such exercise
from the proposed transferee, shall take all steps necessary to accomplish such
transfer.
(d) When the Repurchase Option has been exercised or expires
unexercised or a portion of the Shares has been released from the Repurchase
Option, upon request the Escrow Holder shall promptly cause a new certificate to
be issued for the released Shares and shall deliver the certificate to the
Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the
rights of a shareholder with respect to the Shares while they are held in
escrow, including without limitation, the right to vote the Shares and to
receive any cash dividends declared thereon. If, from time to time during the
term of the Repurchase Option, there is (i) any stock dividend, stock split or
other change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities and other assets, including cash, to which
the Purchaser is entitled by reason of the Purchaser's ownership of the Shares
shall be immediately subject to this escrow, deposited with the Escrow Holder
and included thereafter as "Shares" for purposes of this Agreement and the
Repurchase Option.
7. Legends. The share certificate evidencing the Shares issued hereunder
-------
shall be endorsed with the following legend (in addition to any legend required
under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT
BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
8. Adjustment for Stock Split. All references to the number of Shares
--------------------------
and the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.
9. Tax Consequences. The Purchaser has reviewed with the Purchaser's own
----------------
tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contem plated by this Agreement. The Purchaser
is relying solely on such advisors and not on any statements or representations
of the Company or any of its agents. The Purchaser understands that the
-4-
<PAGE>
Purchaser (and not the Company) shall be responsible for the Purchaser's own
tax liability that may arise as a result of the transactions contemplated by
this Agreement. The Purchaser understands that Section 83 of the Internal
Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income the
difference between the purchase price for the Shares and the Fair Market Value
of the Shares as of the date any restrictions on the Shares lapse. In this
context, "restriction" includes the right of the Company to buy back the Shares
pursuant to the Repurchase Option. The Purchaser understands that the Purchaser
may elect to be taxed at the time the Shares are purchased rather than when and
as the Repurchase Option expires by filing an election under Section 83(b) of
the Code with the IRS within 30 days from the date of purchase. The form for
making this election is attached as Exhibit A-5 hereto.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION
83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE
THIS FILING ON THE PURCHASER'S BEHALF.
10. Arbitration. Purchaser agrees that any claim, dispute or controversy
-----------
arising out of, relating to, or in connection with this restricted stock
purchase agreement shall be settled by binding arbitration pursuant to the
Employment Dispute Resolution Rules of the American Arbitration Association by
one arbitrator appointed in accordance with said rules. The arbitrator may
grant injunctions or other relief in such dispute or controversy. The decision
of the arbitrator shall be final, conclusive and binding on the parties to the
arbitration. Judgment may be entered on the award of the arbitration in any
court having jurisdiction thereof.
(a) The arbitrator shall apply Delaware law to the merits of any
dispute or claim, without reference to rules of conflicts of law. The
arbitration proceedings shall be governed by federal arbitration law, without
reference to state arbitration law.
(b) The Company and Purchaser shall each pay one-half of the costs
and expenses of such arbitration, and each shall separately pay its counsel fees
and expenses.
(c) Purchaser understands that nothing in this Section 10 modifies
Purchaser's at-will status. Either Purchaser or the Company can terminate the
employment relationship at any time, with or without cause.
11. General Provisions.
------------------
(a) This Agreement shall be governed by the laws of the State of
Delaware. This Agreement, subject to the terms and conditions of the Plan and
the Notice of Grant, represents the entire agreement between the parties with
respect to the purchase of the Shares by the Purchaser. Subject to Section 15(c)
of the Plan, in the event of a conflict between the terms and conditions of the
Plan and the terms and conditions of this Agreement, the terms and conditions of
the Plan shall
-5-
<PAGE>
prevail. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Agreement.
(b) Any notice, demand or request required or permitted to be given
by either the Company or the Purchaser pursuant to the terms of this Agreement
shall be in writing and shall be deemed given when delivered personally, by
facsimile, or three (3) days after deposited in the U.S. mail, First Class with
postage prepaid, and addressed to the parties at the addresses of the parties
set forth at the end of this Agreement or such other address as a party may
request by notifying the other in writing.
Any notice to the Escrow Holder shall be sent to the Company's address
with a copy to the other party hereto.
(c) The rights of the Company under this Agreement shall be
transferable to any one or more persons or entities, and all covenants and
agreements hereunder shall inure to the benefit of, and be enforceable by the
Company's successors and assigns. The rights and obligations of the Purchaser
under this Agreement may only be assigned with the prior written consent of the
Company.
(d) Either party's failure to enforce any provision of this Agreement
shall not in any way be construed as a waiver of any such provision, nor prevent
that party from thereafter enforcing any other provision of this Agreement. The
rights granted both parties hereunder are cumulative and shall not constitute a
waiver of either party's right to assert any other legal remedy available to it.
(e) The Purchaser agrees upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES
PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE
OR CONSULTANT AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED
OR PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT
THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE
SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS AN EMPLOYEE OR CONSULTANT FOR THE VESTING PERIOD, FOR ANY PERIOD,
OR AT ALL, AND SHALL NOT INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT
TO TERMINATE PURCHASER'S EMPLOYMENT OR CONSULTING RELATIONSHIP AT ANY TIME, WITH
OR WITHOUT CAUSE.
-6-
<PAGE>
PURCHASER HAS READ AND UNDERSTANDS SECTION 10, WHICH DISCUSSES ARBITRATION.
PURCHASER UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, PURCHASER AGREES TO SUBMIT
ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT TO
BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF
PURCHASER'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES
RELATING TO ALL ASPECTS OF THIS RELATIONSHIP.
By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, and hereby accepts this
Agreement subject to all of the terms and provisions thereof. Purchaser has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of this Agreement. Purchaser agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Agreement.
Purchaser further agrees to notify the Company upon any change in the residence
indicated in the Notice of Grant.
DATED: _________________________
PURCHASER: NAVIGATION TECHNOLOGIES CORPORATION
_________________________________ _________________________________
Signature By
_________________________________ _________________________________
Print Name Title
-7-
<PAGE>
EXHIBIT A-2
-----------
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, __________________________, hereby sell, assign and
transfer unto
________________________________________________________________________________
________________ (__________) shares of the Common Stock of Navigation
Technologies Corporation standing in my name of the books of said corporation
represented by Certificate No. _____ herewith and do hereby irrevocably
constitute and appoint _____________________________________________ to transfer
the said stock on the books of the within named corporation with full power of
substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement (the "Agreement") between________________________ and
the undersigned dated ______________, 19__.
Dated: _______________, 19__
Signature:______________________________
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise the
Repurchase Option, as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE>
EXHIBIT A-3
-----------
JOINT ESCROW INSTRUCTIONS
-------------------------
_____________, 19__
Corporate Secretary
Navigation Technologies Corporation
740 East Arques Avenue
Sunnyvale, California 94086-3833
Dear _________________:
As Escrow Agent for both Navigation Technologies Corporation, a Delaware
corporation (the "Company"), and the undersigned purchaser of stock of the
Company (the "Purchaser"), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Restricted
Stock Purchase Agreement ("Agreement") between the Company and the undersigned,
in accordance with the following instructions:
1. In the event the Company and/or any assignee of the Company
(referred to collectively as the "Company") exercises the Company's Repurchase
Option set forth in the Agreement, the Company shall give to Purchaser and you a
written notice specifying the number of shares of stock to be purchased, the
purchase price, and the time for a closing hereunder at the principal office of
the Company. Purchaser and the Company hereby irrevocably authorize and direct
you to close the transaction contemplated by such notice in accordance with the
terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
check, notice of cancellation of Purchaser's indebtedness to the Company, or
some combination thereof) for the number of shares of stock being purchased
pursuant to the exercise of the Company's Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a shareholder of the Company while the
stock is held by you.
<PAGE>
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's Repurchase Option has been exercised, you
shall deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's Repurchase Option.
Within 90 days after cessation of Purchaser's continuous employment by or
services to the Company, or any parent or subsidiary of the Company, you shall
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's Repurchase
Option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties.
You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in
good faith, and any act done or omitted by you pursuant to the advice of your
own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In case you obey or comply with any such order, judgment or decree, you shall
not be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
-2-
<PAGE>
12. In the event that there is no Escrow Agent, due to his or her
resignation or any other reason, the Company shall appoint a successor Escrow
Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
days' advance written notice to each of the other parties hereto.
COMPANY: Navigation Technologies Corporation
740 East Arques Avenue
Sunnyvale, California 94086-3833
PURCHASER:
--------------------------------
--------------------------------
--------------------------------
ESCROW AGENT: Corporate Secretary
Navigation Technologies Corporation
740 East Arques Avenue
Sunnyvale, California 94086-3833
16. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
-3-
<PAGE>
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware.
Very truly yours,
NAVIGATION TECHNOLOGIES CORPORATION
_____________________________________
By
_____________________________________
Title
PURCHASER:
____________________________________________
Signature
____________________________________________
Typed or Printed Name
ESCROW AGENT:
_____________________________________
Corporate Secretary
-4-
<PAGE>
EXHIBIT A-4
-----------
CONSENT OF SPOUSE
-----------------
I, ____________________, spouse of ___________________, have read and
approve the foregoing Restricted Stock Purchase Agreement (the "Agreement"). In
consideration of the Company's grant to my spouse of the right to purchase
shares of Navigation Technologies Corporation, as set forth in the Agreement, I
hereby appoint my spouse as my attorney-in-fact in respect to the exercise of
any rights under the Agreement and agree to be bound by the provisions of the
Agreement insofar as I may have any rights in said Agreement or any shares
issued pursuant thereto under the community property laws or similar laws
relating to marital property in effect in the state of our residence as of the
date of the signing of the foregoing Agreement.
Dated: _______________, 19____
__________________________________________
Signature of Spouse
<PAGE>
EXHIBIT A-5
-----------
ELECTION UNDER SECTION 83(b)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include in taxpayer's gross income
for the current taxable year the amount of any compensation taxable to taxpayer
in connection with his or her receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME: TAXPAYER: SPOUSE:
ADDRESS:
IDENTIFICATION NO.: TAXPAYER: SPOUSE:
TAXABLE YEAR:
2. The property with respect to which the election is made is described as
follows: __________ shares (the "Shares") of the Common Stock of Navigation
Technologies Corporation (the "Company").
3. The date on which the property was transferred is: ______________, 19__.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, upon certain
events. This right lapses with regard to a portion of the Shares based on
the continued performance of services by the taxpayer over time.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is:
$_______________.
6. The amount (if any) paid for such property is:
$_______________.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
- --------------------------------------------------------------------------
except with the consent of the Commissioner.
- -------------------------------------------
Dated: ___________________, 19____ _______________________________________
Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: ___________________, 19____ _______________________________________
Spouse of Taxpayer
<PAGE>
Exhibit 10.4
NAVIGATION TECHNOLOGIES CORPORATION
1996 STOCK OPTION PLAN FOR NETHERLANDS EMPLOYEES
1. Purposes of the Plan. The purposes of this 1996 Stock Option Plan for
--------------------
Netherlands Employees are to attract and retain the best available personnel for
positions of substantial responsibility, to provide additional incentive to
Netherlands Employees of its Subsidiary and to promote the success of the
Company's business and the business of its Netherlands Subsidiary. Options
granted under the Plan shall be Supplemental Stock Options.
This Plan is a sub-plan created under and pursuant to the U. S. Plan,
and which provides that Netherlands employees may benefit under this Plan.
Options shall be granted under the Plan at the discretion of the Administrator
and as reflected in terms of written option agreements, and are intended to
qualify for preferred treatment under Netherlands tax laws. The terms defined
in this Plan shall have the same defined meanings as in the U.S. Plan unless
otherwise specifically defined herein.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees appointed
-------------
pursuant to Section 4 of the Plan.
(b) "Affiliate" means any corporation or any other entity (including,
---------
but not limited to, partnerships and joint ventures) controlling, controlled by
or under common control with the Company.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Committee" means a Committee appointed by the Board of Directors
---------
in accordance with Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
------------
(f) "Company" means Navigation Technologies Corporation, a Delaware
-------
corporation.
(g) "Employee" means any person, including members of the Management
--------
and Supervising Boards, or entity employed by the Company or any Subsidiary.
(h) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) if the Common Stock is listed on any established stock
exchange or a national market system, its Fair Market Value shall be the closing
sales price for such shares (or the closing bid, if no sales were reported for
the last trading day prior to the time of determination); or
<PAGE>
(ii) in the absence of an established market for the Common
Stock, the value thereof shall be determined in good faith by the Administrator.
(i) "Misconduct" means the commission of any act that is inimical,
----------
contrary, or harmful to the interests of the Company (or any Affiliate),
including but not limited to (1) conduct related to employment for which either
criminal or civil penalties may be sought, (2) willful violation of the
Company's written policies, (3) engaging in any activity that is in competition
with the Company (or any Affiliate), (4) unauthorized disclosure of confidential
information or trade secrets of the Company (or any Affiliate), or (5) any
behavior that may lead to the termination of the employment agreement between
the Company (or any Affiliate) and the employee pursuant to Articles 7A:1639P
and 1639W of the Netherlands Civil Code.
(j) "Notice of Grant" means a written notice evidencing certain terms
---------------
and conditions of an individual Option grant. The Notice of Grant is part of
the Option Agreement.
(k) "Option" means a stock option granted pursuant to the Plan.
------
(l) "Option Agreement" means a written agreement between the Company
----------------
and an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the Plan.
(m) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(n) "Optionee" means an Employee who receives an Option, or any person
--------
to whom such an Option is transferred.
(o) "Plan" means this 1996 Stock Option Plan.
----
(p) "Purchaser" means an Optionee who has exercised an Option and
---------
acquired Shares thereby.
(q) "Right" means an Option granted under the Plan.
-----
(r) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 11 below.
(s) "Subsidiary" means any corporation where at least fifty percent
----------
(50%) of the voting stock of such corporation is owned directly or indirectly by
the Company.
(t) "Supplemental Stock Option" means an Option not intended to
-------------------------
qualify as an incentive stock option under Section 422 of the Internal Revenue
Code.
-2-
<PAGE>
(u) "U. S. Plan" means the Navigation Technologies Corporation 1996
----------
Stock Option Plan, as amended.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 5,000,000 Shares, less the number of Shares issued under the
U.S. Plan and any other subplans promulgated thereunder. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated).
4. Administration of the Plan. The Plan shall be administered by the
--------------------------
Board or a Committee appointed by the Board, which Committee shall be
constituted to satisfy the legal requirements, if any, relating to the
administration of stock option plans (the "Applicable Law"). Once appointed,
such Committee shall serve in its designated capacity until otherwise directed
by the Board. The Board may increase the size of the Committee and appoint
additional members, remove members (with or without cause) and substitute new
members, fill vacancies (however caused), and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by Applicable Law.
(a) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(i) of the Plan;
(ii) to select the Employees to whom Options may from time to
time be granted hereunder;
(iii) to determine whether and to what extent Options are granted
hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder. Such terms and conditions
may include, but are not limited to, the exercise price, and any restriction or
limitation regarding any Shares relating to the option, based in each case on
such factors as the Administrator, in its sole discretion, shall determine;
(vii) to prescribe, amend and rescind rules and regulations
relating to the Plan;
-3-
<PAGE>
(viii) to make such determinations and adopt such procedures as the
Administrator deems appropriate with respect to Plan participation by Employees
including determinations relating to conversions to and from currencies other
than the U.S. dollar; and
(ix) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
(b) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
Optionees.
5. Eligibility.
-----------
(a) Options may be granted to Employees. An Employee who has been
granted an Option may, if otherwise eligible, be granted additional Options.
(b) The Plan shall not confer upon any Optionee any right with respect
to the continuation of the Optionee's employment relationship with the Company,
nor shall it interfere in any way with the Company's right to terminate the
Optionee's employment relationship at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon its adoption by
------------
the Board of Directors. It shall continue in effect until the termination of
the U.S. Plan, unless terminated earlier under Section 14 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
--------------
the Notice of Grant; provided, however, that the maximum term of an Option shall
not exceed five (5) years from the date of grant.
8. Option Exercise Price. The per share exercise price for the Shares to
---------------------
be issued pursuant to exercise of an Option shall be such price as is determined
by the Board; provided, however, that in no event shall such price be less than
one hundred percent (100%) of Fair Market Value on the date the Option is
granted.
9. Form of Consideration. The Administrator shall determine the
---------------------
acceptable form of consideration for exercising an Option, including the method
of payment in accordance with Netherlands law. The Administrator shall require
the Optionee to pay at least the nominal value of the Shares. The Administrator
shall only accept the consideration offered by the Optionee if the Administrator
determines that such consideration may be reasonably expected to benefit the
Company. Unless otherwise determined by the Administrator, all amounts shall be
denominated in U.S. Dollars. Such consideration may consist of:
(i) cash or check;
-4-
<PAGE>
(ii) wire transfer;
(iii) other Shares which (x) in the case of Shares acquired upon
exercise of an Option, have been owned by the Optionee for more than six months
on the date of surrender, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which such
Option shall be exercised;
(iv) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and a broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of an
amount of the sale or loan proceeds required to pay the exercise price;
(v) any other form of consideration permitted under Applicable Law;
or
(vi) any combination of the foregoing methods of payment.
10. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable as set forth under the Option Agreement,
and as shall be permissible under the terms of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Until the issuance (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company) of the
stock certificate evidencing such Shares, no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Company shall issue (or
cause to be issued) such stock certificate promptly upon exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment Relationship. Upon termination of an
--------------------------------------
Optionee's status as an Employee, the Optionee may exercise his or her Option,
only if and within such period of time as may be specified in the Notice of
Grant, and only to the extent that the Optionee was entitled to exercise it at
the date of termination (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant). To the extent that the
Notice of Grant permits the Optionee to exercise his or her Option after the
-5-
<PAGE>
termination of Optionee's employment relationship, different periods of time may
be specified in the Notice of Grant for terminations resulting from death,
Disability or any other reason specified in the Notice of Grant. If, on the date
of termination, the Optionee is not entitled to exercise the Optionee's entire
Option, the Shares covered by the unexercisable portion of the Option shall
revert to the Plan. If, after termination, the Optionee does not exercise his
or her Option within the time, if any, specified by the Administrator, the
Option shall terminate, and the Shares covered by such Option shall revert to
the Plan.
(c) Disability of Optionee. In the event that an Optionee's status as
----------------------
an Employee terminates as a result of the Optionee's total and permanent
disability (as defined under Applicable Laws), the Optionee may exercise his or
her Option at any time within twelve (12) months (or such other period of time
as determined by the Administrator) from the date of such termination, and in no
event later than the expiration of the term of such Option as set forth in the
Option Agreement. If, after termination, the Optionee does not exercise his or
her Option within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee while
-----------------
an Employee, the Option may be exercised at any time within eighteen (18) months
(or such other period of time as determined by the Administrator) following the
date of death by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance. If, after death, the Optionee's
estate or a person who acquired the right to exercise the Option by bequest or
inheritance does not exercise the Option within the time specified herein, the
Option shall terminate, and the Shares covered by such Option shall immediately
revert to the Plan.
(e) Misconduct by Optionee. In the event the Optionee's status as an
----------------------
Employee terminates as a result of the Optionee's Misconduct, the Options shall
terminate immediately.
(f) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
11. Non-transferability of Options. Options may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
12. Adjustments Upon Changes in Capitalization or Merger.
----------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such out standing Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares
-6-
<PAGE>
of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
--------------------------
or liquidation of the Company, the Administrator shall notify each Optionee as
soon as practicable prior to the effective date of such proposed transaction. In
addition, the Administrator may provide that any Company repurchase option
applicable to any Shares purchased upon exercise of an Option shall lapse as to
all such Shares, provided the proposed dissolution or liquidation takes place at
the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option will terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company with or
--------------------
into another corporation, or the sale of substantially all of the assets of the
Company, each outstanding Option shall be assumed or an equivalent option
substituted by the successor corporation or a parent or subsidiary of the
successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Option, the Optionee shall have the right to
exercise the Option as to all of the Optioned Stock. If an Option is
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Administrator shall notify the Optionee that the Option
shall be fully exercisable for a period of fifteen (15) days from the date of
such notice, and the Option shall terminate upon the expiration of such period.
For the purposes of this paragraph, the Option shall be considered assumed if,
following the merger or sale of assets, the option confers the right to purchase
or receive, for each Share of Optioned Stock subject to the Option immediately
prior to the merger or sale of assets, the consideration (whether stock, cash,
or other securities or property) received in the merger or sale of assets by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets was not solely common stock of the successor corporation or its parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option, for each
Share of Optioned Stock subject to the Option, to be solely common stock of the
successor corporation or its parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
13. Time of Granting Options. The date of grant of an Option shall be the
------------------------
date determined by the Administrator.
14. Amendment and Termination of the Plan. The Board may at any time
-------------------------------------
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be
-7-
<PAGE>
made which would materially impair the rights of any Optionee under any grant
theretofore made, without his or her written consent.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with
Applicable Law, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by Applicable Law.
16. Reservation of Shares. The Company, during the term of this Plan,
---------------------
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
17. Agreements. Options shall be evidenced by written agreements in such
----------
form as the Administrator shall approve from time to time.
18. Arbitration. Each stock option agreement shall contain a provision
-----------
submitting all claims, disputes, or controversies arising out of, relating to,
or in connection with such stock option agreement to arbitration.
-8-
<PAGE>
NAVIGATION TECHNOLOGIES CORPORATION
1996 STOCK OPTION PLAN FOR NETHERLANDS EMPLOYEES
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
[Optionee's Name and Address]
- -----------------------------
- ---------------
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number
---------------------------------
Date of Grant
---------------------------------
Exercise Price per Share US $
---------------------------------
Total Number of Shares Granted
---------------------------------
Total Exercise Price
---------------------------------
Term/Expiration Date: Five Years from the Date of Grant
---------------------------------
Option Exercise:
---------------
This Option is exercisable immediately, in whole or in part, provided that
Optionee must enter into a Restricted Stock Purchase Agreement with respect to
the Shares exercised.
Termination Period:
------------------
Except as provided herein, this Option may be exercised for three (3)
months after termination of your employment relationship. In the event that you
have voluntarily terminated your employment, this Option shall be exercisable
for thirty (30) days after such termination. In the event of your death, this
Option may be exercised for a period of eighteen (18) months, or in the event
you become disabled, this Option may be exercised for a period of twelve (12)
months. In the event of your change in status from Employee to
<PAGE>
Consultant, this Option Agreement shall remain in effect. In no event may this
Option be exercised later than the Term/Expiration Date as provided above. If
you commit an act of Misconduct, the Option shall immediately terminate as of
and at the time of such act of Misconduct, and the Shares covered by the
unexercised portion of such Option shall revert to the Plan, or if this Option
has been exercised subsequent to such Misconduct, the Company may within ninety
(90) days after the Board or the Company's chief executive officer has knowledge
of the Misconduct, (i) rescind such exercise and recover the Shares issued to
you upon returning to you the exercise price for such Shares or (ii) if you have
sold the Shares, recover from you the net proceeds from the sale of such Shares
less such exercise price and plus interest on such difference at an annual rate
of the then prime rate on commercial loans plus one percent (1%) from the
exercise date to the date such difference is paid by you to the Company.
II. AGREEMENT
---------
1. Grant of Option. Navigation Technologies Corporation (the "Company"),
---------------
hereby grants to the Optionee named in the Notice of Grant (the "Optionee"), an
option (the "Option") to purchase the total number of Shares set forth in the
Notice of Grant, at the exercise price per share set forth in the Notice of
Grant (the "Exercise Price") subject to the terms and conditions of the 1996
Stock Option Plan for Netherlands Employees (the "Plan"), which is incorporated
herein by reference. Unless otherwise defined herein, the terms defined in the
Plan shall have the same defined meanings in this Option Agreement. Subject to
Section 14 of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail.
2. Exercise of Option.
------------------
(1) Right to Exercise. This Option shall be exercisable during its term
-----------------
in accordance with the Notice of Grant and with the applicable provisions of the
Plan and this Option Agreement. In the event of Optionee's death, total and
permanent disability or other termination of the employment relationship, this
Option shall be exercisable in accordance with the applicable provisions of the
Plan and this Option Agreement.
(2) As a condition to exercising this Option, the Optionee shall execute
the Restricted Stock Purchase Agreement (attached hereto as Exhibit B-1).
(3) Method of Exercise. This Option shall be exercisable by written
------------------
notice (in the form attached as Exhibit A) which shall state the election to
exercise the Option, the number of Shares in respect of which the Option is
being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as may be
required by the Company pursuant to the provisions of the Plan. Such written
notice shall be signed by the Optionee and, together with an executed copy of
the Restricted Stock Purchase Agreement, shall be delivered in person or by
certified mail to the Board or to a person designated by the Board. The written
notice and Restricted Stock Purchase Agreement shall be accompanied by payment
of the Exercise Price. This
<PAGE>
Option shall be deemed to be exercised upon receipt by the Company of such
written notice and Restricted Stock Purchase Agreement accompanied by the
Exercise Price.
Until the stock certificate evidencing such Shares is issued (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Company shall issue to
the Optionee (or cause to be issued) a stock certificate evidencing such Shares
promptly after the Option is exercised and after full payment, as indicated
above, is received by the Company. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 12 of the Plan.
No Shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of law
and the requirements of any national market system or stock exchange upon which
the Shares may then be listed. Assuming such compliance, for income tax
purposes the Shares shall be considered transferred to the Optionee on the date
on which the Option is exercised with respect to such Shares.
3. Method of Payment. Unless otherwise determined by the Administrator,
-----------------
payments shall be denominated in U.S. Dollars. Payment of the Exercise Price
shall be by any of the following, or a combination thereof, at the election of
the Optionee:
(1) cash or check;
(2) wire transfer;
(3) surrender of other shares of Common Stock of the Company which (A)
in the case of Shares acquired pursuant to the exercise of a Company option,
have been owned by the Optionee for more than six (6) months on the date of
surrender, and (B) have a Fair Market Value on the date of surrender equal to
the Exercise Price of the Shares as to which the Option is being exercised; or
(4) delivery of a properly executed exercise notice together with such
other documentation as the Administrator and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale or loan proceeds required to pay the Exercise Price.
4. Lock-Up Period. Optionee hereby agrees that if so requested by the
--------------
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act of 1933, as amended (the "Securities Act"),
Optionee shall not sell or otherwise transfer any Shares or other securities of
the Company during the 180-day period (or such longer period as may be requested
in writing by the Managing Underwriter and agreed to in writing by the Company)
(the "Market Standoff Period") following the effective date of a registration
statement of the Company filed under the Securities Act; provided, however, that
such restriction shall apply only to the first registration statement of the
<PAGE>
Company to become effective under the Securities Act that includes securities to
be sold on behalf of the Company to the public in an underwritten public
offering under the Securities Act. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such Market Standoff Period.
5. Restrictions on Exercise. This Option may not be exercised if the
------------------------
issuance of such Shares upon such exercise or the method of payment of
consideration for such Shares would constitute a violation of any applicable
National or EC securities law or any other laws or regulations.
Optionee acknowledges and understands that the Shares constitute
"restricted securities" under the Securities Act and have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Optionee's
investment intent as expressed herein. In this connection, Optionee understands
that, in the view of the Securities and Exchange Commission, the statutory basis
for such exemption may be unavailable if Optionee's representation was
predicated solely upon a present intention to hold these Securities for the
minimum capital gains period specified under tax statutes, for a deferred sale,
for or until an increase or decrease in the market price of the Securities, or
for a period of one year or any other fixed period in the future. Optionee
further understands that the Securities must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available. Optionee further acknowledges and understands that
the Company is under no obligation to register the Securities. Optionee
understands that the certificate evidencing the Securities will be imprinted
with a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel
satisfactory to the Company, and any other legend required under applicable
state securities laws.
6. Termination of Relationship. In the event that Optionee's status as an
---------------------------
Employee terminates, Optionee may, to the extent otherwise so entitled at the
date of such termination (the "Termination Date"), exercise this Option during
the Termination Period set out in the Notice of Grant. To the extent that
Optionee was not entitled to exercise this Option at the date of such
termination, or if Optionee does not exercise this Option within the time
specified herein, the Option shall terminate.
7. Non-Transferability of Option. This Option may not be sold, pledged,
-----------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent and may be exercised during the lifetime of
Optionee only by Optionee. The terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.
8. Repurchase Option. The Restricted Stock Purchase Agreement shall contain
-----------------
the Company's repurchase option. One-forty-eighth (1/48) of the shares shall be
released from the repurchase option on August 1, 1996 and one-forty-eighth
(1/48) of the shares shall be released from the repurchase option monthly
thereafter, so long as the Optionee remains employed by the Company or one of
its Subsidiaries.
<PAGE>
9. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.
10. Tax Consequences. THE COMPANY MAKES NO REPRESENTATIONS OF ANY KIND
----------------
REGARDING THE TAXATION OF THIS OPTION AND THE SHARES PURCHASED HEREUNDER.
OPTIONEE IS STRONGLY ENCOURAGED TO CONSULT THEIR PERSONAL TAX ADVISER REGARDING
THE APPROPRIATE TAX TREATMENT OF THIS OPTION AND THE SHARES PURCHASED HEREUNDER.
OPTIONEE ACKNOWLEDGES THAT OPTIONEE IS NOT RELYING ON THE COMPANY FOR ANY TAX
ADVICE.
11. Entire Agreement; Governing Law. The Plan is incorporated herein by
-------------------------------
reference. The Plan and this Notice of Grant and Option Agreement constitute
the entire agreement of the parties with respect to the subject matter hereof
and supersede in their entirety all prior undertakings and agreements of the
Company and Optionee with respect to the subject matter hereof, and may not be
modified adversely to the Optionee's interest except by means of a writing
signed by the Company and Optionee. This agreement is governed by the laws of
the State of Delaware and the United States of America. Should any provision of
this Agreement be determined by a court of law to be illegal or unenforceable,
the other provisions shall nevertheless remain effective and shall remain
enforceable.
12. Arbitration. Optionee agrees that any claim, dispute or controversy
-----------
arising out of, relating to, or in connection with this Option Agreement shall
be settled by binding arbitration pursuant to the rules of arbitration of the
Netherlands Arbitration Institute (Nederlands Arbitrage Instituut). The
decision of the arbitrator shall be final, conclusive and binding on the parties
to the arbitration. The arbitration tribunal shall be composed of one arbitrator
and the arbitration shall take place in Amsterdam. All arbitration procedures
shall be conducted in the English language. Consolidation of the arbitration
proceedings with other arbitration proceedings in The Netherlands, as provided
in Article 1046 of The Netherlands Code of Civil Procedure, is excluded.
The Company and optionee shall each pay one-half of the costs and
expenses of such arbitration, and each shall separately pay its counsel fees and
expenses.
OPTIONEE ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREUNDER DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF
CONTINUED ENGAGEMENT AS AN EMPLOYEE, FOR ANY PERIOD, AND SHALL NOT INTERFERE
WITH THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S EMPLOYMENT RELATIONSHIP AT ANY
TIME, WITH OR WITHOUT CAUSE. OPTIONS UNDER THE PLAN ARE GRANTED IN A
DISCRETIONARY FASHION, AND THE GRANT OF ONE OR MORE OPTIONS UNDER THE PLAN SHALL
NOT GIVE RISE TO A RIGHT IN ANY EMPLOYEE TO RECEIVE ADDITIONAL OPTION GRANTS IN
THE FUTURE. FURTHER, THE BOARD RETAINS THE RIGHT, IN ITS SOLE DISCRETION, TO
TERMINATE THE PLAN FOR ANY REASON, OR NO REASON, AT ANY TIME.
<PAGE>
OPTIONEE HAS READ AND UNDERSTANDS SECTION 12, WHICH DISCUSSES ARBITRATION.
OPTIONEE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, OPTIONEE AGREES TO SUBMIT
ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT TO
BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF
OPTIONEE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES
RELATING TO ALL ASPECTS OF THIS RELATIONSHIP.
Optionee acknowledges receipt of a copy of the Plan and represents that
Optionee is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Optionee further agrees to notify the Company upon any change in the residence
address indicated below.
OPTIONEE: NAVIGATION TECHNOLOGIES
CORPORATION
- ----------------------------- -------------------------------
Signature By
- ----------------------------- -------------------------------
Print Name Title
- -----------------------------
Address
- -----------------------------
<PAGE>
EXHIBIT A
---------
1996 STOCK OPTION PLAN FOR NETHERLANDS EMPLOYEES
EXERCISE NOTICE
Navigation Technologies Corporation
c/o European Geographic Technologies BV
de Waal 15
5684 PH Best
The Netherlands
1. Exercise of Option. Effective as of today, ___________, 19__, the
------------------
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of Navigation Technologies
Corporation (the "Company") under and pursuant to the 1996 Stock Option Plan for
Netherlands Employees (the "Plan"), and the Stock Option Agreement dated
________, 19___ (the "Option Agreement").
2. Delivery of Payment. Optionee herewith delivers to the Company the full
-------------------
purchase price for the Shares.
3. Representations of Optionee. Optionee acknowledges that Optionee has
---------------------------
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the stock certificate evidencing such
---------------------
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized agent of the Company), no right to vote or
receive dividends or any other rights as a shareholder shall exist with respect
to the Optioned Stock, notwithstanding the exercise of the Option. The Company
shall cause the Shares to be issued promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 12 of the Plan.
Optionee shall enjoy rights as a shareholder until such time as Optionee
disposes of the Shares or the Company exercises its Repurchase Option. Upon
such exercise, Optionee shall have no further rights as a holder of the Shares
so purchased except the right to receive payment for the Shares so purchased in
accordance with the provisions of this Agreement, and Optionee shall forthwith
cause the Shares so purchased to be transferred to the Company.
5. Tax Consultation. Optionee understands that Optionee may suffer adverse
----------------
tax consequences as a result of Optionee's purchase or disposition of the
Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
<PAGE>
6. Interpretation. Any dispute regarding the interpretation of this
--------------
Agreement shall be submitted by Optionee or by the Company forthwith to the
Board, which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Board or committee shall be final and
binding on the Company and on Optionee.
7. Governing Law; Severability. This Agreement shall be governed by and
---------------------------
construed in accordance with the laws of Delaware and the United States of
America excluding that body of law pertaining to conflicts of law. Should any
provision of this Agreement be determined by a court of law to be illegal or
unenforceable, the other provisions shall nevertheless remain effective and
shall remain enforceable.
8. Restrictive Legend.
------------------
(a) Legend. Optionee understands and agrees that the Company shall
------
cause the legend set forth below or legend substantially equivalent thereto, to
be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by the Company or by applicable
securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY COUNSEL
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
9. Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the mail by registered mail, with postage and fees prepaid, addressed
to the other party at its address as shown below beneath its signature, or to
such other address as such party may designate in writing from time to time to
the other party.
10. Further Instruments. The parties agree to execute such further
-------------------
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
11. Entire Agreement. The Plan, the Notice of Grant and the Option
----------------
Agreement are incorporated herein by reference. This Agreement, the Plan, the
Restricted Stock Purchase Agreement and the Option Agreement constitute the
entire agreement of the parties with respect to the subject matter
<PAGE>
hereof and supersede in their entirety all prior undertakings and agreements of
the Company and Purchaser with respect to the subject matter hereof, and may not
be modified adversely to the Purchaser's interest except by means of a writing
signed by the Company and Purchaser.
Submitted by: Accepted by:
OPTIONEE: NAVIGATION TECHNOLOGIES CORPORATION
__________________________ _________________________
Signature By
__________________________ _________________________
Print Name Title
__________________________ _________________________
Address Date
__________________________
<PAGE>
EXHIBIT B-1
-----------
1996 STOCK OPTION PLAN FOR NETHERLANDS EMPLOYEES
RESTRICTED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made between ____________________________________ (the
"Purchaser") and Navigation Technologies Corporation (the "Company") as of
__________________, 199__.
RECITALS
--------
(1) Pursuant to the exercise of the stock option (grant number ____)
granted to Purchaser under the Company's 1996 Stock Option Plan for Netherlands
Employees and pursuant to the Stock Option Agreement (the "Option Agreement")
dated ___________ by and between the Company and Pur chaser with respect to such
grant, which Option Agreement is hereby incorporated by reference, Purchaser has
elected to purchase _________ of the shares subject to such Option Agreement.
(2) As required by the Option Agreement, as a condition to Purchaser's
election to exercise the option, Purchaser must execute this Restricted Stock
Purchase Agreement, which sets forth the rights and obligations of the parties
with respect to Shares acquired upon exercise of the Option.
1. Repurchase Option.
-----------------
(a) If Purchaser's employment relationship with the Company is
terminated for any reason, including death and disability, the Company shall
have the right and option to purchase from Purchaser, or Purchaser's personal
representative, as the case may be, all of the Purchaser's Shares that are
subject to the Company's right of repurchase as of the date of such termination
(as stated in the Exercise Schedule of the Notice of Grant in the Option
Agreement) at the price paid by the Purchaser for such Shares (the "Repurchase
Option").
(b) Upon the occurrence of a termination, the Company may exercise its
Repurchase Option by delivering personally or by mail, to Purchaser or his
transferee or legal representative, as the case may be, (with a copy to the
Escrow Holder, as defined in Section 2), within ninety (90) days of the
termination, written notice of the exercise of the Repurchase Option and payment
of the aggregate purchase price. Upon delivery of such notice and payment, the
Company shall become the legal and beneficial owner of the Shares being
repurchased and all rights and interests therein or relating thereto, and the
Company shall have the right to retain and transfer to its own name the number
of Shares being repurchased by the Company.
(c) At its discretion, the Company may elect to make payment for the
Shares to a bank selected by the Company. The Company shall avail itself of
this election by a notice in writing to Pur chaser stating the name and address
of the bank and the date of payment.
<PAGE>
(d) If the Company does not elect to exercise the Repurchase Option
conferred above by giving the requisite notice within ninety (90) days following
the termination, the Repurchase Option shall terminate.
2. Transferability of the Shares; Escrow.
-------------------------------------
(a) Purchaser hereby authorizes and directs the secretary of the
Company, or such other person designated by the Company, to transfer the Shares
as to which the Repurchase Option has been exercised from Purchaser to the
Company.
(b) To insure the availability for delivery of Purchaser's Shares upon
repurchase by the Company pursuant to the Repurchase Option under Section 1,
Purchaser hereby appoints the secretary, or any other person designated by the
Company as escrow agent, as its attorney-in-fact to sell, assign and transfer
unto the Company, such Shares, if any, repurchased by the Company pursuant to
the Repurchase Option and shall, upon execution of this Agreement, deliver and
deposit with the secretary of the Company, or such other person designated by
the Company, the share certificates representing the Shares, together with the
stock assignment duly endorsed in blank, attached hereto as Exhibit B-2. The
Shares and stock assignment shall be held by the secretary in escrow, pursuant
to the Joint Escrow Instructions of the Company and Purchaser attached as
Exhibit B-3 hereto, until the Company exercises its Repurchase Option as
provided in Section 1, until such Shares are released from the Company's
Repurchase Option, or until such time as this Agreement no longer is in effect.
As a further condition to the Company's obligations under this Agreement, the
spouse of the Purchaser, if any, shall execute and deliver to the Company the
Consent of Spouse attached hereto as Exhibit B-4. Upon release of the Shares
from the Company's Repurchase Option and upon Purchaser's request, the escrow
agent shall promptly deliver to the Purchaser the certificate or certificates
representing such Shares in the escrow agent's possession belonging to the
Purchaser, and the escrow agent shall be discharged of all further obligations
hereunder; provided, however, that the escrow agent shall nevertheless retain
such certificate or certificates as escrow agent if so required pursuant to
other restrictions imposed pursuant to this Agreement.
(c) The Company, or its designee, shall not be liable for any act it
may do or omit to do with respect to holding the Shares in escrow and while
acting in good faith and in the exercise of its judgment.
(d) Transfer or sale of the Shares is subject to restrictions on
transfer imposed by any applicable National and EC securities laws or other laws
or regulations. Any transferee shall hold such Shares subject to all the
provisions hereof and the Exercise Notice executed by the Purchaser with respect
to any Shares subject to the Company's Repurchase Option purchased by Purchaser
and shall acknowledge the same by signing a copy of this Agreement.
(e) Transfer, pledge, assignment, hypothecation, sale or disposal in
any manner of those Shares not already released from the Repurchase Option by
the Purchaser to a third party is prohibited.
<PAGE>
3. Ownership, Voting Rights, Duties. This Agreement shall not affect in
--------------------------------
any way the ownership, voting rights or other rights or duties of Purchaser,
except as specifically provided herein.
4. Adjustment for Stock Split. All references to the number of Shares
--------------------------
and the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.
5. Arbitration. Optionee agrees that any claim, dispute or controversy
-----------
arising out of, relating to, or in connection with this Option Agreement shall
be settled by binding arbitration pursuant to the rules of arbitration of the
Netherlands Arbitration Institute (Nederlands Arbitrage Instituut). The
decision of the arbitrator shall be final, conclusive and binding on the parties
to the arbitration. The arbitration tribunal shall be composed of one arbitrator
and the arbitration shall take place in Amsterdam. All arbitration procedures
shall be conducted in the English language. Consolidation of the arbitration
proceedings with other arbitration proceedings in The Netherlands, as provided
in Article 1046 of The Netherlands Code of Civil Procedure, is excluded.
The Company and optionee shall each pay one-half of the costs and
expenses of such arbitration, and each shall separately pay its counsel fees and
expenses.
6. Notices. Notices required hereunder shall be given in person or by
-------
registered mail to the address of Purchaser shown on the records of the Company,
and to the Company at its principal executive offices.
7. Survival of Terms. This Agreement shall apply to and bind Purchaser
-----------------
and the Company and their respective permitted assignees and transferees, heirs,
legatees, executors, administrators and legal successors.
8. Representations. Purchaser has reviewed with his own tax advisors
---------------
foreign tax consequences of this investment and the transactions contemplated by
this Agreement. Purchaser is relying solely on such advisors and not on any
statements or representations of the Company or any of its agents. Purchaser
understands that he (and not the Company) shall be responsible for his own tax
liability that may arise as a result of this investment or the transactions
contemplated by this Agreement.
9. Governing Law; Severability. This Agreement shall be governed by and
---------------------------
construed and enforced in accordance with the laws of Delaware and the United
States of America. Should any provision of this Agreement be determined by a
court of law to be illegal or unenforceable, the other provisions shall
nevertheless remain effective and shall remain unenforceable.
Purchaser represents that he has read this Agreement and is familiar with
its terms and provisions. Purchaser hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board upon any
questions arising under this Agreement.
<PAGE>
OPTIONEE HAS READ AND UNDERSTANDS SECTION 5, WHICH DISCUSSES ARBITRATION.
OPTIONEE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, OPTIONEE AGREES TO SUBMIT
ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT TO
BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF
OPTIONEE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES
RELATING TO ALL ASPECTS OF THIS RELATIONSHIP.
IN WITNESS WHEREOF, this Agreement is deemed made as of the date first set
forth above.
"COMPANY"
NAVIGATION TECHNOLOGIES CORPORATION
______________________________________
By
___________________________________
Title
"PURCHASER"
_______________________________________________
Signature
_______________________________________________
Address
_______________________________________________
<PAGE>
EXHIBIT B-2
-----------
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, __________________________, hereby sell, assign and
transfer unto ________________________________________________________
(__________) shares of the Common Stock of Navigation Technologies Corporation
standing in my name of the books of said corporation represented by Certificate
No. _____ herewith and do hereby irrevocably constitute and appoint
______________________________ to transfer the said stock on the books of the
within named corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement (the "Agreement") between________________________ and
the undersigned dated ______________, 19__.
Dated: _______________, 19__
Signature:______________________________
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise the
Repurchase Option, as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE>
EXHIBIT B-3
-----------
JOINT ESCROW INSTRUCTIONS
-------------------------
________________________, 19______
Corporate Secretary
Navigation Technologies Corporation
c/o European Geographic Technologies BV
de Waal 15
5684 PH Best
The Netherlands
Dear _________________:
As Escrow Agent for both Navigation Technologies Corporation, a
Delaware corporation (the "Company"), and the undersigned purchaser of stock of
the Company (the "Purchaser"), you are hereby authorized and directed to hold
the documents delivered to you pursuant to the terms of that certain Restricted
Stock Purchase Agreement ("Agreement") between the Company and the undersigned,
in accordance with the following instructions:
1. In the event the Company exercises the Company's Repurchase Option
set forth in the Agreement, the Company shall give to Purchaser and you a
written notice specifying the number of shares of stock to be purchased, the
purchase price, and the time for a closing hereunder at the office of the
Company. Purchaser and the Company hereby irrevocably authorize and direct you
to close the transaction contemplated by such notice in accordance with the
terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you
any certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the
<PAGE>
provisions of this paragraph 3, Purchaser shall exercise all rights and
privileges of a shareholder of the Company while the stock is held by you.
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's Repurchase Option has been exercised, you
shall deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's Repurchase Option.
Within 90 days after cessation of Purchaser's continuous employment by or
services to the Company, or any parent or subsidiary of the Company, you shall
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's Repurchase
Option.
5. If at the time of termination of this escrow you should have in
your possession any documents, securities, or other property belonging to
Purchaser, you shall deliver all of the same to Purchaser and shall be
discharged of all further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as
are specifically set forth herein and may rely and shall be protected in relying
or refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties.
You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in
good faith, and any act done or omitted by you pursuant to the advice of your
own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law, and are hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case you obey or comply with any such order, judgment or decree, you
shall not be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the loss of any rights under the
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
<PAGE>
11. You shall be entitled to employ such legal counsel and other
experts as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate
if you shall cease to be an officer or agent of the Company or if you shall
resign by written notice to each party. In the event of any such termination,
the Company shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such disputes shall have been settled either by mutual written agreement
of the parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the mail, by registered or certified mail with postage and fees
prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
(10) days advance written notice to each of the other parties hereto.
COMPANY: Navigation Technologies Corporation
c/o European Geographic Technologies BV
de Waal 15
5684 PH Best
The Netherlands
PURCHASER: ----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
ESCROW AGENT: Corporate Secretary
Navigation Technologies Corporation
c/o European Geographic Technologies BV
de Waal 15
5684 PH Best
The Netherlands
<PAGE>
16. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not become
a party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware and
the United States of America.
19. Should any provision of this Agreement be determined by a court
of law to be illegal or unenforceable, the other provisions shall nevertheless
remain effective and shall remain enforceable.
Very truly yours,
NAVIGATION TECHNOLOGIES CORPORATION
-------------------------------
By
-------------------------------
Title
PURCHASER:
-------------------------------
Signature
-------------------------------
Typed or Printed Name
ESCROW AGENT:
- --------------------------------
Corporate Secretary
<PAGE>
EXHIBIT B-4
-----------
CONSENT OF SPOUSE
-----------------
I, ____________________, spouse of ___________________, have read and
approve the foregoing Restricted Stock Purchase Agreement (the "Agreement"). In
consideration of the Company's grant to my spouse of the right to purchase
shares of Navigation Technologies Corporation, as set forth in the Agreement, I
hereby appoint my spouse as my attorney-in-fact in respect to the exercise of
any rights under the Agreement and agree to be bound by the provisions of the
Agreement insofar as I may have any rights in said Agreement or any shares
issued pursuant thereto under the community property laws or similar laws
relating to marital property in effect in the state of our residence as of the
date of the signing of the foregoing Agreement.
Dated: _______________, 19____
--------------------------------
Signature of Spouse
<PAGE>
Exhibit 10.5
NAVIGATION TECHNOLOGIES CORPORATION
1996 STOCK OPTION PLAN FOR FRENCH EMPLOYEES
1. Purposes of the Plan. The purposes of this 1996 Stock Option Plan for
--------------------
French Employees are:
. to attract and retain the best available personnel for positions of
substantial responsibility,
. to provide additional incentive to French Employees, and
. to promote the success of the Company's business and the business of its
French subsidiary.
This Plan is a sub-plan created under and pursuant to the Navigation
Technologies Corporation 1988 Stock Option Plan, which has been approved by the
shareholders of Navigation Technologies Corporation, and which provides that
French employees may benefit under this Plan. Options shall be granted under the
Plan at the discretion of the Administrator and as reflected in terms of written
option agreements, and are intended to qualify for preferred treatment under
French tax laws. Unless otherwise defined herein, the terms defined in the 1988
Stock Option Plan shall have the same defined meanings in this Plan.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Applicable Laws" means the legal requirements relating to the
---------------
administration of stock option plans under French corporate, securities, and tax
laws.
(b) "Disability" means total and permanent disability, as defined under
----------
Applicable Laws.
(c) "Employee" means any person employed by Subsidiary in a salaried
--------
position, who does not own more than 10% of the voting power of all classes of
stock of the Company, or any Parent or Subsidiary and who is a resident of the
Republic of France.
(d) "Fair Market Value" means, as of any date, the dollar value of
-----------------
Common Stock determined as follows:
(i) if the Common Stock is listed on any established stock
exchange or a national market system, its Fair Market Value shall be the average
quotation price for the last twenty (20) days preceding the date of
determination for such stock (or the average closing bid for such twenty (20)
day period, if no sales were reported) as quoted on such exchange or system and
as reported in The Wall Street Journal or such other source as the Administrator
deems reliable; or
<PAGE>
(ii) in the absence of an established market for the Common
Stock, the value thereof shall be determined in good faith by the Administrator.
(e) "Option" means a stock option granted pursuant to the Plan which is
------
intended to qualify for preferred tax treatment under applicable French tax
laws.
(f) "Option Agreement" means a written agreement between the Company
----------------
and an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the Plan.
(g) "Option Price" means the per share price for exercising an Option,
------------
determined in accordance with subsection 9(a) of the Plan.
(h) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(i) "Optionee" means a person eligible to participate in the Plan
--------
pursuant to Section 5 and who holds an outstanding Option.
(j) "Plan" means this Navigation Technologies Corporation 1996 Stock
----
Option Plan for French Employees.
(k) "Subsidiary" means any participating subsidiary of the Company
----------
located in the Republic of France.
(l) "U.S. Plan" means the Navigation Technologies Corporation 1988
---------
Stock Option Plan, as amended.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
-------------------------
the Plan, the maximum aggregate number of Shares that may be optioned and sold
under the Plan is 35,700,000 Shares of Common Stock, less the number of shares
issued under the U.S. Plan and any other subplans promulgated thereunder.
However, at no time shall the total number of Options outstanding which may be
exercised for newly issued Shares of Common Stock exceed that number equal to
one-third of the Company's voting stock, whether preferred stock of the Company
or Common Stock. The Shares may be authorized, but unissued, or reacquired
Common Stock. If any Optioned Stock is to consist of reacquired Shares, such
Optioned Stock must be purchased by the Company prior to the date of grant of
the corresponding Option and must be reserved and set aside for such purpose.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant under the Plan (unless the Plan has
terminated).
4. Administration of the Plan. The Plan shall be administered by the
--------------------------
Board or a Committee appointed by the Board, which Committee shall be
constituted to satisfy the legal
-2-
<PAGE>
requirements, if any, relating to the administration of stock option plans (the
"Applicable Law"). Once appointed, such Committee shall serve in its designated
capacity until otherwise directed by the Board. The Board may increase the size
of the Committee and appoint additional members, remove members (with or without
cause) and substitute new members, fill vacancies (however caused), and remove
all members of the Committee and thereafter directly administer the Plan, all to
the extent permitted by Applicable Law.
(a) Powers of the Administrator. Subject to the provisions of the Plan,
---------------------------
and in the case of a Committee, subject to the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(d) of the Plan;
(ii) to select the Employees to whom Options may be granted
hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each Option granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder. Such terms and
conditions may include, but are not limited to, the exercise price, the time or
times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;
(vii) to construe and interpret the terms of the Plan;
(viii) to prescribe, amend and rescind rules and regulations
relating to the Plan;
(ix) to modify or amend each Option (subject to Section 14(c) of
the Plan);
(x) to authorize any person to execute on behalf of the Company
or Subsidiary any instrument required to effect the grant of an Option
previously granted by the Administrator;
-3-
<PAGE>
(xi) to make all other determinations deemed necessary or
advisable for administering the Plan.
(b) Effect of Administrator's Decision. The Administrator's decisions,
----------------------------------
determinations and interpretations shall be final and binding on all Optionees
and any other holders of Options.
(c) Reporting to the Shareholders' Meeting. In its annual proxy
--------------------------------------
statement to the shareholders, the Board shall inform the shareholders as to the
number and price of the Options granted hereunder, and as to the Shares
subscribed upon exercise of such Options.
5. Eligibility. Options may be granted only to Employees; provided,
-----------
however, that directors who are also Employees of a participating Subsidiary may
be granted Options. An individual who has been granted an Option may, if
otherwise eligible, be granted additional Options.
6. Limitations. Neither the Plan nor any Option shall confer upon any
-----------
Optionee any right with respect to continuing the Optionee's employment
relationship with the Company.
7. Term of Plan. The Plan shall become effective as of the date of its
------------
adoption by the Board. It shall continue in effect until the termination of the
U.S. Plan or the date five years from the date of its adoption, whichever is
sooner, unless terminated earlier under Section 14 of the Plan.
8. Term of Option. The term of each Option shall be as stated in the
--------------
Option Agreement; provided, however, that subject to Section 10(d) hereof, the
maximum term of an Option shall not exceed nine and one-half (9 1/2) years from
the date of grant of the Option.
9. Option Exercise Price and Consideration.
---------------------------------------
(a) Option Price. The Option Price for the Shares to be issued
------------
pursuant to exercise of an Option shall be determined by the Administrator upon
the date of grant of the Option and stated in the Option Agreement, but in no
event shall be lower than one hundred percent (100%) of the Fair Market Value on
the date the Option is granted. This Option Price cannot be modified while the
Option is outstanding.
(b) Waiting Period and Exercise Dates. At the time an Option is
---------------------------------
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised. In so doing, the Administrator may specify that an
Option may not be exercised until the completion of a service period.
(c) Form of Consideration. The Administrator shall determine the
---------------------
acceptable form of consideration for exercising an Option including the method
of payment. Unless otherwise
-4-
<PAGE>
specified by the Administrator, payments shall be denominated in U.S. Dollars.
Such consideration may consist of:
(i) cash or check;
(ii) wire transfer;
(iii) other Shares which (x) in the case of Shares acquired upon
exercise of an Option, have been owned by the Optionee for more than six months
on the date of surrender, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which such
Option shall be exercised;
(iv) delivery of a properly executed exercise notice together
with such other documentation as the Administrator and a broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
an amount of the sale or loan proceeds required to pay the exercise price; or
(v) any combination of the foregoing methods of payment.
10. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when:
(i) the Company receives written notice of exercise (in
accordance with the Option Agreement and in the form attached hereto as Exhibit
A) from the person entitled to exercise the Option, and full payment for the
Shares with respect to which the Option is exercised;
(ii) the Subsidiary receives a written subscription agreement to
the Shares (in accordance with the Option Agreement and in the form attached
hereto as Exhibit B) from the person entitled to exercise the Option.
Full payment may consist of any consideration and method of payment
authorized by the Administrator and permitted by the Option Agreement and the
Plan, and shall be deemed to be definitively made upon receipt of the payment by
the Subsidiary. Shares issued upon exercise of an Option shall be issued in the
name of the Optionee or, if requested by the Optionee, in the name of the
Optionee and his or her spouse.
-5-
<PAGE>
Until the stock certificate evidencing such Shares is issued (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Company shall issue to
the Optionee (or cause to be issued) a stock certificate evidencing such Shares
promptly after the Option is exercised and after full payment, as indicated
above, is received by the Company. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 12 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Employment Relationship. In the event that an
--------------------------------------
Optionee's status as an Employee terminates (other than upon the Optionee's
death or Disability), the Optionee may exercise his or her Option, but only
within three (3) months (or such other lesser period of time as is determined by
the Administrator), and only to the extent that the Optionee was entitled to
exercise it at the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Notice of Grant). If,
at the date of termination, the Optionee is not entitled to exercise his or her
entire Option, the Shares covered by the unexercisable portion of the Option
shall revert to the Plan. If, after termination, the Optionee does not exercise
his or her Option within the time specified by the Administrator, the Option
shall terminate, and the Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. In the event that an Optionee's status as
----------------------
an Employee terminates as a result of the Optionee's Disability, the Optionee
may exercise his or her Option at any time within twelve (12) months from the
date of such termination, but only to the extent that the Optionee was entitled
to exercise it at the date of such termination (and in no event later than the
expiration of the term of such Option as set forth in the Option Agreement).
If, at the date of termination, the Optionee is not entitled to exercise his or
her entire Option, the Shares covered by the unexercisable portion of the Option
shall revert to the Plan. If, after termination, the Optionee does not exercise
his or her Option within the time specified herein, the Option shall terminate,
and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee while
-----------------
an Employee, the Option may be exercised at any time within six (6) months
following the date of death, in compliance with Article 208-7 of the Applicable
Laws, and an additional twelve (12) months thereafter (provided, however, that
with respect to the additional twelve (12) month exercise period, the Option may
not be exercised after the expiration of the term of such Option as set forth in
the Notice of Grant) by the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
that the Optionee was entitled to exercise the Option at the date of death. If,
at the time of death, the Optionee was not entitled to exercise his or her
entire Option, the Shares covered by the unexercisable portion of the Option
shall revert to the
-6-
<PAGE>
Plan. If, after death, the Optionee's estate or a person who acquired the right
to exercise the Option by bequest or inheritance does not exercise the Option
within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall immediately revert to the Plan.
11. Non-Transferability of Options. An Option may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
12. Adjustments Upon Changes in Capitalization or Merger. Subject to any
----------------------------------------------------
required action by the shareholders of the Company, the number of shares covered
by each outstanding Option, and the number of shares which have been authorized
for issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per share of Stock covered by each such outstanding
Option, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Stock resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of the Stock, or any
other increase or decrease in the number of issued shares of Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Administrator, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Stock subject to an
Option.
(a) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously exercised, an
Option will terminate immediately prior to the consummation of such proposed
action.
(b) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option shall be assumed or an equivalent option
substituted by the successor corporation or a parent or subsidiary of the
successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Option, the Optionee shall have the right to
exercise the Option as to all of the Optioned Stock, including Shares as to
which it would not otherwise be exercisable. If an Option is exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee that the Option shall be fully
exercisable for a period of
-7-
<PAGE>
fifteen (15) days from the date of such notice, and the Option shall terminate
upon the expiration of such period. For the purposes of this paragraph, the
Option shall be considered assumed if, following the merger or sale of assets,
the option confers the right to purchase or receive, for each Share of Optioned
Stock subject to the Option immediately prior to the merger or sale of assets,
the consideration (whether stock, cash, or other securities or property)
received in the merger or sale of assets by holders of Common Stock for each
Share held on the effective date of the transaction (and if holders were offered
a choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares); provided, however, that if such
consideration received in the merger or sale of assets was not solely common
stock of the successor corporation or its parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation or
its parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
13. Date of Grant. The date of grant of an Option shall be, for all
-------------
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.
14. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Administrator may at any time
-------------------------
amend, alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
--------------------
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws. Such shareholder approval, if required, shall be obtained
in such a manner and to such a degree as is required by the Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and a
representative of the Administrator.
15. Conditions Upon Issuance of Shares.
----------------------------------
(a) Legal Compliance. Shares shall not be issued pursuant to the
----------------
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws, including, without
limitation, the requirements of any stock exchange or quotation system upon
which the Shares may then be listed or quoted, and shall be further subject to
the approval of counsel for the Company with respect to such compliance.
-8-
<PAGE>
(b) Investment Representations. As a condition to the exercise of an
--------------------------
Option, the Company may require the person exercising such Option to represent
and warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation is
required under Applicable Laws.
16. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
17. Liability of Company. The inability of the Company to obtain
--------------------
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
18. Arbitration. Each stock option agreement shall contain a provision
-----------
submitting to arbitration all claims, disputes, or controversies arising out of,
relating to, or in connection with such stock option agreement.
-9-
<PAGE>
NAVIGATION TECHNOLOGIES CORPORATION
1996 STOCK OPTION PLAN FOR FRENCH EMPLOYEES
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the 1996 Stock Option
Plan for French Employees shall have the same defined meanings in this Option
Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
Optionee's Name and Address: ----------------------------
----------------------------
----------------------------
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Stock Option Agreement,
as follows:
Grant Number -----------------------
Date of Grant -----------------------
Vesting Commencement Date -----------------------
Exercise Price per Share $
-----------------------
Total Number of Shares Granted -----------------------
Total Exercise Price $
-----------------------
Term/Expiration Date: -----------------------
Vesting Schedule:
----------------
Six forty-eighths (6/48ths) of the Shares subject to the Option shall be
released from the Repurchase Option six (6) months after the Vesting
Commencement Date and one forty-eighth (1/48th) of the Shares subject to the
Option shall vest on the first day of each month thereafter.
Termination Period:
------------------
This Option may be exercised for three (3) months after termination of
employment relationship, or such longer period as may be applicable upon death
or Disability of Optionee as provided in the Plan.
<PAGE>
Notwithstanding the above, in case of dismissal of the Optionee for
intentional/non intentional serious misconduct, all the Options granted to the
Optionee are null and void as of right from the date of notification of the
dismissal decision.
The Options under this article are to be understood as the sole Options the
Optionee is entitled to exercise during the year of occurrence of one of the
above mentioned events. The Options the Optionee is not entitled to exercise on
the date of occurrence of one of such events are null and void as of right.
II. AGREEMENT
---------
1. Grant of Option. The Board of the Company hereby grants to the
---------------
Optionee named in the Notice of Grant attached as Part I of this Agreement (the
"Optionee"), an option (the "Option") to purchase a number of Shares set forth
in the Notice of Grant, at the exercise price per share set forth in the Notice
of Grant (the "Exercise Price"), subject to the terms and conditions of the
Plan, which is incorporated herein by reference. Unless otherwise defined
herein, the terms defined in the Plan shall have the same defined meanings in
this Option Agreement. Subject to Section 14 of the Plan, in the event of a
conflict between the terms and conditions of the Plan and the terms and
conditions of this Option Agreement, the terms and conditions of the Plan shall
prevail.
2. Exercise of Option.
------------------
(a) Right to Exercise. This Option shall be exercisable during its
-----------------
term in accordance with the Vesting Schedule set out in the Notice of Grant and
the applicable provisions of the Plan and this Option Agreement. In the event of
Optionee's death, Disability or other termination of Optionee's employment
relationship, the exercisability of the Option is governed by the applicable
provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by delivery
------------------
of an exercise notice to the Company, in the form attached as Exhibit A (the
"Exercise Notice"), which shall state the election to exercise the Option, the
number of Shares in respect of which the Option is being exercised (the
"Exercised Shares"), by delivery of a subscription agreement to the Subsidiary,
in the form attached as Exhibit B (the "Subscription Agreement") and such other
representations and agreements as may be required by the Company or the
Subsidiary pursuant to the provisions of the Plan. Until the stock certificate
evidencing such Shares is issued (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company), no
right to vote or receive dividends or any other rights as a shareholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. The Company shall issue to the Optionee (or cause to be issued) such
stock certificate promptly after the Option is exercised. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 12 of the
Plan. The Exercise Notice and Subscription Agreement shall be signed by the
Optionee and shall be delivered in person or by certified mail to the Secretary
of the Subsidiary. The Exercise Notice and Subscription Agreement
<PAGE>
shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Subsidiary of such fully executed Exercise Notice and Subscription Agreement
accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option unless
such issuance and exercise complies with all relevant provisions of law and the
requirements of any stock exchange upon which the Shares are then listed.
Assuming such compliance, for income tax purposes the Exercised Shares shall be
considered transferred to the Optionee on the date the Option is exercised with
respect to such Exercised Shares.
3. Method of Payment. Payment shall be denominated in U.S. Dollars unless
-----------------
otherwise determined by the Administrator. Payment of the aggregate Exercise
Price shall be by any of the following, or a combination thereof, at the
election of the Optionee:
(a) cash or check; or
(b) wire transfer.
4. Non-Transferability of Option. This Option may not be sold, pledged,
-----------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised during the
lifetime of Optionee only by the Optionee. The terms of the Plan and this
Option Agreement shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
5. Lock-Up Period. Optionee hereby agrees that if so requested by the
--------------
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act of 1933, as amended (the "Securities Act"),
Optionee shall not sell or otherwise transfer any Shares or other securities of
the Company during the 180-day period (or such longer period as may be requested
in writing by the Managing Underwriter and agreed to in writing by the Company)
(the "Market Standoff Period") following the effective date of a registration
statement of the Company filed under the Securities Act; provided, however, that
such restriction shall apply only to the first registration statement of the
Company to become effective under the Securities Act that includes securities to
be sold on behalf of the Company to the public in an underwritten public
offering under the Securities Act. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such Market Standoff Period.
6. Termination of Employment.
-------------------------
(a) The options granted to Optionee may be exercised within a period
of:
(i) 18 months, in case of the death of the Optionee.
<PAGE>
(ii) 12 months, in case of permanent disability of the Optionee.
(iii) 3 months, in case of departure of the Beneficiary from the
Company or one of the companies or intercompany partnerships (groupements
d'interet economique) of the Company for a reason other than dismissal for
intentional/non intentional serious misconduct,
as from the effective date of termination of the Optionee's office for
one of the above mentioned reasons.
7. Restrictions on Exercise. This Option may not be exercised if the
------------------------
issuance of such Shares upon such exercise or the method of payment of
consideration for such Shares would constitute a violation of any applicable
National or EC securities or other laws or regulations.
8. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.
9. Tax Consequences. THE COMPANY MAKES NO REPRESENTATIONS OF ANY KIND
----------------
REGARDING THE TAXATION OF THIS OPTION AND THE SHARES PURCHASED HEREUNDER.
OPTIONEE IS STRONGLY ENCOURAGED TO CONSULT THEIR PERSONAL TAX ADVISER REGARDING
THE APPROPRIATE TAX TREATMENT OF THIS OPTION AND THE SHARES PURCHASED HEREUNDER.
OPTIONEE ACKNOWLEDGES THAT OPTIONEE IS NOT RELYING ON THE COMPANY FOR ANY TAX
ADVICE.
10. Entire Agreement; Governing Law. The Plan is incorporated herein by
-------------------------------
reference. The Plan and this Notice of Grant and Option Agreement constitute
the entire agreement of the parties with respect to the subject matter hereof
and supersede in their entirety all prior undertakings and agreements of the
Company and Optionee with respect to the subject matter hereof, and may not be
modified adversely to the Optionee's interest except by means of a writing
signed by the Company and Optionee. This agreement is governed by the laws of
the State of Delaware and the United States of America. Should any provision of
this Agreement be determined by a court of law to be illegal or unenforceable,
the other provisions shall nevertheless remain effective and shall remain
enforceable.
11. Arbitration. Optionee agrees that any claim, dispute or controversy
-----------
arising out of, relating to, or in connection with this stock option agreement
shall be settled by binding arbitration pursuant to the rules and under the
supervision of the recognized national arbitration institute of the country of
the employee's residence. The arbitrator may grant injunctions or other relief
in such dispute or controversy. The decision of the arbitrator shall be final,
conclusive and binding on the parties to the arbitration. Judgment may be
entered on the award of the arbitration in any court having jurisdiction
thereof.
<PAGE>
(a) The Company and optionee shall each pay one-half of the costs and
expenses of such arbitration, and each shall separately pay its counsel fees and
expenses.
(b) Optionee understands that nothing in this Section 11 modifies
optionee's at-will status. Either optionee or the Company can terminate the
employment relationship at any time, with or without cause.
OPTIONEE ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREUNDER DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF
CONTINUED ENGAGEMENT AS AN EMPLOYEE, FOR ANY PERIOD, AND SHALL NOT INTERFERE
WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S EMPLOYMENT
AT ANY TIME, WITH OR WITHOUT CAUSE. OPTIONS UNDER THE PLAN ARE GRANTED IN A
DISCRETIONARY FASHION, AND THE GRANT OF ONE OR MORE OPTIONS UNDER THE PLAN SHALL
NOT GIVE RISE TO A RIGHT IN ANY EMPLOYEE TO RECEIVE ADDITIONAL OPTION GRANTS IN
THE FUTURE. FURTHER, THE BOARD RETAINS THE RIGHT, IN ITS SOLE DISCRETION, TO
TERMINATE THE PLAN FOR ANY REASON, OR NO REASON, AT ANY TIME.
OPTIONEE HAS READ AND UNDERSTANDS SECTION 11, WHICH DISCUSSES ARBITRATION.
OPTIONEE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, OPTIONEE AGREES TO SUBMIT
ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT TO
BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF
OPTIONEE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES
RELATING TO ALL ASPECTS OF THIS RELATIONSHIP.
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option Agree
ment and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement.
OPTIONEE: NAVIGATION TECHNOLOGIES
CORPORATION
- ---------------------- -------------------------
Signature By
- ---------------------- -------------------------
Print Name Title
- ----------------------
Address
- ----------------------
<PAGE>
EXHIBIT A
---------
NAVIGATION TECHNOLOGIES CORPORATION
1996 STOCK OPTION PLAN FOR FRENCH EMPLOYEES
EXERCISE NOTICE
Navigation Technologies Corporation
c/o French Subsidiary
[Address of French Subsidiary]
Attention: General Secretary
1. Exercise of Option. Effective as of today, ___________, 199__, the
------------------
undersigned ("Optionee") hereby elects to purchase _________ shares (the
"Shares") of the Common Stock of Navigation Technologies Corporation (the
"Company") under and pursuant to the 1996 Stock Option Plan for French Employees
(the "Plan") and the Stock Option Agreement dated ___________ (the "Option
Agreement"). The purchase price for the Shares shall be $__________, as
required by the Option Agreement.
2. Delivery of Payment. Optionee herewith delivers to the Company the
-------------------
full purchase price for the Shares.
3. Representations of Optionee. Optionee acknowledges that Optionee has
---------------------------
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the stock certificate evidencing such
---------------------
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option.
5. Tax Consultation. Optionee represents that Optionee has consulted
----------------
with any tax consultants Optionee deems advisable in connection with the
purchase or disposition of the Shares and that Optionee is not relying on the
Company for any tax advice.
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
-------------------------------
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties and supersede in their
entirety all prior undertakings and agreements of the
<PAGE>
Company and Optionee with respect to the subject matter hereof, and such
agreement is governed by the laws of Delaware and the United States of America
except for that body of laws pertaining to conflict of laws. Should any
provision of this Agreement be determined by a court of law to be illegal or
unenforceable, the other provisions shall nevertheless remain effective and
shall remain enforceable.
Submitted by: Accepted by:
OPTIONEE: NAVIGATION TECHNOLOGIES
CORPORATION
- --------------------- ------------------------
Signature By
- --------------------- ------------------------
Print Name Title
- --------------------- ------------------------
Address Date Accepted
- ---------------------
<PAGE>
EXHIBIT B
---------
NAVIGATION TECHNOLOGIES CORPORATION
1996 STOCK OPTION PLAN FOR FRENCH EMPLOYEES
SUBSCRIPTION AGREEMENT
Navigation Technologies Corporation
c/o French Subsidiary
- ------------------------------
- ------------------------------
Attention: General Secretary
1. Amount and Terms of the Subscription
------------------------------------
In conformity with the Stock Option Plan reserved to the French
employees (the "Plan"), Options to subscribe to Shares of Common Stock (the
"Shares") of Navigation Technologies Corporation (the "Company") were granted
according to the Stock Option Agreement dated _________________ (the "Option
Agreement").
_______ Shares shall be issued to the benefit of the undersigned (the
"Subscriber") by an increase in capital in accordance with the applicable laws
of the United States of America and the State of Delaware.
The increase in capital shall take place within the limits of the
authorized capital of the Company.
The Shares subscribed to may be paid up by:
(a) cash or check; or
(b) wire transfer.
2. Transfer of the funds
---------------------
The funds coming from the subscription of Shares under the Plan shall
be paid over to the Subsidiary by the participating Employees. Full payment
shall be deemed to be definitively made upon the date of receipt of the payment
in the bank accounts in France of the Subsidiary.
<PAGE>
3. Subscription Agreement
----------------------
I, the undersigned, Last name
-----------------
First name
-----------------
Residence
-----------------
subscribe to ________ Shares.
Supporting my subscription I shall pay the total amount of the
Purchase Price of the Shares following one or more of the methods described in
I. hereinabove.
The Subscriber Navigation Technologies Corporation
- ---------------------- ---------------------------
Signature By
- ---------------------- ---------------------------
Name Title
- ---------------------- ---------------------------
Address Date
- ----------------------
<PAGE>
Exhibit 10.6
SHIELDS ENTERPRISES, INC.
1996 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
--------------------
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or supplemental stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees appointed
-------------
pursuant to Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to the
---------------
administration of stock option plans and the issuance of Shares upon exercise of
Options under U.S. state corporate laws, U.S. federal and state securities laws,
the Code and the applicable laws of any foreign country or jurisdiction where
Options will be or are being granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means a Committee appointed by the Board of Directors
---------
in accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
------------
(g) "Company" means Shields Enterprises, Inc., a Delaware corporation.
-------
(h) "Consultant" means any person who is engaged by the Company or any
----------
Parent or Subsidiary to render consulting or advisory services and is
compensated for such services, and any director of the Company whether
compensated for such services or not. If and in the event the Company registers
any class of any equity security pursuant to the Exchange Act, the term
Consultant shall thereafter not include directors who are not compensated for
their services or are paid only a director's fee by the Company.
(i) "Continuous Status as an Employee or Consultant" means that the
----------------------------------------------
employment or consulting relationship with the Company, any Parent, or
Subsidiary, is not interrupted or terminated. Continuous Status as an Employee
or Consultant shall not be considered interrupted in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor. A
leave of
<PAGE>
absence approved by the Company shall include sick leave, military leave, or any
other personal leave approved by an authorized representative of the Company.
For purposes of Incentive Stock Options, no such leave may exceed 90 days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract, including Company policies. If reemployment upon expiration of a
leave of absence approved by the Company is not so guaranteed, on the 181st day
of such leave any Incentive Stock Option held by the Optionee shall cease to be
treated as an Incentive Stock Option and shall be treated for tax purposes as a
Supplemental Stock Option.
(j) "Employee" means any person, including Officers and directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(l) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination, or;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(m) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code.
(n) "Misconduct" means the commission of any act affecting employment
----------
which involves (1) dishonesty, fraud or criminal conduct by Optionee, (2)
Optionee's knowing and willful violation of a material Company written policy or
a lawful direction by an authorized executive officer or the Board, (3)
Optionee's engaging in any activity in competition with the Company or its
subsidiaries in a material manner (excluding a less than 5% investment in any
public company), or (4) Optionee's knowing unauthorized disclosure of
confidential material, proprietary information or trade secrets of the Company.
-2-
<PAGE>
(o) "Supplemental Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(p) "Officer" means a person who is an officer of the Company within
-------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(q) "Option" means a stock option granted pursuant to the Plan.
------
(r) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(s) "Optionee" means an Employee or Consultant who receives an Option.
--------
(t) "Parent" means a "parent corporation", whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(u) "Plan" means this 1996 Stock Option Plan.
----
(v) "Section 16(b)" means Section 16(b) of the Securities Exchange Act
-------------
of 1934, as amended.
(w) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 11 below.
(x) "Subsidiary" means a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 612 Shares. The Shares may be authorized, but unissued, or
reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an option exchange program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); provided,
--------
however, that Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if unvested Shares are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. Administration of the Plan.
--------------------------
(a) Initial Plan Procedure. Prior to the date, if any, upon which the
----------------------
Company becomes subject to the Exchange Act, the Plan shall be administered by
the Board or a committee appointed by the Board.
-3-
<PAGE>
(b) Plan Procedure after the Date, if any, upon Which the Company
-------------------------------------------------------------
becomes Subject to the Exchange Act.
- -----------------------------------
(i) Administration with Respect to Directors and Officers. With
-----------------------------------------------------
respect to grants of Options to Employees who are also Officers or directors of
the Company, the Plan shall be administered by (A) the Board if the Board may
administer the Plan in compliance with the rules under Rule 16b-3 promulgated
under the Exchange Act or any successor thereto ("Rule 16b-3") relating to the
disinterested administration of employee benefit plans under which Section 16(b)
exempt discretionary grants and awards of equity securities are to be made, or
(B) a Committee designated by the Board to administer the Plan, which Committee
shall be constituted to comply with the rules under Rule 16b-3 relating to the
disinterested administration of employee benefit plans under which Section 16(b)
exempt discretionary grants and awards of equity securities are to be made. Once
appointed, such Committee shall continue to serve in its designated capacity
until otherwise directed by the Board. From time to time the Board may increase
the size of the Committee and appoint additional members thereof, remove members
(with or without cause) and appoint new members in substitution therefor, fill
vacancies, however caused, and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by the
rules under Rule 16b-3 relating to the disinterested administration of employee
benefit plans under which Section 16(b) exempt discretionary grants and awards
of equity securities are to be made.
(ii) Multiple Administrative Bodies. If permitted by Rule 16b-3,
------------------------------
the Plan may be administered by different bodies with respect to directors, non-
director Officers and Employees who are neither directors nor Officers.
(iii) Administration With Respect to Consultants and Other
----------------------------------------------------
Employees. With respect to grants of Options to Employees or Consultants who are
- ---------
neither directors nor Officers of the Company, the Plan shall be administered by
(A) the Board or (B) a committee designated by the Board, which committee shall
be constituted in such a manner as to satisfy Applicable Laws. Once appointed,
such Committee shall continue to serve in its designated capacity until
otherwise directed by the Board. From time to time the Board may increase the
size of the Committee and appoint additional members thereof, remove members
(with or without cause) and appoint new members in substitution therefor, fill
vacancies, however caused, and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by the
Applicable Laws.
(c) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the Common
Stock is listed, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(l) of the Plan;
-4-
<PAGE>
(ii) to select the Consultants and Employees to whom Options may
from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are granted
hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions of any award granted
hereunder;
(vii) to determine whether and under what circumstances an Option
may be settled in cash under subsection 9(f) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted; and
(ix) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
(d) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options.
5. Eligibility.
-----------
(a) Supplemental Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if otherwise
eligible, be granted additional Options.
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Supplemental Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Supplemental Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
-5-
<PAGE>
(c) The Plan shall not confer upon any Optionee any right with respect
to continuation of employment or consulting relationship with the Company, nor
shall it interfere in any way with his or her right or the Company's right to
terminate his or her employment or consulting relationship at any time, with or
without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company, as described in Section 17 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
---------------------------------------
(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in the preceding paragraph, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Supplemental Stock Option
(A) granted to a person who, at the time of the grant of
such Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of the grant.
-6-
<PAGE>
(B) granted to any person, the per Share exercise price
shall be no less than 85% of the Fair Market Value per Share on the date of
grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) other Shares which (x) in the case of Shares acquired upon exercise
of an Option have been owned by the Optionee for more than six months on the
date of surrender and (y) have a Fair Market Value on the date of surrender
equal to the aggregate exercise price of the Shares as to which said Option
shall be exercised, (4) delivery of a properly executed exercise notice together
with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price, or
(5) any combination of the foregoing methods of payment. In making its
determination as to the type of consideration to accept, the Administrator shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan, but in no case at a rate of less than 20% per year over five (5)
years from the date the Option is granted.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment or Consulting Relationship. Upon
----------------------------------------------------
termination of an Optionee's Continuous Status as an Employee or Consultant with
the Company, the Optionee may
-7-
<PAGE>
exercise his or her Option, only if and within such period of time as may be
specified in the Notice of Grant of not less than thirty (30) days and only to
the extent that the Optionee was entitled to exercise it at the date of
termination (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant). To the extent that the Notice of
Grant permits the Optionee to exercise his or her Option after the termination
of Optionee's Continuous Status as an Employee or Consultant, different periods
of time may be specified in the Notice of Grant for terminations resulting from
death, Disability or any other reason specified in the Notice of Grant. In the
case of an Incentive Stock Option, such period shall not exceed three (3) months
from the date of termination. If, on the date of termination, the Optionee is
not entitled to exercise the Optionee's entire Option, the Shares covered by the
unexercisable portion of the Option shall revert to the Plan. If, after
termination, the Optionee does not exercise his or her Option within the time,
if any, specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan. Notwithstanding the
above, if Optionee commits an act of Misconduct, the Option shall immediately
terminate as of and at the time of such act of Misconduct, and the Shares
covered by the unexercised portion of such Option shall revert to the Plan, or
if this Option has been exercised subsequent to such Misconduct, the Company may
within ninety (90) days after the Board or the Company's chief executive officer
has knowledge of the Misconduct, at its option, either (i) rescind such exercise
and recover the Shares issued to Optionee upon returning to Optionee the
exercise price for such Shares or (ii) if Optionee has sold the Shares, recover
from Optionee the net proceeds from the sale of such Shares less such exercise
price and plus interest on such difference at 8% per annum from the exercise
date to the date such difference is paid by Optionee to the Company.
In the event of an Optionee's change in status from Employee to
Consultant or Consultant to Employee, the Optionee's Continuous Status as an
Employee or Consultant shall not be considered terminated solely as a result of
such change in status; provided, however, that in the event of Optionee's change
in status from Employee to Consultant an Optionee's Incentive Stock Option shall
automatically convert to a Supplemental Stock Option on the date three (3)
months and one day from the date of the change in status.
(c) Disability of Optionee. In the event of termination of an
----------------------
Optionee's Continuous Status as an Employee or Consultant as a result of his or
her disability, Optionee may, but only within twelve (12) months from the date
of such termination or such other period of time of not less than six (6)
months, determined by the Administrator and specified in the Option Agreement
(and in no event later than the expiration date of the term of such Option as
set forth in the Option Agreement), exercise the Option to the extent otherwise
entitled to exercise it at the date of such termination; provided, however, that
if such disability is not a "disability" as such term is defined in Section
22(e)(3) of the Code, in the case of an Incentive Stock Option such Incentive
Stock Option shall automatically convert to a Supplemental Stock Option on the
day three months and one day following such termination. To the extent that
Optionee is not entitled to exercise the Option at the date of termination, or
if Optionee does not exercise such Option to the extent so entitled within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
-8-
<PAGE>
(d) Death of Optionee. In the event of the termination of Optionee's
-----------------
Continuous Status as an Employee or Consultant as a result of the death of
Optionee or Optionee's death occurs within three (3) months of termination of
Optionee's Continuous Status as an Employee or Consultant, the Option may be
exercised at any time within eighteen (18) months following the date of death or
such other period of time of not less than six (6) months, determined by the
Administrator and specified in the Option Agreement (but in no event later than
the expiration of the term of such Option as set forth in the Notice of Grant),
by the Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent that the Optionee was
entitled to exercise the Option at the date of death. If, at the time of death,
the Optionee was not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall immediately revert to
the Plan. If, after death, the Optionee's estate or a person who acquired the
right to exercise the Option by bequest or inheritance does not exercise the
Option within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(e) Rule 16b-3. Options granted to persons subject to Section 16(b)
----------
of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
10. Non-Transferability of Options. Options may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization or Merger.
----------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Administrator, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or
-9-
<PAGE>
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify the
Optionee at least fifteen (15) days prior to such proposed action. To the
extent it has not been previously exercised, the Option will terminate
immediately prior to the consummation of such proposed action.
(c) Merger. In the event of a merger of the Company with or into
------
another corporation, the Option may be assumed or an equivalent option may be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation. If, in such event, the Option is not assumed or
substituted, the Option shall terminate as of the date of the closing of the
merger. For the purposes of this paragraph, the Option shall be considered
assumed if, following the merger, the option confers the right to purchase, for
each Share of Optioned Stock subject to the Option immediately prior to the
merger, the consideration (whether stock, cash, or other securities or property)
received in the merger by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger was not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of the Option for
each Share of Optioned Stock subject to the Option to be solely common stock of
the successor corporation or its Parent equal in fair market value to the per
share consideration received by holders of Common Stock in the merger.
12. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted, and such
Options shall remain in full force and effect
-10-
<PAGE>
as if this Plan had not been amended or terminated, unless mutually agreed
otherwise between the Optionee and the Administrator, which agreement must be in
writing and signed by the Optionee and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
15. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
16. Agreements. Options shall be evidenced by written agreements in such
----------
form as the Administrator shall approve from time to time.
17. Shareholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under Applicable Laws and the rules of any
stock exchange upon which the Common Stock is listed.
18. Information to Optionees and Purchasers. The Company shall provide to
---------------------------------------
each Optionee, not less frequently than annually, copies of annual financial
statements. The Company shall also provide such statements to each individual
who acquires Shares pursuant to the Plan while such individual owns such Shares.
The Company shall not be required to provide such statements to key employees
whose duties in connection with the Company assure their access to equivalent
information.
-11-
<PAGE>
19. Arbitration. Each stock option agreement shall contain a
-----------
provision submitting to arbitration all claims, disputes, or controversies
arising out of, relating to, or in connection with such stock option agreement.
-12-
<PAGE>
SHIELDS ENTERPRISES, INC.
1996 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
[Optionee's Name and Address]
- -----------------------------
_________________
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number _________________________
Date of Grant _________________________
Vesting Commencement Date July 1, 1996
Exercise Price per Share $________________________
Total Number of Shares Granted _________________________
Total Exercise Price $_________________________
Type of Option: ___ Incentive Stock Option
___ Supplemental Stock Option
Term/Expiration Date: _________________________
<PAGE>
Vesting Schedule:
----------------
You may exercise this Option, in whole or in part, according to the
following vesting schedule:
(i) Except as provided below in subparagraph (ii) 25% of the Shares
subject to the Option shall vest twelve (12) months after the Vesting
Commencement Date, and 1/48 of the Shares subject to the Option shall vest each
month thereafter; or
(ii) In the event the Company merges with or into a subsidiary of
Navigation Technologies Corporation, then 6/48 of the Shares subject to the
Option shall vest six (6) months after the Vesting Commencement Date, and 1/48
of the Shares subject to the Option shall vest monthly thereafter.
Termination of Option
---------------------
This Option shall terminate and be of no further force and effect if
the Company does not consummate a merger with or into a subsidiary of Navigation
Technologies Corporation by December 31, 1996.
Termination Period:
------------------
Except as provided herein, this Option may be exercised for three (3)
months after termination of your employment or consulting relationship. In the
event that you have voluntarily terminated your employment, this Option may be
exercised for thirty (30) days after termination of your employment or
consulting relationship. In the event of your death, this Option may be
exercised for a period of eighteen (18) months, or in the event you become
disabled, this Option may be exercised for a period of twelve (12) months. In
the event of your change in status from Employee to Consultant or Consultant to
Employee, this Option Agreement shall remain in effect. In no event may this
Option be exercised later than the Term/Expiration Date as provided above. If
you commit an act of Misconduct, the Option shall immediately terminate as of
and at the time of such act of Misconduct, and the Shares covered by the
unexercised portion of such Option shall revert to the Plan, or if this Option
has been exercised subsequent to such Misconduct, the Company may within ninety
(90) days after the Board or the Company's chief executive officer has knowledge
of the Misconduct, at its option either (i) rescind such exercise and recover
the Shares issued to you upon returning to you the exercise price for such
Shares or (ii) if you have sold the Shares, recover from you the net proceeds
from the sale of such Shares less such exercise price and plus interest on such
difference at 8% per annum from the exercise date to the date such difference is
paid by you to the Company.
II. AGREEMENT
---------
1. Grant of Option. Shields Enterprises, Inc., a Delaware
---------------
corporation (the "Company"), hereby grants to the Optionee named in the Notice
of Grant (the "Optionee"), an option (the "Option") to purchase the total number
of shares of Common Stock (the "Shares") set forth in the
-2-
<PAGE>
Notice of Grant, at the exercise price per share set forth in the Notice of
Grant (the "Exercise Price") subject to the terms, definitions and provisions of
the 1996 Stock Plan (the "Plan") adopted by the Company, which is incorporated
herein by reference. Unless otherwise defined herein, the terms defined in the
Plan shall have the same defined meanings in this Option Agreement.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds
the $100,000 rule of Code Section 422(d), this Option shall be treated as a
Supplemental Stock Option ("SSO").
2. Exercise of Option.
------------------
(a) Right to Exercise. This Option shall be exercisable during its
-----------------
term in accordance with the Vesting Schedule set out in the Notice of Grant and
with the applicable provisions of the Plan and this Option Agreement. In the
event of Optionee's death, disability or other termination of the employment or
consulting relationship, this Option shall be exercisable in accordance with the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by written
------------------
notice (in the form attached as Exhibit A) which shall state the election to
exercise the Option, the number of Shares in respect of which the Option is
being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as may be
required by the Company pursuant to the provisions of the Plan. Such written
notice shall be signed by the Optionee and shall be delivered in person or by
certified mail to the Secretary of the Company. The written notice shall be
accompanied by payment of the Exercise Price. This Option shall be deemed to be
exercised upon receipt by the Company of such written notice accompanied by the
Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of law
and the requirements of any stock exchange upon which the Shares may then be
listed. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
3. Optionee's Representations. In the event the Shares purchasable
--------------------------
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, if required by the Company, concurrently with the exercise of
all or any portion of this Option, deliver to the Company his or her Investment
Representation Statement in the form attached hereto as Exhibit B.
4. Lock-Up Period. Optionee hereby agrees that if so requested by
--------------
the Company or any representative of the underwriters (the "Managing
Underwriter") in connection with any registration of the offering of any
securities of the Company under the Securities Act, Optionee shall not sell or
otherwise transfer any Shares or other securities of the Company during the 180-
day period (or such
-3-
<PAGE>
longer period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act; provided, however, that such restriction shall apply only to
the first registration statement of the Company to become effective under the
Securities Act that includes securities to be sold on behalf of the Company to
the public in an underwritten public offering under the Securities Act. The
Company may impose stop-transfer instructions with respect to securities subject
to the foregoing restrictions until the end of such Market Standoff Period.
5. Method of Payment. Payment of the Exercise Price shall be by any
-----------------
of the following, or a combination thereof, at the election of the Optionee:
(a) cash;
(b) check;
(c) surrender of other shares of Common Stock of the Company which
(A) in the case of Shares acquired pursuant to the exercise of a Company option,
have been owned by the Optionee for more than six (6) months on the date of
surrender, and (B) have a Fair Market Value on the date of surrender equal to
the Exercise Price of the Shares as to which the Option is being exercised; or
(d) delivery of a properly executed exercise notice together with such
other documentation as the Administrator and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale or loan proceeds required to pay the Exercise Price.
6. Restrictions on Exercise. This Option may not be exercised until
------------------------
such time as the Plan has been approved by the shareholders of the Company, or
if the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board.
7. Termination of Relationship. In the event an Optionee's
---------------------------
Continuous Status as an Employee or Consultant terminates, Optionee may, to the
extent otherwise so entitled at the date of such termination (the "Termination
Date"), exercise this Option during the Termination Period set out in the Notice
of Grant. To the extent that Optionee was not entitled to exercise this Option
at the date of such termination, or if Optionee does not exercise this Option
within the time specified herein, the Option shall terminate.
8. Disability of Optionee. In the event of termination of an
----------------------
Optionee's Continuous Status as an Employee or Consultant as a result of his or
her disability, Optionee may, but only within twelve (12) months from the date
of such termination (and in no event later than the expiration date of the
-4-
<PAGE>
term of such Option as set forth in the Option Agreement), exercise the Option
to the extent otherwise entitled to exercise it at the date of such termination;
provided, however, that if such disability is not a "disability" as such term is
defined in Section 22(e)(3) of the Code, in the case of an Incentive Stock
Option such Incentive Stock Option shall cease to be treated as an Incentive
Stock Option and shall be treated for tax purposes as a Supplemental Stock
Option on the day three months and one day following such termination. To the
extent that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
9. Death of Optionee. In the event of termination of Optionee's
-----------------
Continuous Status as an Employee or Consultant as a result of the death of
Optionee or the Optionee's death occurs within three (3) months of the
termination of Optionee's continuous status as an Employee or Consultant, the
Option may be exercised at any time within eighteen (18) months following the
date of death (but in no event later than the date of expiration of the term of
this Option as set forth in Section 10 below), by Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or inheritance,
but only to the extent the Optionee could exercise the Option at the date of
death.
10. Non-Transferability of Option. This Option may not be transferred
-----------------------------
in any manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by Optionee. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
11. Term of Option. This Option may be exercised only within the
--------------
term set out in the Notice of Grant, and may be exercised during such term only
in accordance with the Plan and the terms of this Option. The limitations set
out in Section 7 of the Plan regarding Options designated as Incentive Stock
Options and Options granted to more than ten percent (10%) shareholders shall
apply to this Option.
12. Tax Consequences. Set forth below is a brief summary as of the
----------------
date of this Option of some of the federal and state tax consequences of
exercise of this Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING
OF THE SHARES.
(a) Exercise of ISO. If this Option qualifies as an ISO, there
---------------
will be no regular federal income tax liability or state income tax liability
upon the exercise of the Option, although the excess, if any, of the Fair Market
Value of the Shares on the date of exercise over the Exercise Price will be
treated as an adjustment to the alternative minimum tax for federal tax purposes
and may subject the Optionee to the alternative minimum tax in the year of
exercise.
(b) Exercise of ISO Following Disability. If the Optionee's
------------------------------------
Continuous Status as an Employee or Consultant terminates as a result of
disability that is not total and permanent disability as defined in Section
22(e)(3) of the Code, to the extent permitted on the date of termination, the
-5-
<PAGE>
Optionee must exercise an ISO within three months of such termination for the
ISO to be qualified as an ISO.
(c) Exercise of Supplemental Stock Option. There may be a regular
-------------------------------------
federal income tax liability and state income tax liability upon the exercise of
a Supplemental Stock Option. The Optionee will be treated as having received
compensation income (taxable at ordinary income tax rates) equal to the excess,
if any, of the Fair Market Value of the Shares on the date of exercise over the
Exercise Price. If Optionee is an Employee or a former Employee, the Company
will be required to withhold from Optionee's compensation or collect from
Optionee and pay to the applicable taxing authorities an amount in cash equal to
a percentage of this compensation income at the time of exercise, and may refuse
to honor the exercise and refuse to deliver Shares if such withholding amounts
are not delivered at the time of exercise.
(d) Disposition of Shares. In the case of an SSO, if Shares are
---------------------
held for at least one year, any gain realized on disposition of the Shares will
be treated as long-term capital gain for federal and state income tax purposes.
In the case of an ISO, if Shares transferred pursuant to the Option are held for
at least one year after exercise and are disposed of at least two years after
the Date of Grant, any gain realized on disposition of the Shares will also be
treated as long-term capital gain for federal and state income tax purposes. If
Shares purchased under an ISO are disposed of within such one-year period or
within two years after the Date of Grant, any gain realized on such disposition
will be treated as compensation income (taxable at ordinary income rates) to the
extent of the difference between the Exercise Price and the lesser of (1) the
Fair Market Value of the Shares on the date of exercise, or (2) the sale price
of the Shares. Any additional gain will be taxed as capital gain, short-term or
long-term depending on the period that the ISO Shares were held.
(e) Notice of Disqualifying Disposition of ISO Shares. If the
-------------------------------------------------
Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
13. Arbitration. Optionee agrees that any claim, dispute or controversy
-----------
arising out of, relating to, or in connection with this stock option agreement
shall be settled by binding arbitration pursuant to the Employment Dispute
Resolution Rules of the American Arbitration Association by one arbitrator
appointed in accordance with said rules. The arbitrator may grant injunctions or
other relief in such dispute or controversy. The decision of the arbitrator
shall be final, conclusive and binding on the parties to the arbitration.
Judgment may be entered on the award of the arbitration in any court having
jurisdiction thereof.
(a) The arbitrator shall apply Delaware law to the merits of any
dispute or claim, without reference to rules of conflicts of law. The
arbitration proceedings shall be governed by federal arbitration law, without
reference to state arbitration law.
-6-
<PAGE>
(b) The Company and Optionee shall each pay one-half of the costs and
expenses of such arbitration, and each shall separately pay its counsel fees and
expenses.
(c) Optionee understands that nothing in this Section 13 modifies
optionee's at-will status. Either optionee or the Company can terminate the
employment relationship at any time, with or without cause.
14. Entire Agreement; Governing Law. The Plan is incorporated herein
-------------------------------
by reference. The Plan and this Option Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede
in their entirety all prior undertakings and agreements of the Company and
Optionee with respect to the subject matter hereof, and may not be modified
adversely to the Optionee's interest except by means of a writing signed by the
Company and Optionee. This agreement is governed by Delaware law except for
that body of law pertaining to conflict of laws.
SHIELDS ENTERPRISES, INC.
a Delaware corporation
By: ____________________________________
-7-
<PAGE>
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT
TO THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT
THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
OPTIONEE HAS READ AND UNDERSTANDS SECTION 13, WHICH DISCUSSES
ARBITRATION. OPTIONEE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, OPTIONEE
AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH
THIS AGREEMENT TO BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE
CONSTITUTES A WAIVER OF OPTIONEE'S RIGHT TO A JURY TRIAL AND RELATES TO THE
RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THIS RELATIONSHIP.
Optionee acknowledges receipt of a copy of the Plan and represents
that he is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option. Optionee
further agrees to notify the Company upon any change in the residence address
indicated below.
Dated: _____________________ __________________________________
Optionee
Residence Address:
__________________________________
__________________________________
__________________________________
-8-
<PAGE>
EXHIBIT A
---------
1996 STOCK OPTION PLAN
EXERCISE NOTICE
Shields Enterprises, Inc.
Attention: Secretary
1. Exercise of Option. Effective as of today, _____________, the
------------------
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of Shields Enterprises, Inc.
(the "Company") under and pursuant to the 1996 Stock Option Plan (the "Plan")
and the [ ] Incentive [ ] Supplemental Stock Option Agreement dated ________,
19___ (the "Option Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
---------------------------
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
3. Rights as Shareholder. Until the stock certificate evidencing such
---------------------
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 11 of the Plan.
4. Tax Consultation. Optionee understands that Optionee may suffer
----------------
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
5. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. Optionee understands and agrees that the Company shall
-------
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by the Company or by state or
federal securities laws:
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY COUNSEL
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE
ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN
THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH
MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER
RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF
THESE SHARES.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instruc tions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
6. Successors and Assigns. The Company may assign any of its rights
----------------------
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.
7. Interpretation. Any dispute regarding the interpretation of this
--------------
Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the Plan,
which shall review such dispute at its next regular meeting. The resolution of
such a dispute by the Board or committee shall be final and binding on the
Company and on Optionee.
8. Governing Law; Severability. This Agreement shall be governed by and
---------------------------
construed in accordance with the laws of the State of Delaware excluding that
body of law pertaining to conflicts
-2-
<PAGE>
of law. Should any provision of this Agreement be determined by a court of law
to be illegal or unenforceable, the other provisions shall nevertheless remain
effective and shall remain enforceable.
9. Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
10. Further Instruments. The parties agree to execute such further
-------------------
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
11. Delivery of Payment. Optionee herewith delivers to the Company the
-------------------
full Exercise Price for the Shares.
12. Entire Agreement. The Plan and Notice of Grant/Option Agreement are
----------------
incorporated herein by reference. This Agreement, the Plan, the Option
Agreement and the Investment Representation Statement constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede
in their entirety all prior undertakings and agreements of the Company and
Optionee with respect to the subject matter hereof, and may not be modified
adversely to the Optionee's interest except by means of a writing signed by the
Company and Optionee
Submitted by: Accepted by:
OPTIONEE: SHIELDS ENTERPRISES, INC.
______________________________ __________________________________
Signature By
__________________________________
Title
Address: Address:
- ------- -------
______________________________ __________________________________
______________________________ __________________________________
-3-
<PAGE>
EXHIBIT B
---------
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE :
COMPANY : SHIELDS ENTERPRISES, INC.
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. Optionee is
acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the Securities. Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company, a legend prohibiting their
transfer without the consent of the Commissioner of Corporations of the State of
California and any other legend required under applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule
144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to
<PAGE>
the satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of the grant of the Option to the Optionee,
the exercise will be exempt from registration under the Securities Act. In the
event the Company becomes subject to the reporting requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or
such longer period as any market stand-off agreement may require) the Securities
exempt under Rule 701 may be resold, subject to the satisfaction of certain of
the conditions specified by Rule 144, including: (1) the resale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of
certain public information about the Company, (3) the amount of Securities being
sold during any three month period not exceeding the limitations specified in
Rule 144(e), and (4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of grant of the Option, then the Securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale
to occur not less than two years after the later of the date the Securities were
sold by the Company or the date the Securities were sold by an affiliate of the
Company, within the meaning of Rule 144; and, in the case of acquisition of the
Securities by an affiliate, or by a non-affiliate who subsequently holds the
Securities less than three years, the satisfaction of the conditions set forth
in sections (1), (2), (3) and (4) of the paragraph immediately above.
(e) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that
any such other registration exemption will be available in such event.
(f) Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities without the consent of the Commissioner of Corporations of
California. Optionee has read the applicable Commissioner's Rules with respect
to such restriction, a copy of which is attached.
Signature of Optionee:
___________________________________
Date:______________________________
-2-
<PAGE>
ATTACHMENT 1
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
----------------------------------------------------
Title 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: Restriction on Transfer. (a) The issuer of any security upon
---------- -----------------------
which a restriction on transfer has been imposed pursuant to Sections 260.102.6,
260.141.10 or 260.534 shall cause a copy of this section to be delivered to each
issuee or transferee of such security at the time the certificate evidencing the
security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a sale
or transfer of such security, or any interest therein, without the prior written
consent of the Commissioner (until this condition is removed pursuant to Section
260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of the
Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or custodian
for the account of the transferee or the transferee's ancestors, descendants or
spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either acting
as such or as a finder) to a resident of a foreign state, territory or country
who is neither domiciled in this state to the knowledge of the broker-dealer,
nor actually present in this state if the sale of such Securities is not in
violation of any securities law of the foreign state, territory or country
concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other lien given
by the purchaser to the seller upon a sale of the security for which the
Commissioner's written consent is obtained or under this rule not required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113 or
25121 of the Code, of the securities to be transferred, provided that no order
under Section 25140 or subdivision (a) of Section 25143 is in effect with
respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such corporation, or
by a wholly owned subsidiary of a corporation to such corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or 25113
of the Code, provided that no order under Section 25140 or subdivision (a) of
Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or countries who are
neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or to
the administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property Law or by
the administrator of the unclaimed property law of another state if, in either
such case, such person (i) discloses to potential purchasers at the sale that
transfer of the Securities is restricted under this rule, (ii) delivers to each
purchaser a copy of this rule, and (iii) advises the Commissioner of the name of
each purchaser;
<PAGE>
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an issuer
transaction that is subject to the qualification requirement of Section 25110 of
the Code but exempt from that qualification require ment by subdivision (f) of
Section 25102; provided that any such transfer is on the condition that any
certificate evidencing the security issued to such transferee shall contain the
legend required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORA TIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
-2-
<PAGE>
EXHIBIT 10.7
Investor Rights Agreement
This Agreement (which may be referred to as the "Restated Investor Rights
Agreement") is entered into as of September 1, 1994, by and among the
Signatories identified on Exhibit A hereto, as such may be amended from time to
pursuant to Section 7.2 hereof, each together with its related parties listed on
Exhibit A (an "Investment Group"); and Navigation Technologies Corporation, a
Delaware corporation (the "Company").
RECITALS:
WHEREAS, the Signatories and the Company are parties to that certain
Amended and Restated Investor Rights Agreement dated as of September 30, 1991
(the "Prior Investor Rights Agreement") and are the record or beneficial holders
of at least 66% of the Registrable Securities defined therein; and
WHEREAS, the parties desire to terminate and replace the Prior Investor
Rights Agreement as provided herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties agree as follows:
ARTICLE 1. TERMINATION OF PRIOR RIGHTS
---------------------------
1.1 Termination of Prior Rights. The Signatories and the Company
---------------------------
hereby agree that this Agreement restates and supersedes in its entirety the
Prior Investor Rights Agreement and that, effective upon the date hereof, the
Prior Investor Rights Agreement shall be terminated and shall have no further
force or effect whatsoever. Except as each has notified the Company otherwise,
each Investor (as defined in the Prior Investor Rights Agreement) who is a party
hereto expressly waives its right to maintain its voting interest in the Company
as set forth in Article 3 of the Prior Investor Rights Agreement to the full
extent such right applies to the sale and issuance by the Company of its
securities through the date hereof.
ARTICLE 2. DEFINITIONS
-----------
2.1 The terms "register", "registered", and "registration" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act of 1933, as amended (the "Act"), and the
declaration or ordering of the effectiveness of such registration statement.
2.2 The term "Registrable Securities" means any not previously
registered common stock outstanding and common stock issuable upon the exercise,
conversion or exercise and
<PAGE>
subsequent conversion of outstanding preferred securities, options, warrants,
debentures or any other convertible security.
2.3 The term "Holder" means any Signatory whose Investment Group
holds at least two percent of the Registrable Securities.
2.4 The term "Initiating Holders" means any Holder or Holders whose
Investment Group holds at least ten percent of the Registrable Securities.
2.5 "Voting Securities" means any class of security entitled to vote
generally for Directors of the Company, including common stock, whether now
authorized or not, as well as any underlying voting security issuable upon
exercise of any right, option or warrant to purchase directly or indirectly said
voting securities or upon conversion of any securities convertible directly or
indirectly into said voting securities.
2.6 "Significant Holders" means Initiating Holders whose Investment
Group holds at least 35% of the Registrable Securities.
ARTICLE 3. REGISTRATION
------------
3.1 Requested Registration.
----------------------
(a) Request for Registration. If the Company shall receive
------------------------
from Initiating Holders at any time after six months after the Initial Public
Offering, as defined in the Company's Bylaws, or if the Company shall receive
from Significant Holders at any time, a written request (specifying that it is
being made pursuant to this Section 3.1) that the Company effect a registration,
qualification or compliance after April 30, 1995, with respect to at least ten
percent of the Registrable Securities or to Registrable Securities held by
members of their Investment Groups and having a proposed public offering price
of at least $25,000,000:
(i) The Company will promptly give written notice of
the proposed registration, qualification or compliance to all other Holders; and
(ii) The Company will use its reasonable best efforts
to effect, as soon as practicable (but not earlier than April 30, 1995), all
such registrations, qualifications and compliances (including, without
limitation, the execution of an undertaking to file post-effective amendments,
appropriate qualification under the applicable blue sky or other state
securities laws and appropriate compliance with exemptive regulations issued
under the Act and any other governmental requirements or regulations) as may be
so requested and as would permit or facilitate the sale and distribution of all
or such portion of the Registrable Securities as are specified in such
Initiating Holders' request, together with all or such portion of the
Registrable Securities of any Holder or Holders joining in such request, or of
their Investment Groups, as are specified in a written request received by the
Company within thirty days after such written notice is given.
-2-
<PAGE>
Subject to the other provisions of this Section 3.1, the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable, but in any event within ninety days (180
days, if it is the Company's first public offering), after receipt of the
request or requests of the Initiating Holders.
(b) Exceptions. Despite the provisions of Paragraph 3.1 (a):
----------
(i) The Company shall not be obligated to effect a
registration, qualification or compliance under this Section 3.1 during the
period starting sixty days prior to the Company's estimated date of filing of,
and ending six months following the effective date of, a registration statement
pertaining to an underwritten public offering of securities for the account of
the Company, provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to be filed and become
effective.
(ii) If the Company shall furnish to such Initiating
Holders a certificate signed by the President or the Chief Financial Officer of
the Company stating that, in the good faith judgment of the majority of the
Board of Directors of the Company ("Board") (not counting any designee of the
Initiating Holders then sitting on the Board), it would be seriously detrimental
to the Company or its shareholders for such registration statement to be filed
in the near future, then the Company shall have an additional period of not more
than six months within which to file such registration statement.
(iii) In the event the Company is eligible to use
Forms S-2 or S-3 (or successor), the Company shall be entitled, at its option,
to use such form.
(iv) The Company shall not be obligated to take any
action to effect any such registration, qualification or compliance pursuant to
this Section 3.1:
(A) If the Company would be required to
register in more than ten jurisdictions as a dealer or to cause any officer or
employee of the Company to register as a salesperson in effecting such
registration, qualification or compliance; or
(B) After the Company has effected three such
registrations pursuant to this Section 3.1, such registrations having been
declared or ordered effective and the securities offered pursuant to such
registrations having been sold.
(c) Underwriting. The Initiating Holders shall include in
------------
their request made pursuant to this Section 3.1 the name of the underwriter or
underwriters that the majority in interest of such Initiating Holders would
propose to employ in connection with the public offering proposed to be made
pursuant to the registration requested, subject to the Company's consent, which
shall not be unreasonably withheld. The Company shall include such information
in the written notice referred to in Subparagraph 3.1 (a)(i). The right of any
Holder to registration pursuant to this Section 3.1 shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities, and those of the Holder's Investment Group, in
the
-3-
<PAGE>
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein.
If employees, officers or directors of the Company holding Registrable
Securities shall request inclusion in a registration pursuant to Section 3.1, or
if holders of Registrable Securities who are not Holders, members of an
Investment Group, employees, officers or directors (the "Other Shareholders")
request such inclusion, the Company shall offer to include the Registrable
Securities of such employees, officers, directors and Other Shareholders in the
underwriting and may condition such offer on their acceptance of the further
applicable provisions of this Article 3. The Company shall (together with all
Holders, members of their Investment Groups, employees, officers, directors and
Other Shareholders proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting in the manner set
forth above.
(d) Limitation. Despite any other provision of this Section
----------
3.1, if the managing underwriter advises the Company in writing that marketing
factors require a limitation of the number of shares to be underwritten:
(i) The Registrable Securities held by employees,
officers and directors of the Company shall be excluded from such registration
to the extent so required by such limitation;
(ii) If a limitation of the number of shares is still
required, the Registrable Securities held by Other Shareholders shall be
included in such registration to the extent so allowed by such limitation, in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities which they hold at the time of filing the registration statement; and
(iii) If a limitation of the number of shares is
further required, Registrable Securities that may be included in the
registration and underwriting shall be allocated among all Investment Groups in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Investment Groups at the time of filing the registration
statement.
No Registrable Securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration.
Any Holder, Investment Group member, employee, officer, director or Other
Shareholder who has requested inclusion in such registration as provided above
who disapproves of the terms of the underwriting may elect to withdraw therefrom
by written notice to the Company. The Registrable Securities so withdrawn shall
also be withdrawn from registration. If by the withdrawal of such Registrable
Securities, a greater number of Registrable Securities held by other Investment
Groups, employees, officers, directors, or Other Shareholders may be included in
such registration (up to the maximum of any limitation imposed by the
underwriters), then the Company shall offer to all Holders on behalf of their
Investment Groups, employees, officers, directors and Other Shareholders who
-4-
<PAGE>
have included Registrable Securities in the registration the right to include
additional shares in the same proportion used in determining the underwriter
limitation in this Paragraph 3.1(d).
3.2 Company Registration.
--------------------
(a) Registration Notice. Any time the Company determines to
-------------------
register any of its securities, either for its own account or the account of a
securityholder or securityholders, other than a registration relating solely to
employee benefit plans on Form S-1 or S-8, or a registration relating solely to
an SEC Rule 145 transaction on Form S-4, or a registration on any other form
(other than Form S-1, S-2 or S-3) which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of Registrable Securities, or a registration pursuant to
Section 3.1, the Company will:
(i) Promptly give each Holder written notice thereof (which
shall include a list of the states and other jurisdictions in which the Company
intends to attempt to qualify such securities under applicable securities laws);
and
(ii) Include in such registration (and any related
qualification in such states and other jurisdictions), and in any underwriting
involved therein, all the Registrable Securities of a Holder and the Holder's
Investment Group specified in any written request or requests by any Holder or
Holders received by the Company within twenty days after such written notice is
given and all Registrable Securities requested to be included by any employees,
officers, directors or Other Shareholders except as set forth in Paragraph
3.2(c).
(b) Underwriting. If the registration of which the Company give
------------
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Subparagraph 3.2(a)(i). In such event, the right of any Holder to
registration pursuant to this Section 3.2 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's,
and such Holder's Investment Group's Registrable Securities in the underwriting
to the extent provided herein. All Holders proposing to distribute their
Registrable Securities through such underwriting (together with the Company,
members of the Holder's Investment Group, Other Shareholders distributing their
securities through such underwriting and any employees, officers or directors of
the Company holding Registrable Securities who shall request inclusion in any
registration statement pursuant to Subparagraph 3.2(a)(ii)) shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company.
(c) Limitation. Despite any other provision of this Section 3.2,
----------
if the managing underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the underwriter may
(subject to the allocation priority set forth below) limit the number of
Registrable Securities entitled to registration in any registration and
underwriting to not less than thirty percent of the securities proposed to be
distributed by the underwriter through such underwriting.
-5-
<PAGE>
The Company shall so advise all Holders and Other Shareholders owning
Registrable Securities which would otherwise be registered and underwritten
pursuant hereto. The reduction shall occur on the following basis:
(i) the Registrable Securities held by employees, officers
and directors shall be excluded from such registration to the extent so required
by such limitation; and
(ii) if a limitation of the number of shares is still
required, the number of shares of Registrable Securities that may be included in
the registration and underwriting shall be allocated among all Investment Groups
and Other Shareholders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by such Investment Groups and
Other Shareholders at the time of filing the registration statement.
No Registrable Securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration. Any
Holder or member of a Holder's Investment Group who disapproves of the terms of
the underwriting may elect to withdraw therefrom by written notice to the
Company and the underwriter. The Registrable Securities so withdrawn shall also
be withdrawn from registration.
3.3 Expenses of Demand Registrations. All expenses incurred in
--------------------------------
connection with the registration, qualification or compliance pursuant to
Section 3.1 including, without limitation, the stock transfer taxes and
underwriters' discounts and commissions, all registration, filing and
qualification fees, printing expenses, escrow fees, fees and disbursements of
counsel for the Company and expenses of any special audits incidental to or
required by such registration shall be borne pro rata by the participants in the
Registration on the basis of the amount of securities so registered.
If the Company receives a request pursuant to Section 3.1 that does not lead to
a registration for whatever reason, then the Initiating Holders shall bear all
expenses pro rata by the number of Registrable Securities each such Holder's
Investment Group owns.
3.4 Company Registration Expenses. In the case of any registration
-----------------------------
effected pursuant to Section 3.2, the participants shall bear any additional
registration and qualification fees and expenses and any additional costs and
disbursements of counsel for the Company that result from inclusion of
securities held by the Holders and their Investment Group members in such
registration pro rata by the participants in the registration on the basis of
the amount of securities so registered.
3.5 Registration on Form S-3. If, at any time when the Company is
------------------------
entitled to register Registrable Securities on Form S-3 (or successor), the
Company shall receive from any Holder or Holders a written request (specifying
that it is being made pursuant to this Section 3.5) that the Company effect a
registration on Form S-3 (or successor) for a public offering of Registrable
Securities of such Holders and their Investment Groups which exceeds three
percent of the then outstanding Voting Securities of the Company, the Company
will use its reasonable best efforts to effect such registration. All expenses
incurred in connection with a registration requested pursuant to this Section
3.5, including without limitation, all registration, qualification, printing and
accounting
-6-
<PAGE>
fees (other than accounting fees incurred by the Company in the
regular course of its business), and fees and disbursements of counsel for the
selling Holder or Holders and their Investment Groups and counsel for the
Company (other than fees and disbursements of counsel incurred by the Company in
the regular course of its business), shall be borne pro rata by the Investment
Groups participating in the registration on the basis of the amount of
securities so registered. The Company agrees to use its reasonable best efforts
at all times commencing after the Initial Public Offering to make all necessary
filings with the SEC to become eligible to use Form S-3 at the earliest
opportunity and to so remain eligible for the term of this Agreement.
3.6 Registration Procedures. In the case of a registration,
-----------------------
qualification or compliance effected by the Company pursuant to this Article 3,
the Company will keep each Holder participating therein advised in writing as to
the initiation of each registration, qualification and compliance and as to the
completion thereof. The Company will:
(a) Keep such registration, qualification or compliance pursuant
to Sections 3.1, 3.2, or 3.5 effective for a period of ninety days or until the
Holder or Holders and their Investment Group members have completed the
distribution described in the registration statement relating thereto, whichever
first occurs; and
(b) Furnish such number of prospectuses and other documents
incident thereto as a Holder from time to time may reasonably request.
3.7 Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless each Holder
and its Investment Group members with respect to which a registration statement
has been filed under the Act pursuant to this Article 3, each of such Holder's
and Investment Group member's partners, officers and directors, each underwriter
of any of the Registrable Securities included in such registration statement,
and each person, if any, who controls any such Holder, Investment Group member
or underwriter within the meaning of Section 15 of the Act (hereinafter
collectively referred to as the "Holder-Underwriters"), as follows:
(i) Against any and all loss, liability, claim, damage and
expense whatsoever arising out of any untrue statement or alleged untrue
statement of a material fact contained in such registration statement (or any
amendment thereto), or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances in which they were made, or arising
out of any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus or prospectus (or any amendment or
supplement thereto) or the omission or alleged omission therefrom of a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, unless such untrue
statement or omission or such alleged untrue statement or omission was made in
reliance upon and in conformity with written information furnished to the
Company by any Holder-Underwriter expressly for use in
-7-
<PAGE>
such registration statement (or any amendment thereto) or such preliminary
prospectus or prospectus (or any amendment or supplement thereto);
(ii) Against any and all loss, liability, claim, damage, and
expense whatsoever to the extent of the aggregate amount paid in settlement of
any litigation, commenced or threatened, or of any claim whatsoever based upon
any such untrue statement or omission or any such alleged untrue statement or
omission, if such settlement is effected with the written consent of the
Company, which consent shall not be unreasonably withheld; and
(iii) Against any and all expense whatsoever reasonably
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under Subparagraphs 3.7(a)(i) or
3.7(a)(ii).
(b) The indemnity agreement stated in Section 3.7(a) is subject to
the condition that, insofar as it relates to any such untrue statement, alleged
untrue statement, omission or alleged omission made in a preliminary prospectus
but eliminated or remedied in the revised prospectus on file with the SEC at the
time the registration statement becomes effective or the amended prospectus is
filed with the SEC pursuant to Rule 424(b) (the "Prospectus"), such indemnity
agreement shall not accrue to the benefit of any underwriter if a copy of the
Prospectus was not furnished to the person asserting loss, liability, claim or
damage at or prior to the time action is required by the Act. In no case shall
the Company be liable under this indemnity agreement with respect to any loss,
liability, claim, damage or expense with respect to any claim made against any
Holder-Underwriter unless the Company shall be notified in writing of the nature
of the claim within thirty days after the service thereof but not later than
five days prior to the date a first response to such assertion must be made if
the failure to give such notice is prejudicial to the Company's ability to
defend against such loss, liability, claim, damage or expense. However, failure
to so notify the Company shall not relieve the Company from any liability which
it may have otherwise than on account of this indemnity agreement. In case of
any such notice, the Company shall be entitled to participate at its expense in
the defense, or if it so elects within a reasonable time after receipt of such
notice, to assume the defense of any suit brought to enforce any such claim. If
the Company so elects to assume the defense, such defense shall be conducted by
counsel chosen by it and approved by the Holder-Underwriter or Holder-
Underwriters and other defendant or defendants, if any, in any suit so brought,
which approval shall not be unreasonably withheld. In the event that the Company
elects to assume the defense of any such suit and retain such counsel, the
Holder-Underwriter or Holder-Underwriters and other defendant or defendants, if
any, in the suit, shall bear the fees and expenses of any additional counsel
thereafter retained by them.
(c) Each Holder on behalf of its Investment Group severally agrees
that it will indemnify and hold harmless the Company, each officer and director
of the Company, each person, if any, who controls the Company within the meaning
of Section 15 of the Act, each underwriter of Registrable Securities included in
any registration statement which has been filed under the Act pursuant to this
Article 3, each person, if any, who controls such underwriter within the
-8-
<PAGE>
meaning of Section 15 of the Act, each other Holder and its Investment Group
members covered by the registration statement, each of such other Holder's or
Investment Group member's officers, directors and partners and each person
controlling such other Holder or Investment Group member within the meaning of
Section 15 of the Act against any and all loss, liability, claim, damage and
expense described in Paragraph 3.7(a) but only with respect to statements or
omissions or alleged statements or omissions made in such registration statement
(or any amendment thereto) or any preliminary prospectus or prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with written
information furnished to the Company by such Holder on behalf of its Investment
Group expressly for use in such registration statement (or any amendment
thereto) or such preliminary prospectus or prospectus (or any amendment or
supplement thereto); provided, however, that the obligations of such Holders on
behalf of its Investment Group hereunder shall be limited to an amount equal to
the proceeds to each such Holder's Investment Group from the securities sold as
contemplated herein. In case any action shall be brought against the Company or
any person so indemnified pursuant to the provisions of this Paragraph 3.7(c)
and in respect of which indemnity may be sought against any Holder on behalf of
its Investment Group, the Holders from whom indemnity is sought shall have the
rights and duties given to the Company, and the Company and the other persons so
indemnified shall have the rights and duties given to the persons entitled to
indemnification by the provisions of this Paragraph 3.7(c).
3.8 Information by Holder. The Holder or Holders of Registrable
---------------------
Securites included in any registration shall furnish to the Company such
information regarding such Holder or Holders and their respective Investment
Group members and the distribution proposed by them as the Company may request
in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Article 3.
3.9 Lockup Agreement. In consideration for the Company agreeing to its
----------------
obligations under this Article 3, and provided that each officer, director and
more than one percent shareholder of the Company agrees to a similar lockup,
each Signatory agrees in connection with any registration of the Company's
securities that, upon the request of the Company or the underwriters managing
any underwritten offering of the Company's securities, not to sell, make any
short sale of, loan, grant any option for the purchase of, or otherwise dispose
of (except for granting a security interest in) any Registrable Securities
(other than those included in the registration or Permitted Transactions as
defined in the Company's Bylaws) without the prior written consent of the
Company or such underwriters, as the case may be, for such period of time (not
to exceed one hundred eighty days) from the effective date of such registration
as the Company or the underwriters may specify. Each Signatory further agrees
to use it best efforts to secure for the Company the same agreement from each
member of its Investment Group which, together with its affiliates, owns or has
the right to acquire in the aggregate more than one percent of the Company's
Registrable Securities.
3.10 Termination of the Company's Obligations. The Company shall have
----------------------------------------
no obligations pursuant to Sections 3.1, 3.2 or 3.5 with respect to any request
or requests made by any Holder after the later of (a) five years after the
Initial Public Offering or (b) the date at which the Holder and the members of
the Holder's Investment Group are able to sell all Registrable Securities
-9-
<PAGE>
held by them within a one hundred eighty day period in accordance with Rule 144
of the Securities and Exchange Commission ("SEC").
3.11 SEC Rule 144 Reporting. With a view to making available to the
----------------------
Investors the benefits of SEC Rule 144 and any future similar rules or
regulations of the SEC which may permit the sale of the Registrable Securities
to the public without registration, the Company agrees to use its best efforts
at all times after its first public offering to:
(a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144;
(b) File with the SEC in a timely manner all reports and other
documents required of the Company under the Act or the Securities Exchange Act
of 1934; and
(c) Furnish to each Holder forthwith upon its request (i) a
written statement by the Company as to its compliance with the public
information requirements of SEC Rule 144, (ii) a copy of the most recent annual
or quarterly report of the Company, and (iii) such other reports and documents
as may be reasonably requested in availing any Holder and its Investment Group
of any rule or regulation of the SEC permitting the sale of any such securities
without registration.
3.12 Transfer of Registration Rights. Until the Initial Public
-------------------------------
Offerings right to cause the Company to register securities granted by the
Company under Sections 3.1, 3.2 and 3.5 may be assigned by any Holder to a
transferee or assignee of not less than two percent of the Voting Securities
outstanding at that time; provided that the Company is given written notice by
such Holder at the time of or within a reasonable time after said transfer,
stating the name and address of said transferee or assignee, identifying the
securities with respect to which such registration rights are being assigned and
providing the written agreement of said transferee to be bound by the terms of
this Agreement.
3.13 Sale Without Registration. At the time of any transfer of any
-------------------------
Registrable Securities which are not registered under the Act, the Company may
require, as a condition of allowing such transfer, that the purchaser or
transferee furnish to the Company: (i) such information as is reasonably
necessary in order to establish that such transfer may be made without
registration under the Act; and (ii) at the expense of the purchaser or
transferee, an opinion of counsel, satisfactory in form and substance to the
Company, to the effect that such transfer may be made without registration under
the Act. Nothing contained in this Section 3.13 shall relieve the Company from
complying with any request for registration, qualification or compliance made
pursuant to the other provisions of this Article 3.
3.14 Limitations on Subsequent Registration Rights. The Company shall
---------------------------------------------
not, without the consent of the Holders whose Investment Groups hold at least
eighty percent of the Registrable Securities, enter into any agreement (other
than this Agreement) with any securityholder or prospective securityholder of
Registrable Securities which would allow such securityholder or prospective
securityholder to include Registrable Securities in any registration filed under
Sections 3.1 or 3.2, unless, with respect to Section 3.1, under the terms of
such agreement such securityholder or
-10-
<PAGE>
prospective securityholder may include Registrable Securities in any such
registration only to the extent that such inclusion of Registrable Securities
will not diminish the amount of Registrable Securities of Investment Groups that
are included in such registration, and, with respect to Sections 3.1 and 3.2,
under the terms of such agreement the cut-back rights granted to such
securityholder or prospective securityholder are no more favorable to such
securityholder or prospective securityholder than those granted to the
Investment Groups pursuant to Sections 3.1 and 3.2.
ARTICLE 4. RIGHT TO MAINTAIN VOTING INTEREST
---------------------------------
4.1 General.
-------
(a) Except as set forth in this Article, whenever after the
Closing Date the Company issues and sells in a transaction not registered under
th Act, in reliance upon a claimed exemption thereunder, any Voting Securities,
each Signatory shall have the right to purchase up to that number of shares of
Voting Securities which, when added to the number of shares of Voting Securities
held by such Signatory's Investment Group prior to such purchase, shall
represent the same percentage of the Voting Securities outstanding after
completion of such issuances and sales to others and to the Signatory on behalf
of its Investment Group as the greater of the percentages of Voting Securities
held by such Signatory's Investment Group:
(i) Prior to such issuances and sales; or
(ii) On the later of the Closing Date and immediately
after the most recent previous time the Signatory had a right to purchase Voting
Securities under this Article taking into account all purchases by a Signatory
under the provisions of this Article and reduced by transfers other than those
within the Signatory's Investment Group.
(b) Each certificate representing Voting Securities purchased
pursuant to Section 4.1(a) or any other securities issued in respect of them
upon any stock split, stock dividend, recapitalization, merger, consolidation,
or similar event, shall (unless otherwise permitted or unless the securities
evidenced by such certificate shall have been registered under the Act) be
stamped or otherwise imprinted with a legend in the following form (in addition
to any legend required under applicable state securities laws):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED
FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO
THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW
OR AN
-11-
<PAGE>
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED.
Upon request of a holder of such a certificate, the Company shall remove the
legend from the certificate or issue to such holder a new certificate therefore
free of the transfer legend if:
(i) With such request, the Company shall have
received either the opinion referred to in Section 4.1(c)(i) or the "no-action"
letter referred to in Section 4.1(c)(ii) to the effect that any transfer by such
holder of the securities evidenced by such certificate will not violate the
Securities Act or applicable state securities laws; or
(ii) In accordance with Paragraph (k) of Rule
144, such holder is not, and has not during the last three months been, an
affiliate of the Company and such holder has held the securities represented by
such certificate for a period of at least three years and such holder is
eligible to use Paragraph (k) of Rule 144.
(c) No Signatory shall have the right to purchase any
Voting Securities pursuant to Section 4.1 (a) unless such Signatory represents
and warrants to the Company that it has not made, and undertakes that it will
not make, any offer of sale of the Voting Securities being so purchased by it
(to members of its Investment Group or others), except in accordance with the
requirements of this Section 4.1 (c), and that it will indemnify and hold
harmless the Company, its officers and directors, and its other stockholders
from and against all loss, liability, cost and expense of any nature caused by
or resulting from such Signatory's representations and warranty being inaccurate
or from its failure fully to comply with and perform its undertaking. Prior to
any proposed offer, sale or other transfer of any of such Voting Securities, the
Signatory shall give written notice (which may be given before or after such
Signatory's purchase of the Voting Securities) to the Company of such
Signatory's intention to effect such offer, sale or other transfer. Each such
notice shall describe the manner and circumstances of the proposed offer, sale
or other transfer in sufficient detail, and shall be accompanied (except in
transactions in compliance with Rule 144) by either:
(i) A written opinion of Day, Berry and Howard
or other legal counsel experienced in the requirements of the Act who shall be
reasonably satisfactory to the Company and to each Signatory whose Investment
Group owns at least 25% of the Company's then outstanding Voting Securities (a
"Principal Stockholder"), addressed to the Company and reasonably satisfactory
in form and substance to the Company and to each Principal Stockholder to the
effect that the proposed offer, sale or other transfer of the Voting Securities
may be effected without registration under the Securities Act; or
(ii) A "no-action" letter from the Securities
and Exchange Commission (the "Commission") reasonably satisfactory in form and
substance to the Company and each Principal Stockholder to the effect that the
proposed offer, sale or other transfer of such securities without registration
will not result in a recommendation by the staff of the Commission that action
be taken with respect thereto, whereupon the Signatory shall be entitled to
offer, sell or
-12-
<PAGE>
otherwise transfer such Voting Securities in accordance with the terms of the
notice delivered by the Signatory to the Company.
Each certificate evidencing the Voting Securities offered, sold or otherwise
transferred as above provided shall bear the restrictive legend set forth in
Section 4.1(b), except that such certificate shall not bear such restrictive
legend if the opinion of counsel or "no-action" letter referred to above is to
the further effect that such legend is not required in order to establish
compliance with the provisions of the Act.
4.2 Voting Securities Held. For the purposes of this Article, the
----------------------
following securities shall be deemed Voting Securities outstanding and/or held
as of the date of such determination:
(a) All shares of common stock issuable upon exercise of options
granted under the Company's stock option plan (the "Plan Shares") or otherwise
to employees, officers, consultants, suppliers, customers or directors of the
Company under stock option, purchase or similar incentive plans or agreements
approved by the Board;
(b) All shares of common stock issuable upon conversion of
preferably debentures, or other securities convertible directly or indirectly
into common stock then outstanding;
(c) All shares of common stock issuable upon exercise of
warrants, options or rights then outstanding;
(d) All shares of common stock issuable upon conversion of
securities convertible directly or indirectly into common stock issuable upon
exercise of warrants, options or rights then outstanding; and
(e) All shares of common stock then outstanding.
For purposes on Section 4.1(a), however, a Voting Security shall be deemed
"issued and sold" only when it becomes actually outstanding, by reason of
exercising or conversion of another security or otherwise.
4.3 Transaction Excluded. The issuance or sale of the following Voting
--------------------
Securities shall not be deemed to be an issuance or sale giving rise to a
Signatory's rights under this Article although, upon such issuance or sale, the
following Voting Securities shall be deemed outstanding (if not already deemed
outstanding by operation of the provisions of Section 4.2) for the purposes of
this Article:
(a) Shares of common stock, including the Plan Shares, issued to
employees, officers, consultants, suppliers, customers or directors of the
Company upon the exercise of options or rights granted under stock option,
purchase or similar incentive plans or agreements
-13-
<PAGE>
except to the extent that since the previous time the Signatories had the right
to maintain voting interest under this Article, the cumulative shares issued
under such grants exceeds two percent of the Voting Securities; and
(b) Any shares of common stock or Preferred Shares (including
common stock issued on conversion thereof), issued by reason of any transactions
contemplated by the Stock Purchase Agreement of even date herewith, between the
Company and Philips Media B.V. ("Stock Purchase Agreement"), except to the
extent that Investors have been given notice and opportunity to exercise rights
prior to the execution of such Stock Purchase Agreement and have notified the
Company of their intention to exercise such right.
4.4 Price and Terms. The purchase by a Signatory of any Voting
---------------
Securites pursuant to this Article shall be at the same price, on the same terms
and of the same type as the Voting Securities issued or sold by the Company to
others. If Voting Securities are issued for a consideration other than cash, the
Board shall determine in good faith the fair market value of the consideration
to be received by the Company, and the Signatory shall be entitled to pay cash
in lieu of such other consideration based upon such determination. If the right
to purchase Voting Securities shall be due to the cumulative exercise of options
or similar rights referred to in Section 4.3(a), the Voting Securities shall be
of the same type as the Voting Securities issued upon such exercises exceeding
the two percent exclusion, and the price for which the Voting Securities are
sold shall be the fair market value exercise price determined by the Board for
purposes of the Company's then most recent option grant; if the Voting
Securities are not Common Stock, the price shall be based thereon.
4.5 Procedure. The Company shall notify the Signatories in writing of
---------
any offering or proposed offering of any Voting Securities and the price and
terms thereof prior to or not later than thirty days after the closing date of
the issuance or sale of such Voting Securities, or not less than thirty days
after the exercise of options that exceeds the threshold stated in Section
4.3(c). The closing of the issuance and sale of Voting Securities to Signatories
shall take place as soon as practicable after the closing of the issuance and
sale of the Voting Securities giving rise to the Signatories' rights under this
Article and shall be conditional upon such closing.
4.6 No Assignment. The rights granted a Signatory in this Article may
-------------
not be assigned by the Signatory except to a successor of the Signatory;
provided, however, that each Signatory may assign its rights hereunder to
another person or entity that acquires at least two percent of the Voting
Securities and agrees to be bound by the terms of this Agreement if the Company
and the Principal Shareholders agree that such assignment will not expose the
Company to a risk of violating the Act by reason of rights to be accorded the
assignee under Section 4.1(a).
ARTICLE 5. RIGHT OF CO-SALE RESPECTING SHARES
----------------------------------
5.1 Right. In the event that a Signatory or group of Signatories
-----
(the "Initiating Investors") propose to sell or otherwise transfer for value any
Voting Securities that in the aggregate (including those proposed for sale or
transfer by members of their Investment Groups) constitute
-14-
<PAGE>
more than fifty percent of the Voting Securities of the Company on a fully-
diluted basis or any interest in such Voting Securities now held by or hereafter
acquired by them ("Majority Shares") to any person or entity, each other
Signatory on behalf of interested members of its Investment Group (the
"Responding Investors") shall have a right of co-sale (the "Right of Co-Sale")
to sell to the proposed transferee (the "Transferee") such Responding Investor's
Pro Rata Share (as defined below) of all Majority Shares that the Initiating
Investors propose to transfer on the terms of the proposal referred to in the
Co-Sale Notice (as defined below).
5.2 Share. A Responding Investor's Pro Rata Share shall be that
-----
proportion which the number of Voting Securities (or shares of Common Stock into
which such Securities have been converted, or a combination thereof) held by
such Responding Investor bears to the sum of (i) the total number of Voting
Securities held by all Responding Investors having and exercising the Right of
Co-Sale (determined as of the date the Co-Sale Notice is delivered to the
Company) and (ii) the total number of Voting Securities held by the Initiating
Investors.
5.3 Notice. At least fifteen business days before the proposed date
------
of a sale or transfer of Majority Shares, the Initiating Investors shall give a
written notice (the "Co-Sale Notice") simultaneously to the Company and to each
Responding Investor in the manner provided in Section 7.7. The Co-Sale Notice
shall describe in detail the proposed transfer, including the number of Majority
Shares proposed to be transferred, the proposed consideration to be paid (which,
for consideration the value of which is not readily ascertainable, shall be the
fair market value of the Majority Shares to be transferred as most recently
determined in good faith by the Board), and the name and address of the
Transferee. Each Responding Investor shall have the right to sell to the
Transferee its Pro Rata Share of the Majority Shares subject to the Co-Sale
Notice on the terms set forth in the Co-Sale Notice.
5.4 Exercise Procedure.
------------------
(a) A Responding Investor wishing to exercise his Right of Co-
Sale shall deliver a notice of exercise of the Right of Co-Sale (the "Election
Notice") to the Signatory of his Investment Group within five business days
after the date of the Co-Sale Notice has been deemed delivered under Section
7.7.
(b) The Rights of Co-Sale not exercised with respect to a
particular transaction ("Declined Co-Sale Rights") by a Responding Investor
("Declining Co-Seller") may be exercised by another member of the Declining Co-
Seller's Investment Group. If Responding Investors in an Investment Group
desiring to take up Declined Co-Sale Rights ("Interested Co-Sellers") state an
aggregate interest with respect to a particular transaction, to sell more shares
than are relinquished by Declining Co-Sellers, the shares to be sold shall be
apportioned among the Interested Co-Sellers proportionally to their existing
investments, unless all such Interested Co-Sellers agree to some other
apportionment. The Signatory of an Investment Group shall be responsible for
carrying out the requirements of this Paragraph 5.4(b) with respect to a
particular Investment Group. Within ten days after the delivery of the Co-Sale
Notice to the Company and the Investors, the Signatory shall specify in a Group
Election Notice, delivered to the Company and to the Initiating
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<PAGE>
Investors, the names and respective number of shares the members of such
Investment Group desire to sell.
5.5 Completion of Sale. Upon the timely delivery by a Signatory of a
------------------
Group Election Notice, the Initiating Investors may, not later than thirty
business days following delivery of the Co-Sale Notice to the Company and each
Investor, conclude a transfer of not less than all of the Majority Shares
covered by the Co-Sale Notice on terms and conditions not more favorable to the
Initiating Investors than those described in the Co-Sale Notice. Any proposed
transfer on terms and conditions more favorable to the Initiating Investors than
those described in the Co-Sale Notice, as well as any subsequent proposed
transfer of any of the Majority Shares by the Initiating Investors, shall again
be subject to the Right of Co-Sale and shall require compliance by the
Initiating Investors with the procedures described in this Article.
5.6 Exceptions. The provisions of this Article do not apply (a) to
----------
Permitted Transactions as defined in the Company's Bylaws, or (b) to
transactions which fall within the scope of Paragraph 6.4(b) of the Stock
Purchase Agreement.
5.7 Legend. All certificates or instruments representing Voting
------
Securites subject to this Right of Co-Sale, whether now outstanding or
subsequently issued, shall be surrendered to the Company for endorsement or
endorsed by the Company on their issuance with the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AND MAY BE
TRANSFERRED ONLY IN COMPLIANCE WITH AN AGREEMENT, DATED AS OF SEPTEMBER 1,
1994, BY AND AMONG THE COMPANY AND THE OTHER PARTIES NAMED THEREIN, A COPY
OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE ISSUER.
The Company shall not transfer any of the Voting Securities on its books without
first ascertaining compliance with all of the applicable provisions of this
Agreement with respect to such transfer.
5.8 Compliance. Exercise of the Investor's rights under this Article
----------
shall be subject to and conditioned upon, and the Initiating Investors and the
Company shall use their best efforts to assist the Investors in, compliance with
applicable laws.
ARTICLE 6 BOARD REPRESENTATION
--------------------
6.1 Board Election. Whenever any Investment Group shall own at least
--------------
ten percent of the Voting Securities, the Signatories shall use their best
efforts to assure that one person designated by the Signatory of such Investment
Group is elected to the Board, and, if such ownership shall be at least twenty
percent of the Voting Securities, the Signatories shall use their best efforts
to assure that two persons designated by the Signatory of such Investment Group
are elected to the Board and if such ownership shall be at least twenty-five
percent of the Voting Securities, the Signatories shall use their best efforts
to assure that at least twenty-five percent (rounded up to the
-16-
<PAGE>
nearest whole number) of the persons elected to the Board are designees of the
Signatory of Investment Group.
6.2 Observer Rights. So long as an Investment Group shall continue to
---------------
own at least two percent of the Voting Securities, the Company shall invite a
representative of the Signatory of such Investment Group to attend all meetings
of the Board in a nonvoting observer capacity and, in this respect, shall give
such representative copies of all notices, minutes, consents and other materials
that it provides to its directors; provided, however, that such representative
shall agree to hold in strictest confidence all information, including, without
limitation, all customer and other proprietary information, so provided and to
not reproduce, disclose or disseminate any such information to any other person
without the written consent of the Company, and, provided further, that the
Company reserves the right to exclude such representative from any meeting or
portion thereof in the event such attendance by such representative would
adversely affect the attorney-client privilege between the Company and its
counsel with respect to material matters, or where such attendance would have
the effect of creating an apparent conflict of interest for such representative,
including, without limitation, the revealing of confidential information of the
Company or the Company's customers which could be used to the private advantage
of any member of the Investment Group.
6.3 Election of CEO. Each Signatory agrees to use its reasonable best
---------------
efforts to assure that any member of the Board designated by the Signatory will
support the election of the Chief Executive Officer of the Company in accordance
with the Stock Purchase Agreement.
6.4 Board Removal. Each Signatory agrees to vote to remove any
-------------
Directo designated by the Signatory of another Investment Group at the request
of such Signatory and not to vote to remove such Director without such request,
except for cause.
ARTICLE 7. GENERAL
-------
7.1 Termination. The provisions of Articles 4, 5 and 6 shall
-----------
terminate the closing of the Initial Public Offering.
7.2 Waivers and Amendments. With the written consent of the
----------------------
record of at least eighty percent of the Registrable Securities held by the
Signatories and their Investment Groups, the obligations of the Company and the
rights of the Signatories under this Agreement may be waived (either generally
or in a particular instance, either retroactively or prospectively,. and either
for a specified period of time or indefinitely), and with the same consent, the
Company, when authorized by resolution of the Board, may enter into a
supplementary agreement for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Agreement or may
terminate this Agreement. No such modification, amendment or waiver shall reduce
the aforesaid percentage of Registrable Securities without the consent of all of
the Signatories. Any elimination of rights granted in this Agreement to the
Signatories shall be effective against a Signatory who voted against or objected
in writing to such elimination only if such elimination does not discriminate
against such objecting Signatory. Upon the effectuation of each such waiver,
consent, agreement of amendment or modification, the Company shall promptly give
written notice
-17-
<PAGE>
thereof to the Signatories who have not previously consented. This Agreement may
also be amended by the Company with no further action on the part of the
Signatories solely to include as Signatories hereunder any purchaser of the
Company's securities issued by the Company after the date hereof who shall own,
following such purchase, at least two percent of the Voting Securities.
7.3 Obligations of Related Parties. Each Signatory shall use its best
------------------------------
efforts to have each member of its Investment Group comply with any obligations
of this Agreement applicable to them. Prior to an Initial Public Offering, no
Signatory will vote its Voting Securities to change the definition of an Initial
Public Offering in the Certificate of Incorporation or the Bylaws, or to change
the provisions of the Bylaws providing for the amendment of such definition;
except that, if such definition in the Bylaws has been amended by the Board of
Directors in the manner provided in the Bylaws, each Signatory will vote its
Voting Securities to amend the Certificate of Incorporation to conform the
definition of Initial Public Offering appearing therein to the amended
definition of Initial Public Offering in the Bylaws.
7.4 Governing Law. This Agreement shall be governed in all respects
-------------
by the laws of the State of California.
7.5 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
7.6 Entire Agreement. This Agreement constitutes the full and entire
----------------
understanding and agreement among the parties with regard to the subjects
hereof, and this Agreement shall supersede and cancel all prior agreements
between the parties hereto with regard to the subject matter hereof, and in
particular, but without limiting the generality of the foregoing, it shall
supersede the entire registration rights, preemptive rights, rights of first
refusal or any and all similar rights held by the Investors prior to the
execution of this Agreement except as provided in the Company's Bylaws.
7.7 Notices, etc. All notices and other communications required or
------------
permitted hereunder shall be in writing and shall be mailed by first class mail,
postage prepaid, certified or registered mail, return receipt requested,
addressed (i) if to any Signatory or member of an Investment Group, at such
person's address as set forth in the Company's records, or at such other address
as such person shall have furnished to the Company in writing, or (ii) if to the
Company, at Navigation Technologies, Attn: Chief Financial Officer, 740 East
Arques Avenue, Sunnyvale, California 94086, or at such other address as the
Company shall have furnished to the party in writing.
7.8 Severability. In case any provision of this Agreement shall be
------------
invalid, illegal, or unenforceable, the validity, legality and enforceability of
the remaining provisions of this Agreement shall not in any way be affected or
impaired thereby. The parties hereto agree to replace any such provision with a
valid provision that reflects as closely as possible the intent and spirit of
the invalid provision.
-18-
<PAGE>
7.9 Termination of Investor Participation. Notwithstanding anything
-------------------------------------
to the contrary contained herein, the obligations and the rights of the Company
and the Signatories and Investment Groups herein shall terminate and be of no
further force or effect as to any Signatory and the members of its Investment
Group effective immediately at such time as such Investment Group holds less
than two percent of the Voting Securities.
7.10 Titles and Subtitles. The titles of the articles, sections and
--------------------
paragraphs of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
7.11 Gender. All pronouns and any variations thereof shall be deemed
------
to refer to the masculine, feminine, neuter, whether singular or plural, as the
context may require.
7.12 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
-19-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
NAVIGATION TECHNOLOGIES CORPORATION
a Delaware Corporation
By: /s/ Thomas A. Lerone
____________________________________
Title: Chief Financial Officer
_________________________________
AMERICAN AUTOMOBILE ASSOCIATION
a Connecticut Non-Stock Corporation
By: /s/ American Automobile Association
____________________________________
Title: _________________________________
NICHIMEN AMERICA, INC.
a New York Corporation
By: /s/ Nichimen America, Inc.
____________________________________
Title: _________________________________
VICTOR NEIDERHOFFER
/s/ Victor Neiderhoffer
________________________________________
Investor Rights Agreement
<PAGE>
PHILIPS MEDIA, B.V.
a Netherlands Corporation
By: /s/ Samuel J. Rozel
____________________________________
Title: Attorney-In-Fact
_________________________________
PRUTECH RESEARCH & DEVELOPMENT PARTNERSHIP
II
By: /s/ R&D Funding Corp
Its General Partner
By: /s/ Michael S. Hasley
____________________________________
Michael S. Hasley
Vice President
PRUTECH PROJECT DEVELOPMENT PARTNERSHIP
By: R&D Funding Corp
Its General Partner
By: /s/ Michael S. Hasley
____________________________________
Michael S. Hasley
Vice President
SHIELDS ENTERPRISES, INC. (SEI)
a Delaware Corporation
By: /s/ Richard J. Weiland
____________________________________
Title: Vice Chairman, Secretary
_________________________________
Investor Rights Agreement
<PAGE>
EXHIBIT A
Investors
---------
"Signatories" are the parties marked with asterisks. Other members of each
Investment Group are the parties marked with pluses. "Investment Groups" are
the numbered groups, each including a Signatory and such members.
1. AAA
a) American Automobile Association*
b) Entities controlled by the American Automobile Association+
2. Nichimen
a) Nichimen Corporation+
b) Nichimen America, Inc.*
c) Entities controlled by Nichimen Corporation+
3. Victor Niederhoffer
a) Victor Niederhoffer*
b) Entities controlled by Victor Niederhoffer+
4. Philips
a) Philips Media B.V.
b) Philips Venture Capital Fund B.V. +
c) Philips Electronics N.V. +
d) Entities controlled by Philips Electronics N.V. +
5. PruTech
a) PruTech R&D Funding Corporation*
b) PruTech Research and Development Partnership +
c) PruTech Project Development Partnership+
d) Partners of PruTech Research and Development Partnership II
and PruTech Development Partnership +
e) Entities controlled by PruTech R&D Funding Corporation+
<PAGE>
6. Shields Enterprises, Inc. (SEI)
a) Shields Enterprises, Inc. (SEI)*
b) The SEI Employee Profit Sharing Plan+
c) SEI employees (current and former), SEI stockholders,
relatives of such employees and stockholders, and trusts for the
benefit of such relatives+
d) Members of law firms engaged by SEI +
e) Persons with business or personal relationships with SEI,
SEI employees (current and former), SEI stockholders, and relatives of
such employees and stockholders+
f) Entities controlled by Shields Enterprises, Inc. +
7. New Investor
a) __________________________________*
b) Entities controlled by ____________________________+
-2-
<PAGE>
EXHIBIT 10.8
NAVIGATION TECHNOLOGIES CORPORATION
___________________
STOCK PURCHASE AGREEMENT
September 1, 1994
___________________
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1 - AUTHORIZATION AND SALE OF THE SHARES.......................... 1
1.1 Old Purchase Agreement Superseded............................. 1
1.2 Authorization of the Shares................................... 1
1.3 Sale of the Shares............................................ 2
1.4 Delivery...................................................... 2
1.5 Payment....................................................... 2
1.6 Time and Place of Closing..................................... 2
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY................. 3
2.1 Organization and Standing: Articles and Bylaws............... 3
2.2 Corporate Power............................................... 3
2.3 Subsidiaries.................................................. 3
2.4 Capitalization................................................ 4
2.5 Authorization................................................. 5
2.6 Financial Information......................................... 5
2.7 Outstanding Debt.............................................. 6
2.8 Absence of Undisclosed Liabilities............................ 6
2.9 Absence of Certain Changes.................................... 6
2.10 Taxes......................................................... 7
2.11 Contracts; Insurance.......................................... 7
2.12 Shareholders, Directors and Officers; Indebtedness............ 9
2.13 Litigation and Bankruptcy Proceedings......................... 9
2.14 Consents...................................................... 9
2.15 Title to Properties; Liens and Encumbrances................... 10
2.16 Leases........................................................ 10
2.17 Business of the Company....................................... 10
2.18 Permits, Licenses, Trademarks, Patents and Other Rights....... 10
2.19 Issuance Taxes................................................ 11
2.20 Offering...................................................... 11
2.21 Compliance with Other Instruments............................. 12
2.22 Employees..................................................... 12
2.23 Registration Rights........................................... 13
2.24 Disclosure.................................................... 13
2.25 Environmental Matters......................................... 13
2.26 Minute Books.................................................. 14
ARTICLE 3 - REPRESENTATIONS, WARRANTIES AND COVENANTS OF PHILIPS.......... 14
3.1 Experience.................................................... 14
3.2 Investment.................................................... 14
3.3 Limitations on Disposition.................................... 14
Stock Purchase Agreement
-i-
<PAGE>
3.4 Access to Data................................................ 14
3.5 Restrictive Legend............................................ 15
3.6 Removal of Legend............................................. 16
3.7 Notice of Proposed Transfers.................................. 16
3.8 Other Representations of Philips.............................. 17
ARTICLE 4 - CONDITIONS TO CLOSING OF PHILIPS.............................. 17
4.1 Representations and Warranties Correct........................ 17
4.2 Performance................................................... 18
4.3 Opinion of Company's Counsel.................................. 18
4.4 Legal Investment.............................................. 18
4.5 Compliance Certificate........................................ 18
4.6 Proceedings and Documents..................................... 18
4.7 Securities Law Compliance..................................... 18
4.8 Consents...................................................... 18
4.9 Conversion of Debentures...................................... 19
4.10 Intellectual Property Release................................. 19
ARTICLE 5 - CONDITIONS TO CLOSING OF COMPANY.............................. 19
5.1 Representations............................................... 19
5.2 Legal Investment.............................................. 19
5.3 Securities Law Compliance..................................... 19
5.4 Opinion of Philips Counsel.................................... 19
ARTICLE 6 - RIGHTS, LIMITATIONS, AND OBLIGATIONS OF PHILIPS............... 20
6.1 Right of First Refusal........................................ 20
6.2 Technology Rights............................................. 20
6.3 Limitation on Equity Position................................. 21
6.4 Limitation on Philips Sales................................... 21
6.5 Put by Current Shareholders................................... 22
6.6 Future Financing.............................................. 24
6.7 Board Designees............................................... 24
6.8 Uniform Commercial Terms...................................... 25
6.9 Succession for CEO............................................ 25
6.10 Limit on Philips Board Members................................ 25
6.11 Restrictions on Philips' Rights to Convert Preferred Shares... 26
6.12 Approval by Philips Designated Directors...................... 27
6.13 Contemplated IPO.............................................. 28
6.14 Acquisition of Common Stock; Maintenance of Common Stock
Position...................................................... 28
6.15 Termination of Philips Special Rights and Restrictions........ 28
6.16 No Rescission................................................. 28
ARTICLE 7 - COVENANTS OF THE COMPANY...................................... 29
Stock Purchase Agreement
-ii-
<PAGE>
7.1 Basic Financial Information................................... 29
7.2 Additional Information........................................ 30
7.3 Prompt Payment of Taxes, etc.................................. 31
7.4 Maintenance of Properties and Leases.......................... 32
7.5 Insurance..................................................... 32
7.6 Accounts and Records.......................................... 32
7.7 Independent Accountants....................................... 32
7.8 Compliance with Requirements of Governmental Authorities...... 32
7.9 Maintenance of Corporate Existence, etc....................... 32
7.10 Availability of Stock for Conversion.......................... 33
7.11 Proprietary Information and Inventions Agreements............. 33
7.12 Incentive Stock Arrangements.................................. 33
7.13 Termination of Covenants...................................... 33
ARTICLE 8 - MISCELLANEOUS................................................. 33
8.1 Governing Law................................................. 33
8.2 Survival...................................................... 34
8.3 Successors and Assigns........................................ 34
8.4 Entire Agreement; Amendment................................... 34
8.5 Notices, etc.................................................. 34
8.6 Delays or Omissions........................................... 35
8.7 Separability.................................................. 35
8.8 Agent's Fees.................................................. 35
8.9 Information Confidential...................................... 36
8.10 Expenses...................................................... 37
8.11 Titles and Subtitles.......................................... 37
8.12 Definition of Company......................................... 37
8.13 Scope......................................................... 37
8.14 Counterparts.................................................. 37
EXHIBITS
A - Restated Certificate of Incorporation
B - Bylaws
C - Restated Investor Rights Agreement
D - Supplementary Purchase Agreement
E - Schedule of Exceptions
F - Proprietary Information and Inventions Agreement
G - Opinion of Company Counsel
Stock Purchase Agreement
-iii-
<PAGE>
H - Shields Engagement Agreement
I - Put Holder List
J - Put Assignment Form
K - Notice to Holder of Put Rights
L - Opinion of Philips Counsel
M - Compliance Certificate
N - Intellectual Property Non-Assertion Certificate
O - Form of Investors Stock Purchase Agreement
P - Purchasers
Stock Purchase Agreement
-iv-
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
AGREEMENT made as of the 1st Day of September 1994, by and between
Navigation Technologies Corporation, a Delaware corporation (the "Company"),
and Philips Media B.V., a corporation organized under the laws of the
Netherlands ("Philips").
WHEREAS, the American Automobile Association, a Connecticut non-stock
corporation ("AAA"), Nichimen America, Inc., a New York corporation
("Nichimen"), Shields Enterprises, Inc., a Delaware corporation ("SEI"), and the
Board of Directors ("Board") of the Company, with the designees thereon of
Philips and its affiliates not participating, have determined that it will be in
the best interests of the Company and its shareholders for Philips to make the
further investment in the Company provided for, and on the terms and conditions
specified, in this Agreement; and
WHEREAS, Philips desires to make such investment on such terms and
conditions; and
WHEREAS, simultaneously herewith the Company, a Philips' affiliate, and
European Geographic Technologies B.V., a corporation organized under the laws of
the Netherlands ("EGT"), are entering into an investment agreement pursuant to
which, among other things, the Company is investing $40 million in EGT (the
"Supplementary Agreement");
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and conditions herein contained, the Company and Philips hereby agree as
follows:
ARTICLE 1 - AUTHORIZATION AND SALE OF THE SHARES
1.1 Old Purchase Agreement Superseded. The Purchase Agreement between
---------------------------------
Philips Venture Capital Fund B.V. and the Company dated October 20, 1991 ("1991
Purchase Agreement") is hereby terminated and is of no further force or effect,
effective as of the Closing, except that the representations, warranties, and
covenants of the Company and of the Purchasers (as defined therein), with
respect to the securities purchased pursuant thereto, which survived the
Closings as defined therein, shall remain in full force and effect as if the
rest of the 1991 Purchase Agreement had not been terminated.
1.2 Authorization of the Shares. The Company has authorized the sale and
---------------------------
issuance of (i) shares of its Convertible Preferred Stock, par value $.001 per
share (the "Preferred Shares" or the "Shares"), having the rights, restrictions,
privileges and pre-
Stock Purchase Agreement
-1-
<PAGE>
ferences as set forth in the Restated Certificate of Incorporation of the
Company (the "Restated Certificate") attached to this Agreement as Exhibit A,
sufficient to meet the purposes of Section 1.3, and (ii) shares of its common
stock (the "Common Stock") sufficient to permit the conversion of the Preferred
Shares into Common Stock.
1.3 Sale of the Shares. Subject to the terms and conditions hereof and in
------------------
reliance upon the representations, warranties and agreements contained herein,
on September 2, 1994 or such later date as the parties may agree upon (the
"Closing Date"), the Company will issue and sell to Philips and Philips will
purchase from the Company 94,117,647 Shares for a purchase price of $0.85 per
Share, to be paid in accordance with Section 1.5 below.
1.4 Delivery. At the closing ("Closing") of the transaction contemplated
--------
hereby on the Closing Date, the Company will deliver to Philips a certificate
representing the Shares purchased.
1.5 Payment. Philips shall make payments payable to the order of the
-------
Company, half in U.S. funds and half in Dutch Guilders by check, wire transfer,
or such other form of payment as shall be mutually agreed upon by Philips and
the Company, as follows:
. On the Closing Date: $20,000,000
. On November 30, 1994: $20,000,000, plus interest at 6% per annum
on $60,000,000 for the period beginning on the Closing Date and
ending on November 30, 1994.
. On May 31, 1995: $20,000,000, plus $1,200,000 in interest.
. On November 30, 1995: $20,000,000, plus $600,000 in interest.
For all payments, the exchange rate for Dutch Guilders to U.S. Dollars
shall be the New York Foreign Exchange Guilder Selling Rate for the second
Business Day preceding the Closing Date published in the Wall St. Journal. As
used herein, "Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in the City of New
York are required or authorized by law or executive order to be closed.
1.6 Time and Place of Closing. The Closing shall take place at 10:00 a.m.
-------------------------
at the offices of the Company, 740 East Arques Avenue, Sunnyvale, California
94086 or at any other such time and place as the parties so choose.
Stock Purchase Agreement
-2-
<PAGE>
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the "Schedule of Exceptions" delivered to Philips
prior to the execution hereof and attached as Exhibit E hereto, the Company
hereby represents and warrants as follows:
2.1 Organization and Standing: Articles and Bylaws. The Company is a
-----------------------------------------------
corporation duly organized and validly existing under the laws of the State of
Delaware and is in good standing under such laws. The Company has requisite
power and authority, corporate and other, to own the properties owned by it and
to conduct business as being conducted by it. The Company is qualified to do
business and is in good standing as a foreign corporation in each state in which
the nature of the business conducted by it or its ownership or leasing of
property make such qualification necessary and where the failure to so qualify
would have a material adverse effect on the Company's properties, operations or
financial condition. Attached hereto as Exhibits A and B, respectively, are
true, complete and correct copies of the Restated Certificate and the Company's
Bylaws ("Bylaws"), as in effect on the Closing Date.
2.2 Corporate Power. The Company has all requisite power and authority,
---------------
corporate and other, to enter into this Agreement, the Restated Investor Rights
Agreement of even date hereof, which is attached hereto as Exhibit C (the
"Investor Rights Agreement"), the Supplementary Purchase Agreement, attached
hereto as Exhibit D, the Shields Engagement Agreement between the Company and
SEI, attached hereto as Exhibit H (the "Shields Engagement Agreement"), and all
other documents, agreements and instruments to be executed by the Company and
delivered to Philips in connection with the Closing and the performance by the
Company of its obligations hereunder and thereunder, and to carry out and
perform its obligations hereunder and thereunder.
2.3 Subsidiaries.
------------
(a) Navigation Technologies U.S., Inc. The Company has one wholly-
----------------------------------
owned subsidiary, Navigation Technologies U.S., Inc., a Delaware corporation
(the "Subsidiary"). The Subsidiary is a corporation duly organized and validly
existing under the laws of the State of Delaware and is in good standing under
such laws. The Subsidiary is duly qualified and in good standing as a foreign
corporation in each state in which the nature of the business conducted by it or
its ownership or leasing of property make such qualification necessary and where
the failure to so qualify would have a material adverse effect on the
Subsidiary's properties, operations or financial condition. The Subsidiary has
requisite power and authority, corporate and other, to own the properties owned
by it and to conduct its business as now being conducted. All of the issued
shares of capital stock of the Subsidiary have been duly and validly authorized
and issued, are fully paid and nonassessable and are owned by the Company, free
and clear of all liens, encumbrances, equities or claims. There are no
Stock Purchase Agreement
-3-
<PAGE>
outstanding preemptive, conversion or other rights, options, warrants,
commitments or agreements granted or issued by or binding upon the Company or
the Subsidiary for the purchase or acquisition of any shares of the Subsidiary's
capital stock. As used in this Article 2, the term "Company" includes the
Subsidiary unless the context otherwise requires.
(b) European Geographic Technologies. The parties acknowledge and
--------------------------------
understand that half the funds provided by the sale of shares pursuant to
Section 1.3 will be used by the Company to acquire a majority interest in EGT
which will become, thereby, directly or indirectly a majority-owned subsidiary,
all as more fully set forth in the Supplementary Purchase Agreement.
2.4 Capitalization. The Company's authorized capital stock consists of
--------------
(a) Common Stock, and (b) Preferred Shares. The number of shares authorized and
the number of shares issued and outstanding immediately prior to the Closing is
set forth in the Schedule of Exceptions hereto. All issued and outstanding
shares of the Company's capital stock have been duly authorized and validly
issued, fully paid and nonassessable, and offered, issued, sold and delivered by
the Company in compliance with applicable Federal and state securities laws. At
the time of the Closing, there will be no outstanding preemptive, conversion or
other rights, options, warrants, commitments or agreements granted or issued by
or binding upon the Company for the purchase or acquisition of any shares of its
capital stock, except as set forth in the Investor Rights Agreement, the Bylaws
and the Restated Certificate and as set forth in the Schedule of Exceptions. To
the best of the Company's knowledge and belief, no shareholder has granted
options or other rights to purchase any shares of Common Stock from such
shareholder other than as set forth in the Schedule of Exceptions. There are no
trusts or any other agreements or understandings to which the Company is a party
with respect to the voting, holding or transfer of Common Stock other than those
so created pursuant to the Investor Rights Agreement, this Agreement, the Bylaws
and among Affiliated Parties. As used in this Agreement, "Affiliated Parties"
are persons, and immediate family of persons, who directly, or indirectly
through one or more intermediaries, control, are controlled by, are under common
control with, are current or former employees of, are shareholders or former
shareholders of, or are benefit plans of a party (other than the Company) to the
Investor Rights Agreement. There are no outstanding dividends, whether current
or accumulated, due or payable on any of the capital stock of the Company.
Philips, AAA, Nichimen, and SEI collectively constitute the holders of at least
66% of the Registrable Securities under the Investor Rights Agreement. The
Company holds no shares of its capital stock in its treasury. Simultaneously
with the Closing, all outstanding convertible debentures, in accordance with
their terms, shall convert to Preferred Shares.
2.5 Authorization. All corporate action on the part of the Company, its
-------------
directors and its shareholders necessary for the authorization, execution,
delivery and performance by the Company of this Agreement, the Investor Rights
Agreement, and
Stock Purchase Agreement
-4-
<PAGE>
the Supplementary Purchase Agreement, and the consummation of the
transactions contemplated herein and therein, and for the authorization,
issuance and delivery of the Shares and of the Common Stock issuable upon
conversion of the Preferred Shares (the "Underlying Shares") has been taken.
This Agreement is a valid and binding obligation of the Company, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization and moratorium laws and other laws of general application
affecting enforcement of creditors' rights generally. The execution, delivery
and performance by the Company of this Agreement, the Investor Rights Agreement,
and the Supplementary Purchase Agreement, and the issuance and sale of the
Shares and the Underlying Shares will not result in any violation of, and will
not conflict with, or result in a breach of any of the terms of, or constitute a
default under (i) any provision of state or Federal law to which the Company is
subject, (ii) the Restated Certificate or Bylaws or (iii) any mortgage,
indenture, agreement, instrument, judgment, decree, order, rule or regulation or
other restriction to which the Company is a party or by which it is bound, or
result in the creation of any mortgage, pledge, lien, encumbrance or charge upon
any of the properties or assets of the Company pursuant to any such term, or
result in the suspension, revocation, impairment, forfeiture or nonrenewal of
any material permit, license, authorization or approval applicable to the
Company's operations or any of its assets or properties, except, in the case of
(iii), such violations, conflicts, breaches, or defaults which are immaterial to
the Company and its Subsidiary taken as a whole. No shareholder has any
preemptive rights or rights of first refusal by reason of the issuance of the
Shares or the Underlying Shares, which rights have not been duly and validly
exercised or waived. The Shares and the Underlying Shares, when issued and paid
for in compliance with the provisions of this Agreement, will be validly issued,
fully paid and nonassessable, and will be free of any liens or encumbrances;
provided, however, that the Shares and the Underlying Shares may be subject to
restrictions on transfer under state and Federal securities laws and under the
agreements referred to herein.
2.6 Financial Information. The Company has delivered its financial
---------------------
statements to Philips, consisting of audited consolidated balance sheets and the
related consolidated statements of operations, shareholders' equity (deficit)
and cash flows for the two years ended September 30 preceding the date hereof;
and unaudited consolidated balance sheet, consolidated statement of operations
and related statement of cash flows for the nine month period ended June 30,
1994 (the "Financial Statements"). The Financial Statements present fairly the
financial position and results of operations of the Company at the dates and for
the periods to which they relate. The Financial Statements have been prepared
in accordance with generally accepted accounting principles consistently
followed throughout the periods involved and show all material liabilities,
absolute or contingent, of the Company required to be recorded thereon in
accordance with generally accepted accounting principles as at the respective
dates thereof.
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<PAGE>
2.7 Outstanding Debt. The Company has no outstanding indebtedness for
----------------
borrowed money except as reflected in the Financial Statements and the notes
thereto and is not a guarantor or otherwise contingently liable for any such
indebtedness (including, without limitation, liability by way of agreement,
contingent or otherwise, to purchase, provide funds for payment, supply funds or
otherwise invest in any debtor or otherwise to insure any creditor against
loss). There exists no default under the provisions of any instrument
evidencing any indebtedness of the Company or of any agreement relating thereto.
2.8 Absence of Undisclosed Liabilities. The Company has no liabilities in
----------------------------------
an amount expected to exceed $50,000 in any particular instance or $400,000 in
the aggregate (fixed or contingent, including without limitation any tax
liabilities due or to become due) that are not fully reflected or provided for
in the Financial Statements and the notes thereto. The Company does not know of
any material liability of any nature, direct or indirect, contingent or
otherwise, or in any amount not adequately reflected or reserved against in the
Financial Statements and the notes thereto.
2.9 Absence of Certain Changes. Since September 30, 1993, the Company has
--------------------------
conducted business only in the ordinary and usual course of business and, other
than as specifically reflected on the Financial Statements, there has not been
any event or condition of any character which, alone or in combination, has
materially adversely affected the Company's business or prospects, including but
not limited to:
(a) any material adverse change in the condition, prospects, assets,
liabilities or business of the Company from that shown in the Financial
Statements;
(b) any damage, destruction or loss of any of the properties or assets
of the Company (whether or not covered by insurance) materially adversely
affecting the assets, properties, financial conditions, operations, prospects,
business or plans of the Company;
(c) any material adverse change or amendments to a contract or
arrangement by which the Company or any of its assets or properties is bound or
subject;
(d) any declaration, setting aside or payment or other distribution in
respect of any of the Company's capital stock, or any direct or indirect
redemption, purchase or other acquisition of any such stock by the Company;
(e) any waiver by the Company of a valuable right or of a material
debt owed to it; or
(f) any labor trouble, or any event or condition of any character,
materially adversely affecting the business or plans of the Company.
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<PAGE>
2.10 Taxes. The Company has filed within the time prescribed by law
-----
(including extensions of time approved by the appropriate taxing authority) all
tax returns and reports required to be filed with the United States Internal
Revenue Service and with the state of Delaware and (except to the extent that
the failure to file would not have a material adverse effect on the condition or
operations of the Company) with all other jurisdictions where such filing is
required by law; and the Company has paid, or made adequate provision in the
Financial Statements for the payment of, all taxes, interest, penalties,
assessments or deficiencies shown to be due or claimed to be due on or in
respect of such tax returns and reports. The Company knows of (i) no other tax
returns or reports which are required to be filed which have not been so filed
and (ii) no unpaid assessment for additional taxes for any fiscal period or any
basis therefor. The Company's Federal income tax returns have not been audited
by the Internal Revenue Service.
2.11 Contracts; Insurance. The Company does not have any currently
--------------------
existing contract, obligation, agreement, plan, arrangement, commitment or the
like (written or oral), of a material nature, including without limitation the
following:
(a) Employment, bonus or consulting agreements requiring payments by
the Company in excess of $20,000 in any single instance (or for consulting
agreements requiring payments of less than $20,000, less than $200,000 in the
aggregate), pension, profit sharing, deferred compensation, stock bonus,
retirement, stock option, stock purchase, phantom stock or similar plans,
including agreements evidencing rights to purchase securities of the Company and
agreements among shareholders and the Company;
(b) Loan or other agreements, notes, indentures, or instruments
relating to or evidencing indebtedness for borrowed money, or mortgaging,
pledging or granting or creating a lien or security interest or other
encumbrances on any of the Company's property or any agreement or instrument
evidencing any guaranty by the Company of payment or performance by any other
person representing a total obligation in excess of $50,000;
(c) Agreements with dealers, sales representatives, brokers or other
distributors, jobbers, advertisers or sales agencies;
(d) Agreements with any labor union or collective bargaining
organization or other labor agreements;
(e) Any contracts or series of contracts with the same person for the
furnishing or purchase of machinery, equipment, goods or services, in an amount
in excess of $20,000 per year including without limitation agreements with
processors and subcontractors;
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<PAGE>
(f) Any indenture, agreement or other document (including private
placement brochures) relating to the sale or repurchase of shares;
(g) Any joint venture contract or arrangement or other agreement
involving a sharing of profits or expenses to which the Company is a party;
(h) Agreements limiting the freedom of the Company to compete in any
line of business or in any geographic area or with any person;
(i) Agreements providing for disposition of the business, assets or
shares of the Company, agreements of merger or consolidation to which the
Company is a party or letters of intent with respect to the foregoing;
(j) Letters of intent or agreements with respect to the acquisition of
the business, assets or shares of any other business;
(k) Insurance policies;
(l) Any licenses, assignments, agreements or understandings relating
to or affecting the database (the "Database") for use in dynamic route guidance
systems and other applications or the software and systems for construction,
updating, maintenance, support and management of the Database and its
applications (the "Software") except licenses, assignments, agreements, or
understandings which have a term of one year or less; and
(m) Any agreements or written understandings or arrangements with a
shareholder of the Company other than regarding matters relating to their
employment or disclosed elsewhere in the Schedule of Exceptions.
The Company has complied with all the material provisions of all contracts,
obligations, agreements, plans, arrangements and commitments listed in the
Schedule of Exceptions and there does not exist any event of default under any
such agreement or any event which, after notice or lapse of time or both, would
constitute an event of default under such agreement. There is no action, suit,
proceeding or investigation pending or threatened against the Company before any
court or before any governmental or administrative agency for the renegotiation
of or any other adjustment of any such agreement.
The Company maintains insurance that, to the best of the Company's
knowledge and belief, is adequate to protect the Company and its financial
condition against the risk involved in the business conducted by the Company to
the extent and in the manner customary for companies in similar businesses
similarly situated.
Stock Purchase Agreement
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<PAGE>
2.12 Shareholders, Directors and Officers; Indebtedness. The Company is
--------------------------------------------------
not indebted, directly or indirectly, to any of its officers, directors or
shareholders or any of their respective relatives except as fully reflected or
provided for in the Financial Statements and the notes thereto except in amounts
which are immaterial to the Company. No officer, director or shareholder of the
Company, or any of their relatives, is indebted to the Company. To the best of
the Company's knowledge and belief, none of the officers or directors or
significant employees or consultants of the Company, or their respective spouses
or relatives, owns directly or indirectly, individually or collectively, a
material interest in any entity which is a competitor, customer or supplier of
(or has any existing contractual relationship with) the Company.
2.13 Litigation and Bankruptcy Proceedings.
-------------------------------------
(a) There is neither pending nor, to the Company's knowledge and
belief, threatened, any action, suit, proceeding or claim, or any basis therefor
or threat thereof, whether or not purportedly on behalf of the Company, to which
the Company is or may be named as a party or to which its property is or may be
subject, or to the Company's knowledge, after due inquiry, to which any officer,
key employee or principal shareholder of the Company is subject, and in which an
unfavorable outcome, ruling or finding in any such matter or for all such
matters taken as a whole might have a material adverse effect on the condition,
financial or otherwise, prospects, or operations of the Company. The Company
has no knowledge of any unasserted claim, the assertion of which is likely and
which, if asserted, would seek damages, an injunction or other legal, equitable,
monetary or nonmonetary relief which claim individually or collectively with
other such unasserted claims if granted would have a material adverse effect on
the condition, financial or otherwise, prospects or operations of the Company.
(b) The Company has not admitted in writing its inability to pay its
debts generally as they become due, filed or consented to the filing against it
of a petition in bankruptcy or a petition to take advantage of any insolvency
act, made an assignment for the benefit of creditors, consented to the
appointment of a receiver for itself or for the whole or any substantial part of
its property, or had a petition in bankruptcy filed against it, been adjudicated
a bankrupt, or filed a petition or answer seeking reorganization or arrangement
under the Federal bankruptcy laws or any other law or statute of the United
States of America or any other jurisdiction.
2.14 Consents. No consent, approval, qualification, order or authorization
--------
of, or filing with, or notification to, any governmental authority is required
in
connection with the Company's valid execution, delivery or performance of this
Agreement and the Investor Rights Agreement, or the offer, sale or issuance of
the Shares by the Company, the issuance of the Underlying Shares, or the
consummation by the Company of any other transaction contemplated hereby, except
such filings as have
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<PAGE>
been made as required by this Agreement or to be made after the Closing under
state and/or federal securities laws, which shall be filed promptly after the
Closing.
2.15 Title to Properties; Liens and Encumbrances. The Company has good and
-------------------------------------------
marketable title in fee simple to all the real property and a valid and
indefeasible ownership interest in all the other property and assets recorded in
the Financial Statements, free from all mortgages, pledges, liens, security
interests, conditional sale agreements, encumbrances or charges, except as shown
in the Financial Statements.
2.16 Leases. Set forth on the Schedule of Exceptions is a correct and
------
complete list (including the amount of rents called for and a description of the
leased property) of all leases with a total obligation of at least $50,000 under
which the Company is a lessee. The Company enjoys peaceful and undisturbed
possession under all such leases, and to the best of the Company's knowledge all
of such leases are valid and subsisting and the Company is not in default of
such leases in any material respect.
2.17 Business of the Company. There is no pending or, to the Company's
-----------------------
knowledge and belief, threatened claim or litigation against or affecting the
Company contesting the Company's right to own, produce, manufacture, update,
maintain, sell or use any product, database, software, process, method,
substance, part or other material presently owned, produced, manufactured,
updated, maintained, sold or used or planned to be produced, manufactured, sold
or used by the Company in connection with the operations of the Company. The
Company has no knowledge or belief that (i) there exists, or there is pending or
planned, any patent, invention, device, application or principle, or any
statute, rule, law, regulation, standard or code which would materially
adversely affect the condition, financial or otherwise, prospects, or operations
of the Company or (ii) there is any other factor (other than fire, flood,
earthquake, accident, act of war or civil commotion, or any other cause or event
beyond the control of the Company) which may materially adversely affect the
condition, financial or otherwise, prospects or operations of the Company.
2.18 Permits, Licenses, Trademarks, Patents and Other Rights.
-------------------------------------------------------
(a) The Company has all franchises, permits, licenses and other
similar authority necessary for the conduct of its business as now being
conducted by it and as planned to be conducted, the lack of which could
materially and adversely affect the prospects, operations or condition,
financial or otherwise, of the Company, and it is not in default in any material
respect under any of such franchises, permits, licenses or other similar
authority. The Company possesses all patents, patent rights, trademarks, service
marks, trademark rights, service mark rights, trade names, trade name rights,
copyrights, mask works, trade secrets, proprietary software, proprietary rights
and processes (the "Intellectual Property"), necessary to conduct its business
as now being conducted and as planned to be conducted, without, to the best of
the Company's
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<PAGE>
knowledge, conflict with or infringement upon any valid rights of others, the
lack of which could materially and adversely affect the operations or condition,
financial or otherwise, of the Company, and has not received any notice of
infringement upon or conflict with the asserted rights of others.
(b) The Schedule of Exceptions sets forth a complete list of all
patents, patent applications, inventions, service marks, trade names,
trademarks, trademark and service mark registrations and applications,
copyrights, and copyright registrations and applications, both domestic and
foreign, owned by the Company as of the Closing. No shareholder, director,
officer or employee of the Company has any interest in any Intellectual Property
of the Company.
(c) The Schedule of Exceptions sets forth a complete list of all
Intellectual Property which materially relates to the Company's business as now
conducted and as planned to be conducted known by the Company to be owned or
controlled by any director, officer or employee of the Company.
(d) Except for agreements with its own employees or consultants in the
form of Exhibit F attached hereto, the Schedule of Exceptions sets forth a
complete list of all of the Company's outstanding options, licenses, franchises,
permits or agreements of any kind with respect to Intellectual Property. To the
best of the Company's knowledge, all licenses granted to the Company with
respect to Intellectual Property are fully assignable (except as otherwise
provided by law), and are free and clear of any attachments, liens or
encumbrances and the Company is not in default or breach, or pursuant to the
transactions contemplated by this Agreement, will not be in default or breach,
of any such license in any material respect.
2.19 Issuance Taxes. All taxes imposed by law in connection with the
--------------
issuance, sale and delivery of the Shares and Underlying Shares shall have been
fully paid, and all laws imposing such taxes shall have been fully complied
with, prior to the Closing or the issuance of any such Underlying Shares, as the
case may be.
2.20 Offering. Subject to the truth and accuracy of Philips's
--------
representations set forth in this Agreement and of the Purchasers'
representations set forth in the Investors Stock Purchase Agreements of near
date herewith between such Purchasers and the Company in the form of Exhibit O
hereto ("Investors Stock Purchase Agreements"), the offer, sale and issuance of
the Shares and Underlying Shares as contemplated by this Agreement and the
Investors Stock Purchase Agreements are exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act,"
which term shall include any successor Federal statute), and from the
registration or qualification requirements of the laws of any applicable state
or other jurisdiction. Each of such Purchasers is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act and is named on
Exhibit P hereto.
Stock Purchase Agreement
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<PAGE>
In the aggregate, such Purchasers are not purchasing in excess of 17,000,000
shares of Common Stock.
2.21 Compliance with Other Instruments. The Company is not in violation of
---------------------------------
any term of its Restated Certificate or Bylaws. The Company is not in violation
of any term of any mortgage, indenture, contract, agreement, instrument,
judgment, decree, order, statute, rule or regulation to which the Company is
subject and a violation of which would have a material adverse effect on the
condition, financial or otherwise, prospects or operations of the Company.
2.22 Employees. To the best of the Company's knowledge and belief, no
---------
employee of the Company is, or is now expected to be, in violation of any term
of any employment contract, Intellectual Property agreement, non-competition
agreement, or any other contract or agreement or any restrictive covenant or any
other common law obligation to a former employer relating to the right of any
such employee to be employed by the Company because of the nature of the
business conducted or to be conducted by the Company or to the use of trade
secrets or proprietary information of others, and, to the best of the Company's
knowledge and belief, the employment of the Company's employees does not subject
the Company or Philips to any liability. No pending or, to the Company's
knowledge and belief, threatened action is currently underway with respect to
the foregoing. The Company does not have any collective bargaining agreement
covering any of its employees and is not subject to any pension, profit sharing
or other similar plan which is subject to the Employee Retirement Income
Security Act of 1974, as amended.
Each employee of the Company who has access to confidential information
concerning the Company has executed and delivered to the Company a proprietary
information and inventions agreement in substantially the form attached as
Exhibit F hereto (the "Proprietary Information and Inventions Agreement").
Each consultant and/or independent contractor retained by the Company to
work with Intellectual Property is working pursuant to a written agreement which
requires such consultant or independent contractor to assign all rights to any
inventions, patent applications and patents, software and copyrights made in the
course of such work to the Company and to preserve and protect the confidential
information of the Company.
To the best of the Company's knowledge, after due inquiry, no officer or
other "key employee" of the Company has any present intention of terminating his
or her employment with the Company and the Company has no present intention of
terminating such employment.
Stock Purchase Agreement
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<PAGE>
2.23 Registration Rights. Except as provided for in the Investor Rights
-------------------
Agreement, the Company is not under any obligation to register any of its
currently outstanding securities or any of its securities which may hereafter be
issued.
2.24 Disclosure. This Agreement, the Investor Rights Agreement, the
----------
Supplementary Purchase Agreement, the Schedule of Exceptions, and the Financial
Statements and notes thereto, as well as any other document, certificate,
schedule or written statement furnished to Philips by or on behalf of the
Company in connection with the transactions contemplated hereby, do not contain
any untrue statement of a material fact and do not omit to state a material fact
necessary in order to make the statements contained therein or herein not
misleading in the light of the circumstances under which they were made. The
Company has no knowledge of any fact or circumstance which materially adversely
affects or in the future may (so far as the Company can now reasonably foresee)
materially adversely affect the condition, financial or otherwise, assets,
business, operations or prospects of the Company which has not been disclosed in
writing to Philips.
Without limiting the foregoing, the information provided by the Company to
its shareholders for purposes of obtaining any necessary approvals did not
contain an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not misleading in
light of the circumstances in which they were made, and the Company shall
indemnify and hold Philips harmless from any loss, liability or expense incurred
by Philips by reason of such information so provided not conforming to this
representation.
2.25 Environmental Matters. The Company has acquired all material permits,
---------------------
licenses, approvals and consents from appropriate local, tribunal, state and
federal governmental bodies, authorities and agencies necessary to conduct its
operations in compliance with all applicable Environmental Laws. For purposes
of this Agreement, "Environmental Laws" shall mean any law, rule, regulation,
order, injunction or decree of any federal, state or local government,
regulatory authority, court or arbitration tribunal within the United States
relating to pollution or protection of the environment (including ambient air,
surface water, ground water, land surface or subsurface strata), including,
without limitation, laws relating to the spill, placement, leaking, release,
discharge, emission, generation, treatment, storage or disposal of pollutants,
contaminants, chemicals or toxic of hazardous substances. There are no
investigations, actions, proceedings and claims of whatsoever nature, whether
pending or to the Company's knowledge threatened, involving the Company or its
properties, operations or business arising under any Environmental Laws.
2.26 Minute Books. The minute books of the Company are accurate and
------------
complete and reflect all material actions taken by its incorporators,
shareholders and directors (including any committees of the Board).
Stock Purchase Agreement
-13-
<PAGE>
ARTICLE 3 - REPRESENTATIONS, WARRANTIES AND COVENANTS OF PHILIPS
Philips represents and warrants to the Company as follows:
3.1 Experience. It has such knowledge and experience in financial and
----------
business matters that it is capable of evaluating the merits and risks of an
investment in the Shares and of making an informed decision regarding such
investment.
3.2 Investment. It is acquiring the Shares for investment for its own
----------
account and not with the view to, or for resale in connection with, any
distribution thereof. It understands that the Shares and Underlying Shares have
not been registered under the Securities Act by reason of a specified exemption
from the registration provisions of the Securities Act which depends upon, among
other things, the bona fide nature of its investment intent as expressed herein.
3.3 Limitations on Disposition. It acknowledges that the Shares and
--------------------------
Underlying Shares must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available and that the Company (i) has no obligation or intention of registering
the Preferred Shares, (ii) may place stop transfer instructions with the
Company's transfer agent to prevent the transfer of Shares and Underlying Shares
in violation of the terms of this Agreement or the Investor Rights Agreement,
and (iii) except as provided in the Investor Rights Agreement, has no obligation
to register the Underlying Shares or make available an exemption from
registration. It has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act, which permits limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, and fully understands that such Rule may not become available for
resale of the Shares and Underlying Shares.
3.4 Access to Data. It is experienced in evaluating and investing in
--------------
companies such as the Company, is able to fend for itself in the transactions
contemplated by this Agreement, the Investor Rights Agreement, and the
Supplementary Purchase Agreement, has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of its
investment, and has the ability to bear the economic risks of its investment.
Philips further represents that it has had access, during the course of the
transaction and prior to its purchase of the Shares, to the information it
believed it needed and desired in connection with its evaluation of its
investment in the Shares and that it has had, during the course of the
transaction and prior to its purchase of the Shares, the opportunity to ask
questions of, and receive answers from, the Company concerning the terms and
conditions of the offering and to obtain additional information (to the extent
the Company possessed such information or could acquire it without unreasonable
effort or expense) necessary to verify the accuracy of any information furnished
to it or to which
Stock Purchase Agreement
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<PAGE>
it had access. No such access shall affect the Company's representations and
warranties hereunder nor Philips' right to rely on such representations and
warranties.
3.5 Restrictive Legend. Each certificate representing the Shares and
------------------
Underlying Shares or any other securities issued in respect of the Shares and
Underlying Shares upon any stock split, stock dividend, recapitalization,
merger, consolidation or similar event, shall (unless otherwise permitted or
unless the securities evidenced by such certificate shall have been registered
under the Securities Act) be stamped or otherwise imprinted with legends in the
following form (in addition to any legend required under applicable state
securities laws):
(a) With respect to compliance with the Securities Act, the following
legend will appear:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED
FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO
THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED.
(b) With respect to compliance with the provisions in the Company's
Bylaws, the following legend will appear:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF
FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION AND ITS OTHER
SHAREHOLDERS AS PROVIDED IN THE BYLAWS OF THE CORPORATION.
(c) With respect to compliance with the provisions in the Investors
Rights Agreement, the following legend will appear:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AND MAY
BE TRANSFERRED ONLY IN COMPLIANCE WITH AN AGREEMENT, DATED AS OF
SEPTEMBER 1, 1994, BY AND AMONG THE COMPANY AND THE OTHER PARTIES
NAMED THEREIN, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF
THE ISSUER.
3.6 Removal of Legend. Upon request of a holder of such a certificate,
-----------------
the Company shall remove the legend specified in Paragraph 3.5(a) from the
certificate or issue to such holder a new certificate therefore free of the
transfer legend if:
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<PAGE>
(a) With such request, the Company shall have received either the
opinion referred to in Paragraph 3.7(a) or the "no-action" letter referred to in
Paragraph 3.7(b) to the effect that any transfer by such holder of the
securities evidenced by such certificate will not violate the Securities Act or
applicable state securities laws; or
(b) In accordance with Paragraph (k) of Rule 144, such holder is not,
and has not during the last three months been, an affiliate of the Company and
such holder has held the securities represented by such certificate for a period
of at least three years and such holder is eligible to use Paragraph (k) of Rule
144.
In the event a holder falls within Paragraphs 3.6(a) or 3.6(b), the Company will
use its best efforts to assist such holder in obtaining removal of the legend
set forth in Paragraph 3.5(a).
3.7 Notice of Proposed Transfers. The holder of each certificate required
----------------------------
to bear or bearing the legend set forth in Paragraph 3.5(a) ("Restricted
Securities") by acceptance thereof agrees to comply in all respects with the
provisions of this Section 3.7. Prior to any proposed transfer of any
Restricted Securities (other than under circumstances described in the Investor
Rights Agreement), the holder thereof shall give written notice to the Company
of such holder's intention to effect such transfer. Each such notice shall
describe the manner and circumstances of the proposed transfer in sufficient
detail, and shall be accompanied (except in transactions in compliance with Rule
144) by either:
(a) A written opinion of legal counsel who shall be reasonably
satisfactory to the Company, addressed to the Company and reasonably
satisfactory in form and substance to the Company, to the effect that the
proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act; or
(b) A "no-action" letter from the Securities and Exchange Commission
(the "Commission") to the effect that the distribution of such securities
without registration will not result in a recommendation by the staff of the
Commission that action be taken with respect thereto, whereupon the holder of
such Restricted Securities shall be entitled to transfer such Restricted
Securities in accordance with the terms of the notice delivered by the holder to
the Company.
Each certificate evidencing the Restricted Securities transferred as above
provided shall bear the appropriate restrictive legend set forth in Paragraph
3.5(a), except that such certificate shall not bear such restrictive legend if
the opinion of counsel or "no-action" letter referred to above is to the further
effect that such legend is not required in order to establish compliance with
the provisions of the Securities Act.
Stock Purchase Agreement
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<PAGE>
3.8 Other Representations of Philips. Philips is a corporation duly
--------------------------------
organized and validly existing under the laws of the Netherlands and is in good
standing under such laws. Philips and its affiliates have all requisite power
and authority, corporate and other, to enter into this Agreement, the Investor
Rights Agreement, the Supplementary Purchase Agreement, and all other documents,
agreements and instruments to be executed by Philips and/or its affiliates and
delivered to the Company in connection with the Closing, and to carry out and
perform their obligations hereunder and thereunder. All corporate action on the
part of Philips, its directors and its shareholders necessary for the
authorization, execution, delivery and performance by Philips and its affiliates
of this Agreement, the Investor Rights Agreement, and the Supplementary Purchase
Agreement, and the consummation of the transactions contemplated herein and
therein, and for the purchase of the Shares and the Underlying Shares has been
taken. This Agreement is a valid and binding obligation of Philips and its
affiliates, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization and moratorium laws and other laws of
general application affecting enforcement of creditors' rights generally. The
execution, delivery and performance by Philips and its affiliates of this
Agreement, the Investor Rights Agreement, and the Supplementary Purchase
Agreement, and the purchase of the Shares and the Underlying Shares will not
result in any violation of, and will not conflict with, or result in a breach of
any of the terms of, or constitute a default under any provision of Dutch, state
or Federal law to which Philips is subject. Philips is a wholly owned
subsidiary of Philips Electronics N.V., a corporation organized under the laws
of the Netherlands. No further consent, approval, qualification, order or
authorization of, or filing with, or notification to, any governmental authority
is required in connection with Philips' and its affiliates' valid execution,
delivery or performance of this Agreement and the Investor Rights Agreement, or
the purchase of the Shares from the Company, or the consummation of any other
transaction contemplated hereby.
ARTICLE 4 - CONDITIONS TO CLOSING OF PHILIPS
The obligation of Philips to purchase the Shares to be purchased at the
Closing is subject to the fulfillment to Philips' satisfaction on or prior to
the Closing Date of each of the following conditions:
4.1 Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by the Company in Article 2 shall be true and correct in all
respects when made, and shall be true and correct in all respects at the Closing
with the same force and effect as if they had been made on and as of the Closing
Date.
4.2 Performance. All covenants, agreements and conditions contained in
-----------
this Agreement to be performed or complied with by the Company on or prior to
the Closing Date shall have been performed or complied with in all respects.
Stock Purchase Agreement
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<PAGE>
4.3 Opinion of Company's Counsel. Philips shall have received from
----------------------------
counsel to the Company, an opinion addressed to Philips, dated the Closing Date,
and in the form attached as Exhibit G.
4.4 Legal Investment. At the Closing Date, the purchase of the Shares to
----------------
be purchased by Philips hereunder shall be legally permitted by all laws and
regulations to which Philips and the Company are subject.
4.5 Compliance Certificate. The Company shall have delivered to Philips a
----------------------
certificate of the Chairman and Chief Executive Officer of the Company in the
form attached as Exhibit M, dated as of the Closing, certifying to the
fulfillment of the conditions specified in Sections 4.1 and 4.2 and such other
matters as Philips may reasonably request.
4.6 Proceedings and Documents. All corporate and other proceedings in
-------------------------
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be reasonably satisfactory in
substance and form to Philips.
4.7 Securities Law Compliance. All actions and steps necessary to assure
-------------------------
compliance with applicable Federal and state securities laws, including all
authorizations, approvals or permits, if any, of any governmental authority or
regulatory body in any states where the Shares are being sold that are required
in connection with the lawful issuance and sale of the Shares pursuant to this
Agreement, the conversion of the Shares and the issuance of the Underlying
Shares shall have been duly obtained and shall be effective on and as of the
Closing except for any such filings as may under applicable law be made
subsequent to the Closing, which such filings the Company agrees it will make in
a timely manner.
4.8 Consents. All material consents, approvals and authorizations,
--------
including the approval of the shareholders of the Company as required by the
General Corporation Law of Delaware, and all material filings with and
notifications of governmental authorities and regulatory agencies or other
entities which regulate the business of the Company or Philips, necessary on the
part of the Company or Philips or their respective affiliates to the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby, shall have been obtained or effected.
4.9 Conversion of Debentures. Simultaneous with the Closing, the Company
------------------------
shall have converted all outstanding convertible debentures of the Company in
accordance with their terms.
Stock Purchase Agreement
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<PAGE>
4.10 Intellectual Property Release. The Company will have received from T.
-----------------------------
Russell Shields, SEI, AAA and Nichimen the Intellectual Property Non-Assertion
Certificate in the form attached as Exhibit N.
4.11 Other Agreements. The execution and delivery by all parties thereto
----------------
of the Shields Engagement Agreement and the Investor Rights Agreement shall have
occurred simultaneously with the Closing.
ARTICLE 5 - CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to sell the Shares to be purchased at the Closing
is subject to the fulfillment to the Company's satisfaction at or prior to such
Closing of each of the following conditions:
5.1 Representations. The representations made by Philips pursuant to
---------------
Article 3 shall be true and correct when made and shall be true and correct as
of the Closing.
5.2 Legal Investment. At the time of the Closing, the purchase of the
----------------
Shares to be purchased by Philips hereunder shall be legally permitted by all
laws and regulations to which Philips and the Company are subject.
5.3 Securities Law Compliance. All actions and steps necessary to assure
-------------------------
compliance with applicable Federal and state securities laws, including all
authorizations, approvals or permits, if any, of any governmental authority or
regulatory body in any state where the Shares are being sold that are required
in connection with the lawful issuance and sale of the Shares pursuant to this
Agreement, the conversion of the Shares and the issuance of the Underlying
Shares shall have been duly obtained and shall be effective on and as of the
Closing except for any such filings as may under applicable law be made
subsequent to the Closing, which such filings the Company agrees it will make in
a timely manner.
5.4 Opinion of Philips Counsel. The Company shall have received from
--------------------------
Philips' counsel, opinions addressed to the Company, dated the Closing Date, and
in the form attached as Exhibit L.
ARTICLE 6 - RIGHTS, LIMITATIONS, AND OBLIGATIONS OF PHILIPS
6.1 Right of First Refusal.
----------------------
(a) The Company singly, excluding its subsidiaries, hereby grants to
Philips a right of first refusal on any sale of its Common Stock, or of its
securities convertible into or exercisable for Common Stock, to a proposed
purchaser, or group of purchasers acting in concert, which would, together with
its affiliates, hold or continue
Stock Purchase Agreement
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<PAGE>
to hold more than a ten percent economic interest in the Company. Upon exercise
of such right, Philips shall receive Preferred Shares in lieu of Common Stock,
or securities convertible into or exercisable for Preferred Shares.
(b) The following transactions shall not constitute events which
trigger the right of first refusal granted in Paragraph 6.1(a):
(i) Stock purchased by existing shareholders to maintain their
voting position under the Investor Rights Agreement;
(ii) Stock issued pursuant to any stock option plan or options now in
existence or outstanding, or granted in accordance with the provisions of
Section 7.12 or the Shields Engagement Agreement; and
(iii) Stock exchanged for equity in new affiliated companies
which are acceptable to Philips.
(c) The Company shall not grant any party an exclusive license for
the in-vehicle use of the Company's database without first providing Philips
with a 60 day right of first refusal to acquire such exclusive license on the
same terms. If Philips elects to exercise such right, it shall acquire such
license on such terms and conditions; if it does not, the Company shall be free
for 60 Business Days (plus an additional 60 Business Days if the license cannot
be completed by the Company in the original 60 day period through no fault of
the Company) to enter into such license on terms no more favorable to the
proposed licensee than those offered to Philips, after which Philips' right of
first refusal shall again apply.
6.2 Technology Rights. The Company will not, except with Philips' written
-----------------
consent: sell, license, or otherwise put at the disposal of another
organization that is not directly or indirectly majority owned by the Company
its database creation and management software for purposes of independently
creating navigable databases. Philips shall not unreasonably withhold its
consent if such organization offers Philips the right, on reasonable terms, to
participate in such organization. Subject to local law and custom, the Company
will use its best efforts to secure for Philips, if Philips requests, an
ownership interest in such organization that is equal to Philips' ownership
interest in the Company. The prohibition established in this Section 6.2 shall
not apply for organizations who use the technology solely for adding attributes
to databases created by the Company or one of its licensees.
6.3 Limitation on Equity Position. Except with the approval of a majority
-----------------------------
of those Directors of the Company who were not designated by Philips ("Non-
Philips Board Members"), for three years following the Company's Initial Public
Offering as defined in the Bylaws, Philips agrees not to own more than seventy-
five percent of the outstanding Common Stock, except for shares acquired by
Philips: (i) in a tender offer
Stock Purchase Agreement
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<PAGE>
or exchange offer for all of the Common Stock, or in a merger, consolidation,
mandatory share exchange or similar transaction to which the Company is a party,
or (ii) pursuant to the exercise of a right of first refusal accorded to Philips
by this Agreement, the Investor Rights Agreement or the Bylaws, or (iii)
otherwise due to actions by the Company or others which Philips has no right or
ability to prevent.
For purposes of this Agreement, "Outstanding" when used with reference to
the Common Stock as of any given date shall mean the number of shares validly
issued and outstanding which have been fully paid and does not include any
shares which are the subject of unexercised rights, options or conversions of
securities; provided however, that all Preferred Shares which have been validly
issued shall be considered to be Outstanding shares of Common Stock, on a share
for share basis, whether or not the purchase price therefor has been paid in
full.
6.4 Limitation on Philips Sales. Philips shall be free to sell the
---------------------------
Preferred Shares or Common Stock which it owns or has the right to acquire
subject to any right of first refusal in the Bylaws, any right of Co-Sale in the
Investor Rights Agreement and the following:
(a) Except with the approval of a majority of the Non-Philips Board
Members, Philips shall not sell Preferred Shares or Common Stock to any one
purchaser or group of purchasers acting in concert which, after such sale, would
own more than ten percent of the outstanding Common Stock of the Company. A
firm commitment underwritten public offering of Common Stock shall not be
subject to this Paragraph 6.4(a).
(b) Until the fifth anniversary of the Initial Public Offering,
Philips shall accord the other Company shareholders the right to participate on
equal terms in any sale by Philips of all or substantially all of its equity
interest in the Company other than in an underwritten public offering of Common
Stock. Philips shall give such other shareholders not less than 30 Business
Days notice of such proposed sale by Philips and an opportunity, during such
period, to take such steps as will effectively permit such shareholders electing
to do so to sell their interests on such terms. If a shareholder elects to
exercise such right, it shall participate in such sale on such terms; if it does
not, Philips shall be free for 60 Business Days (plus an additional 60 Business
Days if the sale cannot be completed by Philips in the original 60 day period
through no fault of Philips) to consummate such sale on terms no more favorable
to Philips than those set forth in the notice to the shareholders, after which
the shareholders' right to participate shall again apply.
(c) Transfers of Preferred Shares or Common Stock among companies
controlled by Philips Electronics, N.V. ("Permitted Transferees") will be
unrestricted provided the transferee agrees to be bound by the same restrictions
as the transferor.
Stock Purchase Agreement
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<PAGE>
(d) If Philips intends to transfer Preferred Shares to any party
other than a Permitted Transferee, Philips shall so notify the Company and shall
simultaneously deliver such shares to the Company, which shall promptly issue to
the transferee an equivalent amount of Common Stock; it being understood, if the
-------------------
Company does not have such equivalent amount of Common Stock authorized and
available for issue, Philips shall be free to transfer unconverted Preferred
Shares, with the condition to the transferee that it convert such Preferred
Shares to Common Stock as soon as sufficient Common Stock is authorized and
available for issue.
6.5 Put by Current Shareholders.
---------------------------
(a) Philips hereby grants to each shareholder or optionee (to the
extent his/her options vest in accordance with the terms of the option) who on
the Closing Date owns less than 2,700,000 shares of Common Stock on a fully
diluted basis, the right to require Philips to purchase up to the number of
shares held by such shareholder or optionee on the Closing Date, at a per-share
price of $0.85.
(b) Philips hereby grants to each shareholder or optionee (to the
extent his/her options vest in accordance with the terms of the option) who on
the Closing Date owns at least 2,700,000 shares of Common Stock on a fully
diluted basis, the right to require Philips to purchase up to 50% of the number
of shares held by such shareholder or optionee on the Closing Date, at a per-
share price of $0.85.
(c) For purposes of the rights granted in Paragraphs 6.5(a) and 6.5(b)
(the "Put Rights") the "shares held" shall consist of: (i) shares owned on the
Closing Date, (ii) shares acquired through conversion of convertible debentures
on the Closing Date, and (iii) shares acquired through the exercise of options
held on the Closing Date and exercised by the date of exercise of the Put
Rights. The names of the shareholders and optionees to whom the Put Rights are
granted and their holdings as of the Closing Date are attached hereto as Exhibit
I.
(d) All or any portion of the Put Rights granted by Philips in
Paragraphs 6.5(a) and 6.5(b) may be assigned by the holder of such rights, with
respect to a stated number of shares, to one or more other shareholders who
receive rights under Paragraph 6.5(b), by the execution and delivery of a Put
Assignment Form, in the form attached as Exhibit J, to such assignee, with a
copy to the Company. All or any portion of the Put Rights granted by Philips in
Paragraph 6.5(a) or 6.5(b) may be assigned by the holder of such rights by the
execution by such holder of such a Put Assignment form, with respect to a stated
number of shares, according to a Permitted Transaction as defined in the Bylaws
in conjunction with the transfer of the same number of shares to such parties.
The Company will serve as transfer agent for the Put Rights and will keep
accurate records of the ownership of Put Rights granted under Paragraph 6.5(a)
and 6.5(b) and make such records available within two Business Days after
Philips request for a current statement of ownership of such Put Rights.
Stock Purchase Agreement
-22-
<PAGE>
(e) The rights granted in this Section 6.5 shall terminate and be of
no further force or effect on the earlier of (i) the fifth anniversary of the
Closing Date or (ii) the closing of the Initial Public Offering.
(f) Any transfer of a Put Right otherwise than pursuant to this
Section 6.5 shall be null and void.
(g) A holder of Put Rights pursuant to this Section 6.5 may exercise
such Put Rights by notice to Philips at the offices of Philips Electronics North
America, Attn: Warren Oates, 100 East 42nd Street, New York, New York 10017,
specifying a date and time for the purchase of the tendered shares, which shall
be no earlier than the fifth Business Day after the notice is given, and the
manner of payment by Philips of the purchase price for such shares. Philips
shall make payment for such shares at the date and time specified for such
purchase against delivery to it of certificates for the Common Stock being sold,
in good delivery form and free and clear of any lien or encumbrance, for the
exact number of shares of Common Stock being sold. Philips may require as a
condition to such purchase reasonable evidence, including certification from the
Company in a form reasonably satisfactory to Philips, substantiating the
ownership of the Put Rights being exercised by the shareholder purporting to
exercise them, such shareholder's ownership and right to sell the Common Stock
being sold and the continued validity of such Put Rights in respect of the
Common Stock being sold. The Company agrees to indemnify Philips for any
damages incurred by Philips in honoring the exercise of such Put Rights in
reasonable reliance upon such a certification that does not accurately reflect
the true ownership of such Put Rights. Put Rights may not be exercised for less
than 1000 shares of Common Stock or, if less, the entire number of shares of
Common Stock as to which the selling shareholder possesses Put Rights at the
time of Put Right exercise.
(h) Philips does not seek to acquire any of the shares of Common
Stock to which the Put Rights relate. Philips has agreed to accord these Put
Rights to the Company's shareholders solely at the request of the Company and
its other shareholders as an accommodating facility to provide such shareholders
with additional liquidity for their Common Stock prior to a Initial Public
Offering. Philips neither encourages nor discourages any such shareholder to
exercise any such Put Rights, and each shareholder is intended to make such
shareholder's own decision concerning such exercise or non-exercise of Put
Rights. Philips does not undertake, and disclaims, any obligation or
responsibility to provide notices of any sort to holders of the Put Rights,
including any notice with respect to a proposed Initial Public Offering, or to
provide such holders with any information concerning the Company and its
affiliates or Philips and its affiliates for purposes of their consideration of
the advisability of exercising the Put Rights. Philips has been assured that the
Company will inform its shareholders receiving Put Rights that Philips, as the
largest shareholder of the Company, with representatives on the Board, will very
likely from time to time have material non-public information that could be
deemed important or desirable by
Stock Purchase Agreement
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<PAGE>
shareholders considering whether or not to exercise their Put Rights and
undertakes no responsibility to make any such information available to them. All
notices and information concerning the Company and its affiliates, insofar as
the holders of the Put Rights are concerned, will come solely from the Company.
The Company agrees to advise all holders of the Put Rights of the foregoing
through a notice to such holders within five Business Days after the Closing
Date in the form annexed to this Agreement as Exhibit K.
6.6 Future Financing. If Philips determines, in its sole discretion, to
----------------
make an additional investment in the Company, such investment will be made at a
price per share to be agreed upon by the Non-Philips Board Members and Philips,
or failing such agreement, at a price equal to the fair market value per share
of the securities to be sold, as determined by an independent investment banker
chosen by the Non-Philips Board Members and Philips for such purpose.
6.7 Board Designees.
---------------
(a) The Company will use its best efforts to assure that twenty-five
percent of the members of the Board, rounded up to the nearest whole number, are
persons designated for that purpose by Philips (the "Philips Board Members") and
that such persons designated by Philips shall constitute at least the same
proportion of membership on each committee that the Board may have from time to
time, other than any special committee the sole function of which is to consider
and act with respect to one or more transactions with Philips or its affiliates.
(b) After the conversion of all Preferred Shares:
(i) Philips will use its best efforts to assure the election, as a
Director of the Company, of a designee of each of AAA, Nichimen and SEI;
provided such company's Investment Group (as defined in the Investor Rights
Agreement) owns at least five percent of the Common Stock.
(ii) If the Investment Group of AAA, Nichimen, or SEI owns less than
five percent of the Common Stock, Philips will nonetheless use its best efforts
to assure the election of such company's designee through December 31, 1999
provided such company has, in Philips' reasonable judgment, a key strategic
relationship with the Company.
(iii) If AAA, Nichimen, or SEI does not have a designee as a
Director of the Company, the Company and Philips agree to offer such entity a
seat on the Company's Strategic Board whenever such advisory board is maintained
by the Company.
Stock Purchase Agreement
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<PAGE>
(iv) Philips will use its reasonable best efforts to assure the
election, as a Director of the Company, of the designee of any holder of at
least five percent of the Common Stock, on the request of AAA, Nichimen, and
SEI.
6.8 Uniform Commercial Terms. The Company will extend, and continue to
------------------------
extend, most favored customer terms and prices to AAA, Nichimen, Philips, and
SEI for similar types and quantities of the Company's goods and services under
similar terms and conditions. Similarly, the Company will extend, and continue
to extend, most favored customer terms and prices to all its customers for
similar types and quantities of the Company's goods and services under similar
terms and conditions.
6.9 Succession for CEO. If the services of T. Russell Shields to serve as
------------------
Chief Executive Officer ("CEO") of the Company, secured pursuant to the Shields
Engagement Agreement, become unavailable, then the Philips Board Members shall
meet with the Non-Philips Board Members to determine a new CEO. If agreement
cannot be reached within 120 days, the Board shall elect as Chief Executive
Officer for two years, a person who has been designated by the Philips Board
Members in their sole discretion. Any successors to such CEO during such period
shall be similarly designated and elected. During the last 120 days of that
two-year period representatives of Philips shall meet with the Non-Philips Board
Members to determine a new CEO. If agreement is not reached before the end of
the two year period, the Board shall elect as Chief Executive Officer for one
year, a person who has been designated by the Non-Philips Board Members in their
sole discretion. Any successors to such CEO during such period shall be
similarly designated and elected.
6.10 Limit on Philips Board Members. Philips will not vote for a candidate
------------------------------
for Board election who is an affiliate of, or otherwise related to or controlled
by Philips or its affiliates except for those candidates designated according to
Paragraph 6.7(a) and candidates designated by the Company in conformance with
the Shields Engagement Agreement and by Investors according to the Investors
Rights Agreement for whom Philips is obligated to vote by contract.
6.11 Restrictions on Philips' Rights to Convert Preferred Shares. Except
-----------------------------------------------------------
as provided in this Section 6.11, Philips and any Permitted Transferees shall
not convert any Preferred Shares into Common Stock, the provisions of the
Restated Certificate notwithstanding. Philips and any Permitted Transferee may
convert Preferred Shares only in any of the following circumstances:
(a) On or after January 1, 2004.
(b) Upon the sale or transfer of any or all Preferred Shares to
anyone other than a Permitted Transferee so long as such sale or transfer is not
in violation of Paragraph 6.4(a).
Stock Purchase Agreement
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<PAGE>
(c) In the event that the cumulative combined net losses of the
Company, EGT and their subsidiaries from January 1, 1994 to the last day of the
calendar year shown below exceeds the cumulative net loss shown:
<TABLE>
<CAPTION>
Year Cumulative Net Loss
- ---- -------------------
<S> <C>
1994 $ 50,000,000
1995 $100,000,000
1996 $130,000,000
1997
and thereafter $150,000,000
</TABLE>
Cumulative net loss in any year shall be determined by the Company's independent
public accountants on the basis of the accounting procedures and principles
pursuant to which the audited consolidated Company financial statements are
prepared in the regular course of its business on a consistent basis. Philips
and the Company may change the dollar amounts appearing under "Cumulative Net
Loss" by jointly executing a designation to that effect that specifies the
change to be made.
(d) At the end of the final period specified in Section 6.9, Philips
and Philips Permitted Transferees may convert all, but not less than all, of the
Philips Preferred Shares.
(e) In the event that through no fault of Philips and no failure by
Philips to take action, fewer than the number of Philips' designees specified in
Paragraph 6.7(a) shall be members of the Board and the committees thereof.
(f) In the event the Chief Executive Officer of the Company is, at
any time, through no fault of Philips and no failure of Philips to take action,
not a person selected in accordance with Section 6.9; provided, however, that an
interim Chief Executive Officer, reasonably satisfactory to Philips, appointed
to serve during the periods provided in Section 6.9 for the selection of a new
Chief Executive Officer shall not be considered an event under this Paragraph
6.11(f).
(g) If there shall have been a material breach in any of the
Company's obligations to Philips or a Permitted Transferee, or a material
violation of any of Philips' or a Permitted Transferee's rights, under this
Agreement, the Restated Certificate, the Bylaws, the Supplementary Purchase
Agreement, the Investor Rights Agreement, the Intellectual Property Non-
Assertion Certificates or any other agreement relating to the transactions
contemplated by this Agreement and, in each case, there has been no action taken
or omitted to be taken by Philips that substantially contributed to the
Company's material breach or material violation, and in each case, such material
breach or material violation by the Company and the absence of such action or
omission by Philips has been agreed to exist by the Company, acting through the
Stock Purchase Agreement
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<PAGE>
majority of the Non-Philips Board Members, or is found to exist by any court or
any other impartial adjudicator having jurisdiction over such question.
Failure by the Company to provide the information to be given to Philips
according to the provisions of Article 7 will not be construed as a material
breach by the Company, unless such failure continues for 45 days after notice to
the Company by Philips of such failure.
(h) To maintain the Common Stock holding of Philips and its
affiliates at thirty-five percent of the Common Stock which is outstanding.
(i) On the closing of the Initial Public Offering.
(j) If the Company shall have received a written request from Philips
pursuant to Section 3.1(a) of the Investor Rights Agreement that the Company
effect a registration, and the registration does not become effective within six
months after such request; provided, however this condition shall not apply so
long as the Company is not at fault in effecting such registration in accordance
with Section 3.1 of the Investor Rights Agreement (including the provisions
relating to timing), and the Company has exercised and continues to exercise its
best efforts to effect such registration.
6.12 Approval by Philips Designated Directors. The Company agrees, without
----------------------------------------
the assent of the Philips Board Members, not to:
(a) Sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or purchase, lease or otherwise acquire, whether directly or
indirectly through an affiliate or affiliates or whether in a single transaction
or series of transactions, assets of the Company or any of its direct or
indirect subsidiaries having an aggregate book value at least equal to the
greater of $3,000,000 or ten percent of the Company's total assets other than in
the ordinary course of the Company's business;
(b) Change the compensation to SEI specified in the Shields
Engagement Agreement;
(c) Adopt, amend or repeal any provision of the Bylaws;
(d) Submit any change to the Certificate of Incorporation to vote by
the Company's shareholders;
(e) Waive any right of first refusal in the Bylaws;
(f) Adopt a shareholders rights plan;
Stock Purchase Agreement
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<PAGE>
(g) Issue any Preferred Stock not already approved as of the Closing
Date;
(h) Declare any dividend or make any distribution.
6.13 Contemplated IPO. The Company and Philips agree that, as soon as
----------------
practicable and advantageous to the Company and its shareholders, it is intended
that the Company will effect the Initial Public Offering.
6.14 Acquisition of Common Stock; Maintenance of Common Stock Position.
-----------------------------------------------------------------
Any Common Stock which Philips or any of its affiliates acquire after the date
hereof shall be promptly delivered to the Company and the Company shall
simultaneously deliver to such acquirer an equal number of Preferred Shares,
except to the extent that retention of Common Stock by Philips is required for
Philips and its affiliates to maintain a thirty-five percent voting interest in
the Company. Absent written prior notification to the Company by Philips to the
contrary, if Philips, its affiliates and its Permitted Transferees own less than
thirty-five percent of the Common Stock, and provided a sufficient number of
Preferred Shares are owned by Philips, its affiliates, and its Permitted
Transferees, the Company will automatically convert a sufficient number of
Preferred Shares owned by Philips and its affiliates to Common Stock in order
for Philips and its affiliates to maintain a thirty-five percent voting interest
in the Company, and will so notify Philips. If Philips so notifies the Company
within 90 days after such conversion, the Company will reconvert any or all such
automatically converted Common Stock back to Preferred Shares.
6.15 Termination of Philips Special Rights and Restrictions. The
------------------------------------------------------
provisions of Sections 6.1,6.2,6.9,6.10,6.12,6.13, the first sentence of Section
6.14, and Paragraphs 6.4(a) and 6.7(a) shall terminate if Philips, its
affiliates and its Permitted Transferees own less than thirty-five percent of
the Common Stock for a period of 90 consecutive days following notice to Philips
by the Company of such level of ownership or if Philips, its affiliates and its
Permitted Transferees own no Preferred Stock.
6.16 No Rescission. Philips hereby agrees not to rescind its purchase of
-------------
securities of the Company as provided in Section 1.3 of this Agreement, or in
any other way assert any liability of the Company with respect to such purchase
arising out of a violation of Section 5 of the Securities Act or of analogous
provisions of state securities laws as a result of the integration with such
purchase of offers or sales of securities by the Company prior to May 1, 1994.
6.17 EGT Matters.
-----------
(a) Operational and Management Responsibility. Effective as of the
-----------------------------------------
Closing Date and subject to the direction and oversight of EGT's Supervisory
Board,
Stock Purchase Agreement
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<PAGE>
the Company agrees to assume full responsibility for the operation and
management of EGT, and Philips agrees to such assumption of responsibility.
(b) Supervisory Board. The Company will support the election of two
-----------------
Philips designees to EGT's Supervisory Board provided Philips and its affiliates
maintain at least a 25% ownership position in the Company, and one Philip's
designee if Philips and its affiliates maintain at least a 10% ownership
position in the Company. If Philips and its affiliates maintain less than a
10% ownership of the Company, the Company will nonetheless support the election
of one Philip's designee to EGT's Supervisory Board through December 31, 1999,
provided Philips or its affiliates have a key strategic relationship with the
Company.
ARTICLE 7 - COVENANTS OF THE COMPANY
The Company hereby covenants and agrees as follows:
7.1 Basic Financial Information. The Company will furnish the following
---------------------------
reports to Philips so long as Philips holds at least one percent of the Common
Stock:
(a) As soon as practicable after the end of each fiscal year of the
Company, and in any event within 90 days thereafter, a consolidated balance
sheet of the Company and its subsidiaries, if any, as at the end of such fiscal
year, and consolidated statements of operations, shareholders' equity (deficit)
and cash flows of the Company and its subsidiaries, if any, for such year,
prepared in accordance with generally accepted accounting principles
consistently applied and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail and certified by
independent public accountants of recognized national standing selected by the
Company, and a Company prepared comparison to budget.
(b) As soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company, and in
any event within 45 days thereafter, a consolidated balance sheet of the Company
and its subsidiaries, if any, as of the end of each such quarterly period, and
consolidated statements of operations and related statement of cash flows of the
Company and its subsidiaries for such period and for the current fiscal year to
date, prepared in accordance with generally accepted accounting principles
consistently applied and setting forth in comparative form the figures in the
current budget, subject to changes resulting from year-end audit adjustments,
all in reasonable detail and certified by the principal financial or accounting
officer of the Company, except that such financial statements will not contain
the notes normally required by generally accepted accounting principles.
Stock Purchase Agreement
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<PAGE>
(c) From the date the Company becomes subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act," which shall include any successor Federal statute), and in lieu of the
financial information required pursuant to Paragraphs 7.1(a) and 7.1(b), upon
request by Philips, copies of its annual reports on Form 10-K and its quarterly
reports on Form 10-Q, respectively.
7.2 Additional Information.
----------------------
(a) From the date hereof and so long as Philips is the holder of at
least two percent of the Common Stock (a "Significant Holder"), the Company will
permit Philips (or its representative) to visit and inspect any of the
properties of the Company, including its books of account and other records, and
to discuss its affairs, finances and accounts with the Company's officers and
its independent public accountants, all at such reasonable times and as often as
any such person may reasonably request.
(b) Until the date on which the Company is subject to the reporting
requirements of Sections 13(a) or 15(d) of the Exchange Act, the Company will
deliver the reports described in this Section 7.2 to Philips so long as Philips
is a Significant Holder:
(i) As soon as practical after the end of each month and in any event
within 25 days thereafter, a consolidated balance sheet of the Company and its
subsidiaries, if any, as at the end of such month and consolidated statements of
operations of the Company and its subsidiaries, for each month and for the
current fiscal year of the Company to date, all subject to customary year-end
audit adjustments, prepared in accordance with generally accepted accounting
principles consistently applied and certified by the principal financial or
accounting officer of the Company.
(ii) As soon as available (but in any event not later than 60 days
after the commencement of each fiscal year of the Company) the business plan of
the Company, in such manner and form as approved by the Board of Directors of
the Company, which business plan shall include a projection of operations and
cash flows for such fiscal year and a projected balance sheet as of the end of
such fiscal year. Any material changes in such business plan shall be submitted
as promptly as practicable after such changes have been approved by the Board of
Directors of the Company.
(iii) With reasonable promptness (but in any event not later than 15
days after the request therefor), such other information and data with respect
to the Company and its subsidiaries as any such person may from time to time
reasonably request.
Stock Purchase Agreement
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<PAGE>
(c) The provisions of Section 7.1 and this Section 7.2 shall not be
in limitation of any rights which Philips, any director of the Company
designated by Philips, or any other shareholder of the Company may have with
respect to the books and records of the Company and its subsidiaries, or to
inspect their properties or discuss their affairs, finances and accounts, under
the laws of the jurisdictions in which they are incorporated.
(d) Notwithstanding Paragraph 7.2(a), Philips shall have no access to
any trade secrets, classified information, customer lists or other proprietary
information unless Philips, or an affiliate of Philips, is a director of the
Company and has access to such trade secrets, classified information, customer
lists or other proprietary information by reason of such directorship; and,
provided further, that Philips shall agree to hold in confidence and trust any
information provided pursuant to this Section 7.2 and not use such information
for any purpose other than for Philips Board Members to carry out their
responsibilities as Directors of the Company. Notwithstanding the above, to the
extent Philips is granted access to or the right to use any trade secrets,
classified information, customer lists or other proprietary information of the
Company pursuant to a licensing or other similar agreement, Philips shall not be
governed by the aforesaid terms and provisions of this Paragraph 7.2(d) to the
extent that such licensing or other agreement conflicts with or overrides this
Paragraph 7.2(d).
(e) Such financial information by such dates as Philips may
reasonably require to prepare its consolidated financial statements.
7.3 Prompt Payment of Taxes, etc. The Company will promptly pay and
----------------------------
discharge, or cause to be paid and discharged, when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company or any subsidiary; provided,
however, that any such tax, assessment, charge or levy need not be paid if the
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have set aside on its books adequate
reserves with respect thereto, and provided, further, that the Company will pay
all such taxes, assessments, charges or levies forthwith upon the commencement
of proceedings to foreclose any lien which may have attached as security
therefor. The Company will promptly pay or cause to be paid when due, or in
conformance with customary trade terms or otherwise in accordance with policies
related thereto adopted by the Board, all other indebtedness incident to
operations of the Company.
7.4 Maintenance of Properties and Leases. The Company will keep its
------------------------------------
properties and those of its subsidiaries in good repair, working order and
condition, reasonable wear and tear excepted, and from time to time make all
needful and proper repairs, renewals, replacements, additions and improvements
thereto; and the Company and its subsidiaries will at all times comply with each
material provision of all leases to which any of them is a party or under which
any of them occupies property if
Stock Purchase Agreement
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<PAGE>
the breach of such provision might have a material and adverse effect on the
condition, financial or otherwise, or operations of the Company.
7.5 Insurance. Except as otherwise decided in accordance with policies
---------
adopted by the Board, the Company will keep its assets and those of its
subsidiaries which are of an insurable character insured by financially sound
and reputable insurers against loss or damage by fire, explosion and other risks
customarily insured against by companies in the Company's line of business, and
the Company will maintain, with financially sound and reputable insurers,
insurance against other hazards and risks and liability to persons and property
to the extent and in the manner customary for companies in similar businesses
similarly situated.
7.6 Accounts and Records. The Company will keep true records and books of
--------------------
account in which full, true and correct entries will be made of all dealings or
transactions in relation to its business and affairs in accordance with
generally accepted accounting principles applied on a consistent basis.
7.7 Independent Accountants. In the event the services of Price
-----------------------
Waterhouse, or any firm of independent public accountants hereafter employed by
the Company, are terminated, the Company will promptly thereafter notify Philips
and, at Philips' request, will request the firm of independent public
accountants whose services are terminated to deliver to Philips a letter from
such firm setting forth the reasons for the termination of their services. In
the event of such termination, the Company will promptly thereafter engage
another firm of independent public accountants of recognized national standing.
In its notice to Philips, the Company shall state whether the change of
accountants was recommended or approved by the Board or any committee thereof.
7.8 Compliance with Requirements of Governmental Authorities. The Company
--------------------------------------------------------
and all its subsidiaries shall duly observe and conform to all valid material
requirements of governmental authorities relating to the conduct of their
businesses or to their properties or assets.
7.9 Maintenance of Corporate Existence, etc. The Company shall maintain
---------------------------------------
in full force and effect its corporate existence, rights and franchises and
all licenses and other rights in or to use patents, processes, licenses,
trademarks, trade names or copyrights owned or possessed by it or any subsidiary
and deemed by the Company to be necessary to the conduct of its business
without, to the Company's best knowledge, any conflict with any interest in or
rights of others to use such patents, processes, licenses, trademarks, trade
names or copyrights.
7.10 Availability of Stock for Conversion. The Company will, from time to
------------------------------------
time, in accordance with the laws of the state of Delaware, increase the
authorized amount of Common Stock if at any time the number of shares of Common
Stock remaining authorized and available for issuance shall be insufficient to
permit conversion of all
Stock Purchase Agreement
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<PAGE>
the then outstanding Preferred Shares. In addition, the Company will at all
times have available and reserved for issuance by it all Preferred Shares and
shares of Common Stock which it may be required to issue in accordance with this
Agreement, at the Closing or thereafter, including shares of Common Stock
issuable upon conversion of the Preferred Shares.
7.11 Proprietary Information and Inventions Agreements. The Company will
-------------------------------------------------
cause each person now or hereafter employed by it or any subsidiary with access
to confidential information to enter into a Proprietary Information and
Inventions Agreement in substantially the form of Exhibit F to the extent
possible by local law and custom.
7.12 Incentive Stock Arrangements. The Company will not, without the
----------------------------
approval of the Board, issue any of its capital stock, or grant an option or
right to subscribe for, purchase or acquire any of its capital stock, to any
employee, former employee, founder, consultant, officer, supplier, customer or
director of the Company or a subsidiary except for the issuance, hereafter or
heretofore, of up to the number of shares of Common Stock that represent fifteen
percent of the outstanding capital stock of the Company on a fully diluted and
converted basis pursuant to a stock option plan, stock purchase plan, benefit
plan, or other arrangement, hereafter or heretofore adopted by the Board and
consented to by Philips.
7.13 Termination of Covenants. The covenants set forth in this Article 7
------------------------
shall terminate and be of no further force and effect on the earlier to occur of
(i) December 31, 2003, (ii) the closing of the Initial Public Offering, and
(iii) Philips owning less than one percent of the Common Stock.
ARTICLE 8 - MISCELLANEOUS
8.1 Governing Law. This Agreement shall be governed in all respects by
-------------
the laws of the State of California.
8.2 Survival. The representations, warranties, covenants and agreements
--------
made herein shall survive (i) any investigation made by Philips and the Company
prior to the Closing and (ii) the Closing.
8.3 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and no liability shall be created to any third party by an
provision hereof except to the American Automobile Association, Nichimen
America, Inc., and Shields Enterprises, Inc. and the shareholders and optionees
through the provisions of Section 6.5.
Stock Purchase Agreement
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<PAGE>
8.4 Entire Agreement; Amendment. This Agreement and the Exhibits and
---------------------------
other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof. Neither this Agreement nor any term hereof may be amended
except by a written instrument signed by all parties hereto. This Agreement may
not be waived except by an instrument in writing executed by the party entitled
to the benefits thereby waived. No waiver of any term, provision or condition
of this Agreement, in any one or more instances, shall be deemed to be, or
construed to be, a further or continuing waiver of any such term, provision or
condition, or as a waiver of any other term, provision or condition of this
Agreement.
8.5 Notices, etc. All notices and other communications required or
------------
permitted hereunder shall be in writing and shall be mailed by certified or
registered mail, postage prepaid, delivered either by hand or by messenger, or
transmitted by electronic telecopy (fax) addressed:
If to Philips, at:
Philips Media B.V.
c/o Philips Electronics North America
Attn: Samuel J. Rozel, Esq.
100 East 42nd Street
New York, New York 10017
Fax: 212/850-7304
with a copy to:
Sullivan & Cromwell
Attn: W. Loeber Landau, Esq.
125 Broad Street
New York, New York 10004
Fax: 212/558-3588
If to the Company, at:
Navigation Technologies
Attn: Chief Financial Officer
740 East Arques Avenue
Sunnyvale, California 94086
Fax: 408/736-3734
or at such other address as either party shall have furnished to the other in
writing. All such notices and other written communications shall be effective
(i) if mailed, seven
Stock Purchase Agreement
-34-
<PAGE>
days after mailing, (ii) if delivered, upon delivery, or (iii) if faxed, within
one business day after transmission with telephone or fax confirmation of
receipt.
8.6 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to either party hereto upon any breach or default of
the other party under this Agreement shall impair any such right, power or
remedy of such party nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring. No waiver of any single breach or default shall
be deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any party hereto of any breach or default under this Agreement or
any waiver on the part of any party hereto of any provisions or conditions of
this Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any party, shall be cumulative and
not alternative.
8.7 Separability. In case any provision of the Agreement shall be
------------
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
In lieu of each illegal, invalid or unenforceable provision, the Company and
Philips shall negotiate in good faith to add a provision that is legal, valid
and enforceable and as similar in terms to such illegal, invalid or
unenforceable provision as may be possible while giving effect to the benefits
and burdens for which the parties have bargained hereunder.
8.8 Agent's Fees.
------------
(a) The Company hereby agrees to indemnify and to hold Philips
harmless of and from any liability for commission or compensation in the nature
of an agent's fee to any broker or other person or firm (and the costs and
expenses of defending against such liability or asserted liability) arising from
any act by the Company or any of its employees or representatives. It is
understood that the only such fees payable in connection with the purchase and
sale of the Preferred Shares are those fees payable to Lehman Brothers Inc. and
Needham & Company, Inc. It is further understood that Prudential Securities has
claimed that a fee is payable to them, which claim the Company disputes and
believes to be without merit.
(b) Philips (i) represents and warrants that it has retained no
finder or broker in connection with the transactions contemplated by this
Agreement and (ii) hereby agrees to indemnify and to hold the Company harmless
from any liability for any commission or compensation in the nature of an
agent's fee to any broker or other person or firm (and the costs and expenses of
defending against such liability or asserted liability) for which Philips, or
any of Philips's employees or representatives, are responsible.
Stock Purchase Agreement
-35-
<PAGE>
8.9 Information Confidential. Philips acknowledges that the information
------------------------
received by it pursuant to its activities as a shareholder of the Company may be
confidential and proprietary to the Company and is provided to Philips for its
use only in its capacity as a shareholder and to the Philips Board members as
directors of the company, and Philips agrees to keep in strictest confidence and
trust all information received by it pursuant hereto and not to use any such
information in any other fashion or to use, reproduce, disclose or disseminate
any such information to any other person (other than its employees or agents
having a need to know the contents of such information in the capacity as
shareholder or director, and its attorneys) without the written consent of the
Company, except in connection with the exercise of rights under this Agreement,
unless the information to be disclosed (i) is already in Philips' possession,
provided that such information is not known by Philips to be subject to another
confidentiality agreement with or other obligation of secrecy to the Company,
(ii) becomes generally available to the public other than as a result of a
disclosure by Philips or Philips' directors, officers, employees, agents or
advisors, (iii) becomes available to Philips on a non-confidential basis from a
source other than the Company, provided that such source is not known by Philips
to be prohibited from disclosing such information to Philips on account of a
legal, contractual or fiduciary obligation with respect to such information, or
(iv) without violating any of Philips' obligations under this Agreement, has
been or is subsequently acquired or developed by Philips other than directly or
indirectly from the Company; or if Philips is required to disclose such
information by any law, regulation, order, decree or rules to which it is
subject and only to the extent and to the persons it is so required to disclose
and only after it shall have used its reasonable best efforts to contest such
requirement if there are reasonable grounds to do so. Philips shall not make
any confidential information of the Company available to any party (including,
without limitation, its employees, agents, attorneys or partners) who or which
is not a party to this Agreement, if such party, to the best of Philips's
knowledge, is unable or unwilling to comply with the provisions of this Section
8.9. Notwithstanding the foregoing provisions of this Section 8.9, it is
understood and agreed that the Company and Philips may from time to time have
separate agreements pertaining to the use of confidential or proprietary
information. Such agreements shall take precedence over the terms and provisions
of this Section 8.9, provided that such agreements are in writing and signed by
the Company and Philips.
8.10 Expenses. The Company shall pay all reasonable closing costs and fees
--------
incurred on behalf of the Company in connection with the execution of this
Agreement and the agreements entered into in connection with the transactions
contemplated hereby. The Company shall not be obligated to pay any legal fees
or expenses incurred by Philips in connection with the transactions contemplated
hereby.
8.11 Titles and Subtitles. The titles of the paragraphs and subparagraphs
--------------------
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
Stock Purchase Agreement
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<PAGE>
8.12 Definition of Company. All references to "the Company" in Articles 2,
---------------------
4, and 6 shall be deemed to mean "the Company and its subsidiaries, collectively
and singly" unless the context clearly requires the reference to mean "the
Company singly."
8.13 Scope. Each party hereto shall be responsible for the actions of all
-----
entities under its control and cause such entities to abide by the terms of this
Agreement wherever applicable.
8.14 Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be an original, but all of which together shall constitute one
instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the date first above written.
NAVIGATION TECHNOLOGIES
CORPORATION
By: /s/ Thomas A. Lerone
-------------------------
Title: Chief Financial Officer
------------------------
PHILIPS MEDIA B.V.
By:/s/ Samuel J. Rozel
-------------------------
Title: Attorney-in-fact
-----------------------
-37-
<PAGE>
EXHIBIT 10.9
STOCK PURCHASE AGREEMENT
by and among
NAVIGATION TECHNOLOGIES CORPORATION
and
the Purchasers named herein
Dated as of June 24, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1. PURCHASE AND SALE OF SHARES..................................... 1
1.1 Authorization of Shares................................... 1
1.2 Sale of the Shares........................................ 2
1.3 Closings.................................................. 2
1.4 Waivers and Consents...................................... 3
1.5 Definitions............................................... 4
SECTION 2. ADJUSTMENTS IN SHARES ISSUED.................................... 4
2.1 Adjustments in Shares Issued.............................. 4
2.2 Procedures for Adjustment................................. 4
2.3 Procedures for SEI Purchasers............................. 5
2.4 Fractional Shares......................................... 5
SECTION 3. ADDITIONAL RIGHTS OF PHILIPS.................................... 5
3.1 Additional Purchase Rights................................ 5
SECTION 4. OTHER AGREEMENTS................................................ 6
4.1 Subject to Other Agreements............................... 6
4.2 Certain Put Rights........................................ 6
4.3 Conversion of Preferred Shares............................ 6
4.4 Lockup.................................................... 6
4.5 Action by Consent of Stockholders......................... 6
4.6 Certain Stock Options..................................... 7
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................... 7
5.1 Organization, Good Standing and Qualification............. 7
5.2 Capitalization............................................ 7
5.3 Authorization............................................. 8
5.4 Valid Issuance of the Preferred Shares.................... 8
5.5 Governmental Consents..................................... 8
5.6 Compliance With Other Instruments......................... 8
5.7 Public Offerings.......................................... 8
5.8 Industrial Security Clearances............................ 9
5.9 Fees Payable to Third Parties............................. 9
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER................. 9
6.1 Purchase of Securities.................................... 9
6.2 Legends................................................... 9
6.3 Authorization............................................. 9
6.4 Investment Experience..................................... 10
6.5 Accredited Investor....................................... 10
6.6 Restricted Securities; Rule 144........................... 10
6.7 No Public Market.......................................... 10
</TABLE>
<PAGE>
-ii-
<TABLE>
<S> <C> <C>
6.8 Access to Data............................................ 10
SECTION 7. CONDITIONS TO THE PURCHASERS' OBLIGATIONS....................... 11
7.1 Opinions of Counsel....................................... 11
7.2 Representations and Warranties............................ 11
7.3 Compliance with this Agreement............................ 11
7.4 Officer's Certificate..................................... 11
7.5 Stock Certificates........................................ 11
7.6 Merger Agreement.......................................... 11
7.7 Legal Investment.......................................... 12
7.8 Securities Law Compliance................................. 12
7.9 Consents.................................................. 12
7.10 Proceedings Satisfactory................................. 12
7.11 Purchase of All Preferred Shares......................... 12
SECTION 8. CONDITIONS TO THE COMPANY'S OBLIGATIONS......................... 12
8.1 Representations and Warranties............................ 12
8.2 Compliance with this Agreement............................ 12
8.3 Legal Investment.......................................... 13
8.4 Securities Law Compliance................................. 13
SECTION 9. SPECIAL RIGHTS AND RESTRICTIONS................................. 13
9.1 Issue Taxes............................................... 13
9.2 Transfer of Shares........................................ 13
SECTION 10. DEFINITIONS............................................... 13
SECTION 11. MISCELLANEOUS............................................. 15
11.1 Notices.................................................. 15
11.2 Successors and Assigns................................... 17
11.3 Amendment and Waiver..................................... 17
11.4 Counterparts............................................. 17
11.5 Governing Law............................................ 17
11.6 Survival of Representations and Warranties............... 17
SECTION 12. WRITTEN CONSENT OF STOCKHOLDERS.......................... 17
</TABLE>
<PAGE>
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is made as of June 24,
1996, by and among NAVIGATION TECHNOLOGIES CORPORATION, a Delaware corporation
(the "Company"), PHILIPS MEDIA B.V. and PHILIPS MEDIA SERVICES B.V., each a
Netherlands corporation (which, together with their Affiliates (other than the
Company or its controlled Affiliates) are herein referred to collectively as
"Philips"), SHIELDS ENTERPRISES, INC., a Delaware corporation ("SEI"), the
undersigned Persons listed on the signature pages hereto under the caption "SEI
PURCHASERS" (the "SEI Purchasers", and Philips, SEI and the SEI Purchasers,
collectively, the "Purchasers"), THE AMERICAN AUTOMOBILE ASSOCIATION,
(INCORPORATED), a Connecticut non-stock corporation ("AAA"), PRUTECH RESEARCH
AND DEVELOPMENT PARTNERSHIP II and PRUTECH PROJECT DEVELOPMENT PARTNERSHIP, each
a California limited partnership (collectively, "Prutech"), and NICHIMEN
AMERICA, INC., a New York corporation (together with any Affiliates,
"Nichimen"). The Purchasers together with AAA, Prutech and Nichimen are
sometimes hereinafter referred to collectively as the "Stockholders".
WHEREAS, the Company and the Stockholders have determined that it is in the
best interests of the Company and the Stockholders for the Purchasers to make
the further investment in the Company provided for, and on the terms and
conditions set forth, in this Agreement;
WHEREAS, the Purchasers desire to make such investment on such terms and
conditions; and
WHEREAS, AAA, Prutech and Nichimen desire to waive any rights to
participate in such investment under the Investor Rights Agreement, and to
consent to the terms of such investment pursuant to this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and conditions herein contained, the Company and the Purchasers, and AAA,
Prutech and Nichimen for certain purposes set forth herein, hereby agree as
follows:
SECTION 1. PURCHASE AND SALE OF SHARES.
1.1 Authorization of Shares. The Company has authorized the issuance of (i)
-----------------------
shares of its Preferred Stock, par value $.001 per share (the "Preferred
Shares") sufficient to meet the purposes of Section 1.2, and (ii) shares of its
Common Stock, par value $.001 per share (the "Common Shares", and together with
the Preferred Shares, sometimes referred to collectively as the "Shares")
sufficient to permit the conversion of the Preferred Shares into Common Shares
in accordance with the provisions of the Restated Certificate of Incorporation
of the Company, this Agreement and the Philips Agreement (as amended by Section
4.3 hereof).
<PAGE>
-2-
1.2 Sale of the Shares.
------------------
(a) The Company agrees to sell to each of the Purchasers, and each of
the Purchasers agrees to purchase from the Company, in accordance with the
provisions of this Agreement, that number of Preferred Shares for the aggregate
purchase price set forth opposite their respective names on Schedule A hereto at
----------
the Closing (as hereinafter defined).
(b) The number of Preferred Shares to which each of the Purchasers is
entitled under this Agreement is subject to adjustment as set forth in Section
2.1.
1.3 Closings.
--------
(a) The purchase and sale of 28,866,570 Preferred Shares shall take
place at a closing (the "Closing") to be held at the offices of Sullivan &
Cromwell, 125 Broad Street, New York, NY, at 10:00 a.m. on June 25, 1996 (the
"Closing Date"), or at such other time and place as the Purchasers and the
Company shall agree.
(b) On the Closing Date, subject to the conditions stated herein, the
Company will deliver to Philips a certificate representing 28,157,496 Preferred
Shares, against payment to the Company of the purchase price therefor in the
amounts and in the manner as set forth below:
(i) $18,262,563.24 by wire transfer of federal or other immediately
available funds;
(ii) an amount in U.S. dollars equal to the aggregate balance in Dutch
guilders (converted on the Closing Date at the New York Foreign
Exchange Guilder Selling Rate determined at the close of business
on the second Business Day prior to the Closing Date, as
published in The Wall Street Journal) outstanding
-----------------------
on the Closing Date under that certain loan agreement dated
October 8, 1991 in the principal amount of 6,000,000 Dutch
guilders, payable to Philips by European Geographic Technologies,
B.V., a wholly-owned subsidiary of the Company, by assignment of
such note to the Company, (such balance as of May 31, 1996, being
8,525,916 Dutch guilders, with interest accruing at a per diem
rate of 2,054 Dutch guilders), for a number of Preferred Shares
determined by dividing such amount in U.S. dollars by $1.04; and
(iii) $6,032,999.97 by cancellation of those certain demand promissory
notes dated May 16, 1996, June 3, 1996 and June 14, 1996,
respectively, each in the stated principal amount of $2,000,000,
plus all interest accrued thereon through the Closing Date,
payable to Philips by the Company;
<PAGE>
-3-
(c) On the Closing Date, subject to the conditions stated herein, the
Company will deliver to each of the other Purchasers a certificate representing
the number of Preferred Shares to be purchased by such Purchaser against payment
to the Company by certified check or wire transfer of the purchase price
therefor in federal or other immediately available funds.
1.4 Waivers and Consents.
--------------------
(a) By their execution and delivery of this Agreement, each of AAA,
Nichimen and Prutech hereby waives any rights it or their respective Investment
Groups (as defined in the Investor Rights Agreement) may have pursuant to the
Investor Rights Agreement to purchase any Shares and consents to the issuance of
the Preferred Shares pursuant to this Agreement and to the transactions
contemplated hereby. Philips and SEI hereby agree that their rights pursuant to
this Agreement fully satisfy their, and their respective Investment Groups',
rights under the Investor Rights Agreement. The Company represents and warrants
that the parties hereto include all the Signatories to the Investor Rights
Agreement except Victor Niederhoffer and that no further Signatories will be
permitted to become parties to that Agreement.
(b) Each of Philips, SEI, Nichimen, AAA and Prutech hereby waives the
rights, if any, that it and its Investment Group may have to request
registration of its Registrable Shares pursuant to (i) Section 3.1 of the
Investor Rights Agreement until the third anniversary of the IPO Date and (ii)
Section 3.2 of the Investor Rights Agreement in connection with the Company's
initial IPO. The foregoing waiver shall apply only to a registration of
Registrable Shares pursuant to Section 3.1 of the Investor Rights Agreement, and
in connection with the Company's initial IPO, Section 3.2 of such agreement, and
not otherwise.
(c) Each of Philips, SEI, Nichimen, AAA and Prutech hereby waives the
rights, if any, that it and its Investment Group may have under Section 4.1(a)
of the Investor Rights Agreement with respect to the issuance by the Company of
any Common Stock in connection with (i) the transactions contemplated by the
merger agreement to which reference is made in Section 7.6 hereof, (ii) the
transactions contemplated by this Agreement, including the exercise of any
options the issuance of which is permitted by the terms of this Agreement or
(iii) the exercise of any options issued since the date of the Investor Rights
Agreement. Nothing in this Section 1.5(c) shall constitute a waiver or
limitation of any rights under Section 4.1(a) of the Investor Rights Agreement
except as expressly set forth in the foregoing sentence.
(d) Philips hereby waives the rights, if any, that it and its
Investment Group may have under Section 6.1 of the Philips Agreement with
respect to the issuance by the Company since the date of the Philips Agreement
of any Common Stock pursuant to any stock option plan approved by, or options
granted with the approval of, those members of the Board of Directors of the
Company designated by Philips.
(e) The Company and each of the parties hereto who is one of the
Signatories to the Investor Rights Agreement hereby agrees that the Common
Shares issuable upon
<PAGE>
-4-
conversion of the Preferred Shares shall be considered to be "Registrable
Securities" for all purposes under the Investor Rights Agreement.
1.5 Definitions. Unless the context otherwise requires, all capitalized
-----------
terms used and not otherwise defined shall have the meanings set forth in
Section 10 or, if not inconsistent therewith, in the Investor Rights Agreement.
SECTION 2. ADJUSTMENTS IN SHARES ISSUED
2.1 Adjustments in Shares Issued. The number of Preferred Shares issued
----------------------------
to each of the Purchasers pursuant to this Agreement shall be adjusted upon the
earlier to occur of (i) the closing of an IPO on the IPO Date, or (ii) October
1, 1996 (the earlier of such dates, the "Adjustment Date"). On the Adjustment
Date, the number of Preferred Shares to which each Purchaser is entitled under
this Agreement shall be determined by dividing the aggregate purchase price paid
by such Purchaser at the Closing by the applicable Adjustment Price. For
purposes of the foregoing the applicable Adjustment Price on the IPO Date shall
be 80% of the gross price per share at which the Common Stock is initially
offered to the public in connection with the IPO if the IPO Date occurs prior to
October 1, 1996, and otherwise, the Adjustment Price shall be $.85 per share.
After such determination, the number of Preferred Shares initially purchased by
each Purchaser pursuant to this Agreement shall be adjusted by issuance by the
Company of additional Preferred Shares or surrender by each Purchaser to the
Company of Preferred Shares, as appropriate, such that each Purchaser holds the
shares to which it is entitled under this Agreement. For purposes of this
Section 2.1, the determination of the number of Preferred Shares to which a
Purchaser is entitled and the adjustments contemplated hereby shall be effected
without regard to any other shares of the Common Stock or Preferred Stock now or
then held by such Purchaser.
2.2 Procedures for Adjustment.
-------------------------
(a) If the number of Preferred Shares to which a Purchaser is
entitled pursuant to Section 2.1 is less than the number of Preferred Shares
issued to such Purchaser at the Closing, such Purchaser shall surrender its
certificate(s) representing the Preferred Shares to the Company on the
Adjustment Date. As promptly as practicable after such surrender (or, if the
number of Preferred Shares to which a Purchaser is entitled pursuant to Section
2.1 is greater than the number of Preferred Shares issued to such Purchaser at
the Closing, as soon as practicable after the Adjustment Date), the Company
shall deliver to such Purchaser a certificate or certificates representing a
number of shares of the Preferred Stock such that such Purchaser holds the
number of Preferred Shares to which it is so entitled. The adjustment with
respect to each Purchaser made pursuant to Section 2.1 shall be deemed to have
been made on the Adjustment Date notwithstanding the earlier or later surrender
or issuance of any certificates representing shares of Preferred Stock.
<PAGE>
-5-
(b) It is understood by the parties hereto that immediately
following the adjustment in the Preferred Shares described in Section 2.1 and
Section 2.2(a) above on the Adjustment Date, the Preferred Shares shall convert
to Common Shares in the manner set forth in paragraph (c)(2) of Article FOURTH
of the Restated Certificate of Incorporation of the Company. The Company will
deliver to each Purchaser a certificate or certificates for the Common Stock
into which the Preferred Shares have been so converted, against delivery to it
of certificates for such Preferred Shares.
2.3 Procedures for SEI Purchasers. In order to facilitate the adjustment
-----------------------------
in the number of Preferred Shares purchased by the SEI Purchasers hereunder and
the conversion of such Preferred Shares to Common Shares on the Adjustment Date,
each of the SEI Purchasers hereby appoints Mitchell Morris ("Morris") as
attorney-in-fact of such Purchaser to receive and hold the certificate
representing the Preferred Shares purchased by such Purchaser at the Closing in
escrow until the Adjustment Date. The SEI Purchasers shall be the record
holders of such Preferred Shares and the certificates shall be issued in the
names of the SEI Purchasers. On the Adjustment Date, Morris shall deliver such
certificates to the Company on behalf of the SEI Purchasers in exchange for
certificates representing the Common Shares into which the Preferred Shares
purchased by the SEI Purchasers have been converted, adjusted in accordance with
the provisions of Sections 2.1 and 2.2(a).
2.4 Fractional Shares. No fractional shares or scrip representing
-----------------
fractional shares shall be issued upon the adjustments required pursuant to
Section 2.1. With respect to any fraction of a share called for upon any such
adjustment, the Company shall pay to the holder of Shares an amount in cash
equal to such fraction multiplied by the Adjustment Price.
SECTION 3. ADDITIONAL RIGHTS OF PHILIPS
3.1 Additional Purchase Rights. Concurrently with an IPO, Philips shall
--------------------------
purchase the number of shares of Common Stock necessary to constitute, when
aggregated with all other Philips Shares, 48% of the Stock Outstanding on the
IPO Date, and Philips shall also purchase the number of shares of Common Stock
necessary to constitute, when aggregated with all other Philips Shares
(including those purchased concurrently with the closing of the IPO) 48% of the
Common Stock outstanding upon the closing of the underwriters' over-allotment
option in connection with such IPO. The Company shall provide to Philips
written notice of the number of shares of Common Stock to be offered pursuant to
the IPO at least one Business Day prior to the effectiveness of the Registration
Statement relating to the IPO. Within 24 hours of receipt of the Company's
notice, Philips shall enter into an agreement for the purchase of the shares
Philips has agreed to purchase pursuant to this Section 3.1 and shall purchase
such shares concurrently with the closing of the IPO or such over-allotment
option, as the case may be, at a price per share equal to the price at which
shares of the Common Stock are initially offered to the public pursuant to the
IPO, net of underwriters' discounts.
<PAGE>
-6-
SECTION 4. OTHER AGREEMENTS.
4.1 Subject to Other Agreements. Except as otherwise set forth herein,
---------------------------
this Agreement and the rights of the Purchasers hereunder as purchasers and
holders of the Preferred Shares are generally subject to the terms and
conditions of the Investor Rights Agreement and of the Philips Agreement.
4.2 Certain Put Rights. Notwithstanding the provisions of Section 6.5
------------------
of the Philips Agreement, each of the Stockholders other than Philips hereby
represents and agrees for the benefit of Philips that (i) it has not heretofore
transferred or assigned its rights pursuant to Section 6.5 of the Philips
Agreement ("Put Rights") to any Person other than another Stockholder or Victor
Niederhoffer and (ii) it will not hereafter transfer, assign or exercise Put
Rights at any time before the earlier to occur of the IPO Date (at which time
such rights will terminate) or October 1, 1996, and that any proposed exercise,
transfer or assignment of such rights shall be void and of no effect.
4.3 Conversion of Preferred Shares.
------------------------------
(a) Paragraph 6.11(a) of the Philips Agreement is hereby amended to
read in its entirety as follows:
"(a) On or after October 1, 1996."
(b) Each of the Purchasers other than Philips agrees that none of
the Preferred Shares shall be convertible into Common Shares until the
Adjustment Date.
4.4 Lockup. As contemplated by Section 3.9 of the Investor Rights
------
Agreement, and in connection with the IPO, each of the Stockholders other than
SEI hereby agrees that other than private sales to another Stockholder, it will
not and will use its reasonable best efforts to assure that no member of its
Investment Group will sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares or other equity securities,
warrants, options or convertible securities of the Company beneficially owned
(as defined by the Securities Exchange Act of 1934 and the rules and regulations
promulgated thereunder) by it or its Investment Group, whether now owned or
hereafter acquired, for the period commencing on the effective date of the
Registration Statement for the IPO and ending 180 days after the IPO Date
without the prior written consent of the underwriters of the IPO.
Notwithstanding the foregoing, this covenant shall become null and void in the
event that the IPO is not completed by October 1, 1996.
4.5 Action by Consent of Stockholders. The Company and the Stockholders
---------------------------------
agree that, prior to the next annual meeting of stockholders of the Company, the
Company will take no action to recommend, and the Stockholders will vote their
Shares to oppose, any amendment to the Certificate of Incorporation of the
Company which restricts the right of the stockholders of
<PAGE>
-7-
the Company to act by consent in lieu of a meeting, as provided in section 228
of the Delaware General Corporation Law, including any action to remove
directors with or without cause. The Company agrees that it shall promptly amend
its By-laws to remove any limitation on action by written consent.
4.6 Certain Stock Options. Each of the Company and SEI agrees that prior
---------------------
to the IPO Date it will not grant to its employees or other service providers
any further options to acquire shares of Common Stock of the Company or shares
of capital stock of SEI, respectively, except as set forth below. The Company
represents that since April 30, 1996, it has granted or will grant options to
purchase an aggregate of 10,000,000 shares of Common Stock to T. Russell Shields
and options to purchase an aggregate of 11,063,363 shares of Common Stock to all
other Persons. SEI represents that, since April 30, 1996, it has or will grant
options to purchase an aggregate of no more than 611.33191 shares of capital
stock, which shares, upon consummation of the merger referred to in Section 7.6,
will be converted into or otherwise exchanged for options to purchase an
aggregate of no more than 4,000,000 shares of Common Stock. The options granted
or to be granted by the Company to T. Russell Shields and the options granted or
to be granted by SEI will all by their terms terminate and be of no effect if
such merger and the IPO do not occur prior to October 1, 1996, and none will be
exercisable prior to the merger and the IPO. The options granted by the Company
to other Persons to purchase an aggregate of 1,652,375 shares of Common Stock
will by their terms terminate and be of no effect if the IPO does not occur by
January 1, 1997, and none of such options will be exercisable prior to that
date.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants that:
5.1 Organization, Good Standing and Qualification. The Company is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite power and authority to carry on
its business as now conducted and as proposed to be conducted in the future.
The Company is duly qualified to transact business and is in good standing in
each jurisdiction in which the failure to so qualify would have a material
adverse effect on its business or properties.
5.2 Capitalization. The authorized capital stock of the Company
--------------
consists of 350,000,000 shares of Common Stock, par value $.001 per share, and
210,000,000 shares of Preferred Stock, par value $.001 per share. As of June
19, 1996, 137,341,906 shares of the Company's Common Stock were outstanding.
Except in connection with any exercise of outstanding stock options, no further
shares of Common Stock have been issued by the Company since such date. As of
the date of this Agreement, 140,467,238 shares of the Company's Preferred Stock
are outstanding. All outstanding shares of Common Stock and Preferred Stock
have been duly authorized and validly issued, and are fully paid and non-
assessable.
<PAGE>
-8-
5.3 Authorization. All corporate action on the part of the Company, its
-------------
officers, directors and stockholders necessary for (i) the authorization,
execution and delivery of this Agreement and the issuance of the Preferred
Shares and (ii) the performance of all obligations of the Company hereunder has
been taken. This Agreement constitutes the valid and legally binding obligation
of the Company, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and rules of law governing specific
performance, injunctive relief and other equitable remedies.
5.4 Valid Issuance of the Preferred Shares. The issuance of the Preferred
--------------------------------------
Shares on the Closing Date and, if applicable, the Adjustment Date, by the
Company and compliance by the Company with all of the provisions of this
Agreement are legal and will not conflict with, constitute a violation of, or
result in the creation of any lien upon any property of the Company under the
provisions of, any agreement, charter instrument, by-law or other instrument to
which the Company is a party or by which it or its properties may be bound.
5.5 Governmental Consents. No consent, approval, order or authorization
---------------------
of, or registration, qualification, designation, declaration or filing with, any
federal, state, local or provincial governmental authority on the part of the
Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for any post-sale filings pursuant to
applicable state securities laws, which filings will be effected within the
applicable time periods. The offer and sale of the Preferred Shares pursuant to
the terms of this Agreement are exempt from the registration requirements of
Section 5 of the Securities Act.
5.6 Compliance With Other Instruments. The Company will not be as of the
---------------------------------
Closing Date in violation or default of any instrument, judgment, order, writ,
decree, or contract to which it is a party or by which it is bound, or of any
provision of any federal or state statute, rule or regulation applicable to the
Company, which violation or default could be materially adverse to the Company.
The execution, delivery and performance of each of this Agreement and the
consummation of the transactions contemplated hereby and thereby will not result
in any such violation or be in conflict with or constitute, with or without the
passage of time and giving of notice, either a default under any such provision,
of its Restated Certificate of Incorporation or Bylaws or of any instrument,
judgment, order, writ, decree or contract or an event which results in the
creation of any material lien, charge or encumbrance upon any assets of the
Company, which violation, default, conflict or event could be materially adverse
to the Company.
5.7 Public Offerings. During 1996, the Company will not, without the
----------------
prior consent of Philips, sell pursuant to public offerings, including pursuant
to over-allotment options granted to underwriters in connection therewith,
shares of Common Stock resulting in proceeds to the Company in excess of
$150,000,000, reduced by the proceeds to the Company resulting from the sale of
shares to Philips and others at the initial public offering price less the
underwriting commission contemporaneously with, but not as part of, the IPO.
<PAGE>
-9-
5.8 Industrial Security Clearances. Neither the Company nor any of its
------------------------------
employees is required to have, and does not have, any industrial security
clearance relating to classified information and none is needed for purposes of
any contract with any United States government department, agency or
instrumentality or, any subcontract under such a contract. No such requirement
will exist on the Adjustment Date.
5.9 Fees Payable to Third Parties. The issuance of the Preferred Shares
-----------------------------
and the Common Shares to the Purchasers pursuant to this Agreement will not
create any obligation of the Company to pay any amounts to any third party under
any agreements entered into by the Company prior to the date hereof, including
without limitation the Letter Agreement between Lehman Brothers and the Company,
dated May 9, 1994.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each of the Purchasers hereby represents and warrants that:
6.1 Purchase of Securities. Such Purchaser is purchasing the Preferred
----------------------
Shares for investment for its own account, not as nominee or agent, and not with
a view to the distribution or resale thereof, subject, nevertheless, to any
requirement of law that the disposition of its property shall be at all times
within its control. Such Purchaser will not, in any event, make any sale or
other disposition of such securities in contravention of the Securities Act and
the rules and regulations of the SEC thereunder.
6.2 Legends. Such Purchaser understands that the certificates
-------
evidencing the Preferred Shares and any Common Shares issuable be upon
conversion thereof may bear one or more of the legends set forth in the Investor
Rights Agreement and the Philips Agreement (in addition to a legend referring to
the restrictions on transfer contained herein and any legend required under
applicable state securities laws). It is understood that each certificate
representing the Preferred Shares and the Common Shares issuable upon conversion
thereof and any securities issued in respect thereof or exchange therefor shall
also bear legends in the following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR
OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED."
6.3 Authorization. This Agreement constitutes such Purchaser's valid
-------------
and legally binding obligation, enforceable in accordance with its terms,
subject to applicable bankruptcy,
<PAGE>
-10-
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and rules of law governing specific performance,
injunctive relief and other equitable remedies.
6.4 Investment Experience. Such Purchaser is an investor in securities of
---------------------
companies in the development stage and/or other venture capital investments and
acknowledges that it can bear the economic risk of its investment, including a
complete loss of its investment, and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Preferred Shares. Such Purchaser also represents
that it has not been organized solely for the purpose of acquiring the Preferred
Shares. Such Purchaser understands that the Preferred Shares have not been
registered under the Securities Act or under the securities laws of any
jurisdiction by reason of reliance upon certain exemptions, and that the
reliance of the Company on such exemptions is predicated upon the accuracy of
the Purchasers' representations and warranties in this Section 6.
6.5 Accredited Investor. Such Purchaser is an "accredited investor" as
-------------------
defined in Rule 501 of Regulation D under the Securities Act, a copy of which is
attached hereto as Exhibit 6.5.
-----------
6.6 Restricted Securities; Rule 144. Such Purchaser understands that the
-------------------------------
Preferred Shares and the Common Shares issuable upon conversion thereof are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
the Shares may be resold without registration under the Securities Act only in
certain limited circumstances. Such Purchaser acknowledges that the Shares must
be held indefinitely unless subsequently registered under the Securities Act or
an exemption from such registration is available. Such Purchaser is aware of
the provisions of Rule 144 promulgated under the Securities Act which permit
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the existence
of a public market for the shares, the availability of certain current public
information about the Company, the resale occurring not less than two (2) years
after a party has purchased and paid for the security to be sold, the sale being
effected through a "broker's transaction" or in transactions directly with a
"market maker" (as provided by Rule 144(f)) and the number of shares being sold
during any three (3) month period not exceeding specified limitations.
6.7 No Public Market. Such Purchaser understands that no public market
----------------
now exists for any of the securities issued by the Company and that there is no
assurance that a public market will ever exist for the Preferred Shares or the
Common Shares issuable upon conversion thereof.
6.8 Access to Data. Such Purchaser has reviewed the Private Offering
--------------
Memorandum delivered to such Purchaser by the Company and has had an opportunity
to discuss the Company's business, management and financial affairs with the
Company's management and the opportunity to review the Company's facilities.
<PAGE>
-11-
SECTION 7. CONDITIONS TO THE PURCHASERS' OBLIGATIONS.
The following conditions to the Purchasers' obligations must be satisfied
on the Closing Date:
7.1 Opinions of Counsel. Each of the Purchasers shall have received from
-------------------
(a) Wilson Sonsini Goodrich & Rosati, special counsel for the Company, an
opinion that (i) the Preferred Shares purchased by such Purchaser, and the
shares of Common Stock into which such Preferred Shares are convertible, have
been duly authorized and upon payment of the consideration as provided in this
Agreement, will be validly issued, fully paid and nonassessable, (ii) the
Agreement has been duly authorized, executed and delivered, and (iii) the
issuance of the Preferred Shares pursuant to the terms of the Agreement, and the
issuance of the Common Shares upon conversion of the Preferred Shares is not and
will not be required to be registered under the Securities Act, and (b) from
Day, Berry & Howard, special counsel for the Company, an opinion that the
Agreement constitutes a valid and binding obligation of the Company enforceable
in accordance with its terms (subject to customary qualifications).
7.2 Representations and Warranties. The representations and warranties
------------------------------
contained in Section 5 shall be true in all material respects on the Closing
Date with the same effect as though made on and as of that date.
7.3 Compliance with this Agreement. The Company shall have performed and
------------------------------
complied with all agreements and conditions contained in this Agreement which
are required to be performed or complied with by the Company on or before the
Closing Date.
7.4 Officer's Certificate. Each of the Purchasers shall have received a
---------------------
certificate dated the Closing Date and signed by the President or a Vice
President and the Treasurer, Assistant Treasurer or Chief Financial Officer of
the Company, certifying that the conditions specified in Sections 7.2 and 7.3
have been fulfilled.
7.5 Stock Certificates. The Company shall have delivered to the
------------------
Purchasers certificates representing the Preferred Shares, each dated the
Closing Date, duly authorized and executed.
7.6 Merger Agreement. The Company, SEI and any other necessary parties
----------------
thereto shall have executed and delivered a definitive agreement for the
acquisition by merger with a subsidiary of the Company of all of the issued and
outstanding capital stock of SEI, and such agreement shall have been duly
approved by the Boards of Directors and shareholders of the respective parties
thereto.
<PAGE>
-12-
7.7 Legal Investment. On the Closing Date, the purchase of the Preferred
----------------
Shares by the Purchasers shall be legally permitted by all laws and regulations
to which the Company and the Purchasers are subject.
7.8 Securities Law Compliance. All actions and steps necessary to assure
-------------------------
compliance with applicable federal and state securities laws, including all
authorizations, approvals or permits, if any, of any governmental authority or
regulatory body in any states where the Preferred Shares are being sold that are
required in connection with the lawful issuance and sale of the Preferred Shares
pursuant to this Agreement shall have been duly obtained and shall be effective
on the Closing Date except for any such filings as may under applicable law be
made subsequent to the Closing Date, which filings the Company agrees it will
make in a timely manner.
7.9 Consents. All material consents, approvals and authorizations,
--------
including the approval of the stockholders, as required by the Delaware General
Corporation Law, and all material filings with and notifications of governmental
authorities and regulatory agencies or other entities which regulate the
business of the Company or the Purchasers, necessary on the part of the Company
or the Purchasers or their respective Affiliates to the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby,
shall have been obtained or effected.
7.10 Proceedings Satisfactory. All proceedings taken in connection with
------------------------
the issuance of the Preferred Shares and all documents and papers relating
thereto shall be satisfactory to each of the Purchasers.
7.11 Purchase of All Preferred Shares. No Purchaser shall have failed to
--------------------------------
have purchased any Preferred Shares to be acquired by it pursuant to this
Agreement which another Purchaser has not purchased in its stead.
SECTION 8. CONDITIONS TO THE COMPANY'S OBLIGATIONS.
The following conditions to the Company's obligations must be satisfied on
the Closing Date:
8.1 Representations and Warranties. The representations and warranties
------------------------------
contained in Section 6 shall be true in all material respects on the Closing
Date with the same effect as though made on and as of that date.
8.2 Compliance with this Agreement. The Purchasers shall have performed
------------------------------
and complied with all agreements and conditions contained in the Agreement which
are required to be performed or complied with by the Purchasers on or before the
Closing Date.
<PAGE>
-13-
8.3 Legal Investment. On the Closing Date, the purchase of the Preferred
----------------
Shares by the Purchasers shall be legally permitted by all laws and regulations
to which the Company and the Purchasers are subject.
8.4 Securities Law Compliance. All actions and steps necessary to assure
-------------------------
compliance with applicable federal and state securities laws, including all
authorizations, approvals or permits, if any, of any governmental authority or
regulatory body in any states where the Preferred Shares are being sold that are
required in connection with the lawful issuance and sale of the Preferred Shares
pursuant to this Agreement shall have been duly obtained and shall be effective
on the Closing Date except for any such filings as may under applicable law be
made subsequent to the Closing Date, which filings the Company agrees it will
make in a timely manner.
SECTION 9. SPECIAL RIGHTS AND RESTRICTIONS.
9.1 Issue Taxes. The Company will pay all taxes imposed by the United
-----------
States or any state or political subdivision thereof in connection with the
issuance and sale of the Preferred Shares and the Term Warrant and in connection
with the exercise of the Term Warrant and will hold the Purchasers harmless
against any and all liabilities relating to such taxes.
9.2 Transfer of Shares. Without limiting the generality of the provisions
------------------
of Section 4.1 hereof, transfers of the Preferred Shares shall be subject to the
terms and conditions of the Philips Agreement and the Investor Rights Agreement,
as well as Section 4.4 hereof.
SECTION 10. DEFINITIONS.
As used in this Agreement (including exhibits and schedules) the following
terms have the respective meanings set forth below or in the Section or other
provision of this Agreement indicated unless otherwise explicitly stated herein:
Adjustment Date - see Section 2.1.
---------------
Adjustment Price - see Section 2.1.
----------------
Affiliate - with respect to any Person, a Person that, directly or
---------
indirectly through one or more intermediaries, controls, or is controlled by or
is under common control with such Person. The term "control" means the
possession, directly or indirectly, or the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
Agreement - this Stock Purchase Agreement, dated as of June 24, 1996, by
---------
and among the Company and the Stockholders (including exhibits and schedules),
as amended or modified from time to time.
<PAGE>
-14-
Business Day - any day other than a Saturday, Sunday or day on which banks
------------
are required or permitted to close in the State of New York.
Closing Date - see Section 1.3(a).
------------
Common Shares - see Section 1.1.
-------------
Common Stock - the common stock, par value $.001 per share, of the Company.
------------
Company - Navigation Technologies Corporation, a Delaware corporation. All
-------
references to the Company in this Agreement shall include any successors in
interest or permitted assigns of the Company.
Fair Market Value - (i) if the Common Stock is listed on a National
-----------------
Securities Exchange or admitted to unlisted trading privileges on such exchange
or approved for trading on NASDAQ, the average of the closing sale price of the
Common Stock on such exchange or system for the five trading days prior to the
date of determination of Fair Market Value; or (ii) if the Common Stock is not
so listed or admitted to unlisted trading privileges or approved for trading on
NASDAQ, the average for the five trading days prior to the date of determination
of Fair Market Value of the average of the last reported bid and asked prices
quoted each day by National Quotation Bureau Inc.; or (iii) if the Common Stock
is not so listed or admitted to unlisted trading privileges or approved for
trading on NASDAQ and bid and asked prices are not so reported, an amount
determined in good faith by the Board of Directors of the Company.
Investor Rights Agreement - that certain Restated Investor Rights
-------------------------
Agreement, dated as of September 1, 1994, by and among the Company and each of
the Stockholders.
IPO - a firm commitment underwritten public offering pursuant to an
---
effective registration statement under the Securities Act covering the offer and
sale to the public of Common Stock for the account of the Company or
stockholders of the Company or both having an aggregate offering price to the
public of not less than $40,000,000 or, if such aggregate public offering price
is less, in which the aggregate number of Common Shares sold in the public
offering equals at least 20% of the total number of Common Shares and Preferred
Shares of the Company outstanding (exclusive of treasury shares) immediately
after the closing of such offering.
IPO Date - the date of the first purchase of any shares of the Common Stock
--------
by underwriters in connection with an IPO.
Person - an individual, a corporation, a partnership, an association, a
------
joint stock company, a trust, an unincorporated organization, a governmental
body or a political subdivision, a municipal corporation, a public corporation
or any other entity or individual or group or organization of entities or
individuals.
<PAGE>
-15-
Philips Agreement - that certain Stock Purchase Agreement , dated as of
-----------------
September 1, 1994, by and between the Company and Philips.
Philips Shares - all shares of Common Stock owned beneficially on any date
--------------
by Philips.
Preferred Shares - see Section 1.1.
----------------
Preferred Stock - the convertible preferred stock, par value $.001 per
---------------
share, of the Company.
Purchasers - see introductory paragraph.
----------
SEC - the Securities and Exchange Commission.
---
Securities Act - the Securities Act of 1933, as amended, or any similar
--------------
federal law then in force.
Shares - see Section 1.1.
------
Stock Outstanding - as of any date, the total number of shares of Common
-----------------
Stock issued and outstanding, excluding shares owned by the Company or any
controlled Affiliate of the Company.
Stockholders - see introductory paragraph.
------------
SECTION 11. MISCELLANEOUS.
11.1 Notices. All notices and other communications required or permitted
-------
hereunder shall be in writing and shall be mailed by certified or registered
mail, postage prepaid, delivered either by hand or by messenger, or transmitted
by electronic telecopy (fax) addressed:
(i) If to Philips, at:
Philips Media B.V.
c/o Philips Electronics North America
Attn: Samuel J. Rozel, Esq.
100 East 42nd Street
New York, NY 10017
Fax: 212/850-7304
<PAGE>
-16-
with a copy to:
Sullivan & Cromwell
Attn: W. Loeber Landau, Esq.
125 Broad Street
New York, NY 10004
Fax: 212/558-3588
(ii) If to the Company, at:
Navigation Technologies Corporation
Attn: Chief Financial Officer
740 East Arques Avenue
Sunnyvale, CA 94086
Fax: 408/736-3734
with a copy to:
Day, Berry & Howard
Attn: Martin L. Budd, Esq.
One Canterbury Green
Stamford, CT 06901
Fax: 203/977-7301
and to:
Wilson Sonsini Goodrich & Rosati
Attn: Barry E. Taylor, Esq.
Donna M. Petkanics, Esq.
650 Page Mill Road
Palo Alto, CA 94304
Fax: 415/493-6811
(iii) If to any of the other Stockholders, to such Stockholder at
such Stockholder's address as set forth in the Company's
records,
or at such other address as a party shall have furnished to the other parties in
writing. All such notices and other written communications shall be effective
(i) if mailed, seven days after mailing, (ii) if delivered, upon delivery, or
(iii) if faxed, one Business Day after transmission with telephone or fax
confirmation of receipt.
<PAGE>
-17-
11.2 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, this Agreement shall inure to the benefit of and be binding upon the
successors, assigns, heirs, executors and administrators of each of the parties
hereto.
11.3 Amendment and Waiver. With the written consent of the record holders
--------------------
of at least 90% of the Shares purchased or to be purchased by the Purchasers
hereunder, the obligations of the Company and the rights of the Purchasers under
this Agreement may be waived (either generally or in a particular instance,
either retroactively or prospectively, and either for a specified period of time
or indefinitely), and with the same consent, the Company, when authorized by
resolution of the Board, may enter into a supplementary agreement for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement. Nothing in this Section 11.3 shall
preclude the Company from waiving any of its rights under this Agreement. No
modification, amendment or waiver pursuant to this Agreement shall reduce the
aforesaid percentage of Shares without the consent of all of the Purchasers.
Any elimination of rights granted in this Agreement to the Purchasers shall be
effective against a Purchaser who voted against it or objected in writing to
such elimination only if such elimination does not discriminate against such
objecting Purchaser. Upon the effectuation of each such waiver, consent,
agreement of amendment or modification, the Company shall promptly give written
notice thereof to the Purchasers who have not previously consented.
11.4 Counterparts. This Agreement may be executed by the several parties on
------------
separate counterparts which, when taken together with counterparts signed by all
the other parties, shall constitute a single fully executed Agreement which
shall be as fully binding and effective as a counterpart which has been executed
by all parties.
11.5 Governing Law. This Agreement shall be deemed a contract made under
-------------
the laws of the State of New York and together with the rights and obligations
of the parties hereunder, shall be construed under and governed by the laws of
the State of New York.
11.6 Survival of Representations and Warranties. All of the
------------------------------------------
representations and warranties set forth in Sections 5 and 6 shall survive the
execution and delivery of this Agreement and the issuance of the Preferred
Shares.
SECTION 12. WRITTEN CONSENT OF STOCKHOLDERS.
By execution of this Agreement, each of the parties hereto who is currently
a holder of Preferred Shares and/or Common Shares of the Company hereby
consents, without a meeting and in lieu thereof, in accordance with Section 228
of the General Corporation Law of Delaware and the Company's By-laws, to the
adoption of the following resolution, which consent shall have the same force
and effect as if duly adopted at a special meeting of the stockholders of the
Company:
<PAGE>
-18-
RESOLVED: That the Agreement and Plan or Reorganization (the
"Reorganization Agreement"), in the form heretofore approved by the Board
of Directors of the Company, providing for the merger (the "Merger") of NT
Acquisitions Corp., a Delaware corporation and a wholly-owned subsidiary
of the Company with and into Shields Enterprises, Inc., a Delaware
corporation ("SEI") as a result of which SEI will become a wholly-owned
subsidiary of the Company be, and it hereby is, approved; and that the
terms and conditions of the Merger as set forth in the Reorganization
Agreement be, and they hereby are, approved, subject to such changes and
modifications of a non-material nature as the proper officers of the
Company may consider necessary or appropriate. A copy of the
Reorganization Agreement in the form executed by the respective parties
shall be substituted for the form of agreement submitted to the
stockholders and, as so executed, is approved and ratified in its
entirety.
Each of the parties hereto who is a holder of Preferred Shares and/or Common
Shares is giving his, her or its consent with respect to all Common Shares and
Preferred Shares held by such stockholder in favor of the above resolution.
<PAGE>
IN WITNESS WHEREOF, the Company and each of the Stockholders have caused
this Agreement to be executed by their duly authorized officers as the date
first above written.
NAVIGATION TECHNOLOGIES CORPORATION
By:/s/ Thomas A. Lerone
--------------------------------------
PHILIPS MEDIA B.V.
By:/s/ Samuel J. Rozel
----------------------------------
SHIELDS ENTERPRISES, INC. (SEI)
By:/s/ Mitchell Morris
----------------------------------
PHILIPS MEDIA SERVICES B.V.
By:/s/ Samuel J. Rozel
----------------------------------
<PAGE>
-20-
THE AMERICAN AUTOMOBILE CORPORATION
(INCORPORATED)
By:/s/ The American Automobile Association (Incorporated)
------------------------------------------------------
PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP II
By: R&D Funding Corp.
Its general partner
By:/s/ Michael S. Hasley
------------------------------
Michael S. Hasley
Vice President
PRUTECH PROJECT DEVELOPMENT PARTNERSHIP
By: R&D Funding Corp.
Its general partner
By:/s/ Michael S. Hasley
------------------------------
Michael S. Hasley
Vice President
<PAGE>
SEI PURCHASERS:
--------------------------------------
Print Name of Purchaser
--------------------------------------
Signature of Purchaser
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE
NAME OF PURCHASER PREFERRED SHARES PURCHASE PRICE
----------------- ---------------- --------------
<S> <C> <C>
Philips Media Services B.V. 28,157,496 $29,283,795.84
SEI PURCHASERS:
Robert H. and Holde H. 19,230 $ 19,999.20
Borcherts JTRS
Fred M. and Lynne A. Brody 9,132 $ 9,497.28
JTRS
Anthony DiPaolo 10,000 $ 10,400.00
William R. Miller 5,000 $ 5,200.00
Stephen and Ilene D. Novak 204,800 $ 212,992.00
JTRS
Sebastian J. Pacelli 35,000 $ 36,400.00
Carmen Pacelli 26,000 $ 27,040.00
Angela D. Pacelli 5,000 $ 5,200.00
Barbara Radner 48,076 $ 49,999.04
Katherine B. Shields 42,306 $ 43,998.24
T. Russell Shields 125,000 $ 130,000.00
Allen L. Overcash 4,800 $ 4,992.00
Vincent and Elizabeth Pacelli 5,500 $ 5,720.00
JTRS
Barbara M. Shields 15,000 $ 15,600.00
Richard J. and Karen M. 19,230 $ 19,999.20
Weiland JTRS
Richard W. Smith 10,000 $ 10,400.00
Myron Wolf 25,000 $ 26,000.00
</TABLE>
<PAGE>
-23-
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE
NAME OF PURCHASER PREFERRED SHARES PURCHASE PRICE
----------------- ---------------- --------------
<S> <C> <C>
Semion Krishtal 50,000 $ 52,000.00
Allan P. Newman 50,000 $ 52,000.00
</TABLE>
<PAGE>
EXHIBIT 10.10
SUPPLEMENTARY PURCHASE AGREEMENT
AGREEMENT made as of the 1st Day of September, 1994, by and among
Navigation Technologies Corporation, a Delaware corporation ("NavTech"); Philips
Venture Capital Fund B.V., a corporation organized under the laws of the
Netherlands ("Philips"); European Geographic Technologies B.V., a corporation
organized under the laws of the Netherlands ("EGT"); and Philips Media B.V., an
affiliate of Philips and a corporation organized under the laws of the
Netherlands ("Philips Media").
WHEREAS, NavTech and Philips Media are entering into a Stock Purchase
Agreement simultaneously herewith pursuant to which Philips Media is acquiring
certain securities of NavTech (the "Stock Purchase Agreement"), one provision of
which is that NavTech enter into this Agreement;
WHEREAS, each of the parties hereto wish to conduct certain transactions to
facilitate the funding of NavTech and EGT;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and conditions herein contained, the parties hereby agree as follows:
ARTICLE 1 BASIC TRANSACTIONS
------------------
1.1 Meaning of Terms. Capitalized terms used but not otherwise defined
----------------
herein shall have the same meaning as in the Stock Purchase Agreement.
1.2 Supplementary Closing Date. The "Supplementary Closing Date" shall be
--------------------------
a date convenient to the parties which is not later than the tenth Business Day
after the later of: (a) the date on which EGT receives all necessary approvals
by all relevant government ministries, agencies or bodies to authorize the
issuance of stock by EGT in an amount sufficient to complete the transaction
envisioned by Section 1.11 herein and (b) the date NavTech establishes a wholly-
owned subsidiary ("NavTech International") to make the investment in EGT .
1.3 NavTech Bridge Loan Amount. The "NavTech Bridge Loan Amount" shall
--------------------------
mean the principal amount of the promissory notes of EGT held by NavTech, plus
accrued interest thereon through the Closing Date (after which no further
interest shall accrue).
1.4 Valuation of EGT and NavTech Stock. For all transactions envisioned
----------------------------------
by this Article 1, each share of EGT stock as presently constituted shall be
Supplementary Purchase Agreement
-1-
<PAGE>
valued at Nfl 6.00, and each share of NavTech Preferred Stock or Common Stock
as presently constituted shall be valued at US $0.85.
1.5 Exchange Rates. For all transactions envisioned by this Article 1,
--------------
the exchange rate for Dutch Guilders to U.S. Dollars shall be the New York
Foreign Exchange Guilder Selling Rate for the second Business Day preceding the
Closing Date published in the Wall St. Journal.
1.6 Exchange of Philips EGT Debt for NavTech Stock Held by EGT. On the
----------------------------------------------------------
Closing Date, EGT shall deliver to Philips, in good delivery form and free and
clear of any liens or encumbrances, 1,254,573 shares of NavTech Common Stock
(constituting all shares of NavTech stock held by EGT) in exchange for a
reduction equal to the value of such shares in the promissory notes of EGT held
by Philips in the principal amount of Nfl 21,702,906 plus accrued interest
thereon through the Closing Date (after which no further interest shall accrue)
(collectively, after such reduction, the "Reduced Philips Bridge Loan Amount").
Immediately thereafter, NavTech shall issue to Philips 1,254,573 shares of
Preferred Stock in exchange for the 1,254,573 shares of NavTech Common Stock
acquired from EGT by Philips pursuant to this Paragraph.
1.7 Exchange of Philips' EGT Stock for NavTech Stock. On the Closing
------------------------------------------------
Date, Philips shall deliver to NavTech, by the Deed of Transfer prepared by the
Civil Law Notary, the shares of EGT stock then held by Philips, in good delivery
form and free and clear of any liens or encumbrances, and NavTech shall
simultaneously deliver to Philips, in good delivery form and free and clear of
any liens or encumbrances, Preferred Shares having an aggregate value equal to
the EGT shares thus acquired.
1.8 Philips Purchase of NavTech Stock. On the Supplementary Closing Date,
---------------------------------
Philips shall pay NavTech an amount equal to the Reduced Philips Bridge Loan
Amount, and NavTech shall simultaneously deliver to Philips, in good delivery
form and free and clear of any liens or encumbrances, Preferred Shares having an
aggregate value equal to the Reduced Philips Bridge Loan Amount.
1.9 Philips Loan to NavTech. On the Supplementary Closing Date, Philips
-----------------------
shall lend NavTech Nfl 65,000,000 without interest.
1.10 NavTech Investment in NavTech International. On the Supplementary
-------------------------------------------
Closing Date, immediately following the transactions of Sections 1.8 and 1.9,
NavTech shall contribute in Dutch Guilders to the capital of NavTech
International (the "NTI Investment Amount") an amount equal to the sum of
US$40,000,000, the NavTech Bridge Loan Amount, and the Reduced Philips Bridge
Loan Amount.
Supplementary Purchase Agreement
-2-
<PAGE>
1.11 NavTech International Investment in EGT. On the Supplementary
---------------------------------------
Closing Date, immediately following the transaction of Section 1.10, EGT will
issue and sell to NavTech International, and NavTech International will purchase
from EGT, the number of shares of EGT stock (rounded to the nearest whole share)
valued at the NTI Investment Amount. EGT will promptly deliver to NavTech
International the Deed of Issue prepared by the Civil Law Notary together with a
copy of EGT's official shareholder register indicating that NavTech has been
issued with the Shares purchased.
1.12 EGT Repayment. On the Supplementary Closing Date, immediately
-------------
following the transaction of Section 1.11, EGT shall repay the Reduced Philips
Bridge Loan Amount to Philips and the NavTech Bridge Loan Amount to NavTech, and
Philips and NavTech shall cancel the corresponding promissory notes.
1.13 EGT Purchase of Future Payments. On the Supplementary Closing Date,
-------------------------------
immediately following the transaction of Section 1.12, EGT shall purchase from
NavTech the Dutch Guilder portion of the future payments to be made by Philips
pursuant to Section 1.5 of the Stock Purchase Agreement, at the face amount of
such payments before interest.
1.14 NavTech Repayment. On the Supplementary Closing Date, immediately
-----------------
following the transaction of Section 1.13, NavTech shall repay Nfl 65,000,000 to
Philips.
1.15 Default. Notwithstanding any other terms and conditions of Section
-------
1.11 if the Supplementary Closing Date does not occur before January 1, 1995,
NavTech International will be relieved of its obligation under Section 1.11 to
acquire EGT stock and make the payments to EGT, the NavTech Bridge Loan Amount
will be immediately due and payable to NavTech, and interest shall commence to
accrue on the Reduced Philips Bridge Loan Amount retroactive to the Closing
Date.
1.16 Philips Prepayment. Philips, NavTech and EGT agree to use their best
------------------
efforts to negotiate and execute a mutually agreeable license agreement for the
use of NavTech's and EGT's databases by Philips and its affiliates, one
provision of which will require Philips and its affiliates to apply prepayments
made by Philips and its affiliates to EGT prior to the date hereof of Nfl
6,000,000, plus accrued interest thereon from the date of such prepayment to the
date applied, as a credit pursuant to such license agreement (together, the
"Philips Prepayment") against 50% of each license payment due thereunder to
NavTech and EGT by Philips and its affiliates until such prepayments and
interest have been entirely applied. In the event such license agreement is not
negotiated within one year of the date hereof, the parties agree to negotiate a
mutually agreeable extension of time to complete such agreement or a mutually
agreeable repayment arrangement with respect to the Philips Prepayment, provided
that no such repayment will commence prior to 1998.
Supplementary Purchase Agreement
-3-
<PAGE>
ARTICLE 2 REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------
2.1 Each party hereto represents as follows:
(a) Existence and Standing. It duly exists and is in good standing with
----------------------
the state or nation of its incorporation.
(b) Corporate Powers. It has all requisite power and authority to enter
----------------
into this Agreement and to perform all of its obligations hereunder and such
performance will not conflict with any other contractual or legal obligation.
(c) No Third Party Liability. No liability shall be created to any third
------------------------
party by any provision hereunder. Each party will indemnify and hold harmless
the other parties hereto from any claim, action, or action for damages by a
third party with respect to its performance hereunder.
2.2 EGT represents and covenants as follows:
(a) Authorizations. Before December 15, 1994, EGT will use its
--------------
reasonable best efforts to obtain the authorization to issue the shares to
NavTech envisioned by this Agreement and secure the waivers and approvals
necessary for the transfer to NavTech by Philips of the EGT shares Philips owns.
2.3 NavTech and Philips further covenant as follows:
(a) Actions Taken. All necessary actions of their directors and
-------------
shareholders have been taken to authorize the execution, delivery and
performance of this Agreement.
2.4 NavTech further represents and warrants as follows:
(a) No Restrictions on Transfer. There are no restrictions on the
---------------------------
transfer by EGT to Philips of its NavTech Common Stock as contemplated by
Section 1.6 hereof.
ARTICLE 3 MISCELLANEOUS
-------------
3.1 Governing Law. This Agreement shall be governed in all respects by
-------------
the laws of the Kingdom of the Netherlands.
3.2 Force Majeure. No party shall be liable to the others for a failure
-------------
to perform if such performance would violate any law, statute, regulation, court
order, administrative decree or judgement of any court or tribunal or other
governmental or
Supplementary Purchase Agreement
-4-
<PAGE>
administrative body having jurisdiction over such person or such
person's properties or assets.
3.3 Survival. The representations, warranties, covenants and agreements
--------
made herein shall survive the Closing and the transactions effected on the
Supplementary Closing Date.
3.4 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, successors, assigns, heirs, executors and administrators of the parties
hereto.
3.5 Entire Agreement; Amendment. This Agreement, the Stock Purchase
---------------------------
Agreement and the other documents delivered pursuant hereto and thereto or in
connection with the Closing and on the Supplementary Closing Date constitute the
full and entire understanding and agreement between the parties with regard to
the subjects hereof and thereof. Neither this Agreement nor any term hereof may
be amended, except by a written instrument signed by all parties hereto.
3.6 Notices, etc. All notices and other communications required or
------------
permitted hereunder shall be in writing and shall be mailed by certified or
registered mail, postage prepaid, delivered either by hand or by messenger, or
transmitted by electronic telecopy (fax) addressed:
If to Philips, at:
Philips Venture Capital Fund B.V.
c/o Philips Electronics North America Corporation
Attn: Samuel J. Rozel, Esq.
100 East 42nd Street
New York, New York 10017
Fax: +1-212-850-7304
with a copy to:
Sullivan & Cromwell
Attn: W. Loeber Landau, Esq.
125 Broad Street
New York, New York 10004
Fax: +1-212-558-3588
Supplementary Purchase Agreement
-5-
<PAGE>
If to NavTech, at:
Navigation Technologies
Attn: Chief Financial Officer
740 East Arques Avenue
Sunnyvale, California 94086-3833
Fax: +1-408-736-3734
If to EGT, at:
European Geographic Technologies B.V.
Attn: Managing Director
de Waal 15
5684 PH Best, The Netherlands
Fax: +31-4998-92078
or at such other address as any party shall have furnished to the others in
writing. All such notices and other written communications shall be effective
(i) if mailed, seven days after mailing, (ii) if delivered, upon delivery, or
(iii) if faxed, with receipt acknowledged by telephone or fax transmission one
business day after transmission.
3.7 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any party hereto upon any breach or default of any
other party under this Agreement shall impair any such right, power or remedy of
such party nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of a similar breach or default
thereafter occurring. No waiver of any single breach or default shall be deemed
a waiver of any other breach or default thereto before or thereafter occurring.
Any waiver, permit, consent or approval of any kind or character on the part of
any party hereto of any breach or default under this Agreement or any waiver on
the part of any party hereto of any provisions or conditions of this Agreement
must be made in writing and shall be effective only to the extent specifically
set forth in such writing. All remedies, either under this Agreement or by law
or otherwise afforded to any party, shall be cumulative and not alternative.
3.8 Separability. In case any provision of this Agreement shall be
------------
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby
and in lieu of each such illegal, invalid or unenforceable provision, the
parties hereto shall negotiate in good faith to substitute a provision that is
legal, valid and enforceable and as similar in terms to such illegal, invalid or
unenforceable provision as may be possible while giving effect to the benefits
and burdens for which the parties have bargained hereunder.
Supplementary Purchase Agreement
-6-
<PAGE>
3.9 Titles and Subtitles. The titles of the articles, sections and
--------------------
paragraphs of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
3.10 Scope. Each party hereto shall be responsible for the action of all
-----
entities under its control or controlling it and shall cause such entities to
abide by the terms of this Agreement wherever applicable.
3.11 Conflict. To the extent that the provisions hereof conflict with any
--------
of the provisions of the Stock Purchase Agreement relating to the transactions
contemplated herein, the provisions hereof shall govern.
3.12 Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be an original, but all of which together shall constitute one
instrument.
Supplementary Purchase Agreement
-7-
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the date first above written.
NAVIGATION TECHNOLOGIES CORPORATION
BY: /s/ Thomas A. Lerone
-----------------------
Title: Chief Financial Officer
-----------------------
PHILIPS VENTURE CAPITAL FUND B.V.
By: /s/ Samuel J. Rozel
----------------------
Title: Attorney-in-fact
----------------------
EUROPEAN GEOGRAPHIC TECHNOLOGIES B.V.
By: /s/
----------------------
Title: Financial Managing Director
---------------------------
PHILIPS MEDIA B.V.
By: /s/ Samuel J. Rozel
----------------------
Title: Attorney-in-fact
----------------------
Supplementary Purchase Agreement
-8-
<PAGE>
EXHIBIT 10.11
EXECUTION COPY
--------------
EMPLOYMENT AGREEMENT
This Agreement is made as of the 24th day of June, 1996, by and between
----
Navigation Technologies Corporation, a Delaware corporation ("NavTech"), and T.
Russell Shields, an individual residing in Chicago, Illinois ("Shields"), with
reference to the following:
A This Employment Agreement is being entered into in anticipation of the
merger (the "Merger") contemplated under an Agreement and Plan of
Reorganization of even date herewith between, among other parties, NavTech
and Shields Enterprises, Inc. ("SEI"), pursuant to which SEI will become a
wholly-owned subsidiary of NavTech (the "Plan of Reorganization").
B. Shields is chairman, a director and the majority shareholder of SEI.
As a condition to NavTech entering into the Plan of Reorganization and
consummating the Merger, Shields is entering into this Employment
Agreement.
C. This Employment Agreement shall become effective upon the Effective
Date of the Merger and shall have no effect unless and until such Merger
occurs.
D. Unless otherwise indicated, all capitalized terms used herein shall
have the same meaning as specified in the Plan of Reorganization.
NOW THEREFORE, the parties hereto agree as follows:
1. Services of Shields
-------------------
a. Shields will serve as NavTech's Chairman and Chief Executive Officer,
and, as directed by the Board of Directors of NavTech (the "Board"), shall
perform the services that are customary to such office, including, without
limitation, those duties set forth on Exhibit E-1 attached hereto. Shields'
office shall be located in the Chicago, Illinois metropolitan area, and Shields
shall not be required to relocate without his consent.
b. Except as provided in Section 6.a., this Agreement shall terminate on
the earliest to occur of (i) the expiration of four (4) years from the Effective
Date, (ii) Shields' death or Disability (as defined below), and (iii) the
termination of this Agreement by NavTech or Shields as evidenced by a written
notice to that effect.
<PAGE>
c. Shields agrees that:
(i) During the term of this Agreement and for a period of one (1)
year after the termination of this Agreement for any reason, Shields will not,
acting alone or in conjunction with others, directly or indirectly, without the
consent in writing of the Board:
(A) Engage (either as owner, partner, stockholder, employer,
employee, consultant or otherwise) in any business or activity directly in
competition with a business or activity which is related to creating, managing,
adapting, applying, distributing, selling or licensing navigable street map
databases and related database creation, update, access, routing, compiling or
other application software, or any logical extensions thereof, or any other
business conducted during the term of this Agreement by NavTech ( the "NavTech
Businesses"); it being agreed, without limiting any of the foregoing, that
Shields will not directly or indirectly provide software services to any
competitor of NavTech in the NavTech Businesses.
(B) Engage (either as owner, partner, stockholder, employer,
employee, consultant or otherwise) in any business or activity directly in
competition with any business or activity related to the design, development or
support of computer software or systems for third parties, or management
consulting services related thereto, or any other business conducted by SEI
during the term of this Agreement (the "SEI Businesses"); it being agreed,
without limiting any of the foregoing, that Shields will not directly or
indirectly provide software services to any competitor of SEI in the SEI
Businesses.
(C) Induce any customers of NavTech or any of its
subsidiaries to curtail or cancel their business with any of them or induce any
person or entity to do business with any competitor of NavTech or any of its
subsidiaries in competition with the business of NavTech or any of its
subsidiaries.
(D) Solicit or canvass business in connection with the
selling or licensing of navigable street map databases or related software from
any person or entity who was a customer of NavTech or any of its subsidiaries
during the period in which Shields' services are or were provided to NavTech or
any of its subsidiaries; or
(E) Induce, or attempt to influence, any employee of NavTech
or any of its subsidiaries to terminate his/her employment.
The provisions of each of clauses (A), (B), (C), (D) and (E) above are separate
and distinct commitments independent of each of the other clauses. It is agreed
that the ownership of not more than five percent (5%) of the equity securities
of any company having securities listed on an exchange or regularly traded in
the over-the-counter market shall not, in itself, be deemed inconsistent with
subparagraphs 1.c.(i)(A) or (B).
-2-
<PAGE>
(ii) Except in the course of providing services hereunder, Shields
shall not, at any time, during the term of this Agreement or thereafter, for any
reason whatsoever, disclose, use, transfer or sell any confidential or
proprietary information of NavTech and its subsidiaries so long as such
information has not otherwise lawfully been disclosed or is not otherwise in the
public domain, except as required by law or pursuant to legal process.
(iii) Shields agrees to cooperate with NavTech by being available
to testify on behalf of NavTech or any subsidiary or affiliate of NavTech in any
proceeding, whether civil, criminal, administrative or investigative, and to
assist NavTech, or any subsidiary or affiliate of NavTech, in any such action,
suit or proceeding, by providing information, and meeting and consulting with
the Board or its representatives or counsel, or representatives or counsel of
NavTech or any subsidiary or affiliate of NavTech, as requested by such Board,
representatives or counsel. NavTech agrees to reimburse Shields for all
expenses and time reasonably incurred in connection with his provision of
testimony or assistance after the termination of Shields' services under this
Agreement.
2. Compensation
------------
a. So long as Shields continues to perform the services specified in
Section 1 and this Agreement has not terminated, compensation for Shields'
services (inclusive of all compensation paid by any NavTech affiliates) shall
consist of (i) the Base Annual Compensation, (ii) the Senior Executive Bonus
Plan, and (iii) such customary benefits as NavTech may provide to its executive
employees. NavTech shall reimburse Shields for his reasonable expenses incurred
in performing his duties to NavTech hereunder, subject to policies established
by the Board from time to time.
b. The Base Annual Compensation for Shields' services shall be at the
annual rate of Three Hundred and Seventy Five Thousand Dollars ($375,000),
commencing upon the Effective Date. The Base Annual Compensation shall be paid
to Shields by NavTech in twenty-six (26) equal bi-weekly installments each year.
The Board shall have the right, but no obligation, to increase the Base Annual
Compensation from time to time, as it sees fit.
c. Shields will also be eligible to participate in the Senior Executive
Bonus Plan to be established by NavTech in 1996 and continued for Shields during
the entire term of this Agreement. Shields' target bonus each year will be
fifty percent (50%) of his Base Annual Compensation, subject to his achievement
of applicable milestones and objectives. For each year, any such bonus will be
paid to Shields on a bi-weekly basis during the following year. Such milestones
and objectives shall be established annually by the Board and shall refer to
financial and other data determinable as of the end of each fiscal year of
NavTech. A determination as to whether such milestones and objectives have been
met shall be made by the Board within ninety (90) days after the end of each
such fiscal year, and such bonus, if any, shall be deemed earned as of the end
of the fiscal year for which the objectives and milestones were set. The
aggregate amount of any bi-weekly payments which would have been due during such
ninety (90) day period had such determination been made on the last date of the
fiscal year shall be paid in a lump
-3-
<PAGE>
sum immediately following such determination. For the year 1996, the bonus will
not be linked to any milestones or objectives but will be fifty percent (50%) of
the Base Annual Compensation paid to Shields by NavTech between the Effective
Date and December 31, 1996.
d. NavTech will grant non-qualified options to Shields to purchase ten
(10) million shares of NavTech common stock with an exercise price of One Dollar
and Seventy Cents ($1.70) per share, which options shall vest as follows: (i)
options to acquire 1,250,000 shares of NavTech common stock shall vest on
January 1, 1997 and (ii) options to acquire the remaining 8,750,000 shares of
NavTech common stock shall vest in forty-two (42) equal monthly installments
starting on February 1, 1997. Shields will not be eligible to be considered for
grants of additional stock options until August 1, 2000. Except as otherwise
provided in subsections 2.e. and 2.f. below, any vested options may be exercised
up to, but not including, the tenth (10th) anniversary of the date of grant of
such options. NavTech shall enter into an option agreement with Shields
substantially in the form of Exhibit E-2 to this Agreement. In the event of any
inconsistency between such option agreement and this Agreement, this Agreement
shall control.
e. If NavTech terminates Shields' employment for Cause (as defined
below), or Shields' employment terminates due to his death or Disability (as
defined below), or Shields terminates his employment with NavTech other than as
a result of a NavTech Breach (as defined below), NavTech shall not be required
to pay any compensation for termination, and Shields shall not thereafter
continue to participate in any benefit plans of NavTech or its subsidiaries,
except to the extent required by law, provided that Shields shall be entitled to
receive any bonus earned but unpaid as of the date of such termination over the
period such bonus would have been paid to Shields had Shields' employment not
been so terminated. If NavTech terminates Shields' employment for Cause as a
result of an act or omission which involves dishonesty or criminal conduct
directed against NavTech or any of its subsidiaries, all vesting of options
shall cease, and all vested but unexercised options shall terminate, effective
upon such termination of employment. If NavTech terminates Shields' employment
for Cause for reasons other than those described in the foregoing sentence, all
vesting of options shall cease effective upon such termination, and all vested
but unexercised options shall terminate ninety (90) days after such termination
of employment. In the event Shields' employment terminates due to his death or
Disability, or Shields terminates his employment with NavTech other than as a
result of a NavTech Breach, all vested but unexercised stock options may be
exercised in accordance with their terms, but all vesting shall cease as of the
date of such termination of employment.
f. In the event that Shields' employment is terminated by NavTech without
Cause or by Shields as a result of a NavTech Breach, NavTech will provide
Shields with the following: severance pay equal to one (1) year Base Annual
Compensation; any earned and unpaid bonus as of the date of such termination
with such bonus to be paid over the period it would have been paid to Shields
had Shields not been terminated; continuation of Shields' normal benefits for a
one (1) year period after the date of termination; continuation of vesting of
Shields' non-qualified stock options for a period of one (1) year from the date
of termination; and continuation of the right to exercise all vested options in
accordance with their terms. In the event of such a
-4-
<PAGE>
termination, the foregoing shall be Shields' sole and exclusive remedy and
Shields shall not be entitled to any other or further payments, compensation or
benefits from NavTech.
g. For purposes of this Agreement, "Cause" shall mean any act of or
omission by Shields in the conduct of Shields' duties and responsibilities which
constitutes gross negligence or willful misconduct, or any act of or omission by
Shields outside the course of Shields' duties and responsibilities which
involves dishonesty or criminal conduct adverse to NavTech or any of its
subsidiaries or to Shields' value to NavTech as an officer. In the event the
Board believes it has Cause to terminate Shields' employment, it shall give
written notice to Shields stating the specific grounds constituting Cause. In
the event that the Cause alleged constitutes any act or omission in the conduct
of Shields' duties and responsibilities which constitutes gross negligence or
willful misconduct, Shields shall have an opportunity within five (5) days after
receiving such notice to meet with the Board to discuss such allegations of
Cause, and a period of not less than ten (10) days to cure such Cause. Shields
shall not be entitled to any notice or any opportunity to cure any termination
for Cause based on any act or omission outside the course of Shields' duties and
responsibilities which involves dishonesty or criminal conduct adverse to
NavTech or any of its subsidiaries or to Shields' value to NavTech as an
officer. A "NavTech Breach" shall mean a continued material failure of NavTech
to comply with the terms of this Agreement, and such failure continues for a
period of ten (10) days following notice of such failure by Shields to the
Board. Any such notice shall specifically state the grounds which Shields
alleges constitutes a NavTech Breach. "Disability" shall mean Shields'
incapacity due to physical or mental illness as certified in writing by a
physician selected by Shields and reasonably acceptable to NavTech (it being
understood that (i) such physician shall be deemed to be reasonably acceptable
to NavTech if, within a period of fifteen (15) days after Shields notifies
NavTech of the name of such physician, NavTech does not object to the use of
such physician, and (ii) if Shields fails to select a physician within fifteen
(15) days after a written request from NavTech to do so, NavTech shall have the
right to select the physician to examine Shields).
h. NavTech shall indemnify Shields with respect to his performance of
services hereunder to the full extent allowed under the General Corporation Law
of the State of Delaware.
3. Proprietary Information and Inventions
--------------------------------------
a. Subject to the exceptions identified in Section 3.c., Shields'
interest in:
(i) Any and all inventions, improvements and ideas (whether or not
patentable or copyrightable) which Shields has made or conceived, or which he
may make or conceive, either solely or jointly with others, at any time during
the term of the Shields Engagement Agreement, dated September 1, 1994, or this
Agreement; and
(ii) Any suggestion, proposal, writing, drawing and the like of any
sort whatsoever, including any interest in any copyright, which Shields creates
or assists in creating during his engagement with or provision of services to
NavTech;
-5-
<PAGE>
which is related to NavTech's Businesses (including the businesses of its
subsidiaries), contemplated businesses of which Shields is aware, or logical
extensions thereof, will be the exclusive property of NavTech, its successors,
assignees, or nominees.
(The items specified above in this Section 3.a. are hereinafter collectively
called "Proprietary Subject Matter"). Shields shall fully and promptly disclose
to NavTech all Proprietary Subject Matter made or conceived during the term of
Shields' employment. Shields shall not knowingly or intentionally assign or
otherwise relinquish any rights in such Proprietary Subject Matter to any third
party without the prior written consent of the Board.
b. At the request and expense of NavTech, but without further
compensation to Shields beyond the provisions of this Agreement, Shields shall
promptly consent to such acts and execute, acknowledge and deliver all such
papers, including without limitation patent and copyright applications, as may
be necessary or desirable in the sole discretion of NavTech, to obtain, to
protect, to maintain, or to vest in NavTech the entire right, title and interest
in and to Proprietary Subject Matter, and in and to any patent applications,
patents, copyright applications, copyrights, investors' certificates or other
proprietary rights of any kind relating thereto, in all countries of the world;
including rendering such assistance as NavTech may request in any future
contemplated or pending litigation, Patent Office proceeding, or other
proceeding.
c. (i) The Board may from time to time except from the provisions of
Sections 3.a. and 3.b. hereof Shields' rights in Proprietary Subject Matter upon
a determination by the Board that such would not adversely affect, or materially
contribute to an adverse effect on, the results of operations or the financial
condition or prospects of NavTech or any of its subsidiaries. Any such
determination of the Board shall be by majority vote not including Shields or
directors that have been designated by or are affiliated with Shields.
(ii) The exception set forth in Section 3.c.(i) notwithstanding,
Shields will not assert against NavTech any claim for infringement or
misappropriation of any excepted Proprietary Subject Matter.
d. Shields will not knowingly or negligently disclose, or cause others to
disclose to NavTech or any of its subsidiaries, or induce NavTech or any of its
subsidiaries to use, any information or material which is the property of other
individuals or companies and which there is any reason to believe is of
proprietary or confidential nature, except with the consent of the owners of
such information or material.
e. Since the services which Shields is rendering to NavTech will include,
and Shields shall have access to, NavTech's knowledge and information of private
or confidential or secret nature, Shields shall not during, or after, the term
of this Agreement, except as reasonably required in the normal course of
NavTech's business or as authorized in writing by the Board, publish, disclose
or make use of, or authorize anyone else to publish, to disclose or otherwise
made use of, any such knowledge or information, whether of a technical or of a
non-technical
-6-
<PAGE>
nature, which in any way relates to the design, construction, manufacture or
sale of NavTech's services or products.
f. All documents, written information and other terms including but not
limited to notes, sketches, manuals, blueprints, notebooks, products, tools,
fixtures, records and information relating to the services or products of
NavTech or its subsidiaries, made or obtained by Shields through Shields'
provision of services to, or employment by, NavTech, will be the exclusive
property of NavTech and shall be delivered by Shields to NavTech upon
termination of this Agreement (whether such termination is caused by an act of
NavTech or by Shields or by any other act), or any other time as requested by
NavTech. Subject to the confidentiality provisions of Section 3.e. hereof,
Shields may retain copies of such papers as necessary for the sole purpose of
protecting his legal interests.
4. Board of Directors
------------------
NavTech agrees to use its best efforts to achieve Shields' election to its
Board during the period Shields owns beneficially (as defined by the Securities
Act of 1934 and the rules and regulations promulgated thereunder) ten percent
(10%) or more of the outstanding shares of voting common stock of NavTech. For
purposes of this Section 4, shares of NavTech owned beneficially by Shields'
Family (as defined below) or any trusts for the benefit of members of Shields'
Family shall be treated as owned beneficially by Shields. "Shields' Family"
shall mean Shields' spouse and siblings, and all descendants of Shields, his
spouse and siblings.
5. Governing Law; Arbitration; Injunctive and Other Relief
-------------------------------------------------------
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely in Delaware. Each party hereby irrevocably
consents to the exclusive jurisdiction of the federal and state courts located
in Chicago, Illinois with respect to any actions which may arise in connection
with this Agreement and are not required by this Section 5 to be arbitrated.
Except as provided in this Section 5, any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration administered by the American Arbitration Association in accordance
with its Commercial Arbitration Rules, and judgment on the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
Within fifteen (15) days after the commencement of arbitration, NavTech and
Shields shall each select one person to act as arbitrator and the two selected
shall select a third arbitrator within ten (10) days of their appointment. If
the arbitrators so selected are unable or fail to agree upon the third
arbitrator, or if either party fails to appoint an arbitrator, such arbitrator
or arbitrators shall be selected by the American Arbitration Association.
Each of the parties to this Agreement acknowledges that a breach of this
Agreement may cause the other party irreparable harm which may not be adequately
compensated by money
-7-
<PAGE>
damages. Therefore, in the event of a breach or threatened breach by a party,
injunctive or other equitable relief will be available to the other party, and
any arbitrator acting pursuant to this Agreement shall have the authority to
provide such injunctive or other equitable relief. Remedies provided herein are
not exclusive, except as provided in Section 2.f.
The arbitrators shall have the authority to award such remedies or relief
that a court of the State of Delaware could order or grant in an action governed
by Delaware law, including, without limitation, specific performance of any
obligation created under this Agreement, the issuance of an injunction, or the
imposition of sanctions for abuse or frustration of the arbitration process.
The arbitration proceedings shall be conducted in Chicago, Illinois.
Notwithstanding the foregoing, any party may bring and pursue an action in
any Federal or State court located in Chicago, Illinois seeking provisional
relief, including a temporary restraining order or preliminary injunction,
pending an arbitration proceeding. Any provisional relief obtained shall be
discontinued once the arbitrators have assumed jurisdiction and ordered such
discontinuance.
6. Miscellaneous
-------------
a. Survival. Notwithstanding anything in this Agreement to the contrary,
--------
Sections 1.c., 2(e), 2(f), 2(h), 3, 4, 5 and 6 shall survive any termination of
this Agreement.
b. Successors and Assigns. The provisions hereof shall inure to the
----------------------
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto.
c. Entire Agreement; Effective Date; Amendment. This Agreement and the
-------------------------------------------
Exhibit hereto together constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereto and thereof.
None of this Agreement and the Exhibit hereto or any term hereof or thereof may
be amended, waived, discharged or terminated, except by a written instrument
signed by both of the parties hereto. This Agreement shall become effective
upon the Effective Date of the Merger and shall have no effect unless and until
such Merger occurs. This Agreement and the Exhibit hereto shall, upon their
effectiveness, supersede the Shields' Engagement Agreement and the Proprietary
Information and Invention Agreement, each dated as of September 1, 1994.
d. Notices, etc. All notices and other communications required or
-------------
permitted hereunder shall be in writing and shall be mailed by certified or
registered mail, postage prepaid, delivered either by hand or by messenger, or
transmitted by electronic telecopy (fax) addressed:
If to NavTech, at:
Navigation Technologies Corporation
Attn: General Counsel
-8-
<PAGE>
10400 W. Higgins Road, Suite 400
Rosemont, Illinois 60018
Fax: (847) 699-6556
With copies to:
Martin L. Budd, Esquire
Day, Berry & Howard
One Canterbury Green
Stamford, CT 06901-2047
Fax: (203) 977-7301
Philips Electronics North America Corp.
Attn: Samuel J. Rozel, Esquire
Senior V.P., Secretary and General Counsel
100 East 42nd Street
New York, NY 10017
Fax: (212) 850-7304
If to Shields, at:
T. Russell Shields
160 E. Pearson #3108
Chicago, Illinois 60611
Fax: (312) 266-1194
with a copy to:
Marshall E. Eisenberg, Esquire
Neal, Gerber and Eisenberg
Two North LaSalle Street
Suite 2200
Chicago, Illinois 60602
Fax: (312) 269-1747
or at such other address as any party shall have furnished to the others in
writing. All such notices and other written communications shall be effective
(i) if mailed, seven (7) days after mailing (if mailed from outside the United
States, such mailing must be by airmail and said seven (7) days shall be
fourteen (14) days), (ii) if delivered, upon delivery, or (iii) if faxed, one
(1) business day after transmission and acknowledgment of receipt by telephone
or fax.
f. Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to either party hereto upon any breach or default of
the other party under this
-9-
<PAGE>
Agreement shall impair any such right, power or remedy of such party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or any similar breach or default thereafter occurring. No waiver of any
single breach or default shall be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of any party hereto of any breach or default
under this Agreement or any waiver on the part of any party hereto of any
provisions or conditions of this Agreement must be made in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.
g. Separability. In case any provision of this Agreement shall be
------------
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Shields and NavTech acknowledge that the restrictive covenants herein have been
negotiated in good faith and they believe that such restrictive covenants are
reasonable and are not more restrictive or broader than are necessary to protect
the interests of the parties hereto, and would not achieve their intended
purpose if they were on different terms or for periods of time shorter than the
periods of time provided herein or applied in more restrictive geographical
areas than are provided herein. Each party further acknowledges and agrees that
the NavTech Businesses and SEI Businesses, respectively, are highly competitive,
that NavTech would not enter into this Agreement but for the covenants contained
in Section 1.c., and that such covenants are essential to protect the value of
the NavTech Businesses and SEI Businesses, respectively. Shields and NavTech
acknowledge and confirm that competition by Shields would likely cause
irreparable injury to NavTech and its subsidiaries. If, however, it shall be
determined at any time by any arbitrator or court of competent jurisdiction that
this Agreement, as written, is unenforceable because the restrictions set forth
herein are unreasonable, the parties hereto agree that such portions as shall
have been determined to be unreasonably restrictive shall thereupon be deemed so
amended as to make such restrictions reasonable in the determination of such
arbitrator or court, and the said covenants, as so modified, shall be
enforceable between the parties to the same extent as if such amendments had
been made prior to the date of any alleged breach of said covenants.
h. Titles and Subtitles. The titles of the paragraphs of this Agreement
--------------------
are for convenience of reference only and are not to be considered in construing
this Agreement.
i. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be an original, but all of which together shall constitute one
instrument. Each party may execute a separate counterpart which taken together
shall constitute as fully binding an agreement as if both executed the same
counterpart.
-10-
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the date first above written.
T. RUSSELL SHIELDS
/s/ T. Russell Shields
----------------------------------------
NAVIGATION TECHNOLOGIES
CORPORATION
By:/s/ Navigation Technologies Corporation
----------------------------------------
Title:
-------------------------------------
-11-
<PAGE>
EXHIBIT E-1
-----------
TO EMPLOYMENT AGREEMENT
-----------------------
Chairman and Chief Executive Officer
President and Chief Operating Officer
Job Responsibilities
In order to clarify the provision of the By-laws describing the duties of the
Chairman and Chief Executive Officer, on the one hand, and the President and
Chief Operating Officer, on the other hand, the Board hereby states more
explicitly the duties and responsibilities of each.
The Chairman and CEO is responsible for the long term entrepreneurial
vision for NavTech, and for representing NavTech in high level situations
with customers, partners, and throughout the industry.
. He reports to the Board.
. He provides long-term strategic vision and technical direction to
NavTech via the President and the Board.
. He develops and maintains senior level strategic customer
relationships.
. He works throughout the industry in a market development and
company spokesman role.
The President and COO is responsible for the planning, operation and
performance of NavTech.
. He reports directly to the Board, and shall be a member thereof.
. He is responsible for the development of the strategic and
operational plans (including budgets) for NavTech.
. He is responsible for the implementation of NavTech's plans,
including profit and loss performance under the budgets of
NavTech.
. He is responsible for all personnel decisions for the
organization, other than officers of NavTech which are to be
elected by the Board. All employees, excluding the Office of the
Chairman, report directly (or through normal reporting
hierarchies) to the President.
. He is responsible for the sales efforts of NavTech.
E-1-1
<PAGE>
. If SEI is acquired, it shall report to the President.
The Chairman and the President will have joint responsibilities for and
work together to:
. Develop corporate partner relationships.
. Set long term goals for NavTech and formulate marketplace
strategies.
. Develop agendas for Board meetings.
. Secure financing and communicate with Wall Street and investors
regarding NavTech's performance.
-E-2-
<PAGE>
EXHIBIT E-2
-----------
TO EMPLOYMENT AGREEMENT
-----------------------
SHIELDS OPTION AGREEMENT
------------------------
-E-1-
<PAGE>
NAVIGATION TECHNOLOGIES CORPORATION
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the 1996 Stock Option
Plan (the "Plan") and Optionee's Employment Agreement dated June 24, 1996 (the
"Employment Agreement") shall have the same defined meanings in this Option
Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
T. Russell Shields
160 E. Pearson #3108
Chicago, IL 60611
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan, Employment Agreement and this
Option Agreement, as follows:
<TABLE>
<CAPTION>
<S> <C>
Grant Number --------------------------
Exercise Price per Share $1.70
Total Number of Shares Granted 10,000,000
Total Exercise Price $17,000,000
Type of Option: Incentive Stock Option
-----
X Supplemental Stock Option
-----
</TABLE>
Date of Grant:
-------------
The Date of Grant of this Option is June 17, 1996. This Option shall
become effective upon the Effective Date of the Merger and shall have no effect
unless and until such Merger occurs.
Term/Expiration Date:
--------------------
This Option shall expire ten years after the Date of Grant.
Vesting Schedule:
----------------
This Option may be exercised, in whole or in part, in accordance with the
following schedule:
1,250,000 of the Shares subject to the Option shall vest on January 1, 1997
and 8,750,000 of the Shares subject to the Option shall vest in forty-two (42)
equal monthly installments beginning on February 1, 1997.
<PAGE>
Termination Period:
------------------
Except as otherwise provided herein, to the extent that the Option has not
vested at the date of your termination, such unvested portion of the Option
shall terminate. In the event that your Continuous Status as an Employee or
Consultant terminates for Cause as a result of an act or omission which involves
dishonesty or criminal conduct directed against the Company or any of its
subsidiaries, the Option shall terminate as of the date of your termination. In
the event that your Continuous Status as an Employee or Consultant terminates
for Cause for reasons other than those described in the foregoing sentence, the
Option, to the extent vested, shall terminate ninety (90) days after the date of
your termination. In the event that your Continuous Status as an Employee or
Consultant terminates due to your death, Disability (as defined in the
Employment Agreement), or voluntary termination other than as a result of a
NavTech Breach, the Option, to the extent vested, shall terminate upon
expiration of its term. In the event that your Continuous Status as an Employee
or Consultant is terminated either by the Company without Cause or by you as a
result of a NavTech Breach, your Option shall continue to vest for one (1) year
from the date of termination and the Option, to the extent vested, shall
terminate upon expiration of its term. In no event may this Option be exercised
later than the Term/Expiration Date as provided above.
II. AGREEMENT
---------
1. Grant of Option. The Plan Administrator of the Company hereby grants
---------------
to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee") an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan and Employment Agreement, which are incorporated herein
by reference. Subject to Section 15(c) of the Plan, in the event of a conflict
between the terms and conditions of the Plan and the terms and conditions of
this Option Agreement, the terms and conditions of the Plan shall prevail. In
the event of any conflict between the terms and conditions of the Employment
Agreement and the terms and conditions of this Option Agreement, the terms and
conditions of the Employment Agreement shall prevail. In the event of a
conflict between the terms and conditions of the Plan and the terms and
conditions of the Employment Agreement, the terms and conditions of the
Employment Agreement shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Supplemental Stock Option ("SSO").
2
<PAGE>
2. Exercise of Option.
------------------
(a) Right to Exercise. This Option is exercisable during its term in
-----------------
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement. In the event of
Optionee's death, Disability or other termination of Optionee's employment or
consulting relationship, the exercisability of the Option is governed by the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an
------------------
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be signed by
the Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The Exercise Notice shall be accompanied by payment
of the aggregate Exercise Price as to all Exercised Shares. This Option shall be
deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with all relevant provisions of law
and the requirements of any stock exchange or quotation service upon which the
Shares are then listed. Assuming such compliance, for income tax purposes the
Exercised Shares shall be considered transferred to the Optionee on the date the
Option is exercised with respect to such Exercised Shares.
3. Method of Payment. Payment of the aggregate Exercise Price shall be
-----------------
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash; or
(b) check; or
(c) delivery of a properly executed exercise notice together with such
other documentation as the Administrator and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale or loan proceeds required to pay the exercise price; or
(d) surrender of other Shares which (i) in the case of Shares acquired
upon exercise of an option, have been owned by the Optionee for more than six
(6) months on the date of surrender, and (ii) have a Fair Market Value on the
date of surrender equal to the aggregate Exercise Price of the Exercised Shares.
4. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the
3
<PAGE>
lifetime of Optionee only by the Optionee. The terms of the Plan and this
Option Agreement shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
5. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.
6. Tax Consequences. Some of the federal and state tax consequences
----------------
relating to this Option, as of the date of this Option, are set forth below.
THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING
THIS OPTION OR DISPOSING OF THE SHARES.
Exercising the Option.
---------------------
(i) Supplemental Stock Option. The Optionee may incur regular
-------------------------
federal income tax and state income tax liability upon exercise of a SSO. The
Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the Fair Market Value
of the Exercised Shares on the date of exercise over their aggregate Exercise
Price. If the Optionee is an Employee or a former Employee, the Company will be
required to withhold from his or her compensation or collect from Optionee and
pay to the applicable taxing authorities an amount in cash equal to a percentage
of this compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.
(ii) Incentive Stock Option. If this Option qualifies as an ISO,
----------------------
the Optionee will have no regular federal income tax or state income tax
liability upon its exercise, although the excess, if any, of the Fair Market
Value of the Exercised Shares on the date of exercise over their aggregate
Exercise Price will be treated as an adjustment to alternative minimum taxable
income for federal tax purposes and may subject the Optionee to alternative
minimum tax in the year of exercise. In the event that the Optionee undergoes a
change of status from Employee to Consultant, any Incentive Stock Option of the
Optionee that remains unexercised shall cease to qualify as an Incentive Stock
Option and will be treated for tax purposes as a Supplemental Stock Option on
the ninety-first (91st) day following such change of status.
(b) Disposition of Shares.
---------------------
(i) SSO. If the Optionee holds SSO Shares for at least one year,
---
any gain realized on disposition of the Shares will be treated as long-term
capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least one year
---
after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO
4
<PAGE>
Shares within one year after exercise or two years after the grant date, any
gain realized on such disposition will be treated as compensation income
(taxable at ordinary income rates) to the extent of the excess, if any, of the
lesser of (A) the difference between the Fair Market Value of the Shares
acquired on the date of exercise and the aggregate Exercise Price, or (B) the
difference between the sale price of such Shares and the aggregate Exercise
Price. Any additional gain will be taxed as capital gain, short-term or long-
term depending on the period that the ISO Shares were held.
(c) Notice of Disqualifying Disposition of ISO Shares. If the
-------------------------------------------------
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
an ISO on or before the later of (i) two years after the grant date, or (ii)
one year after the exercise date, the Optionee shall immediately notify the
Company in writing of such disposition. The Optionee agrees that he or she may
be subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
7. Entire Agreement; Governing Law. The Plan and the Employment
-------------------------------
Agreement are incorporated herein by reference. The Plan, the Employment
Agreement, and this Option Agreement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by Delaware law except for that body of
law pertaining to conflict of laws.
8. Arbitration. Optionee agrees that any claim, dispute or controversy
-----------
arising out of, relating to, or in connection with this stock option agreement
shall be settled by binding arbitration pursuant to the Commercial Arbitration
Rules and the Supplemental Procedures for Large, Complex Disputes of the
American Arbitration Association by one arbitrator appointed in accordance with
said rules and procedures. The arbitrator may grant injunctions or other
relief in such dispute or controversy. The decision of the arbitrator shall be
final, conclusive and binding on the parties to the arbitration. Judgment may
be entered on the award of the arbitration in any court having jurisdiction
thereof.
(a) The arbitrator shall apply Delaware law to the merits of any
dispute or claim, without reference to rules of conflicts of law. The
arbitration proceedings shall be governed by federal arbitration law, without
reference to state arbitration law.
(b) The Company and optionee shall each pay one-half of the costs and
expenses of such arbitration, and each shall separately pay its counsel fees
and expenses.
(c) Optionee understands that nothing in this Section 8 modifies
optionee's at-will status. Either optionee or the Company can terminate the
employment relationship at any time, with or without cause.
9. NO GUARANTEE OF EMPLOYMENT. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE
--------------------------
VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE
5
<PAGE>
HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR CONSULTANT AT THE
WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN
OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND
AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE
VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED
PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE OR CONSULTANT FOR THE VESTING
PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S
RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTING
RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.
OPTIONEE HAS READ AND UNDERSTANDS SECTION 8, WHICH DISCUSSES
ARBITRATION. OPTIONEE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, OPTIONEE
AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH
THIS AGREEMENT TO BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE
CONSTITUTES A WAIVER OF OPTIONEE'S RIGHT TO A JURY TRIAL AND RELATES TO THE
RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THIS RELATIONSHIP.
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option
Agreement. Optionee hereby agrees to accept as binding, conclusive and final
all decisions or interpretations of the Administrator upon any questions
relating to the Plan and Option Agreement. Optionee further agrees to notify
the Company upon any change in the residence address indicated below.
OPTIONEE: NAVIGATION TECHNOLOGIES
CORPORATION
/s/ T. Russell Shields /s/ Navigation Technologies Corporation
----------------------- ---------------------------------------
Signature By
T. Russell Shields
----------------------- ---------------------------------------
Print Name Title
Residence Address:
160 E. Pearson, #3108
Chicago, IL 60611
6
<PAGE>
CONSENT OF SPOUSE
-----------------
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Option Agreement. In consideration of the
Company's granting his or her spouse the right to purchase Shares as set forth
in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
____________________________________
Spouse of Optionee
<PAGE>
EXHIBIT A
---------
NAVIGATION TECHNOLOGIES CORPORATION
EXERCISE NOTICE
Navigation Technologies Corporation
740 East Arques Avenue
Sunnyvale, California 94086-3833
Attention: Secretary
1. Exercise of Option. Effective as of today, ________________, 199__,
------------------
the undersigned ("Purchaser") hereby elects to purchase ______________ shares
(the "Shares") of the Common Stock of Navigation Technologies Corporation (the
"Company") under and pursuant to the 1996 Stock Plan (the "Plan") and the Stock
Option Agreement dated _____________, 19___ (the "Option Agreement"). The
purchase price for the Shares shall be $_____________, as required by the
Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
-------------------
full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser
----------------------------
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance (as evidenced by the
---------------------
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
will be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 13
of the Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
----------------
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
<PAGE>
6. Entire Agreement; Governing Law. The Plan, Optionee's Employment
-------------------------------
Agreement dated June 24, 1996 (the "Employment Agreement") and the Option
Agreement are incorporated herein by reference. This Agreement, the Plan, the
Employment Agreement and the Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Purchaser
with respect to the subject matter hereof, and may not be modified adversely to
the Purchaser's interest except by means of a writing signed by the Company and
Purchaser. This agreement is governed by Delaware law except for that body of
law pertaining to conflict of laws.
Submitted by: Accepted by:
PURCHASER: NAVIGATION TECHNOLOGIES CORPORATION
----------------------- ----------------------------
Signature By
T. Russell Shields
----------------------- ----------------------------
Print Name Title
Address: Address:
------- -------
160 E. Pearson, #3108 740 East Arques Avenue
Chicago, IL 60611 Sunnyvale, California 94086-3833
2
<PAGE>
EXHIBIT 10.12
April 18, 1996
Mr. Ronald Brumback
631 S. Garfield Avenue
Hinsdale, IL 60521
Dear Ron,
I am pleased to offer you the position of President and Chief Operating Officer
of Navigation Technologies Corporation ("NavTech"). Subject to your acceptance
of this offer, your employment will commence as of April 22, 1996. Your duties
and responsibilities as President and COO are more fully described in Exhibit A
attached to this letter. As President and COO you shall report directly to the
Board of Directors and the intent is that you shall be a board member as long as
you hold those positions.
You will receive a base cash compensation of $14,423.08 paid bi-weekly, equal to
$375,000 per annum. You will also be eligible to participate in the senior
executive bonus plan to be established by NavTech in 1996. Your target bonus
each year will be 50% of your base annual cash compensation, subject to your
achievement of applicable milestones and objectives. For each year, any such
bonuses will be paid to you on a bi-weekly basis during the following year.
Such milestones and objectives shall refer to financial data determinable as of
the end of each fiscal year of NavTech and a determination as to whether such
milestones and objectives have been met shall be made within 90 days after the
end of each such fiscal year. The aggregate amount of any bi-weekly payments
which would have been due during such 90 day period had such determination been
made the last date of the fiscal year shall be made in a lump sum immediately
following such determination. For the year 1996, the bonus will not be linked
to any milestones or objectives but will be 50% of the base cash compensation
paid to you by NavTech between April 22 and December 31, 1996.
In addition, subject to your acceptance of this employment offer, the Board of
Directors has granted you options to purchase 5,000,000 shares of Navigation
Technologies Corporation common stock at the fair market value at the time of
the grant (i.e. $0.85 per share). The options will, subject to your continued
employment, vest in equal monthly installments over a four year period
commencing on April 22, 1996. These options will be incentive stock options to
the maximum extent allowable at the time of the grant; the balance will be non-
qualified options. You will not be eligible for grants of additional stock
options until July 1, 2000.
In the event that you and your family relocate from Illinois to California
during the course of your employment, NavTech will pay the reasonable costs of
such relocation including any necessary adjustments to achieve a tax neutral
effect all on the same terms as the relocation plan which Philips now has in
effect for employees of your status.
NavTech currently provides company-paid employee insurance from your date of
hire including medical, dental, vision, life and long-term disability coverage.
Employees have the option of acquiring medical/dental/vision coverage for their
dependents as well, with the company paying 50%
<PAGE>
Mr. Ronald Brumback
April 18, 1996
Page 2
of the premium. You will also be eligible to participate in
a Section 125 Health Care/Dependent Care Reimbursement Plan and a 401(k) Savings
and Investment Plan. Should the company institute any executive benefit plans
you will be entitled to participate in such plans.
While I hope our relationship will be long and mutually beneficial, it is
mutually recognized that our relationship shall not be for any definite term,
but rather shall be one of "at-will" employment.
In the event that your employment is terminated by NavTech without cause (as
defined below), NavTech will provide you with the following: severance pay
equal to one year base compensation plus any earned and unpaid bonus as of the
date of such termination such bonus to be paid over the period it would have
been paid to you had you not been terminated; continuation of your normal
benefits for a one year period after the date of termination; continuation of
vesting of your incentive stock option for a period of three months from the
date of termination; and extension of the time period for the exercise of your
non-qualified options to two years from the date of termination. Your incentive
stock options shall convert to non-qualified options if they are not exercised
within three months of such termination. The foregoing provisions regarding
your options shall supersede any existing terms. In the event of such a
termination, the foregoing shall be your sole and exclusive remedy and you shall
not be entitled to any other or further payments, compensation or benefits from
NavTech. For these purposes "cause" shall mean any act or omission in the
conduct of your duties and responsibilities which constitutes gross negligence
or willful misconduct, or any act or omission outside the course of your duties
and responsibilities which includes dishonesty or criminal conduct.
In the event that you voluntarily terminate your employment with NavTech, you
shall be entitled to receive any bonus and earned but unpaid as of the date of
such termination over the period such bonus would have been paid to you had you
not voluntarily terminated your employment.
In order to minimize costs and expenses for all parties, any disputes or
controversies arising in connection with your employment or the cessation of
your employment with the company will be resolved by binding arbitration in the
State of Illinois. The arbitration will be conducted in accordance with the
applicable rules of the American Arbitration Association under Illinois law.
This offer is contingent on the execution by you and NavTech of the Proprietary
Information and Invention Agreement attached hereto as Exhibit B on or before
the commencement of your employment with NavTech. This offer is also contingent
on your providing NavTech with proof of your legal eligibility to work in the
United States within seventy-two (72) hours of your first day of employment.
Let me express my pleasure and enthusiasm about the prospect of your employment
with NavTech, my appreciation for the contribution you have made to NavTech as a
Board member thus far, and my expectation that you will find NavTech to be
exciting and fulfilling place to work.
<PAGE>
Mr. Ronald Brumback
April 18, 1996
Page 3
I look forward to your positive response to this offer and to your continuing
role as a key member of the team that will lead NavTech to success.
Cordially,
/s/ T. Russell Shields
- ----------------------
Chairman
AGREED TO AN ACCEPTED:
<PAGE>
Mr. Ronald Brumback
April 18, 1996
Page 4
/s/ Ronald A. Brumback
- ---------------------- ----------------------
Ronald A. Brumback Date
<PAGE>
EXHIBIT 10.13
OFFICE LEASE
------------
THIS LEASE is made as of the day of October, 1991, by and between
THE BIANCHI JOINT VENTURE, a California General Partnership
(hereinafter called "Landlord"), and
NAVIGATION TECHNOLOGIES, a Delaware corporation
(hereinafter called "Tenant").
The parties hereto agree that said letting and hiring is upon and subject to the
terms, covenants and conditions herein set forth and Tenant covenants as a
material part of the consideration for this Lease to keep and perform each and
all of said terms, covenants and conditions by it to be kept and performed and
that this Lease is made upon the condition of such performance.
Witnesseth:
1. PREMISES. Landlord hereby leases to Tenant and Tenant hereby hires
--------
and takes from Landlord those certain premises (the "Premises") outlined in red
on Exhibit "A", situated in Sunnyvale, County of Santa Clara, State of
California, and those more particularly described as follows:
That certain approximately 20,000 square feet of space outlined on the
floor plan attached hereto as on Exhibit "A" (the "Premises") located
within that certain concrete building (the "Building"), which building is
situated on that certain parcel of real property located on the
southwesterly corner of East Arques Avenue and San Geronimo Way, Sunnyvale,
California, commonly known as 740 East Arques Avenue, consisting of
approximately 1.811 acres of land.
The term "Premises" as used throughout this Lease is hereby defined to include
(i) any improvements now or hereafter installed therein or attached thereto, and
(ii) the reasonable exclusive use by Tenant, its agents, employees and invitees
of sidewalks and driveways in front of or adjacent to the Premises, and parking
areas located on the Parcel. The leased area of the Premises shall be measured
from outside of exterior walls to outside of exterior walls and shall include
any atriums, depressed loading docks, covered entrances or expresses, and
covered loading areas.
2. TERM. The term of this Lease shall be for four (4) years and one (1)
----
month commencing on the 1st day of October, 1991, and ending on the 31st day of
October, 1995, unless the term of the Premises hereby demised shall be sooner
terminated as hereinafter provided.
3. POSSESSION. Tenant is currently in possession of the Premises under
----------
the terms of the lease dated September 1986 by and between Justin M. Jacobs Sr.,
as Landlord and Karlin and Collins Inc. as Tenant. Tenant and Landlord upon the
ratification of this Lease, agree to cancel said previous lease as of September
30, 1991 and Tenant agrees to take possession of the Premises in its current "as
is" condition.
4. RENT. Tenant agrees to pay to Landlord at such place as Landlord may
----
from time to time designate without deduction, offset, abatement, prior notice,
or demand, and Landlord agrees to accept as Basic Rent for the leased Premises,
the total sum of SIX HUNDRED THIRTY-SIX THOUSAND DOLLARS and XX/100
($636,000.00) in lawful money of the United States of America, payable as
follows:
The sum of $8,750.00 payable each month from October 1, 1991 through
September 30, 1992,
The sum of $14,000.00 payable each month from October 1, 1992 through
September 30, 1994,
The sum of $15,000.00 payable each month from October 1, 1994 through
October 31, 1995.
(A) ???
(B) ???
(C) Additional Rent. Beginning with the commencement of the term
---------------
of this Lease, Tenant shall pay to Landlord in addition to the Base Rent and as
Additional Rent the following:
(i) Taxes.
-----
(a) As Additional Rent and in accordance with Paragraph
40 of this Lease, Tenant shall pay to Landlord all Real Property Taxes. The term
"Real Property Taxes," as used herein, shall mean (i) all taxes, assessments,
levies and other charges of any kind or nature whatsoever, general and special,
foreseen and unforeseen (including all installments of principal and interest
required to pay any general or special assessments for public improvements and
any increases resulting from reassessments caused by any change in ownership of
the Complex) now or hereafter imposed by any governmental or quasi-governmental
authority or special district having the direct or indirect power to tax or levy
assessments, which are levied or assessed against, or with respect to the value,
occupancy or use of, all or any portion of the Complex (as now constructed or as
may at any time hereafter be constructed, altered, or otherwise changed) or
Landlord's interest therein; any improvements located within the Complex
(regardless of ownership); the fixtures, equipment and other property of
Landlord, real or personal, that are an integral part of and located in the
Complex; or parking areas, public utilities, or energy within the Complex; (ii)
all charges, levies or fees imposed by reason of environmental regulation or
other governmental control of the Complex; and (iii) all costs and fees
(including attorneys' fees) incurred by Landlord in contesting any Real Property
Tax and in negotiating with public authorities as to any Real Property Tax. If
at any time during the term of this Lease the taxation or assessment of the
Complex prevailing as of the commencement date of this Lease shall be altered so
that in lieu of or in addition to any Real Property tax described above there
shall be levied, assessed or imposed (whether by reason of a change in the
method of taxation or assessment, creation of a new tax or charge, or any other
cause) an alternate or additional tax or charge (i) on the value, use or
occupancy of the Complex or Landlord's interest therein or (ii) on
-1-
<PAGE>
or measured by the gross receipts, income or rentals from the Complex, on
Landlord's business of leasing the Complex, or computed in any manner with
respect to the operation of the Complex, then any such tax or charge, however
designated, shall be included within the meaning of the term "Real Property
Taxes" for purposes of this Lease. If any Real Property Tax is based upon
property or rents unrelated to the Complex then only that part of such Real
Property Tax that is fairly allocable to the Complex shall be included within
the meaning of the term "Real Property Taxes." Notwithstanding the foregoing,
the term "Real Property Taxes" shall not include estate, inheritance, gift or
franchise taxes of Landlord or the federal or state net income tax imposed on
Landlord's income from all sources.
(b) Tenant shall have no obligation to pay any charges,
levies or fees imposed by reason of environmental regulations or other
government control of the Parcel relating to toxic wastes or damage to the
environment which Tenant does not create and, in the event Tenant does create
such toxic wastes or damage to the environment and is therefore obligated to pay
such charges, levies or fees, such obligation shall be limited to those charges
which are required to be paid for clean-up or otherwise by applicable law or
governmental authority. Furthermore, Landlord agrees to indemnify, defend and
hold Tenant harmless from any and all charges, levies, fees, and all other
claims and damages, including, without limitation, reasonable attorneys' fees,
sustained by Tenant ("Claims") resulting from environmental regulations or
government control of the Parcel relating to toxic wastes or damage to the
environment except to the extent caused by Tenant.
(c) Tenant shall have no obligation to pay tax increases
resulting from the sale, conveyance, assignment or transfer of the Building
and/or the Parcel (i.e., Proposition 13 increases).
(d) Tenant shall be liable for and shall pay ten days
before delinquency, taxes levied against any personal property or trade fixtures
placed by Tenant in or about the Premises. If any such taxes on Tenant's
personal property or trade fixtures are levied against Landlord or Landlord's
property or if the assessed value of the Premises is increased by the inclusion
therein of a value placed upon such personal property or trade fixtures of
Tenant and if Landlord, after written notice to Tenant, pays the taxes based on
such increased assessment, which Landlord shall have the right to do regardless
of the validity thereof, but only under proper protest if requested by Tenant.
Tenant shall upon demand, as the case may be, repay to Landlord the taxes so
levied against Landlord, or the proportion of such taxes resulting from such
increase in the assessment; provided that in any such event Tenant shall have
the right, in the name of Landlord and with Landlord's full cooperation, to
bring suit in any court of competent jurisdiction to recover the amount of any
such taxes so paid under protest, and any amount so recovered shall belong to
Tenant, (ii) if the Tenant makes improvements in the Premises, whether
installed, and/or paid for by Landlord or Tenant and whether or not affixed to
the real property so as to become a part thereof, are assessed for real property
tax purposes at a valuation higher than the valuation at which standard office
improvements in other space in the Complex are assessed, then the real property
taxes and assessments levied against Landlord or the Complex by reason of such
excess assessed valuation shall be deemed to be taxes levied against personal
property of Tenant and shall be governed by the provisions of 3(C)(i)(a) above.
If the records of the County Assessor are available and sufficiently detailed to
serve as a basis for determining whether said Tenant improvements are assessed
at a higher valuation than standard office improvements in other space in the
Complex, such records shall be binding on both the Landlord and the Tenant. If
the records of the County Assessor are not available or sufficiently detailed to
serve as a basis for making said determination, the actual cost of construction
shall be used.
(ii) Property Insurance. Landlord shall purchase and keep in
------------------
force and as Additional Rent and in accordance with Paragraph 4D of this Lease,
Tenant shall pay to Landlord the cost of a policy or policies of insurance
covering loss or damage to the Premises and Complex in the amount of the full
replacement value thereof, providing protection against those perils included
within the classification of "all risks" insurance and flood and/or earthquake
insurance, if available, plus a policy of rental income insurance in the amount
of one hundred percent (100%) of twelve (12) months Basic Rent, plus sums paid
as Additional Rent. If such insurance cost is increased due to Tenant's use of
the Premises or the Complex, Tenant agrees to pay to Landlord the full cost of
such increase. Tenant shall have no interest in nor any right to the proceeds of
any insurance procured by Landlord for the Complex.
Landlord and Tenant do each hereby respectively release the other, to
the extent of insurance coverage of the releasing party, from any liability for
loss or damage caused by fire or any of the extended coverage casualties
included in the releasing party's insurance policies, irrespective of the cause
of such fire or casualty; provided, however, that if the insurance policy of
either releasing party prohibits such waiver, then this waiver shall not take
effect until consent to such waiver is obtained. If such waiver is so
prohibited, the insured party affected shall promptly notify the other party
thereof.
(iii) Expenses of Operation, Management and Maintenance of the
--------------------------------------------------------
Common Areas of the Complex and Building in which the Premises are Located.
- --------------------------------------------------------------------------
As Additional Rent, and notwithstanding the provisions of Paragraph 43 to the
contrary, Tenant shall pay directly or to Landlord all expenses of operating,
management, maintenance and repair of the Common Areas of the Complex including,
but not limited to, license, permit, and inspection fees; security; utility
charges associated with exterior landscaping and lighting (including water and
sewer charges); all charges incurred in the maintenance of landscaped areas,
lakes, parking lots, sidewalks, driveways; maintenance, repair and replacement
of all fixtures and electrical, mechanical, and plumbing systems; structural
elements and exterior surfaces of the buildings; salaries and employee benefits
of personnel and payroll taxes applicable thereto; supplies, materials,
equipment and tools, the cost of capital expenditures which have the effect of
reducing operating expenses; provided, however, that in the event Landlord makes
such capital improvements, Landlord may amortize its investment in said
improvements (together with interest at the rate of fifteen percent (15%) per
annum on the unamortized balance) as an operating expense in accordance with
standard accounting practices; provided, that such amortization is not at a rate
greater than the anticipated savings in the operating expenses.
"Additional Rent" as used herein shall not include Landlord's debt
repayments; interest on charges; expenses directly or indirectly incurred by
Landlord for the benefit of any other tenant; cost for the installation of
partitioning or any other Tenant improvements; cost of attracting tenants;
depreciation; interest; or executive salaries.
As Additional Rent, and notwithstanding the provisions of Paragraph 43
to the contrary, Tenant shall pay the cost of operation (including common
utilities), management, maintenance, and repair of the Building (including
common areas such as lobbies, restrooms, janitor's closets, hallways, elevators,
mechanical and telephone rooms, stairwells, entrances, spaces above the ceilings
and janitorization of said common areas) in which the Premises are located. The
maintenance items herein referred to include, but are not limited to, all
windows, window frames, plate glass, glazing, truck doors, main plumbing systems
of the Building (such as water and drain lines, sinks, toilets, faucets, drains,
showers and water fountains), main electrical systems (such as panels and
conduits), heating and air conditioning systems (such as compressors, fans, air
handlers, ducts, boilers, heaters), store fronts, roofs, downspouts, building
common area interiors (such as wall coverings,
-2-
<PAGE>
window coverings, floor coverings and partitioning), ceilings, building exterior
doors, skylights (if any), automatic fire extinguishing systems, and elevators;
license, permit, and inspection fees; security; salaries and employee benefits
of personnel and payroll taxes applicable thereto; supplies, materials,
equipment and tools; the cost of capital expenditures which have the effect of
reducing operating expenses; provided, however, that in the event Landlord makes
such capital improvements, Landlord may amortize its investment in said
improvements (together with interest at the rate of fifteen percent (15%) per
annum on the unamortized balance) as an operating expense in accordance with
standard accounting practices, provided, that such amortization is not at a rate
greater than the anticipated savings in the operating expenses. Tenant hereby
waives all rights under, and benefits of, subsection 1 of Section 1932 and
Sections 1941 and 1942 of the California Civil Code and under any similar law,
statute or ordinance now or hereafter in effect.
(iv) Utilities of the Building in Which the Premises are
---------------------------------------------------
Located. As Additional Rent, Tenant shall pay the cost of all utility charges
- -------
such as water, gas, electricity, sewer service, waste pick-up and any other
utilities, materials or services furnished directly to the Building in which the
Premises are located, including, without limitation, any temporary or permanent
utility surcharge or other exactions whether or not hereinafter imposed.
Landlord shall not be liable for and Tenant shall not be entitled to
any abatement or reduction of rent by reason of any interruption or failure of
utility services to the Premises which such interruption or failure is caused by
accident, breakage, repair, strikes, lockouts, or other labor disturbances or
labor disputes of any nature, or by any other cause, similar or dissimilar,
beyond the reasonable control of Landlord; provided, however, that if such
interruption or failure lasts for forty hours or more all payments due hereunder
shall be reduced by 50% until such interruption or failure is cured.
Provided that Tenant is not in default in the performance or observance of
any of the terms, covenants, or conditions of this Lease to be performed or
observed by it. Landlord shall furnish to the Premises reasonable quantities of
water, gas and electricity suitable for the intended use of the Premises and
heat and air conditioning required in Landlord's judgment for the comfortable
use and occupation of the Premises for such purposes. Tenant agrees that at all
times it will cooperate fully with Landlord and abide by all regulations and
requirements that Landlord may prescribe for the proper functioning and
protection of the building heating, ventilating and air conditioning systems.
If Tenant shall require water, gas, or electric current in excess of that
usually furnished or supplied to premises being used as general office space.
Tenant shall first obtain the written consent of Landlord, which consent shall
not be unreasonably withheld and Landlord may cause an electric current, gas, or
water meter to be installed in the Premises in order to measure the amount of
electric current, gas or water consumed for any such excess repair thereof, all
charges for such excess water, gas and electric current consumed (as shown by
such meters and at the rates then charged by the furnishing public utility; and
any additional expense incurred by Landlord in keeping account of electric
current, gas, or so consumed shall be paid by Tenant, and Tenant agrees to pay
Landlord therefor promptly upon demand by Landlord.
The Additional Rent due hereunder shall be paid to Landlord (i) within five
(5) days after presentation of invoice from Landlord setting forth such
Additional Rent and/or (ii) at the option of Landlord. Tenant shall pay to
Landlord monthly, in advance, Tenant's pro rata share of an amount estimated by
Landlord to be Landlord's approximate average monthly expenditures for such
Additional Rent items, which estimated amount shall be reconciled at the end of
each calendar year as compared to Landlord's actual expenditure for said
Additional Rent items, with Tenant paying to Landlord, upon demand, any amount
of actual expenses expended by Landlord in excess of said estimated amount, or
Landlord refunding to Tenant (providing Tenant is not in default under this
Lease) any amount of estimated payments made by Tenant in excess of Landlord's
actual expenditures for said Additional Rent items, within ten (10) days of
notice of expenses.
The respective obligations of Landlord and Tenant under this paragraph
shall survive the expiration or other termination of this Lease, and if the term
hereof shall expire or shall otherwise terminate on a day other than the last
day of a calendar year, the actual Additional Rent incurred for the calendar
year in which the term hereof expires or otherwise terminates shall be
determined and settled on the basis of the statement of actual Additional Rent
for such calendar year and shall be pro rated in the proportion which the number
of days in such calendar year preceding such expiration or termination bears to
365.
(D) Time for Payment. In the event that the term of this Lease
----------------
commences on a date other than the first day of a calendar month, on the date of
commencement of the term hereof Tenant shall pay to Landlord, as rent for the
period from such date of commencement to the first day of the next succeeding
calendar month, that proportion of the monthly rent hereof which the number of
days beyond such date of commencement and the first day of the next succeeding
calendar month bears to thirty (30). In the event that the term of this Lease,
for any reason, ends on a date other than the last day of a calendar month, on
the first day of the last calendar month of the term hereof, Tenant shall pay to
Landlord, as rent for the period from said first day of the last calendar month
to and including the last calendar day of the term hereof, that proportion of
the monthly rent hereof which the number of days beyond said first day of said
last calendar month and the last day of the term hereof bears to thirty (30).
(E) Late Charge. Notwithstanding any other provision of this Lease,
-----------
if Tenant is in default in the payment of rental as set forth in this Paragraph
4 when due, or any part thereof, Tenant agrees to pay Landlord, in addition to
the delinquent rental due, a late charge fee for each rental payment in default
ten (10) days. Said later charge shall equal five percent (5%) of each rental
payment so in default.
(F) First Month's Rent. Lessor acknowledges receipt from Tenant on
------------------
the execution hereof, the sum of Eight Thousand Seven Hundred Fifty Dollars and
Zero Cents ($8,750.00) consulting rent for the first month of the term hereof.
(G) Place of Payment of Rent and Direct Expenses. All rental
--------------------------------------------
hereunder and all payments hereunder for Operating Expenses and Taxes shall be
paid to Landlord, without deduction or offset, in lawful money of the United
States of America, at the office of Landlord at:
Deerfield Realty Corporation
1550 El Camino Real #260
Menlo Park, CA 94025
or to such other person or to such other place as Landlord may, from time to
time, designate in writing.
(H) Security Deposit. Under the terms of the previous lease, the
----------------
Tenant has deposited with Landlord the sum of Fourteen Thousand Dollars
($14,000.00). Said sum shall continue to be held by Landlord as a Security
Deposit for the faithful performance
-3-
<PAGE>
by Tenant of all of the terms, covenants, and conditions of this Lease to be
kept and performed by Tenant during the term hereof. If Tenant defaults with
respect to any provision of this Lease, including, but not limited to, the
provisions relating to the payment of rent and any of the monetary sums due
herewith, Landlord may (but shall not be required to) use, apply or retain all
or any part of this Security Deposit for the payment of any other amount which
Landlord may spend by reason of Tenant's default or to compensate Lessor for any
other loss or damage which Landlord may suffer by reason of Tenant's default. If
any portion of said Deposit is so used or applied, Tenant shall, within ten (10)
days after written demand therefor, deposit cash with Landlord in an amount
sufficient to restore the Security Deposit to its original amount. Tenant's
failure to do so shall be a material breach of this Lease. Landlord shall not be
required to keep this Security Deposit separate from its general funds, and
Tenant shall not be entitled to interest on such Deposit. If Tenant fully and
faithfully performs every provision of this Lease to be performed by it, the
Security Deposit or any balance thereof shall be returned to Tenant or at
Landlord's option, to the last assignee of Tenant's interest hereunder at the
expiration of the Lease term and after Tenant has vacated the Premises. In the
event of termination of Landlord's interest in this Lease, Landlord shall
transfer said Deposit to Landlord's successor in interest whereupon Tenant
agrees to release Landlord from liability for the return of such Deposit or the
accounting therefor.
5. USE. Tenant shall use the Premises for general office, R&D, light
---
manufacturing and assembly, storage/warehouse and related uses and all other
uses incidental thereto and shall not use or permit the Premises to be used for
any other purpose without the prior written consent of Landlord. Tenant shall
not use or occupy the Premises in violation of law or of the certificate of
occupancy issued for the Complex of which the Premises are a part and shall,
upon five (5) days' written notice from Landlord, discontinue any use of the
Premises which is declared by any governmental authority having jurisdiction to
be a violation of law or of said certificate of occupancy. Tenant shall comply
with any direction of any governmental authority having jurisdiction, which
shall by reason of the nature of Tenant's use or occupancy thereof. Tenant
shall not do or permit to be done anything which will invalidate or increase the
cost of any fire, extended coverage or any other insurance policy covering the
Complex and/or property located therein. Tenant shall promptly upon demand
reimburse Landlord for any additional premium charged for such policy by reason
of Tenant's failure to comply with the provisions of this Paragraph. Tenant
shall not do or permit anything to be done in or about the Premises which will
in any way obstruct or interfere with the rights of other tenants or occupants
of the Complex, or injure or annoy them, or use or allow the Premises to be used
for any improper, immoral, unlawful or objectionable purpose, nor shall Tenant
cause, maintain or permit any nuisance in, on or about the Premises.
6. NOTICES. Any notice required or permitted to be given hereunder must
-------
be in writing and may be given by personal delivery or by mail, and if given by
mail shall be deemed sufficiently given forty eight hours after mailing when
sent by registered or certified mail return receipt requested addressed to
Tenant at the Complex of which the Premises are a part, or to Landlord at the
address of Landlord set forth in Paragraph 3(6). Either party may by written
notice to the other specify a different address for notice purposes except that
the Landlord may in any event use the Premises as Tenant's address for notice
purposes.
7. BROKERS. Tenant warrants that it has had no dealings with any real
-------
estate broker or agent in connection with the negotiation of this Lease
excepting only Deerfield Realty and that it knows of no other real estate broker
or agent who is, or might be, entitled to a commission in connection with this
Lease, Landlord agrees to pay any and all commissions due to the above noted
broker in connection with the execution of this Lease.
8. HOLDING OVER. If Tenant holds over after the expiration or earlier
------------
termination of the term hereof without the express written consent of Landlord,
Tenant shall become a tenant at sufferance only, at the market rental rate in
effect upon the date of such expiration and otherwise upon the terms, covenants
and conditions herein specified, so far as applicable. Acceptance by Landlord
of rent after such expiration or earlier termination shall not constitute a
holdover hereunder or result in a renewal. The foregoing provisions of this
paragraph are in addition to and do not affect Landlord's right of re-entry or
any other rights of Landlord hereunder or as otherwise provided by law.
9. CONDITIONS OF PREMISES. Tenant acknowledges that neither Landlord nor
----------------------
any agent of Landlord has made any representation or warranty with respect to
the Premises or with respect to the suitability of the Premises for the conduct
of Tenant's business. The taking of possession of the Premises by Tenant shall
conclusively establish that the Tenant's Premises and said Complex were at such
time in satisfactory condition, for Tenant's purposes.
10. ALTERATIONS. Tenant shall make no alterations, decorations, additions
-----------
or improvements in or to the Premises in excess of $10,000.00 without Landlord's
prior written consent which consent shall not be unreasonably withheld, and then
only by contractors or mechanics approved by Landlord. Tenant agrees that there
shall be no construction or partitions or other obstructions which might
reasonably interfere with Landlord's free access to mechanical installations or
service facilities of the Complex or interfere with the moving of Landlord's
equipment to or from the enclosures containing said installations or facilities.
All such work shall be done at such time and in such manner as Landlord may from
time to time designate. Tenant covenants and agrees that all work done by
Tenant shall be performed in full compliance with all reasonable laws, rules,
orders, ordinances, directions, regulations and requirements of all governmental
agencies, offices, departments, bureaus and boards having jurisdiction. Before
commencing any work, Tenant shall give Landlord at least five (5) days' written
notice of the proposed commencement of such work and shall, if required by
Landlord, secure at Tenant's own cost and expense a completion and lien
indemnity bond, satisfactory to Landlord, for such reasonable work. Tenant
further covenants and agrees that any mechanic's lien filed against the Premises
or against the Complex for work claimed to have been done for, or materials
claimed to have been furnished to Tenant, will be discharged by Tenant, by bond
or otherwise, within ten (10) days after the filing thereof, at the cost and
expense of Tenant. All alterations, decorations, additions or improvements upon
the Premises made by either party, including (without limiting the generality of
the foregoing) all wall coverings, built-in cabinet work, paneling and the like,
shall, unless Landlord elects otherwise, become the property of Landlord and
shall remain upon, and be surrendered with, the Premises, as a part thereof, at
the end of the term hereof, except that Landlord may, by written notice to
Tenant, delivered at the time Tenant requests permission from Landlord to make
such alterations or improvements, require Tenant to remove all partitions,
counters, railings and the like installed by Tenant, and Tenant shall repair or,
at Landlord's option, shall pay to the Landlord all costs arising from such
removal.
All personal property, office machinery and equipment, furniture and
movable partitions owned by Tenant or installed by Tenant at its expense in the
Premises shall be and remain the property of Tenant and may be removed by Tenant
at any time during the lease term when Tenant is not in default hereunder. If
Tenant shall fail to remove all of its effects from said Premises upon
termination of this Lease for any cause whatsoever, Landlord may, at its option,
remove the same in any manner that Landlord shall choose, and store said effects
and to the extent permitted by Law Tenant agrees to pay Landlord upon demand any
and all expenses incurred in such removal, including court costs and attorneys'
fees and storage charges on such effects for any length of time that the same
shall be in Landlord's possession; or Landlord may, at
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<PAGE>
its option, without notice, sell said effects, or any of the same, at private
sale, for such price as Landlord may obtain and apply the proceeds of such sale
upon the expenses incident to the removal and sale of said effects.
11. REPAIRS. Notwithstanding the provisions of paragraph 43 by entry
-------
hereunder Tenant accepts the Premises as being in condition acceptable by
Tenant, except as may be told to Landlord in writing within ten (10) days of
entry hereunder. Tenant shall, at Tenant's sole cost and expense, maintain the
Premises and every part thereof in the same condition and repair as delivered,
ordinary wear and tear and damage from causes beyond the reasonable control of
Tenant excepted. Tenant shall, upon the expiration or sooner termination of the
term hereof, surrender the Premises to Landlord in the same condition as when
received, ordinary wear and tear and damage from causes beyond the reasonable
control of Tenant excepted. Landlord shall have no obligation to alter,
remodel, improve, repair, decorate or paint the Premises or any part thereof and
the parties hereto affirm that Landlord has made no representations to Tenant
respecting the conditions of the Premises or the Complex except as specifically
herein set forth.
12. LIENS. Tenant shall keep the Premises, the Complex and the property
-----
upon which the Complex is situated free from any liens arising out of the work
performed, materials furnished or obligations incurred by Tenant.
13. ENTRY BY LANDLORD. Landlord reserves and shall at any and all times
-----------------
have the right to enter the Premises to inspect the same, to supply janitorial
services and any other service to be provided to Tenant by Landlord hereunder,
to submit said Premises to prospective purchasers or tenants, to post notices of
nonresponsibility, to alter, improve or repair the Premises or any portion of
the Complex, all without being deemed guilty of an eviction of Tenant and
without abatement of rent, and may erect scaffolding and other necessary
structures where reasonably required by the character of the work to be
performed, provided that the business of the Tenant shall be interfered with as
little as is reasonably practicable. Tenant hereby waives any claim for damages
for any injury or inconvenience to or interference with Tenant's business, any
loss of occupancy or quiet enjoyment of the Premises, and any other loss
occasioned thereby so long as Landlord's entry is reasonable. For each of the
aforesaid purposes, Landlord shall at all times have and retain a key with which
to unlock all of the doors in, upon and about the Premises, excluding Tenant's
vaults and safes, and Landlord shall have the right to use any and all means
which Landlord may deem proper to open said door in an emergency in order to
obtain entry to the Premises, and any entry to the Premises obtained by Landlord
by any of said means, or otherwise, shall so long as reasonable under the
circumstances not be construed or deemed to be a forcible or unlawful entry
into, or a detainer of, the Premises, or an eviction of Tenant from the Premises
or any portion thereof, and any reasonable damages caused on account thereof
shall be paid by Tenant. It is understood and agreed that no provision of the
Lease shall be construed as obligating Landlord to perform any repairs,
alterations or decorations except as otherwise expressly agreed herein to be
performed by Landlord.
14. INDEMNIFICATIONS. Tenant shall indemnify and hold harmless Landlord
----------------
against and from any and all causes and claims including, but not limited to,
those arising from Tenant's use of the premises or the conduct of its business
or from any activity, work done, permitted or suffered by the Tenant in or about
the premises, and shall further indemnify and hold harmless Landlord against and
from any and all claims arising from any breach or default in the performance of
any obligation of Tenant's part to be performed under the terms of this Lease,
or arising from any act, neglect, fault or omission of the Tenant, or of its
agents or employees, and from and against all costs, attorneys' fees, expenses
and liabilities incurred in or about such claim or any action or proceeding
brought thereon, and in case any action or proceeding be brought against
Landlord by reason of any such claim. Tenant upon notice from Landlord shall
defend the same at Tenant's expense by counsel reasonably satisfactory to
Landlord; provided however, that the foregoing indemnification shall not be
effective if any such claims arose from the active neglect or willful misconduct
of Landlord. Tenant, as a material part of the consideration to Landlord,
hereby assumes all risk of damage to property or injury to person in, upon or
about the Premises from any cause whatsoever except that which is caused by the
negligence or willful misconduct of Landlord. Landlord shall indemnify and hold
harmless Tenant against and from any and all causes and claims arising from the
active neglect or willful misconduct or intentional failure of Landlord to
observe any of the terms.
15. DAMAGE TO TENANT'S PROPERTY. Notwithstanding the provisions of
---------------------------
Paragraph 15 to the contrary, neither Landlord nor its agents shall be liable
for any damage to property entrusted to employees of the Complex, nor for loss
of or damage to any property by theft or otherwise, nor for any injury or damage
to persons or property resulting from fire, explosion, falling plaster, steam,
gas, electricity, water which may leak from any part of the Complex or from the
pipes, appliances or plumbing works therein or from the street or sub-surface or
form any other place or resulting from dampness or any other cause whatsoever,
unless the same is caused by the active negligence or willful or reckless
misconduct of the Landlord. Landlord or its agents shall not be liable for any
latent defect in the Premises or in the Complex. Notwithstanding the preceding
sentence however, Landlord shall be responsible for any damage caused by defects
in the roof up until the time Landlord replaces aid roof during the leasehold
period. Tenant shall give prompt notice to Landlord in case of fire or
accidents in the Premises or in the Complex or of defects therein or in the
fixtures or equipment.
16. INSURANCE SUBROGATION. The parties release each other, and their
---------------------
respective authorized representatives, from any claims for damage to any person
or to the Premises or the complex and to the fixtures, personal property,
Tenant's improvements, and alterations of either Landlord or Tenant in or on the
Premises that are caused by or result from risks insured against under any
insurance policies carried by the parties and in force at the time of any such
damage.
Each party shall cause each insurance policy obtained by it to provide that
the insurance company waives all right of recovery by way of subrogation against
either party in connection with any damage covered by any policy. Neither party
shall be liable to the other for any damages caused by fire and any of the risks
insured against under any insurance policy required by this Lease.
17. LIABILITY INSURANCE. Tenant shall, at Tenant's expense, obtain and
-------------------
keep in force during the term of this Lease, a policy of comprehensive public
liability insurance insuring Landlord and Tenant against any liability arising
out of the ownership, use, occupancy, maintenance, repair or improvement of the
Premises and as appurtenant thereto. Such insurance shall provide $1,000,000.00
combined single limit for bodily injury and property damage. The limits of said
insurance shall not, however, limit the liability of the Tenant hereunder, and
Tenant is responsible for ensuring that the amount of liability insurance
carried by Tenant is sufficient for Tenant's purposes. Tenant may carry said
insurance under a blanket policy, satisfactory to Landlord. If Tenant shall fail
to procure and maintain said insurance, Landlord may, but shall not be required
to, procure and maintain same, but at the expense of Tenant. Insurance required
hereunder shall be in companies rated A+ AAA or better in "Best's Insurance
Guide." Tenant shall deliver to Landlord prior to occupancy of the Premises
copies of policies of liability insurance required herein or certificates
evidencing the existence and amounts of such insurance with evidence
satisfactory to Landlord of payment of premiums. No policy shall be cancelable
or subject to reduction of coverage except after fifteen (15) days' prior
written notice to Landlord. Tenant acknowledges and agrees that insurance
coverage carried by Landlord will not cover Tenant's property within the
Premises or the Complex and that Tenant shall be responsible, at Tenant's sole
cost and expense, for providing insurance coverage for Tenant's movable
-5-
<PAGE>
equipment, furnishing, trade fixtures and other personal property in or upon the
Premises or the Complex, and for any alterations, additions or improvements to
or of the Premises or any part thereof made by Tenant, in the event of damage or
loss thereto from any cause whatsoever.
(A) Tenant's Personal Property Insurance and Workman's Compensation
---------------------------------------------------------------
Insurance. Tenant shall maintain a policy or policies of fire and property
- ---------
damage insurance in "all risk" form with a sprinkler leakage endorsement
insuring the personal property, inventory, trade fixtures, and leasehold
improvements within the Premises for the full replacement value thereof. The
proceeds from any of such policies shall be used for the repair or replacement
of such items so insured.
Tenant shall also maintain a policy or policies of workman's compensation
insurance and any other employee benefit insurance sufficient to comply with all
laws.
18. DAMAGE OR DESTRUCTION.
---------------------
(A) In the event the Complex of which the Premises or a part thereof
is damaged the Landlord shall:
(i) In the event of the destruction of all or more than
twenty-five percent (25%) of the full insurable value of the Complex, at
Landlord's option, within a period of ninety (90) days thereafter, commence
repair, reconstruction and restoration of said Complex and prosecute the
same diligently to completion, in which event this Lease shall remain in
full force and effect, or within said ninety (90) day period elect not to
so repair, reconstruct or restore said Complex in which event this Lease
shall terminate. In either event, Landlord shall give the Tenant written
notice of its intention within said ninety (90) day period. In the event
Landlord elects not to restore said Complex, said Lease shall be deemed to
have terminated as of the date of such total destruction.
(ii) In the event of a partial destruction of the Complex to
an extent not exceeding Twenty-Five Percent (25%) of the full insurable
value thereof and if the damage thereto is such that the Complex may be
repaired, reconstructed or restored within a period of ninety (90) days
from the date of the happening of such casualty and Landlord will receive
insurance proceeds sufficient to cover the cost of such repairs, Landlord
shall commence and proceed diligently with the work of repair,
reconstruction and restoration and the Lease shall continue in full force
and effect.
(B) Upon any termination of this Lease under any of the provisions
of this Paragraph, the parties shall be released thereby without further
obligation to the other from the date possession of the Premises is surrendered
to the Landlord except for items which have therefore accrued and are then
unpaid.
(C) In the event of repair, reconstruction and restoration as herein
provided, the rental provided to be paid under this Lease shall be abated
proportionally in the ratio which the Tenant's use of said Premises is impaired
during the period of such repair, reconstruction or restoration. The Tenant
shall not be entitled to any compensation or damages for loss in the use of the
whole or any part of said Premises and/or any inconvenience or annoyance
occasioned by such damage, repair, reconstruction or restoration.
(D) Tenant shall not be released from any of its obligations under
this Lease except to the extent and upon the conditions expressly stated in this
Paragraph. Notwithstanding anything to the contrary contained in this Paragraph,
should Landlord be delayed or prevented from repairing or restoring said damaged
Premises within one (1) year after the occurrence of such damage or destruction
by reason of acts of God, war, governmental restrictions, inability to procure
the necessary labor or materials, or other causes beyond the reasonable control
of Landlord, the Landlord shall be relieved of its obligation to make such
repairs or restoration and Tenant shall be released from its obligations under
this Lease as of the end of said one (1) year period.
(E) It is hereby understood that if Landlord is obligated to or
elects to repair or restore as herein provided, Landlord shall be obligated to
make repairs or restoration only of those portions of said Complex and said
Premises which were originally provided at Landlord's expense; and the repair
and restoration of items not provided at Landlord's expense shall be the
obligation of Tenant.
(F) Notwithstanding anything to the contrary contained in this
Paragraph, Landlord shall not have any obligation whatsoever to repair,
reconstruct or restore the Premises when the damage resulting from any casualty
covered under this Paragraph occurs during the last twelve (12) months of the
term of this Lease or any extension thereof and the Lease shall terminate as of
the date of such damage if Tenant so elects within thirty (30) days of the
occurrence of such damage.
(G) The provisions of Section 1932, Subdivision 2, and Section 1933,
Subdivision 4, of the Civil Code of the State of California are hereby waived by
Tenant.
19. EMINENT DOMAIN. In case the whole of the Premises, or such part
--------------
thereof as shall substantially interfere with the Tenant's use and occupancy
thereof, shall be taken for any public or quasi-public purpose by any lawful
power or authority, by exercise of the right of appropriation, condemnation or
eminent domain, or sold to prevent such taking, the Tenant or the Landlord, may,
at its option, terminate this Lease effective as of the date possession is
required to be surrendered to said authority. Tenant shall not, because of such
taking, assert any claim against the Landlord or the taking authority for any
compensation because of such taking, and Landlord shall be entitled to receive
the entire amount of any award without deduction for any estate or any interest
of Tenant. In the event the amount of property or the type of estate taken
shall not substantially interfere with the conduct of Tenant's business,
Landlord shall be entitled to the entire amount of the award without deduction
for any estate or interest of Tenant, and Landlord at its option may terminate
this Lease. If Landlord does not so elect, Landlord shall promptly proceed to
restore the Premises to substantially their same condition prior to such partial
taking, and a proportionate allowance shall be made to Tenant for the rent
corresponding to the time during which said restoration is being made and to the
part of the Premises of which Tenant shall be so deprived on account of such
taking and restoration. Nothing contained in this Paragraph shall be deemed to
give Landlord any interest in any specific award made to Tenant for the taking
of personal property and fixtures belonging to Tenant or the loss of Tenant's
goodwill or relocation expenses.
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<PAGE>
20. DEFAULTS AND REMEDIES.
---------------------
(A) The occurrence of any one or more of the following events shall
constitute a default hereunder by Tenant:
(i) The abandonment of the Premises by Tenant. Abandonment is
herein defined to include, but is not limited to, any absence by
Tenant from the Premises for five (5) days or longer while in default
of any provision of this Lease.
(ii) The failure by Tenant to make any payment of rent or
additional rent required to be made by Tenant hereunder, within five
(5) days after written notice thereof from Landlord to Tenant.
(iii) The failure by Tenant to observe or perform any of the
express or implied covenants or provisions of this Lease to be
observed or performed by Tenant, other than as specified in (i) or
(ii) above, where such failure shall continue for a period of ten (10)
days after written notice thereof from Landlord to Tenant, provided
however, that any such notice shall be in lieu of, and not in addition
to, any notice required under California Code of Civil Procedure
Section 1161; provided, further, that if the nature of Tenant's
default is such that more than ten (10) days are reasonably required
for its cure, then Tenant shall not be deemed to be in default if
Tenant shall commence such cure within said ten (10) day period and
thereafter diligently prosecute such cure to completion.
(iv) (1) The making by Tenant of any general assignment for the
benefit of creditors; (2) the appointment of a trustee or receiver to
take possession of substantially all of Tenant's assets located at the
Premises or of Tenant's interest in this Lease, where possession is
not restored to Tenant within thirty (30) days; or (3) the attachment,
execution or other judicial seizure of substantially all of Tenant's
assets located at the Premises or of Tenant's interest in this Lease
where such seizure is not discharged within thirty (30) days.
(B) In the event of such default by Tenant, in addition to any other
remedies available to Landlord at law or in equity, Landlord shall have the
immediate option to terminate this Lease and all rights of Tenant hereunder. In
the event that Landlord shall elect to so terminate this Lease then Landlord may
recover from Tenant:
(i) The worth at the time of award of any unpaid rent which has
been earned at the time of such termination; plus
(ii) The worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss Tenant proves
could have been reasonably avoided; plus
(iii) The worth at the time of award of the amount by which the
unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss Tenant proves could have been
reasonably avoided; plus
(iv) Any other amount necessary to compensate the Landlord for
all the detriment approximately caused by Tenant's failure to perform
its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom.
As used in subparagraphs (i) and (ii) above, the "worth at the time of
award" is computed by allowing interest at the prevailing discount rate of the
Federal Reserve Bank of San Francisco at the time of the award plus five percent
(5%), but not more than the maximum rate permissible by law. As used in
subparagraph (iii) above, the "worth at the time of award" is computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award plus one percent (1%).
(C) In the event of any such default by Tenant, Landlord shall also
have the right, to the extent permitted by law with or without terminating this
Lease, to re-enter the Premises and remove all persons and property from the
Premises; such property may be removed and stored in a public warehouse or
elsewhere at the cost of and for the account of Tenant. No re-entry or taking
possession of the Premises by Landlord pursuant to this subparagraph shall be
construed as a election to terminate this Lease unless a written notice of such
intention be given to Tenant or unless the termination thereof be decreed by a
court of competent jurisdiction.
21. ASSIGNMENT AND SUBLETTING. Tenant shall not voluntarily or by
-------------------------
operation of law assign, transfer, mortgage or otherwise encumber all or any
part of Tenant's interest in this Lease or in the Premises and shall not sublet
all or any part of the Premises, without the prior written consent of Landlord,
which consent shall not be unreasonably withheld. Any attempted assignment,
transfer, mortgage, encumbrance or subletting without such consent shall, at the
option of Landlord, constitute grounds for termination of this Lease.
No subletting or assignment, even with the consent of Landlord, shall
relieve Tenant of its obligation to pay rent and to perform all of the other
obligations to be performed by Tenant hereunder. The acceptance of rent by
Landlord from any other person shall not be deemed to be a waiver by Landlord of
any provision of this Lease or to be a consent of any assignment or subletting.
Each subletting or assignment to which Landlord has consented shall be by
an instrument in writing in form satisfactory to Landlord and shall be executed
by the sublessor or assignor and by the sublessee or assignee in each instance,
as the case may be, and each sublessee or assignee shall agree in writing for
the benefit of the Landlord herein to assume, to be bound by and to perform the
terms, covenants, and conditions of this Lease to be done, kept and performed by
the Tenant. One executed copy of such written instrument shall be delivered to
the Landlord. Tenant agrees to reimburse Landlord for Landlord's reasonable
attorneys fees and such other reasonable charges which Landlord incurs or causes
to be incurred in conjunction with the processing and documentation of any such
requested subletting or assignment of this Lease or Tenant's interest in and to
the Premises in an amount not to exceed $500.00.
22. SUBORDINATION. This Lease shall be subject and subordinate at all
-------------
times to all ground and underlying leases which now exist or may hereafter be
executed affecting the Complex or the land upon which the Complex is situated or
both, and to the lien of any mortgages or deed of trust in any amount or amounts
whatsoever now or hereafter placed on or against the land and Complex or either
thereof, or on Landlord's interest or Estate therein, or portion thereof, or on
or against any ground or underlying lease without the necessity of the
-7-
<PAGE>
execution and delivery of any further instruments on the part of Tenant to
effectuate such subordination; provided, however, that so long as Tenant is not
in default, the terms of the Lease shall not be affected by termination
proceedings in respect to such ground or underlying lease or foreclosure or
other proceedings under such mortgages or deeds of trust. Tenant hereby agreeing
at the written request of the Landlord under such ground or underlying lease or
the purchaser of the Complex in such foreclosure or other proceedings, to attorn
to such Landlord or to such purchase or, at such Landlord's or such purchaser's
option, to enter into a new lease for the balance of the term hereof upon the
same terms and provisions as are continued in this Lease. Notwithstanding the
foregoing, Tenant will execute and deliver upon demand such further instrument
or instruments evidencing such subordination of the Lease to the lien of any
such mortgage or mortgages or deed of trust as may be required by Landlord.
23. ESTOPPEL CERTIFICATE. Tenant shall, at any time and from time to time
--------------------
upon not less than ten (10) days' prior written notice from Landlord, execute,
acknowledge and deliver to Landlord a statement in writing (i) certifying that
this Lease is unmodified and in full force and effect (or, if modified, stating
the nature of such modification and certifying that this Lease as so modified,
is in full force and effect) and the dates to which the rental and other charges
are paid in advance, if any, and (ii) acknowledge that there is not, to Tenant's
knowledge, any incurred defaults on the part of the Landlord hereunder, or
specifying such defaults, if any, that are claimed. Any such statement may be
relied upon by a prospective purchase or encumbrance of all or any portion of
the real property of which the Premises are a part.
Tenant's failure to deliver such statement within such time shall be
conclusive upon Tenant (i) that this Lease is in full force and effect, without
modification except as may be represented by Landlord, (ii) that there are no
uncured defaults in Landlord's performance, and (iii) that not more than one
month's rental has been paid in advance.
24. CONFLICT OF LAWS. This Lease shall be governed by and construed
----------------
pursuant to the laws of the State of California.
25. COMMON AREAS. Tenant shall have the non-exclusive right, in common
------------
with others, to the use of common entrances, lobbies, elevators, ramps, drives,
stairs and similar access and service ways and common areas in and adjacent to
the Complex of which the Premises are a part subject to such nondiscriminatory
rules and regulations as may be adopted by Landlord.
26. SUCCESSORS AND ASSIGNS. This Lease shall be binding upon and shall
----------------------
inure to the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns.
27. SURRENDER OF PREMISES. The voluntary or other surrender of this lease
---------------------
by Tenant, or a mutual cancellation thereof, shall not work a merger, and shall,
at the option of Landlord, operate as an assignment to it of any or all
subleases of subtenancies.
28. ATTORNEYS' FEES. In the event that either party should bring suit or
---------------
commence arbitration under this lease or because of the breach of any provision
of this Lease, then all costs and expenses, including reasonable attorneys'
fees, incurred by the prevailing party therein shall be paid by the other party,
which obligation on the part of the other party shall be deemed to have accrued
on the date of the commencement of such action and shall be enforceable whether
or not the action is prosecuted to judgment.
29. PERFORMANCE BY TENANT. All covenants and agreements to be performed
---------------------
by Tenant under any of the terms of this Lease shall be performed by Tenant at
Tenant's sole cost and expense and without any abatement of rent. If Tenant
shall fail to pay any sum of money, other than rent required to be paid by it
hereunder or shall fail to perform any other act on its part to be performed
hereunder, and such failure shall continue for ten (10) days after notice
thereof by Landlord, Landlord may, without waiving or releasing Tenant from any
obligations of Tenant, but shall not be obligated to make, make any such payment
or perform any other such action on Tenant's part to be made or performed as in
this Lease provided. Any amount due from Tenant to Landlord hereunder which is
not paid when due shall bear interest at an annual rate of five percent (5%) per
annum plus the annual percentage rate established by the Federal Reserve Bank of
San Francisco on advances to member banks under Sections 13 and 13(a) of the
Federal Reserve Act prevailing on the 25th day of the month preceding either the
(1) date on which this Lease is executed; or (2) the date the amount became due,
whichever is less (but not more than the maximum rate permissible by law), until
paid, unless otherwise specifically provided herein, but the payment of such
interest shall not exercise or cure any default by Tenant under this Lease.
30. RULES AND REGULATIONS AND COMMON AREA. Subject to the terms and
-------------------------------------
conditions of this Lease and such Rules and Regulations as Landlord may from
time to time reasonably prescribe, Tenant and Tenant's employees, invitees and
customers shall, in common with other occupants of the Complex (if any) in which
the Premises are located, and their respective employees, invitees and
customers, and others entitled to the use thereof, have the non-exclusive right
to use the access roads, parking areas, and facilities provided and designated
by Landlord for the general use and convenience of the occupants of the Complex
in which the Premises are located, which areas and facilities are referred to
herein as "Common Area". This right shall terminate upon the termination of
this Lease. Landlord reserves the right from time to time to make reasonable
changes in the shape, size, location, amount and extent of Common Area.
Landlord further reserves the right to promulgate such reasonable rules and
regulations relating to the use of the Common Area, and any part or parts
thereof, as Landlord may deem appropriate for the best interests of the
occupants of the Complex. The Rules and Regulations shall be binding upon
Tenant upon delivery of a copy of them to Tenant, and Tenant shall abide by
them, and cooperate in their observance. Such Rules and Regulations may be
amended by Landlord form time to time, with or without advance notice, and all
amendments shall be effective upon delivery of a copy to Tenant. Landlord shall
not be responsible to Tenant for the non-performance by any other tenant or
occupant of the Complex of any of said Rules and Regulations.
Landlord shall operate, manage and maintain the Common Area. The manner in
which the Common Area shall be maintained and the expenditures for such
maintenance shall be at the discretion of Landlord.
31. DEFINITION OF THE LANDLORD. The term "Landlord" as used in this
--------------------------
Lease, so far as covenants or obligations on the part of Landlord are concerned,
shall be limited to mean and include only the owner or owners at the time in
question of the fee of the Premises, and in the event of any transfer,
assignment or other conveyance or transfers of any such title, the Landlord
herein named (and in the case of any subsequent transfers or conveyances, the
then grantor) shall be automatically freed and relieved form and after
performance of any covenants or obligations on the part of Landlord contained in
this Lease thereafter to be performed and, without further agreement, the
transferee of such title shall be deemed to have assumed and agreed to observe
and perform any and all obligations of the Landlord hereunder, during its
ownership of the Premises. Landlord may transfer its interest in the Premises
without the consent of Tenant and such transfer or subsequent transfer shall not
be deemed a violation on Landlord's part of any of the terms and conditions of
this Lease.
-8-
<PAGE>
32. WAIVER. The waiver by either party of any breach of any term,
------
covenant, or condition herein contained shall not be deemed to be a waiver of
any subsequent breach of the same or any other term, covenant or condition
herein contained nor shall any custom or practice which may arise between the
parties in the administration of the terms hereof be deemed a waiver of, or in
any way affect, the right of Landlord to insist upon the performance by Tenant
in strict accordance with said terms. The subsequent acceptance of rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any term, covenant or condition of this Lease, other than the
failure of tenant to pay the particular rent so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
rent.
33. PARKING. Tenant shall have the right to use with other tenants or
-------
occupants of the Complex 100% of the parking spaces in the common parking areas
----
of the Complex. Tenant agrees that Tenant, Tenant's employees, agents,
representatives and/or invitees shall not use parking spaces in excess of said
100% allocated to Tenant hereunder. Landlord shall have the right, at Landlord's
- ----
sole discretion, to specifically designate the location of Tenant's parking
spaces within the common parking areas of the Complex in the event of a dispute
among the tenants occupying the building and/or Complex referred to herein, in
which event Tenant agrees that Tenant, Tenant's employees, agents,
representatives and/or invitees shall not use any parking spaces other than
those parking spaces specifically designated by Landlord for Tenant's use. Such
parking spaces, if specifically designated by Landlord to Tenant, may be
reasonably relocated by Landlord at any time, and from time to time. Landlord
reserves the right, at Landlord's sole discretion, to rescind any specific
designation of parking spaces, thereby returning Tenant's parking spaces to the
common parking area. Landlord shall give Tenant written notice of any change in
Tenant's parking spaces. Tenant shall not, at any time, park, or permit to be
parked, any trucks or vehicles adjacent to the loading areas so as to interfere
in any way with the use of such areas, nor shall Tenant at any time park, or
permit the parking of Tenant's trucks or other vehicles or the trucks and
vehicles of Tenant's suppliers or others, in any portion of the common area not
designated by Landlord for such use by Tenant. Tenant shall not park nor permit
to be parked, any inoperative vehicles or equipment on any portion of the common
parking area or other common areas of the Complex. Tenant agrees to assume
responsibility for compliance by its employees with the parking provision
contained herein. If Tenant or its employees park in other than such designated
parking areas, then Landlord may charge Tenant, as an additional charge, and
Tenant agrees to pay, Ten Dollars ($10.00) per day for each day or partial day
each such vehicle is parked in any area other than that designated. Tenant
hereby authorized Landlords, at Tenant's sole expense, to tow away from the
Complex any vehicle belonging to Tenant or Tenant's employees parked in
violation of these provisions, or to attach violation stickers or notices to
such vehicles. Tenant shall use the parking areas for vehicle parking only, and
shall not use the parking areas for storage.
34. TERMS AND HEADINGS. The words "Landlord" and "Tenant" as used herein
------------------
shall include the plural as well as the singular. Words used in any gender
include other genders. If there be more than one Tenant the obligations
hereunder imposed upon Tenant shall be joint and several. The paragraph
headings of this Lease are not a part of this Lease and shall have no effect
upon the construction or interpretation of any part thereof.
35. EXAMINATION OF LEASE. Submission of this instrument for examination
--------------------
or signature by Tenant does not constitute a reservation of or option for a
lease, and it is not effective as a lease or otherwise until execution by and
delivery to both Landlord and Tenant.
36. TIME. Time is of the essence with respect to the performance of every
----
provision of this Lease in which time or performance is a factor.
37. PRIOR AGREEMENTS, AMENDMENTS. This Lease contains all of the
----------------------------
agreements of the parties hereto with respect to any matter covered or mentioned
in this Lease, and no prior agreement or understanding pertaining to any such
matter shall be effective for any purpose. No provision of this Lease may be
amended or added to except by an agreement in writing signed by the parties
hereto or their respective successors in interest.
38. SEPARABILITY. Any provision of this Lease which shall prove to be
------------
invalid, void or illegal in no way affects, impairs or invalidates any other
provision hereof, and such other provisions shall remain in full force and
effect.
39. RECORDING. Neither Landlord nor Tenant shall record this Lease or a
---------
short form memorandum thereof without the consent of the other.
40. EXHIBITS. All Exhibits that are referred to in this Lease and
--------
attached hereto are incorporated herein by this reference and made a part of the
Lease.
41. SALE BY LANDLORD. In the event of a sale, conveyance, assignment or
----------------
transfer of the Premises or any interest therein, by Landlord or any owner of
the reversion then constituting Landlord, Landlord or such owner shall thereby
be released from any further liability or obligation under any of the terms,
covenants or conditions (express or implied) of this Lease in favor of Tenant;
and in such event (as between Landlord or such owner and such successor in
interest) Tenant agrees thereafter to look solely to the successor in interest
of Landlord or such owner for further performance of All terms and obligations
under this Lease. The terms of this Lease shall not be affected by any of the
above, and Tenant agrees to attorn to the successor in interest of Landlord or
such owner provided that such successor in interest of Landlord or such owner
shall have assumed, pursuant to an agreement to which Tenant is a party, full
liability for all obligations of Landlord, regardless of when incurred. In
connection with such a sale, conveyance, assignment or transfer, Tenant agrees
to provide to the prospective purchaser, at Landlord's request, a copy of
Tenant's most recent then available financial statements, which such prospective
purchaser shall agree to hold in confidence.
Tenant agrees that each of the foregoing covenants and agreements shall be
applicable to any covenant or agreement either expressly contained in this Lease
or imposed by statute or at common law.
42. SIGNS. No sign, placard, picture, advertisement, name or notice shall
-----
be inscribed, displayed or printed or affixed on or to any part of the outside
of the Premises or to any exterior windows of the Premises without the written
consent of Landlord first had and obtained which consent shall not be
unreasonably withheld and Landlord shall have the right to remove any such sign,
placard, picture, advertisement, name or notice without notice to and at the
expense of Tenant. If Tenant is allowed to print or affix or in any way place a
sign in, on, or about the Premises, upon expiration or other sooner termination
of this Lease, Tenant at Tenant's sole cost and expense shall both remove such
sign and repair all damage in such a manner as to restore all aspects of the
appearance of the Premises to the condition prior to the placement of said sign.
-9-
<PAGE>
All approved signs or lettering on outside doors shall be printed, painted,
affixed or inscribed at the expense of Tenant by a person approved of by
Landlord.
Tenant shall not place anything or allow anything to be placed near the
glass of any window, door partition or wall which may appear unsightly from
outside the Premises.
43. LANDLORD'S REPAIR/REPLACEMENT RESPONSIBILITY. Landlord at Landlord's
--------------------------------------------
expense has agreed to perform those repairs to the driveway, HVAC system and
roof that are described in the bids by Golden Gate Mechanical Corporation and
the bid by Renew Sealers Paving Company which are attached hereto as exhibit B.
However Landlord is still in the process of determining the extent of the
driveway/parking area repair required and may upon agreement with the Tenant
accept bids other than the one by Renew Sealers Paving Company. Tenant at
Tenant's expense agrees to continue its normal and regular maintenance program
of these items, but any repairs or replacements that are required will be the
responsibility of Landlord. In addition Landlord will have an inspection of the
roof bracing performed by Quake Structural, a qualified structural engineering
firm, and agrees to perform the work recommended by them.
44. TOXIC CLAUSE. Tenant shall not be responsible for any claim, damage
------------
or injury based upon or arising out of the actual or threatened discharge,
disbursal, release or escape of smoke, vapors, soot, fumes, acids, alkalis,
toxic chemicals, liquids or gases, lead paint, radon, waste materials, hazardous
materials or other irritants, pollutants or contaminants into or upon the land,
the atmosphere or any course or body of water, whether above or below ground
which event is not directly related to Tenant's use of its premises.
45. AUTHORITY. The undersigned parties hereby warrant that they have
---------
proper authority and are empowered to execute this Lease on behalf of the
Landlord and Tenant, respectively.
IN WITNESS WHEREOF, the parties have executed this Lease the day and year
first above written.
TENANT LANDLORD
NAVIGATION TECHNOLOGIES BIANCHI JOINT VENTURE
By:/s/ Thomas A. Lerone By:/s/ Tito J. Bianchi
------------------------------ ------------------------------
By:/s/ Nora Bianchi Stent
------------------------------
-10-
<PAGE>
FIRST AMENDMENT TO LEASE
This First Amendment to Lease ("First Amendment") is entered into as of
March 24, 1995 (Effective Date") by and between THE BIANCHI JOINT VENTURE, a
California general partnership (hereinafter "Landlord") and NAVIGATION
TECHNOLOGIES, a Delaware Corporation ( hereinafter "Tenant"), with reference to
the following facts:
RECITALS
46. The premises currently leased by Tenant pursuant to the lease dated
October 1, 1991 consists of approximately 20,000 rentable square feet commonly
known as 740 East Arques Avenue, Sunnyvale, California (hereinafter the
"Premises").
47. WHEREFORE, Landlord and Tenant wish to modify and amend the provisions
of the Lease to provide that the Lease Term be extended for three (3) additional
years. Tenant's lease during the extended period shall be subject to the terms
and conditions of the Lease, as modified by the provisions set forth herein
below.
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, the parties agree as follows:
(A) EXPIRATION DATE. The expiration date for the Tenant's leasing of the
Premises shall be extended from October 31, 1995 to October 31, 1998.
(B) MONTHLY RENT. Paragraph 4 of the Lease is amended to provide that the
Monthly Rent for the Premises shall be as follows:
PERIOD RENT PER MONTH
11/01/95 TO 10/31/98 $12,500.00 NNN per month
(C) TENANT IMPROVEMENT ALLOWANCE. Paragraph 10 of the Lease is amended to
provide that the Landlord will contribute an additional tenant improvement
allowance not to exceed $40,000 to be made available on the following schedule:
$20,000 paid between 10/31/95 and 12/31/95
$20,000 paid between 1/31/96 and 3/31/96
(D) MONUMENT SIGN. Landlord, at Landlord's expense will provide a
monument sign up to the size of the one at 255 San Geronimo, providing such sign
meets the approval of all the appropriate governmental authorities. Tenant, at
Tenant's expense, will be responsible for any corporate signage to be placed
upon the monument.
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<PAGE>
(E) FULL FORCE AND EFFECT: To the best of Landlord's and Tenant's
knowledge, the Lease is in full force and effect, neither party is in default of
its obligations under the Lease and neither party has claims, offsets, or
defenses to the enforcement of the lease.
(F) ENTIRETY. Except as provided in this First Amendment, the Lease, is
the entire agreement between the parties except as expressed herein. Moreover,
no subsequent change or modification of this Lease, as amended, shall be binding
unless in writing and fully executed by Landlord and Tenant.
TENANT:
Dated: 3/27/95 NAVIGATION TECHNOLOGIES a
--------- Delaware Corporation
By: /s/ Thomas A. Lerone
--------------------------------
Its: Chief Executive Officer
-------------------------------
LANDLORD:
Dated: 3/29/95 BIANCHI JOINT VENTURE,
---------- a California General Partnership
By: /s/ Tito J. Bianchi
--------------------------------
TITO J. BIANCHI
By: /s/ Nora Bianchi Stent
--------------------------------
NORA BIANCHI STENT
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<PAGE>
EXHIBIT 10.14
FIRST BANK SYSTEM, INC.
LEASE AGREEMENT
DATA SHEET
<TABLE>
<CAPTION>
DATE: __________________________
<S> <C>
BUILDING NAME AND ADDRESS: Dakota Center, 51 Broadway
Fargo, North Dakota
LANDLORD NAME AND ADDRESS: First Bank System, Inc.
601 2nd Avenue South,
Minneapolis, Minnesota, 55402
(Attention: FBS Properties Management)
TENANT NAME AND ADDRESS: Shields Enterprises, Inc.,
212 East Ohio Street
Chicago, Illinois 60611-3203
USE (SECTION 2): Business offices
LEASE TERM (SECTION 3): June 1, 1994 through May 31,1999
RENTABLE SQUARE FEET OF 13,545 (12,094 usable square feet)
DEMISED PREMISES (SECTION 1):
RENTABLE SQUARE FEET OF 81,672
BUILDING (SECTION 1):
MONTHLY BASE RENT (SECTION 4): Months 1-8 - $7,901.41
Remaining months - $6,777.50
ADDITIONAL RENT (SECTIONS 5 and 6): Estimated payments for 1994 of $4.60
per sq. ft. annualized for Operating
Expenses and $362.80 per month for
special utility and janitorial
services
TENANT'S PROPORTIONATE SHARE 16.58%
(SECTION 5):
</TABLE>
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT, made as of June 1, 1994, between FIRST BANK SYSTEM,
INC., a Delaware corporation (hereinafter called "Landlord"), and SHIELDS
ENTERPRISES, INC., an Illinois corporation (hereinafter called "Tenant");
WITNESSETH, THAT:
1. Demised Premises: Landlord, subject to the terms and conditions
----------------
hereof, hereby leases to Tenant the premises (hereinafter referred to as the
"Demised Premises") consisting of 13,545 rentable square feet (12,094 net usable
square feet) of office space on the second floor of the building containing
81,672 rentable square feet and known as Dakota Center in Fargo, North Dakota
(hereinafter referred to as the "Building"). A floor plan is attached as
Exhibit A. The building is located on real property legally described on
attached Exhibit A-1 (the "Property"). All measurements of usable and rentable
area contemplated or required by this Lease with respect to the Demised Premises
or the Building shall be made on the basis of BOMA space measuring standards.
Tenant shall be provided, without additional rental, five parking
spaces, in common with Landlord and other tenants in the building and their
customers and invitees, in the parking lot located on a portion of the Property
situated east of the Building.
2. Use: The Demised Premises shall be used by Tenant for the purpose
---
of business offices, and for no other purpose. Tenant shall also be entitled to
the nonexclusive use of all hallways, access ways, parking facilities and other
common areas and facilities ("Common Areas") appurtenant to the Building.
3. Term: Tenant takes the Demised Premises from Landlord, upon the
----
terms and conditions herein contained, to have and to hold the same for the term
(the "Lease Term") commencing on the 1st of June, 1994 (the "Commencement
Date"), and expiring on the 31st day of May, 1999 (the "Expiration Date").
4. Base Rent: Tenant shall pay to Landlord total "Base Rent" for the
---------
Lease Term in the amount of $7,901.41 per month during the first eight months of
the Lease Term and in the amount of $6,777.50 per month for the remaining months
of the Lease Term, on the first day of each month, in advance, at the offices of
Coldwell Banker First Realty-Encore, 51 Broadway in Fargo, North Dakota or at
such other place as may from time to time be designated by Landlord.
5. Additional Rent: Tenant shall pay, as "Additional Rent" to
---------------
Landord, together with each monthly installment of base rent, the amount of any
gross receipts tax, sales tax, or similar tax (but excluding therefrom any
income tax) payable, or which will be payable, by Landlord, by reason of the
receipt of the monthly base rent and adjustments thereto.
<PAGE>
Tenant shall also pay, as additional rent, Tenant's "Proportionate
Share" of the Operating Expenses (as hereinafter defined) for the Building for
each calendar year (or portion thereof) during the Lease Term, or any extension
or renewal thereof for purposes of determining Tenant's Proportionate Share of
Operating Expenses, Tenant's Proportionate Share is estimated to equal
approximately 16.58% of the total and will be computed as a percentage which the
rentable square foot area of the Demised Premises bears to the rentable square
foot area of the Building. The term "Operating Expenses" as used herein shall
mean all real estate taxes, insurance premiums, and other expenses and costs
which Landlord shall pay or become obligated to pay because of or in connection
with the ownership of the Building (excluding, however, depredation and interest
or payments of principal on any mortgage or other encumbrance). Costs of capital
improvements to the Building shall not be included in Operating Expenses, except
as follows: (a) costs of capital improvements made to the Building or equipment
installed in the Building subsequent to the Commencement Date which are required
under any governmental laws, regulations or ordinances shall be included in
Operating Expenses, but only as amortized on a straight line basis over the
useful life of such equipment or improvements, using an interest rate equal to
the Reference Rate (or a successor rate) from time to time established by First
Bank National Association (Minneapolis) or a similar rate of a similar
institution if First Bank National Association (Minneapolis) no longer exists or
no longer establishes a Reference Rate (or successor rate) (such rate being
referred to below as the "Interest Rate"); and (b) costs of capital improvements
not covered under the immediately preceding subsection (a) that have the effect
of reducing Operating Expenses shall be included in Operating Expenses, but only
insofar as the Operating Expenses are actually reduced (the intention of the
parties being that there shall be no net increase in Operating Expenses as a
result of such a capital improvement).
Operating Expenses shall also include reasonable costs and attorneys' or
consultant's fees associated with any administrative or legal proceeding
commenced by Landlord for the purpose of attempting to obtain an abatement of
real estate taxes and/or special assessments with respect to the Building.
Landlord shall, in its sole discretion, determine on an annual basis whether or
not to commence such abatement proceedings, and Tenant may not independently
commence such proceedings on behalf of itself and/or Landlord.
All Operating Expenses shall be determined in accordance with generally
accepted accounting principles which shall be consistently applied (with
appropriate accruals).
The payment of Additional Rent set forth herein shall be in addition to
the Base Rent payment required by paragraph 4 of this Lease. Should this Lease
commence or terminate at any time other than the first day of the calendar year,
the Operating Expenses shall be prorated such that Tenant shall pay only its
proportionate share of the Operating Expenses for the calendar days during such
calendar year for which Tenant is obligated to pay Base Rent with respect to the
Demised Premises.
Prior to commencement of the Lease Term, and prior to the commencement
of each calendar year thereafter commencing during the Lease Term, or any
renewal or extension thereof, Landlord may estimate for such calendar year the
total amount of Operating Expenses and Tenant's Proportionate Share of the same
for such calendar year, and the computation of the annual and
-2-
<PAGE>
monthly Additional Rent payable during such calendar year as a result of
increase or decrease in Tenant's share of Operating Expenses. Said estimate will
be in writing and will be delivered or mailed to Tenant at the Demised Premises.
Tenant acknowledges that Tenant's Proportionate Share of estimated
operating expenses (other than real estate taxes and special assessments) during
calendar year 1994 shall be $3.00 per rentable square foot on an annualized
basis ($3,386.25 per month for the initial Demised Premises). Tenant also
acknowledges that Tenant's proportionate share of estimated real estate taxes
and special assessments during calendar year 1994 shall be $1.60 per square foot
of rentable area, on an annualized basis ($1,806.00 per month for the initial
Demised Premises).
The amount of Tenant's Proportionate Share of Operating Expenses for
such calendar year, so estimated, shall be payable in equal monthly
installments, in advance, on the first day of each month of such calendar year,
together each installment of monthly Base Rent.
As soon as practicable after the expiration of each calendar year,
Landlord shall determine and certify to Tenant the actual amount of the
Operating Expenses payable in such calendar year and Tenant's Proportionate
Share thereof. If Tenant has underpaid its Proportionate Share of Operating
Expenses for such calendar year, then (subject to Tenant's examination rights as
set forth below) Tenant shall, within thirty (30) days after receiving
Landlord's certification, pay such deficiency to Landlord. In the event of any
overpayment by Tenant, such overpayment shall be refunded to Tenant in the form
of a credit against future monthly Operating Expense payments or, if at the end
of the Lease Term, by a refund.
Landlord agrees to keep accurate books and records reflecting the
Operating Expenses of the Building. For thirty (30) days after receiving
Landlord's certification, Tenant's authorized agent or representative (which
shall be an independent certified public accountant selected by Tenant with
Landlord's approval), shall have the right, so long as Tenant is not then in
default hereunder, to examine such books and records at Landlord's office during
normal business hours for the purpose of verifying the information in such
certification. Unless Tenant asserts in good faith the existence of a specific
error or errors therein, in writing, within thirty (30) days after such receipt,
the certification shall be deemed to be correct for all purposes.
In the event Tenant's examination reveals that the actual Operating
Expenses are less than those set forth in Landlord's certification, Tenant shall
receive a credit equal to the amount of its Proportionate Share of the
difference against the installment or installments of Additional Rent next
coming due, or, if the Lease Term has expired, a cash payment equal to its
Proportionate Share of such difference to be paid within 30 days of Tenant's
determination. In the event Tenant's examination reveals that the actual
Operating Expenses are more than those set forth in Landlord's certification,
Tenant shall pay Landlord its Proportionate Share of the difference within 30
days of Tenant's determination. All costs and expenses associated with any such
examination shall be paid by Tenant, except that if the amount of Operating
Expenses set forth in Landlord's certification is more than five percent (5%)
greater than the true and correct Operating Expenses as determined by Tenant's
examination, Landlord shall pay the reasonable costs and expenses associated
with such
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<PAGE>
examination. Tenant shall keep such books and records and the information
contained therein confidential and shall use the same only for determination and
establishment of the correctness or incorrectness of Landlord's certification of
Operating Expenses.
6. Tenant's Expense Credit and Special Charge: As a special credit to
------------------------------------------
the Tenant, Landlord will make no charge for rental for Operating Expenses,
including real estate taxes, to the Tenant for months one through eight of the
first year of the Lease Term.
Tenant intends to conduct office operations on a 24 hour per day 7 days
per week basis on the Demised Premises. To compensate the Landlord for
additional janitorial services and utility services required, Tenant shall pay
additional and separate rental in the initial amount of $.10 per rentable square
foot per year for electrical and utility services, and $.26 per rentable square
foot per year for additional janitorial services, for an initial additional
monthly rental of $362.80 per month for the initial Demised Premises, payable in
advance. This rental shall be subject to annual adjustments based on Landlord's
annual good faith determination of actual additional expense incurred by
Landlord in connection with such additional services.
Tenant may submit a request to the appropriate governmental authorities
for a real estate tax abatement as an incentive for its occupancy of the Demised
Premises (as opposed to a tax abatement resulting from a protest of the assessed
value of the Building). Landlord will cooperate with any such request. In the
event that a real estate tax abatement is granted to Landlord as a result of
Tenant's request, the benefits of any such abatement shall be reflected in the
Tenant's additional rental obligation as set forth under this Lease if, as and
when such benefits are received by Landlord.
7. Landlord and Tenant Improvements: Landlord has caused to be
--------------------------------
constructed the improvements to the Demised Premises described on the Work
Letter attached hereto as Exhibit B (the "Initial Tenant Improvements"). Tenant
acknowledges that the Initial Tenant Improvements have been completed in
accordance with the plans and specifications approved by Tenant and that the
Demised Premises are in good and satisfactory condition and are in compliance
with the terms of this Lease, except for such minor details of construction,
decoration and mechanical adjustment, if any, as are disclosed to Landlord in
writing within thirty (30) days after Tenant takes possession of the Demised
Premises.
Tenant shall not make any improvements, alterations (including, without
limitation, the penetration of walls, ceilings or floors), additions or
installations (including, without limitation, wiring for communications and data
processing systems) in or to the Demised Premises ("Improvements") without
obtaining Landlord's prior written consent, which consent shall not be
unreasonably withheld. Tenant shall not be allowed to make any alterations,
modifications, improvements, additions, or installations if such action results
or would result in a labor dispute or otherwise would materially interfere with
Landlord's operation of the Building. Along with any request for Landlord's
consent and before commencement of any Improvements or delivery of any materials
to be used in the Improvements to the Demised Premises or into the Building,
Tenant shall furnish Landlord with plans and specifications, names and addresses
of contractors, copies of contracts, necessary permits and licenses, and an
indemnification in such form and amount as may be reasonably satisfactory to
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<PAGE>
Landlord or a performance bond executed by a commercial surety reasonably
satisfactory to Landlord, in an amount equal to the estimated cost of the
Improvements. Landlord's approval of contractor's plans, specifications and
working drawings for said Improvements shall create no responsibility or
liability on the part of Landlord for their completeness, design sufficiency, or
compliance with all laws, rules and regulations of governmental agencies or
authorities. Tenant agrees to defend and hold Landlord forever harmless from any
and all claims and liabilities of any kind and description which may arise out
of or be connected in any way with said Improvements. All Improvements hereunder
shall be done only by contractors or subcontractors approved by Landlord and at
such time and in such manner as Landlord may from time to time reasonably
designate. Landlord reserves the right to require Tenant to use Landlord's
designated contractors, subcontractors, or engineers to perform Improvements
which affect structural or mechanical systems of the Building. All work done by
Tenant, its agents, employees, or contractors shall be done in such a manner as
to avoid labor disputes. Tenant shall pay the cost of all such Improvements, and
also the cost of painting, restoring, or repairing the Demised Premises and the
Building occasioned by such Improvements. Upon completion of any Improvements,
Tenant shall, unless waived by Landlord, furnish Landlord with "as built"
architectural drawings of the Demised Premises, sworn construction cost
statements, and full and final waivers of liens and receipted bills covering all
labor and materials expended and used. The Improvements shall comply with all
insurance requirements and all laws, ordinances, rules and regulations of all
governmental authorities and shall be constructed in a good and workmanlike
manner. Tenant shall permit Landlord to inspect construction operations in
connection with the Improvements.
Improvements made by Tenant during the Lease Term shall, unless Landlord
otherwise agrees, be removed by Tenant at its expense at or prior to the
Expiration Date or the effective date of earlier termination of this Lease, and
Tenant shall repair, at Tenant's sole expense, any damage caused to the Demised
Premises by such removal. Landlord agrees that it shall notify Tenant in
writing, at such time as Landlord consents to any Improvement, as to whether or
not the Improvement must be so removed by Tenant at or prior to the Expiration
Date or the effective date of earlier termination of this Lease. Tenant shall,
at or prior to such termination date or Expiration Date remove all computer and
communication cabling and equipment installed by or at the direction of Tenant.
Tenant shall repair or restore any damage caused by the installation and removal
of such cabling, or any Improvement, which Tenant is required to remove
hereunder. Property not specified for removal shall upon termination or
expiration of the Lease become the property of Landlord. Except for computer or
communication cabling installed by or at the direction of Tenant, the
improvements, additions, alterations and installations comprising the Initial
Tenant Improvements, as defined herein, and made or installed pursuant to plans
and specifications approved by Landlord, shall not be subject to the removal
requirements set forth herein. All moveable trade fixtures, equipment,
furnishings, and other personal property of Tenant located in the Demised
Premises shall remain the property of Tenant and shall be removed by Tenant upon
termination or expiration of this Lease, and Tenant shall repair, at Tenant's
sole expense, any damage caused to the Demised Premises by such removal.
Tenant shall not permit any mechanic's or other liens to be filed
against the Demised Premises or the Building for any labor or materials
furnished to or in connection with any Improvements performed or claimed to have
been performed in or about the Demised Premises at the instance and
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<PAGE>
request of Tenant, and shall immediately discharge and remove any such lien,
provided, the Tenant shall have the right to contest such lien, in good faith,
on the condition that Tenant provides Landlord, and if requested by Landlord,
Landlord's mortgage lender, with a bond, cash escrow deposit or other security
in a form and amount reasonably acceptable to Landlord and Landlord's mortgage
Lender. In the event Tenant fails to remove or contest any such lien, Landlord
may remove such lien and Tenant shall immediately pay Landlord, as Additional
Rent, upon demand, all costs and expenses, including attorneys' fees, which
Landlord incurs in connection with the removal of such lien. Landlord shall have
the right to post a notice in the Demised Premises disclaiming any liability for
payment for any Improvements of Tenant or other construction or improvements
performed by persons or entities other than Landlord or its contractors, and/or
for any liens arising in connection therewith, and Tenant agrees not to disturb
any such notice.
8. Services: Landlord agrees that it shall:
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A. Furnish heat and air-conditioning to the Demised Premises, on a
24 hour per day basis, Saturdays and Sundays included, subject
to any applicable energy laws, codes and regulations, to
maintain conditions inside the Demised Premises as follows:
(1) not more than 75 degrees Fahrenheit and 50% relative
humidity when the outside temperature does not exceed 92
degrees Fahrenheit dry bulb and 75 degrees Fahrenheit wet
bulb;.
(2) not less than a minimum temperature of 72 degrees Fahrenheit
when the outside temperature is not less than minus 16
degrees Fahrenheit; and
(3) maximum inside relative humidity will, in any event, be
limited to that which will not cause condensation on the
windows when outside temperatures are between minus 16
degrees and 65 degrees Fahrenheit dry bulb.
Landlord shall not be responsible for maintaining such conditions
if heat generating machines or equipment other than those
described on attached Exhibit E are used in the Demised Premises
which affect the temperature otherwise maintained by the air-
conditioning system, unless Tenant agrees to pay, as Additional
Rent with the monthly rental payments due under this Lease as
billed by Landlord, for the installation, operation and
maintenance costs of supplementary air conditioning equipment in
the Demised Premises, and gives Landlord sufficient time to
complete the installation of such equipment. If heat generating
machines or equipment other than those described on attached
Exhibit E are used in the Demised Premises, Landlord reserves the
right to install such supplementary air conditioning equipment in
the Demised Premises,
-6-
<PAGE>
and the installation, operation and maintenance costs thereof
shall be paid by Tenant to Landlord as Additional Rent with the
monthly rental payments due under this Lease as billed by
Landlord.
B. Provide maintenance and janitorial services to the Demised
Premises, excluding any special treatment of walls, floors, or
ceilings made by or at the request of Tenant and excluding
repairs to any fixtures or other improvements installed or made
by or at the request of Tenant, in accordance with the schedule
set forth on attached Exhibit F.
C. Provide water facilities and City water for drinking, lavatory
and toilet purposes drawn through fixtures installed by Landlord.
D. Provide electrical facilities and electric current as available
and provided by the public utility serving the City of Fargo.
E. Provide Tenant, upon Tenant paying the rent reserved hereunder
and observing and performing all agreements, terms and conditions
to be observed and performed hereunder by Tenant, quiet
possession of the Demised Premises for the entire term hereof,
subject to all the provisions of this Lease.
F. Comply with applicable zoning, occupancy and health regulations
and standards of the City of Fargo and other governmental
agencies.
G. Provide security to the Building in accordance with attached
Exhibit G.
Landlord agrees to acknowledge and commence a response, within 3 hours
(unless Landlord is delayed in doing so by any event of Force Majeure), to any
emergency request from Tenant made to Landlord's building manager with regard to
building services.
It is understood that Landlord's obligation to provide the foregoing
services and facilities shall not be construed so as to preclude Landlord from
including the cost of any such services as Operating Expenses under paragraph 5
hereof. It is further understood that Landlord does not warrant that any of the
services referred to above will be free from interruption to the extent that
such interruption is caused by an event of Force Majeure. No interruption of
services caused by an event of Force Majeure shall be deemed an eviction or
disturbance of Tenant's use and possession of the Demised Premises or any part
thereof, nor shall it render Landlord liable to Tenant for damages by abatement
of rent or otherwise or relieve Tenant from performance of Tenant's obligations
under this Lease.
9. Covenants of Tenant: Tenant agrees that it shall:
-------------------
A. Observe such reasonable regulations as from time to time may be
put in effect by Landlord for the general safety, comfort and
convenience of occupants and tenants of said Building.
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<PAGE>
B. Use the Demised Premises in a manner which complies with all
federal, state, and local laws, ordinances and regulations.
C. Give Landlord access to the Demised Premises at all reasonable
times, without charge or diminution of rent, to enable Landlord
to examine the same and to make such repairs, additions, and
alterations as Landlord may deem advisable.
D. Keep the Demised Premises clean, in good order and condition,
and replace all glass broken by Tenant with glass of the same
quality as that broken, save only glass broken by fire and
extended coverage risks, and commit no waste in the Demised
Premises.
E. Pay for electric lamps, starters and ballasts used in the
Demised Premises.
F. Upon the termination of this Lease in any manner whatsoever,
remove Tenant's goods and effects and those of any other person
claiming under Tenant, and quit and deliver up the Demised
Premises to Landlord peaceably and quietly in as good order and
condition as the same are now in or hereafter may be put in by
Landlord or Tenant, reasonable use and wear thereof and repairs
which are Landlord's obligation excepted. Goods and effects not
removed by Tenant at the termination of this Lease, however
terminated, shall be considered abandoned and Landlord may
dispose of the same as it deems expedient.
G. Not assign this Lease or sublet all or any part of the Demised
Premises without first obtaining Landlord's written consent
thereto, which consent may be withheld in Landlord's sole
discretion; provided, however, that Tenant may assign this Lease
or sublet the Demised Premises, without the consent of Landlord
(but only after having given 10 days' prior written notice of
such assignment or sublease to Landlord describing the parties
to and material terms of the assignment or sublease), to any
party that controls, is controlled by or is under common control
with Tenant or to any party that acquires substantially all of
the assets of Tenant, and in any such case Tenant shall supply
Landlord with a copy of the executed assignment or sublease
within 10 days after it is executed and delivered. In no event
shall Tenant assign this Lease or sublet the Demised Premises to
any present or past Tenant of the Building at the time of the
proposed assignment or subletting. In the event Landlord
consents to any such assignment or subletting, Tenant and the
proposed assignee or sublessee shall enter into a written
agreement with Landlord providing that: (i) Tenant shall pay to
Landlord, as Additional Rent hereunder, all sums received from
the assignee or subtenant in excess of the amounts owed to
Landlord by Tenant under this Lease, which amounts shall be paid
to Landlord as and when received by Tenant; and (ii) such
assignee or sublessee shall assume in writing the performance of
the covenants and obligations of Tenant hereunder. No assignment
or subletting shall not be deemed to release Tenant
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<PAGE>
from the payment and performance of any of its obligations under
this Lease, whether or not Landlord's consent is required and/or
given, unless Landlord specifically and expressly so states in
writing.
H. Not place signs on the Demised Premises or elsewhere in the
Building or Common Areas except for the sign described on
attached Exhibit C, which sign shall be installed by Tenant, at
Tenant's sole expense, and shall be removed (and any damage
caused by such removal repaired) by Tenant, at Tenant's sole
expense, prior to the expiration or termination of this Lease. A
Tenant directory will be provided on the main floor of the
building and in the court area. Landlord's acceptance of any name
for listing on the Building's directory shall not be deemed
consent to any sublease or assignment, or occupancy of the
Demised Premises by any party other than Tenant.
I. Not overload, damage or deface the Demised Premises or do any act
which may make void or voidable any insurance on the Demised
Premises or the Building, or which may render an increased or
extra premium payable for insurance.
J. Not create or permit to be created or remain, and will discharge
any lien, encumbrance or charge (other than a lien, encumbrance
or charge created by Landlord) upon the Building or Demised
Premises or any part thereof. Tenant agrees to indemnify and hold
harmless Landlord from and against any and all liabilities,
costs, and expenses (including attorneys' fees) arising from the
creation or removal of any lien or encumbrance proscribed herein.
K. Tenant agrees that the use of the Common Areas, including but not
limited to all halls, passageways, toilet rooms, parking areas
and landscaped areas in the Building, by the Tenant or Tenant's
servants, employees, guests or invitees, shall be subject to the
applicable rules and regulations as may from time to time be made
by Landlord for the safety, comfort and convenience of the
owners, occupants, tenants and business invitees of the Building.
Use of the roof of the Building is reserved to the Landlord.
Tenant agrees that no awnings or shades shall be used upon the
Demised Premises except such as may be approved by Landlord.
Tenant's obligations under this paragraph 9 to do or not to do a
specified act shall extend to and include Tenant's obligation to see to it that
Tenant's employees and agents shall do or shall not do such acts, as the case
may be.
10. Rights Reserved by Landlord: Landlord reserves the following rights
---------------------------
exercisable without notice and without liability to Tenant and without effecting
an eviction, constructive or actual, or disturbance of Tenant's use or
possession, or giving rise to any claim for set-off or abatement of rent:
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<PAGE>
A. To control, install, affix and maintain any and all signs on the
Building or the Common Areas, except those signs within the
Demised Premises not visible from outside the Demised Premises.
B. To reasonably designate, limit, restrict and control any service
in or to the Building, including but not limited to the
designation of sources from which Tenant may obtain sign painting
and lettering. Any restriction, designation, limitation or
control imposed by reason of this subparagraph shall be imposed
uniformly on Tenant and other tenants occupying space in the
Building.
C. To retain at all times and to use in appropriate instances keys
to all doors within and into the Demised Premises. No locks
shall be changed without the prior written consent of Landlord.
This provision shall not apply to Tenant's safes, or other areas
maintained by Tenant for the safety and security of monies,
securities, negotiable instruments or like items.
D. To make repairs, alterations, additions, or improvements, whether
structural or otherwise, in and about the Building, or any part
thereof, and for such purposes to enter upon the Demised
Premises, and during the continuation of any of said work, to
temporarily close doors, entryways, public spaces, and corridors
in the. Building and to interrupt or temporarily suspend
services and facilities, provided, that Landlord shall not
permanently alter the Common Areas of the Building in a manner
which materially and detrimentally affects Tenant's use of the
Demised Premises.
E. To restrict or prohibit vending or dispensing machines of any
kind in or about the Demised Premises, except for Tenant's break
room.
F. To approve the weight, size and location of safes and other heavy
equipment and articles in and about the Demised Premises and the
Building and to require all such items to be moved into and out
of the Building and the Demised Premises only at such times and
in such manner as Landlord shall direct in writing.
In exercising its rights under this Section, Landlord shall, when
feasible, provide Tenant with reasonable prior notice of Landlord's activities,
and shall make a reasonable effort to minimize the resulting interference with
the conduct of Tenant's business, including conducting such activities during
nonbusiness hours when it is possible to do so without a material increase in
expense.
11. Casualty Loss: In case of damage to the Demised Premises or the
-------------
Building by fire or other casualty, Tenant shall give immediate notice to
Landlord, who shall thereupon cause the damage to be repaired with reasonable
speed, at the expense of the Landlord, subject to delays which may arise by
reason of adjustment of loss under insurance policies and to delays beyond the
reasonable control of Landlord, and to the extent that the Demised Premises are
rendered
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<PAGE>
untenantable, the rent shall proportionately abate, except in the event such
damage resulted from or was contributed to by the act, fault, or neglect of
Tenant, Tenant's employees or agents, in which event there shall be no abatement
of rent. In the event the damage shall be so extensive that the Landlord shall
decide not to repair or rebuild, this Lease shall, at the option of Landlord, be
terminated as of the date of such damage by written notice from the Landlord to
the Tenant and the rent shall be adjusted to the date of such damage and Tenant
shall thereupon promptly vacate the Demised Premises. Landlord will, within 30
days after the date the damage occurred, notify Tenant of the date by which
Landlord reasonably estimates the repairs will be completed, and if such date is
more than 90 days after the date such damage occurred, Tenant will have the
right to terminate this Lease by written notice given to Landlord within 10 days
after such Landlord notice is given to Tenant.
12. Insurance:
---------
A. Tenant's Obligations
1. Property Insurance. At all times during the entire Lease
Term, Tenant shall maintain at its own expense a policy of
"all-risk" insurance covering improvements, betterments,
fixtures and personal property owned or installed ' in the
Demised Premises at full replacement cost thereof.
2. Liability Insurance. At all times during the entire Lease
Term, Tenant shall maintain at its own expense a policy of
commercial general liability insurance, including
contractual liability covering its obligations under this
Lease, with a minimum coverage of $1,000,000.00 per
occurrence and not less than $3,000,000 annual aggregate for
this location. In addition to Tenant, the policy shall also
name Landlord, its agents, and assigns and any other person
designated by Landlord as additional insureds.
3. Workers' Compensation. In addition to the policies referred
to above, Tenant shall maintain at all times during the term
of this Lease worker's compensation insurance coverage to
the full extent required by applicable law and as may be
adequate to fully protect Landlord against claims made by
Tenant's employees, agents or contractors.
B. Landlord's Obligations:
1. Property Insurance. At all times during the term of this
Lease, Landlord shall maintain insurance providing coverage
for "all risks" of loss to the Building for not less than
80% of the full replacement cost thereof.
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<PAGE>
2. Liability Insurance. At all times during the term of this
Lease, Landlord shall maintain commercial general liability
insurance providing coverage for the common areas and ways
on the Building and the land on which the Building is
located.
All policies of insurance purchased by Tenant in compliance with the
above provisions shall be purchased from an insurance company licensed to do
business in the state in which the Building is located with an A. M. Best rating
of not less than AX and shall be placed with such companies and upon such forms
as Landlord shall approve.
At least 10 days before the commencement of the Lease Term and annually
at each policy renewal thereafter, Tenant shall provide the Landlord with a
certificate of insurance as evidence of the above insurance which shall provide
that the insurer will give Landlord at least 30 days' written notice prior to
any cancellation, non-renewal or material change in coverage. Tenant shall also,
upon Landlord's request, provide copies of all insurance policies to Landlord.
Tenant shall not conduct any activities in or about the Demised Premises
which will in any way impair or invalidate the insurer's obligations under any
policy of insurance contemplated hereunder or maintained by Landlord with
respect to the Building. In the event any increases in premiums for Landlord's
insurance on the Building are due to increased risk resulting from Tenant's use
of the Demised Premises, Tenant shall pay to Landlord upon demand, as Additional
Rent, the amount of such increase, whether or not Landlord has consented to
Tenant's use.
13. Condemnation: If the entire Demised Premises are taken by eminent
------------
domain, this Lease shall automatically terminate as of the date of taking. If a
portion of the Demised Premises is taken by eminent domain, Landlord shall have
the right to terminate this Lease as of the date of taking by giving written
notice thereof to Tenant within 30 days after such date of taking. If Landlord
does not elect to terminate this Lease, it shall, at its expense, restore the
Demised Premises, exclusive of any improvements or other changes made therein by
Tenant, to as near the condition which existed immediately prior to the date of
taking as reasonably possible, and to the extent that the Demised Premises are
rendered untenantable, the rent payable hereunder shall proportionately abate.
AR damages awarded as compensation for diminution in value of the leasehold
estate hereby created or to the fee of the Demised Premises shall be the sole
property of Landlord; provided, however, that Landlord shall not be entitled to
any separate award made to Tenant for the value and cost of removal of personal
property and trade fixtures belonging to and paid for by Tenants.
11. Hazardous Materials: Tenant covenants, represents and warrants to
-------------------
Landlord, its successors and assigns, that it has not used or permitted and will
not use or permit the Demised Premises to be used, whether directly or through
contractors, agents or tenants, for the generating, transporting, treating,
storage, manufacture, emission or disposal of any petroleum products or any
dangerous, toxic or hazardous pollutants, chemicals, wastes or substances as
defined in the Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, or the Federal Resource Conservation and Recovery Act of
1976 or any other federal, state or local environmental
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<PAGE>
laws, statutes, regulations, requirements and ordinances ("Hazardous
Materials"). Tenant agrees to indemnify and reimburse the Landlord, it
successors and assigns, for any breach of these representations and warranties
and from any loss, damage, expense or cost arising out of or incurred by
Landlord which is the result of a breach of, misstatement of or
misrepresentation of the above covenants, representations and warranties,
together with all attorneys, fees incurred in connection with any action brought
by or against the Landlord arising out of the above. These covenants,
representations and warranties shall be deemed continuing covenants,
representations and warranties for the benefit of the Landlord, and any
successor and assigns of the Landlord, including any subsequent owner of the
Building and shall survive termination of this Lease. Notwithstanding the
foregoing, Tenant shall not be responsible under this Section 14 for any
Hazardous Materials introduced to the Demised Premises prior to the Commencement
Date, including any Hazardous Materials used or installed in connection with the
Initial Tenant Improvements.
15. ADA Compliance: Except as may be provided elsewhere in this Lease,
--------------
Tenant covenants, represents and warrants to Landlord, its successors and
assigns, that Tenant shall be responsible for maintaining the Demised Premises
in compliance with the Americans with Disabilities Act of 1990 ("ADA") and with
any other federal, state or local statute or regulation as each may have been
amended from time to time, pertaining to providing access to the Demised
Premises to persons with disabilities or to the removal of existing barriers to
access to the Demised Premises by such individuals and that any future
modifications/ additions to the Demised Premises will comply with the ADA and
all other federal, state or local laws, statutes, regulations or ordinances of
similar nature. Notwithstanding the foregoing, and unless otherwise agreed,
Tenant shall not be responsible for maintaining ADA compliance with respect to
any Common Areas of the Building. Tenant agrees to indemnify and reimburse the
Landlord, its successors and assigns, for any breach of these representations
and warranties and for any and all expense, cost, loss or liability, including
attorneys' fees, which Landlord may incur as the result of a breach,
misstatement of or misrepresentation of such covenants, representations and
warranties or in connection with the application of or enforcement, threatened
or actual, of any federal, state or local law statute, regulation or ordinance,
including the ADA, as a result of such breach. These covenants, representations
and warranties shall be deemed continuing covenants, representations and
warranties for the benefit of the Landlord, and any successor and assigns of the
Landlord, including any subsequent owner of the Demised Premises and shall
survive any termination of this Lease. Notwithstanding the foregoing, Tenant
shall not be responsible under this Section 15 for any failure of the Initial
Tenant Improvements to comply with the ADA as of the Commencement Date.
16. Indemnification: Except for the gross negligence or willful
---------------
misconduct of Landlord, its employees, agents and representatives, Landlord
shall not be liable to Tenant, and Tenant hereby waives all claims against
Landlord, for any injury or damage to any person or property in or about the
Demised Premises by or from any cause whatsoever, and without limiting the
generality of the foregoing& whether caused by snow, ice or water leakage of any
character from the roof, walls, basement or other portion of the Demised
Premises or the Building& or caused by gas, fire, oil, electricity or any cause
whatsoever in, on, or about the Demised Premises or the Building or caused by
the acts of negligence of other tenants or occupants of any part of the
Building.
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<PAGE>
Unless otherwise provided by insurance coverage, Tenant agrees to
indemnify and hold Landlord harmless from and defend Landlord against any and
all liabilities, obligations, damages, penalties, claims, costs, charges and
expenses, including reasonable architect's and attorneys' fees, imposed upon,
incurred by or asserted against Landlord by reason of any injury or damage to
any person or property whatsoever: (a) occurring in, on, or about the Demised
Premises or any part thereof; (b) resulting from any use, non-use, possession,
occupation, condition, operation, maintenance or management of the Demised
Premises or any part thereof, excluding Common Areas; or (c) resulting from any
failure on the part of Tenant to keep, observe, or perform any of the terms
contained in this Lease, except when such injury or damage shall be caused
solely by the gross negligence or willful misconduct of the Landlord.
17. Waiver of Subrogation: Landlord and Tenant hereby expressly release
---------------------
each other, including their respective officers, servants, agents or employees
from any claim or cause of action for any loss or damage whatsoever to the
Building, Demised Premises or property therein or business conducted therefrom
arising out of any negligence or alleged negligence of the other party, their
servants, officers, agents or employees resulting in fire, smoke, explosion or
other insurable perils in the Building or Demised Premises. It is the intention
of the parties that they shall look only to their respective insurance carriers,
if any, for payment of such loss. This shall apply specifically, but not
exclusively, to damages caused by sprinkling devices, heating and air
conditioning apparatus, water, snow, frost, steam, excessive heat or cold,
falling plaster, broken glass, sewage, gas, odor or noise, or the bursting or
leaking of pipes, plumbing fixtures or the roof or wall of the Building.
Tenant and Landlord agree that insurance carried in compliance with
paragraphs 12.A.1 and 12-B-1 and providing coverage for losses described in the
above paragraph shall contain a waiver of subrogation whereby the insurer agrees
to waive any right of recovery against the other party with respect to losses
covered by the insurance whether or not such loss is caused by the fault or
negligence of the other party.
18. Default: Any of the following shall constitute an "Event of
------- Default" :
A. Tenant fails to pay Base Rent, Additional Rent, or any other
payment that Tenant is required to pay under the terms of this
Lease within 10 days after Landlord gives Tenant a written
notice of such default (provided, however, that such 10-day
period shall be reduced to 5 days if Landlord has previously
during the Lease Term given Tenant such a 10-day default
notice, and further provided, however, that Landlord shall not
be required to give Tenant any written notice of such default,
and Tenant shall not be entitled to any grace period, if
Landlord has previously during the Lease Term given Tenant such
a 5-day default notice);
B. This Lease or the Demised Premises or any part of the Demised
Premises are taken upon execution or by other process of law
directed against Tenant, or are taken upon or are subject to
any attachment at the instance of any creditor
-14-
<PAGE>
or claimant against Tenant, and the attachment is not
discharged or disposed of within thirty (30) days after its
levy;
C. Tenant or any guarantor of Tenant files a petition in
bankruptcy or insolvency or for reorganization or arrangement
under the bankruptcy laws of the United States or under any
insolvency act of any state, or admits the material allegations
of any such petition by answer or otherwise, or is dissolved or
makes an assignment for the benefit of creditors;
D. Involuntary Proceedings under any such bankruptcy law or
insolvency act or for the dissolution of Tenant are instituted
against Tenant or any guarantor of Tenant, or a receiver or
trustee is appointed for all or substantially all of the
property of Tenant or such guarantor, and such proceeding is
not dismissed or such receivership or trusteeship vacated
within sixty (60) days after such institution or appointment;
E. Tenant attempts to assign, pledge, mortgage, transfer or sublet
Tenant's interest under this Lease without Landlord's prior
written consent, except as permitted in paragraph 8G; or
F. Tenant breaches any other agreement, term, covenant or
condition of this Lease and such breach continues for a period
of ten (10) days after written notice from Landlord to Tenant,
or, if such breach cannot be cured reasonably within such ten
(10) day period and Tenant fails to commence and proceed
diligently to cure such breach within a reasonable time period
not to exceed thirty (30) days.
If any one or more Events of Default occur, then Landlord may, at Landlord's
option:
(i). Notify Tenant, in writing, that this Lease shall
terminate as of the earliest date permitted by law or on
any later date specified in such notice, and Tenant's
right to possession of the Demised Premises shall cease
as of the date set forth in Landlord's notice of
termination.
(ii). With or without terminating this Lease and without notice
or demand to Tenant, but in accordance with legal
process, re-enter and take possession of the Demised
Premises using such procedures as may, from time to time,
be provided by law to expel Tenant and those claiming
through or under Tenant, and to remove the effects of
either or both. Landlord's exercise of such right of re-
entry shall not subject Landlord to liability for
conversion or trespass and shall not affect Landlord's
right to recover arrearages of rent payable under this
Lease or any amounts due as a result of any preceding
breach of covenants or conditions. No re-entry or taking
possession of the Demised Premises
-15-
<PAGE>
by Landlord will be construed as an election on
Landlord's part to terminate this Lease unless a written
notice of such intention is given to Tenant.
(iii). In the event of re-entry by Landlord as set forth in
subparagraph (ii) above, or should Landlord take
possession pursuant to legal proceedings or otherwise,
Landlord may, from time to time, without terminating this
Lease, re-let the Demised Premises or any part of the
Demised Premises in Landlord's or Tenant's name, but for
the account of Tenant, for such term as Landlord, in its
sole discretion, may determine, and Landlord may collect
and receive any rent resulting from such reletting.
Landlord will have no obligation to relet the Demised
Premises and will in no way be responsible or liable for
any failure to relet the Demised Premises or any part
thereof.
(iv). With or without terminating this Lease and without demand
or notice to Tenant, to cure any Event of Default and
charge Tenant for the cost of effecting such cure,
including, without limitation, attorneys' fees and
interest at the Interest Rate plus 4% per annum.
(v). With or without terminating this Lease, recover from
Tenant an amount equal to the rent owing for the balance
of the Lease Term plus the amount of any past due rent,
less the net proceeds, if any, of any re-letting of the
Demised Premises by Landlord. All Landlord's expenses in
connection with such re-letting, including, but without
limitation, all repossession costs, brokerage
commissions, attorneys fees, expenses for employees,
alteration and repair costs and expenses of preparation
for such re-letting shall be deducted from the proceeds
of any relenting in determining the net proceeds of such
re-letting. Landlord may recover the amount due from
Tenant under this subparagraph (v) monthly, on the day on
which the base rent would have been payable under the
Lease, or, if Landlord so chooses, on a less frequent
basis.
(vi). Elect to terminate this Lease and recover from Tenant, as
liquidated damages and not as a penalty, an aggregate
rent, which, at the time of such termination, represents
the sum of the full amount of any past due rent plus the
amount by which the rent that would have accrued for the
balance of the Lease Term exceeds the fair market value
of the Demised Premises for the same period with such
amount discounted to present value at the lesser of 8% or
the discount rate of the Federal Reserve System on the
date of the Event of Default.
Any suit or suits for the recovery of the amounts and damages set forth above
may be brought by Landlord, from time to time, at Landlord's election, and
nothing in this Lease will be deemed to
-16-
<PAGE>
require Landlord to await the date upon which this Lease or the Lease Term would
have expired had no Event of Default occurred. Each right and remedy provided to
Landlord in this Lease is cumulative and is in addition to any other right or
remedy provided to Landlord in this Lease or existing now or after the date of
this Lease at law or in equity or by statute or otherwise. All costs incurred by
Landlord in collecting any amounts and damages owing by Tenant pursuant to the
provisions of this Lease or to enforce any provision of this Lease, including
reasonable attorneys' fees from the date any such matter is turned over to an
attorney, whether ' or not one or more actions are commenced by Landlord, will
also be recoverable by Landlord from Tenant.
Landlord shall be deemed to be in default under this Lease ff Landlord
breaches any agreement, term, covenant or condition of this Lease and such
breach continues for a period of ten (10) days after written notice from Tenant
to Landlord, or, if such breach cannot be cured reasonably within such ten (10)
day period and Tenant fails to commence and proceed diligently to cure such
breach within a reasonable time period not to exceed (30) days.
19. Notices: All bills, statements, notices or communications which
-------
Landlord may desire or be required to give to Tenant shall be deemed
sufficiently given or rendered if in writing and either delivered to Tenant
personally or sent by registered or certified mail addressed to Tenant at the
Building, and the time of rendition thereof or the giving of such notice or
communication shall be deemed to be the time when the same is delivered to
Tenant or deposited in the mail as herein provided. Any notice by Tenant to
Landlord must be served by registered or certified mail addressed to Landlord
c/o Coldwell Banker First Realty-Encore, 51 Broadway, Suite 305, Fargo, North
Dakota 58102 and to Landlord at the address shown on the Data Sheet above, or in
case of subsequent change upon notice given, to the latest address furnished.
20. Holding Over: Should Tenant continue to occupy the Demised
------------
Premise after expiration of the Lease Term or any renewal or renewals thereof
without executing a new lease with Landlord or its successor in interest, such
holdover tenancy shall be from month to month and in no event from year to year
or for any longer term upon the same terms and conditions set forth in this
Lease, except those relating to the payment of base rent. In the event of such
holdover tenancy, the monthly Base Rent payable by Tenant shall be the greater
of 150% of the Base Rent payable during the last month of the Lease Term or an
amount determined by Landlord as the "market rent" charged by Landlord for
office space in the Building and/or other buildings of similar type and
character. Notwithstanding the foregoing, Tenant shall be liable in damages to
Landlord for failure to vacate the Demised Premises after expiration of the
Lease Term or any renewal.
21. Subordination: The rights of Tenant shall be and are subject and
-------------
subordinate at all times to the lien of any mortgage or mortgages now or
hereafter in force against the real estate on or in which the Building is
located, and Tenant shall execute further instruments subordinating this Lease
to the lien or liens of any mortgage or mortgages as shall be requested by
Landlord; provided that such mortgagee or mortgagees shall recognize the
validity and continuance of this Lease so long as Tenant is not in default under
the terms of this Lease.
-17-
<PAGE>
22. Estoppel Certificate: Tenant shall at any time upon not less than
--------------------
ten (10) days' prior written notice from. Landlord, execute, acknowledge and
deliver to Landlord a statement in writing: (i) certifying that this Lease is
unmodified and in full force and effect (or, if modified, stating the nature of
such modification, indemnifying the instruments of modification and certifying
that this Lease, as so modified, is in full force and effect), and the date to
which the Base Rent, "Security Deposit," Additional Rent and other charges are
paid in advance, if any; and (ii) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord hereunder, or specifying
such defaults, if any, which are claimed. Any such statement may be
conclusively relied upon by any prospective purchaser, encumbrancer or other
transferee of the Demised Premises.
Tenant's failure to deliver such statement within such time shall be
conclusive upon Tenant that this Lease is in full force and effect, without
modification except as may be represented by Landlord, that there are no uncured
defaults in Landlord's performance; and that no rent has been paid in advance.
If Landlord so desires to finance or refinance the Demised Premises or
the Building, or any part thereof, Tenant hereby agrees to deliver to Landlord
and/or to any lender designated by Landlord such financial records of Tenant as
may be reasonably required by such lender. Such statements may include but not
be limited to the past three (3) years' financial statements of Tenant. All such
financial statements shall be received by Landlord in confidence and shall be
used only for the purposes herein set forth.
23. Attorneys' Fees and Costs: In the event that either party incurs
-------------------------
attorneys' fees or other costs in order to enforce its right hereunder, the
nonprevailing (or defaulting) party shall pay the other party's reasonable fees
and court or other costs and expenses.
24. Parties/Binding Effect: The term "Tenant", wherever used in this
----------------------
Lease, shall be construed to mean tenants in all cases where there is more than
one tenant, and the necessary grammatical changes required to make the
provisions hereof apply to corporations, partnerships or individuals, men or
women, shall in all cases be assumed as though in each case fully expressed.
Each provision hereof shall extend to and shall bind Tenant and its heirs, legal
representatives, successors and assigns, provided that this Lease shall not
inure to the benefit of any assignee, heir, legal representative, transferee or
successor of Tenant, except upon the express written consent or election of
Landlord. The term "Landlord" as used in this Lease so far as covenants or
obligations on the part of Landlord are concerned shall be limited to mean and
include only the owner or owners of the Building at the time in question, and in
the event of any transfer or transfers or conveyances the then grantor shall be
automatically freed and released from all liability accruing from and after the
date of such transfer or obligation on the part of Landlord contained in this
Lease to be performed, it being intended hereby that the covenants and
obligations contained in this Lease on the part of Landlord shall be binding on
the Landlord, its successors and assigns, only during and in respect to their
respective successive periods of ownership. This Lease shall not be affected by
any such sale or conveyance, and Tenant agrees to attorn to the purchaser or
grantee. Tenant shall look solely to Landlord's interest in the Building for
recovery of any judgment from Landlord. Neither Landlord nor any of its
officers, directors, shareholders, partners, agents or employees, nor any
successor holder of
-18-
<PAGE>
Landlord's interest in the Building or this Lease, shall ever be personally
liable for any such judgment or for the payment of any monetary obligation to
Tenant.
25. Option to Lease: Tenant shall have the option to lease
---------------
approximately 5,000 additional rentable square feet of space located in the
southwest comer of the third floor of the building, as shown upon attached
Exhibit D ("Option Space"). Such option must be exercised, if at all, by
Tenant's written notice of exercise received by Landlord on or before September
1, 1994. If such option is exercised, the Option Space shall be added to the
Demised Premises effective December 1, 1994 and shall be leased by Tenant upon
the same terms and conditions as the initial Demised Premises, including the
Lease Term, except that the annual Base Rent for the Option Space shall be $6.00
per square foot of rentable area contained in the Option Space. Landlord shall
install the initial tenant improvements in the Option Space on or before
December 1, 1994 (subject to any delays caused by plans and specifications
approvals by the parties or applicable governmental units and/or any events of
Force Majeure), in accordance with plans and specifications to be reasonably
agreed upon by Landlord and Tenant, provided, however, that Tenant shall
reimburse Landlord (within 10 days after Landlord bills Tenant) for the cost of
such improvements if and to the extent that such cost exceeds $10-00 per square
foot of usable area in the Option Space ("Excess Costs"). Landlord may require
that estimated Excess Costs be deposited by Tenant with Landlord prior to
Landlord's commencing or completing such initial tenant improvements. The Option
Space shall be incorporated by addendum into this Lease.
26. Right of First Refusal: Tenant shall have a right of first refusal
----------------------
with respect to the leasing of additional space within the premises subject to
the Master Lease defined below and which is configured by Landlord so as to
exceed 2,000 square feet of rentable area. Landlord shall provide to Tenant
written notice of the proposed terms of leasing, describing the proposed
location, area, rental and any other terms Landlord deems to be material.
Tenant shall have 15 days (but only 10 days if Landlord's notice is given to
Tenant on or after December 31, 1996) from the date of such notice to accept in
writing the terms of such leasing. In the event the terms are not so accepted,
Tenants right of first refusal shall expire and be of no effect with respect to
the space so offered to Tenant and Tenant shall not have any right of first
refusal as to any future leasing of such space.
27. Prime Lease: It is understood and agreed that Landlord holds a
-----------
leasehold interest in ' the building and property pursuant to an Agreement of
Lease dated September 9, 1981, between Rauenhorst Corporation and Dakota
Bankshares, Inc. ("Prime Lease") and this Lease shall be subject to consent by
the present fee owner, Dakota Bank Building Limited Partnership ("Prime
Landlord"), substantially in the form of consent attached to this Lease as
Exhibit H, and is subject to all of the terms and conditions of the Prime Lease,
including required consents of the Prime Landlord.
28. Governing Law: This Lease, and the respective rights and
-------------
obligations of Landlord and Tenant hereunder, shall be governed by and construed
in accordance with the internal laws of the State of North Dakota.
29. Severability: ff any provisions of this Lease or the application
------------
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Lease and the
-19-
<PAGE>
application of such provisions to other persons or circumstances shall not be
affected and shall be enforced to the greatest extent permitted by law.
30. Brokers: Landlord and Tenant each represents and warrants the other
-------
that, except for Coldwell Banker First Realty Encore (whose commission shall be
paid by Landlord), no realtors, brokers or agents were involved in the
negotiation and execution of this lease. Tenant hereby indemnifies Landlord and
agrees to hold Landlord harmless from and against the claim of any other
realtor, broker or agent with whom Tenant may have dealt regarding this Lease or
the Demised Premises.
31. Force Majeure: Any deadline or time period provided in this Lease
-------------
for the performance of any obligation of Landlord shall be extended for the
period of any delay caused by Tenant or by Force Majeure. The term "Force
Majeure" shall mean delays or hindrances to performance by reason of abnormal
weather, the unavailability of government approvals or the revocation thereof,
the unavailability of labor or materials, war, riots, insurrection, fire,
casualty, strike, lockouts, labor disputes, power failures, Acts of God, the
elements or any other cause beyond Landlord's reasonable control.
-20-
<PAGE>
IN WITNESS WHEREOF, the respective parties hereto have executed this
Lease or caused this Lease to be executed by their duly authorized
representatives in duplicate the day and year first above written.
FIRST BANK SYSTEM, INC.,
a Delaware corporation,
By /s/ Raymond C. Hoy
-----------------------------------------
Its Vice President
--------------------------------------
SHIELDS ENTERPRISES, INC.
By /s/ Lorinne L. Lunde
-----------------------------------------
Its Treasurer
--------------------------------------
-21-
<PAGE>
NOTE: The information provided on this Data Sheet is for convenience purposes
only. In the event of any conflict or inconsistency between the Data Sheet and
the terms of the attached Lease, the terms of the Lease shall be controlling.
<PAGE>
EXHIBIT A
[FLOOR PLAN OF SECOND FLOOR]
<PAGE>
EXHIBIT A-1
The following property in the City of Fargo, County of Cass and State of North
Dakota:
Lots 1, 2, 3, 4 and 5, except the South 100 feet of said Lots;
Lots 6 and 7, except air rights above 15 feet over the South 116 feet of
said Lots;
Lots 8, 9, 10, 11 and 12, except the South 116 feet of said Lots;
Lots 13, 14, 20, 21 and 22;
All of the vacated alley lying South of said Lots 13 and 22 and lying North
of said Lots 1 through 12, inclusive;
All in Block 1, Kenney & Devitt's 1st Addition to the City of Fargo, Cass
County, North Dakota, according to the recorded plat thereof.
<PAGE>
EXHIBIT B
WORK LETTER
Section 6 of the Lease between Shields Enterprises Inc., as Tenant, and
First Bank Systems, Inc., as Landlord of even date herewith ("Lease") provides
that Initial Tenant Improvements to the Demised Premises subject to the Lease
should be made in accordance with this letter. The purpose of this letter is to
set forth additional terms and conditions relating to the construction of such
improvements, which terms are as follows:
1. Landlord has constructed the Initial Tenant Improvements, at
Landlord's sole expense.
2. A synopsis of the Initial Tenant Improvements is as follows:
Demolition: The existing walls were removed per agreed floor
layout dated 4/13/94, and drawn by Prairie Design
Studio. Existing carpet was removed. Debris was
disposed and cleaned for re-fitting.
Ceiling: The ceiling grid was reworked to provide a
continuous pattern in each of the three major open
areas. This includes engineered placement of
overhead lighting compatible to computer terminal
operation.
Wall Surfaces: All wall surfaces were patched and painted with
tenant's color choice. Existing vinyl surfaces, in
rooms 202, 203, 204, 205, 214, 216, 217 & 211 were
cleaned and left in place.
Flooring: All new carpet of tenant's choice, providing it is
within the approved flooring allowance, was
installed except in rooms 202, 203, 204, & 206
where existing carpet if acceptable. Rooms 207,
208, 211 & 218 were surfaced with vinyl
composition tile.
Cabinets: Upper and lower cabinets and counter tops covered
with laminated plastic with a single blow sink
were installed in room 21 1, the break room.
Laminated plastic lower cabinets and work surface
with adjustable shelving above were installed in
the work room, #218.
B-1
<PAGE>
Coat rods with wire shelving above were provided
on two walls in the coat room, #212.
Storage room #220 was fit with sturdy open
shelving along the north wall only.
Door Locks: Standard lockable door passages were installed in
storage rooms and office doors as outlined by
Tenant's personnel. This includes one push button
"Simplex" lock on the phone room, #208.
Cooling: The computer room, #207, will be cooled based on
heat load information provided by Tenant's
personnel, by a separate cooling unit with its own
thermostat.
The balance of the heat pumps in the office and
open areas are ducted to provide as even as
possible heat and cooling. There are several
thermostats provided throughout the area.
Electrical: Wall outlets, standard and dedicated, have been
provided as indicated by Tenant's personnel.
Overhead electrical wire feeds have been installed
to the power poles supplying power to the office
cubicles.
Phone Room: The phone room, #208, has two 4'x8' plywood sheets
installed as mounting boards for the telephone
punch down blocks.
Wiring: All computer communication wiring and phone jacks
and associated wiring and installation are the
sole responsibility of Tenant.
Window Treatment: All exterior windows are presently fit with mini
blinds and will stay in place as is.
3. All such construction has been completed in accordance with the
plans and specifications approved by Tenant and is in conformance
with general building requirements regarding construction.
4. Landlord agrees that, subsequent to the date of the Lease, Tenant
may utilize as temporary facilities approximately 2,000 square feet
of space in the lower level of the building as designated by
Landlord, until the Demised Premises are available for occupancy.
There shall be no additional rental charge for this temporary
occupancy. However, any costs of installation of temporary telephone
or other facilities and any
B-2
<PAGE>
costs of returning the area to its original condition shall be the
expense of the Tenant, together with any telephone or other utility
charges attributable to such use.
This letter shall be attached to the Lease and shall be considered part
of such Lease for all purposes.
FIRST BANK SYSTEM, INC.,
a Delaware corporation,
By _________________________________________
Its ______________________________________
SHIELDS ENTERPRISES, INC.
By _________________________________________
Its ______________________________________
B-3
<PAGE>
EXHIBIT C
TENANT'S SIGNAGE DESCRIPTIONS AND LOCATIONS
-------------------------------------------
[FLOOR PLAN OF WEST ELEVATION]
<PAGE>
[COLDWELL BANKER NOTICE]
<PAGE>
EXHIBIT D
OPTION SPACE DESCRIPTION
[FLOOR PLAN OF THIRD FLOOR]
<PAGE>
EXHIBIT E
Date: June 6, 1994
To: Mark Richman, Coldwell Banker
cc: Lori Lunde, SEI
From: Jackie Ford
Re: Office Equipment
----------------
When fully staffed, the current SEI facility in Fargo will house the following
equipment:
. 105 PCS (including 5 RS6000 machines)
. 6 laser printers
. 12 Point-of-Sale terminals
. 1 Automated Call Distribution System cabinet
. 2 fax machines
. 2 high volume copiers
. 20 modems
Please call me at 708/515-3600 if you need additional information. I will be
available at this number until Wednesday.
saa
<PAGE>
EXHIBIT F
DAKOTA CENTER CUSTODIAL
Custodial:
The Dakota Center Building employs Automated Maintenance Services as an
independent contractor to provide us with the cleaning service. At the
present time they provide service five days a week, generally starting at
6:00 PM until their work is completed. Their service includes but is not
limited to:
Nightly:
1. Empty all waste receptacles and dispose of waste.
2. Dust and damp mop all resilient tile floors.
3. Vacuum and spot clean all carpeted areas.
4. Low dusting of desks, file cabinets and furnishings.
5. Spot clean of doors, partition glass, light switch areas.
6. Clean and disinfect restroom fixtures and floors.
7. Spot wash restroom partitions, doors and walls.
Monthly:
1. Scrub & recondition resilient floors.
2. Vacuum or dust air supply diffusers or grills.
3. Dust window blinds.
Quarterly:
1. Light dust surfaces not reached in nightly duties, such as door
frames, picture frames or wall hangings.
F-1
<PAGE>
EXHIBIT G
DAKOTA CENTER SECURITY
Security:
The building is opened at approximately 6:30 AM Monday thru Friday by
the building engineer, at which time he walks through the structure
checking for potential problems.
At approximately 6:00 PM the custodial service locks the exterior doors
to the building and they check through the night for any security
breaches. They have a list of available personnel to contact should they
encounter any problems.
All other times the building is locked with only key access by the
tenants through self closing and locking doors.
G-1
<PAGE>
THIS INSTRUMENT DRAFTED BY
AND WHEN RECORDED RETURN TO:
Kenneth T. Tyra
Dorsey & Whitney
2200 Pillsbury Center South
220 South Sixth Street
Minneapolis, Minnesota 55402
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PAGE
----
1. Demised Premises........................................................ 1
2. Use..................................................................... 1
3. Term.................................................................... 1
4. Base Rent............................................................... 1
5. Additional Rent......................................................... 1
6. Tenant's Expense Credit and Special Charge.............................. 4
7. Landlord and Tenant Improvements........................................ 4
8. Services................................................................ 6
9. Covenants of Tenant..................................................... 7
10. Rights Reserved by Landlord............................................. 9
11. Casualty Loss........................................................... 10
12. Insurance............................................................... 11
13. Condemnation............................................................ 12
14. Hazardous Materials..................................................... 12
15. ADA Compliance.......................................................... 13
16. Indemnification......................................................... 13
17. Waiver of Subrogation................................................... 14
18. Default................................................................. 14
19. Notices................................................................. 17
20. Holding Over............................................................ 17
21. Subordination........................................................... 17
22. Estoppel Certificate.................................................... 18
23. Attorneys' Fees and Costs............................................... 18
24. Parties/Binding Effect.................................................. 18
25. Option to Lease......................................................... 19
26. Right of First Refusal.................................................. 19
27. Prime Lease............................................................. 19
28. Governing Law........................................................... 19
29. Severability............................................................ 19
30. Brokers................................................................. 20
31. Force Majeure........................................................... 20
-i-
</TABLE>
<PAGE>
-1-
EXHIBIT 10.15
LEASE CONTRACT FOR COMMERCIAL PREMISES
Drawn up in conformity with the model contract as issued by The Netherlands
Real-Estate Council in October 1988.
The Undersigned: Planoform Vastgoed B.V., having its registered office in
-----------------------
Arnhem, The Netherlands, at the address Groningensingel 94, and also holding
office there, for the purposes hereof duly represented by Planoform Holding
B.V., in its turn duly represented by its Directors Mr. L. Elmendorp and Mr. G.
de Jong, both resident in Elst (Province of Gelderland), The Netherlands,
hereinafter called: "the Landlord", and
European Geological Technologies B.V. (EGT), having its registered office in
- ------------------------------------
Best, The Netherlands, at the address De Waal 15, and also holding office there,
for the purposes hereof duly represented by its Director Mr. A.F. Ruimschotel,
resident in Son, The Netherlands,
hereinafter called: "the Tenant",
hereby agree as follows:
- ------------------------
PREMISES, INTENDED USE, FLOOR LOAD
1.1 The present Agreement concerns the building, hereinafter called "the Leased
Premises", locally known as 1255 m2 office space located at De Waal numbers
11 up to including 19 in Best (The Netherlands), and 1277 m2 office space
located at De Waal numbers 43 up to including 51 in Best (The Netherlands);
the total parking space consists of the current space - to be rearranged
belonging to De Waal 11-19, the parking space belonging to De Waal 43-51,
as well as 18 new parking spaces to be created; and specified further on
the drawing and/or description of the Leased Premises or the lease
brochures of the Leased Premises, attached to the present deed.
1.2 The Tenant shall use the Leased Premises solely as office space.
1.3 The maximum allowable floor load in the Leased Premises shall be:
a. on the ground floor 600 kg/m2;
b. on all other floors 400 kg/m2.
Initial Landlord: (Initial) Initial Tenant: (Initial)
<PAGE>
-2-
TERMS AND CONDITIONS
2.1 The present agreement shall consist of:
a. The General Conditions for the Lease of Commercial Premises (algemene
bepalingen huurovereenkomst bedrijfsruimte), lodged with the Office of
the Clerk of the District Court of The Hague (The Netherlands) on 12
April 1989, and registered there under number 58/1989, hereinafter
called "the General Conditions". These General Conditions are known to
the parties. The Tenant has received a copy thereof.
b. The provisions laid down in the Property Division Deed, the relative
Rules Pertaining to the Division of Property and the adopted By-Laws
(if any), all this in so far as these provisions shall be applicable,
and if the Leased Premises constitutes a part of a building or a
complex that has been divided into apartment rights.
2.2 The provisions listed in 2.1 shall apply save as expressly otherwise
provided in the provisions laid down hereinafter, or if applicability to
the Leased Premises is not possible.
DURATION, PROLONGATION AND CANCELLATION
3.1 The present Agreement shall be entered into for a period of 8.5 years,
commencing on 1 July 1993 and terminating on 31 December 2001.
3.2 During the period referred to in 3.1 the parties shall not have the right
to terminate the Agreement in the interim by means of cancellation. In
order to terminate the present Agreement at the end of the said period, a
notice of cancellation in conformity with the provisions laid down in 3.4
shall be required.
3.3 In the event that the period referred to in 3.1 lapses and no notice of
cancellation in conformity with the provisions laid down in 3.4 has been
given, the Agreement shall be prolonged for an additional period of five
years, therefore until 31 December 2006. The Agreement shall terminate on
that moment only, however, if a notice of cancellation in conformity with
the provisions laid down in 3.4 is given, the Agreement shall be prolonged
for an additional period of five years, and so on, at all times, however,
except if at the end of any subsequent period a notice of cancellation in
conformity with the provisions laid down in 3.4 is given.
3.4 Cancellation of the present Agreement shall only be effected by means of a
notice in the form of a writ of a Court Bailiff, or by registered post,
with due observance of a period of notice of at least twelve months prior
to the lapse of the then current period.
3.5 The provisions laid down in the present Clause shall be without prejudice
to the provisions laid down under 7 of the General Conditions.
<PAGE>
-3-
PAYMENT, PAYMENT PERIOD
4.1 The Tenant shall pay the Landlord an amount consisting of the following
elements: the rent; the compensation for the additional deliveries and
services referred to under 6; the V.A.T. that is statutory due over the
said rent and compensation, or an equivalent amount as referred to under
4.2 The annual rent shall amount to NLG 453,125.== (in words: FOUR HUNDRED AND
FIFTY-THREE THOUSAND ONE HUNDRED AND TWENTY-FIVE DUTCH GUILDERS). The rent
shall annually on 1 July, and on 1 July 1994 for the first time, and
subsequently in the same manner, be increased in compliance with the
provisions laid down in Clause 4 of the General Conditions.
4.3 The compensation for the additional deliveries and services shall be
determined in compliance with the provisions laid down in Clause 11 of the
General Conditions and the said compensation shall be subject to a system
of advance payments with a later settlement, as specified there.
4.4 The rent and the advance payment of the compensation for the additional
deliveries and services and the V.A.T. or the amount equivalent therewith
shall be paid in advance, and at all times before or on the first day of
the period to which the payment relates.
4.5 Per period of payment of three months:
- the rent shall amount to NLG 113,281.25
- the advance payment of
- the compensation for heating and
- water supply shall amount to NLG Nill
- the advance payment of
- the compensation for the additional
- deliveries and services
- shall amount to NLG Nill
================
so that the Tenant in the aggregate
shall be due NLG 113,281.25
in words: ONE HUNDRED AND THIRTEEN THOUSAND TWO HUNDRED AND EIGHTY-ONE
DUTCH GUILDERS AND TWENTY-FIVE CENTS, to be increased with the statutory
due V.A.T. or the amount equivalent thereto as referred to under 5.
4.6 In view of the date that the present Agreement comes into force, the first
payment shall relate to the period of 1 July 1993 up to including 30
September 1993, and the amount due with respect to this initial period
shall be NLG 113,281.25, to be increased with the statutory due V.A.T. or
the amount equivalent thereto as referred to under 5. The Tenant shall pay
the said amount before or on 1 July 1993.
Initial Landlord: (Initial) Initial Tenant: (Initial)
<PAGE>
-4-
V.A.T.
5.1 All amounts stated in the present Agreement shall be exclusive of V.A.T.
The Tenant shall be due V.A.T. over the rent and the advance payment of the
compensation for the additional deliveries and services. The V.A.T. shall
be charged by the Landlord to the Tenant and shall be paid simultaneously
with the payment of the rent and the compensation for the additional
deliveries and services, or the advance payment thereof.
5.2 The Tenant herewith grants an irrevocable power of attorney to the Landlord
to also on behalf of him submit a petition as referred to in Section 11
paragraph 1 sub b under 5 of The Netherlands Act on the V.A.T. of 1968 (Wet
op de Omzetbelasting 1968), a so-called option-petition for a charged lease
(optieverzoek tot belaste verhuur). On request it shall co-sign the said
request within fourteen days after it has received the same from the
Landlord for the purposes of co-signing, and shall see to it that it will
be returned to the Landlord.
5.3 If the petition is not submitted within the period stated for that purpose
by the law, or if it is rejected, the Tenant shall in addition to the rent
and the compensation for the additional deliveries and services, or the
advance payment thereof, be due an amount that is equal to the amount of
the V.A.T. that would have been due if the petition would have been
granted. The same provision applies if the petition is granted as per a
later date than the date requested, however only during the period that
ends with the date of commencement of the charged lease.
5.4 If the Tenant proves that it is the fault of the Landlord that the petition
was not submitted in time or was rejected, the amount that is equal to the
amount of the V.A.T. as referred to in 5.3 shall not be due.
5.5 In the event that the Landlord alienates the Leased Premises, or the
building or the complex of which the Leased Premises constitutes a part,
and the new owner also opts for charged lease, the Tenant shall also be
bound by the provisions laid down in the present Clause.
DELIVERIES AND SERVICES
6. With respect to additional deliveries and services to be provided by or on
behalf of the Landlord, the parties agree as follows: that the Landlord
shall provide no additional deliveries and services.
BANK GUARANTEE
7.1 The provisions laid down in Clause 8 of the General Conditions shall apply
to the security to be given by the Tenant. The bank guarantee shall be
issued on the actual date of commencement of the present Agreement.
Initial Landlord: (Initial) Initial Tenant: (Initial)
<PAGE>
-5-
7.2 The amount referred to in Clause 8 paragraph 1 of the General Conditions
shall herewith between the parties be established at NLG 133,105.==, in
words: ONE HUNDRED AND THIRTY-THREE THOUSAND ONE HUNDRED AND FIVE DUTCH
GUILDERS.
CARETAKER
8. Until otherwise stated by the Landlord, the Landlord shall be the
caretaker.
ATTACHMENTS
9. The following attachments belong to the present Agreement, and shall form
an integral part thereof:
- the General Conditions as referred to in 2.1 under a;
- the drawing of the Leased Premises certified by the parties and annexed
to the present Agreement;
- the description of the Leased Premises certified by the parties and
annexed to the present Agreement;
- the bank guarantee as referred to under 7.
SPECIAL PROVISIONS
10.1 The dates mentioned in the present Agreement shall be based on the
presumption that the Landlord will make the Leased Premises available to
the Tenant on 1 July 1993. These dates and periods of payment of rent
shall change proportionately if the Landlord makes the Leased Premises
available to the Tenant at an other date. The Landlord shall not be liable
if the Leased Premises is not completed and made available to the Tenant
within the stipulated time.
10.2 The present Agreement can be deemed rescinded by force of law if (a part
of) the Leased Premises for any reason whatsoever will not be realized, in
which case the parties shall not be due anything towards each other.
10.3 The Tenant herewith declares that he has no objections against any sale of
the Leased Premises by the Landlord to a third party.
10.4 The Tenant shall, after having received written permission to that effect,
have the right to sub-lease the Leased Premises. The Landlord shall
withhold the said permission only if it can have reasonable objections
against the proposed sub-tenant based on the solvency, morality or line of
business of the same. The lease agreement concluded between the Tenant and
his sub-tenant must not deviate from the contents of the present
Agreement, save in so far as the present Agreement contains provisions
that relate exclusively to the legal relationship between the parties.
Initial Landlord: (Initial) Initial Tenant: (Initial)
<PAGE>
-6-
10.5 In connection with the implementation of the Books 3, 5 and 6 and
several Titles of Book 7 of the (new) Dutch Civil Code as per 1 January
1992, in the present Agreement and the General Conditions that constitute
a part thereof as per the said date, the phrase:
1. "rights is rem" shall be read as "restricted rights";
2. "cooperative association" shall be read as "cooperation";
3. "failure in the performance" shall be read as "imputable failure in
the performance";
4. "goods" shall be read as "things";
5. "indivisible" shall be read as "severally";
6. "after summoning and notification of default" shall be read as "after
default";
7. "Section 1302 Dutch Civil Code" shall be read as "(New) Dutch Civil
Code, Book 6, Section 265 up to including 279 (Dutch Civil Code 6:265
et seq.)";
8. "Section 1619 Dutch Civil Code" shall be read as "(New) Dutch Civil
Code 7A, Section 1619 (Dutch Civil Code 7A: 1619)";
9. "Sections 1460 paragraph 1 and 1476 Dutch Civil Code" shall be read
as "(New) Dutch Civil Code, Book 6, Section 9 paragraph 2 (Dutch
Civil Code 6: 9 paragraph 2)";
10. "Section 1624 Dutch Civil Code" shall be read as "(New) Dutch Civil
Code 7A, Section 1624 (New Dutch Civil Code 7A: 1624)"; whereas the
words "not subject to mitigation" shall lapse.
10.6 At the actual date of commencement of the present Agreement the lease
agreement regarding the premises De Waal 11-19 in Best in force between
the parties shall terminate, as well as any further agreements entered
into in relation thereto. All this unless as appears otherwise from the
present Agreement.
EXTRA FACILITIES DE WAAL 11-19
10.7 The Landlord has applied extra facilities in the aforementioned office as
listed in the annexed overview of additional work dated 14 January 1992.
These facilities shall remain the property of the Landlord and shall be
used by and for the account of the Tenant as a good housekeeper, and shall
as regards the daily maintenance be maintained, and if necessary be
repaired or replaced, by the Tenant. The said facilities to an amount of
NLG 306,203.== shall be paid by the Tenant on the basis of annuity in ten
years at an interest of nine percent, by means of a surcharge on the rent
of NLG 47,712.60 per year, being NLG 11,928.15 per quarter (all amounts
exclusive of V.A.T.). This rent surcharge will be paid by the Tenant as
per 15 October 1991 (phase 1).
EXTRA FACILITIES DE WAAL 43-51
10.8 The Landlord shall apply the following extra facilities in the office
located at De Waal 43-51 on behalf of the Tenant, which facilities shall
remain the property of the Landlord, and shall be used by and for the
account of the Tenant as a good housekeeper, and shall be maintained, and
if necessary be repaired or replaced, by the Tenant:
Initial Landlord: (Initial) Initial Tenant: (Initial)
<PAGE>
-7-
a. connection between the office located at De Waal 1119 and the office
located at De Waal 43-51 over two floors with reception room and
representative entrance;
b. air-conditioning installation;
c. cooling installation on behalf of the computer room;
d. separation walls;
e. various adaptations of constructions and installations;
f. additional outside lighting for a budgeted aggregate amount of
approximately NLG 455,000. == excluding V.A.T.
The aforementioned facilities of approximately NLG 455,000.== shall be paid
by the Tenant on the basis of annuity in eight and a half years at an
interest of nine percent by means of a surcharge on the rent. This means
that the annual rent during one and a half year will be increased with an
amount of NLG 79,050.== per year exclusive of V.A.T., being NLG 19,762.50
per quarter (exclusive of V.A.T.).
The budgeted total price of the facilities mentioned in the present Clause
to be installed on commission of the Tenant shall as soon as possible, but
three months after the actual date of commencement of the present Agreement
at the latest, be established finally on the basis of actual costs
incurred, in conformity with invoices to be submitted. At that time the
final surcharge on the rent shall be calculated.
At the option of the Tenant the amount of the extra facilities referred to
in the present Clause may also be paid in the following manner:
the first three years the Tenant only pays nine percent interest over the
total of the costs incurred for these facilities; the remaining five and a
half years the Tenant pays the extra facilities on the basis of annuity
against nine percent interest. In this case the Tenant shall give to the
Landlord a bank guarantee for an amount of NLG 114,000.== (to be increased
with V.A.T.) to be issued on the actual date of commencement of the present
Agreement, as a security for any failure to pay during the first three
years.
LEAVING THE LEASED PREMISES IN THE INTERIM
10.9 If the Tenant desires to leave the Leased Premises in the interim, without
prejudice to the provisions laid down in Clause 10 paragraph 4 the
following provisions shall apply:
- the Tenant shall remain fully liable for all obligations arising from
the present Agreement;
- the Tenant shall redeem the remainder of the costs regarding the
facilities applied in the office located at De Waal 11-19 and the office
located at De Waal 43-51 as referred to in Clause 10 paragraphs 7 and 8
of the present Agreement, which amount shall be paid on leaving the
Leased Premises.
<PAGE>
-8-
VALUE OF THE EXTRA FACILITIES AT THE END OF THE LEASE CONTRACT
10.10 The Landlord shall have the obligation of exertion under the laws of The
Netherlands (inspanningsverplichting) at the end of the lease period of
eight and a half years in conformity with the lease contract to try to
stipulate with a following tenant for the extra facilities that have been
applied in the office located at De Waal 11-19 and the office located at
De Waal 43-51 in Best as referred to in Clause 10 paragraphs 7 and 8 of
the present Agreement. The cash value of this rent surcharge, to be
calculated on the basis of the then current promissory note discount rate
plus two percent and over a period of 10 years at the most, or so much
shorter as the actual lease of the Leased Premises will be, shall be paid
to the Tenant on the day that the lease contract of the next tenant comes
into force.
DEDUCTION ON THE RENT
10.11 The Landlord shall give the Tenant a rent deduction of NLG 130,000. ==
(exclusive of V.A.T.). The Landlord shall to that end give the Tenant a
credit note to be set-off with the first rent payment(s) pursuant to
Clause 4 of the present Agreement.
ONE-TIME CONTRIBUTION FOR THE REARRANGEMENT OF PARKING SPACES
10.12 By way of contribution for the rearrangement of the parking spaces
located at De Waal 11-19, the Tenant shall on the actual date the present
Agreement comes into force pay to the Landlord an estimated amount of NLG
25,000. == to be increased with V.A.T. These estimated expenses shall as
soon as possible, but three months after the actual date the present
Agreement comes into force at the latest, finally be established by the
Landlord on the basis of the actual costs incurred, using invoices that
are to be submitted, after which the balance (if any) shall be set-off
between the parties.
INCREASE OF THE RENT IN CASE OF PROLONGATION OF THE LEASE AGREEMENT
10.13 In the event that the lease agreement is prolonged by the parties
after 31 December 2001, the Landlord shall as then charge no increase of
the rent for the facilities as referred to in Clause 10 paragraphs 7 and
8 of the present Agreement. Neither the Landlord for the facilities as-
referred to in Clause 10 paragraphs 7 and 8 of the present Agreement
charge an increase of the rent for "the Leased Premises" as defined in
Clause 1 paragraph 1 of the present Agreement.
RIGHT OF FIRST REFUSAL
10.14 If the Landlord during the currency of the present Agreement, being as
per 1 July 1993, decides to sell the Leased Premises, the Tenant shall be
the first to be notified thereof by the Landlord by means of a registered
letter with proof of receipt. If the Tenant within two weeks after having
received the said notification fails to notify the Landlord of the fact
that it desires to be a
Initial Landlord: (Initial) Initial Tenant: (Initial)
<PAGE>
-9-
candidate to buy the Leased Premises, the Landlord shall be at liberty to
sell the Leased Premises to third parties, and the obligations of the
Landlord arising from the present Clause shall lapse. If the Tenant does
decide to buy the Leased Premises, the parties shall freely negotiate to
reach an Agreement. In the event that the parties fail to reach such an
Agreement within one month, the Landlord shall be at liberty to sell the
Leased Premises to third parties whereas the obligations of the Landlord
arising from the present Clause shall lapse.
SUBSTITUTING TENANT(S)
10.15 The Tenant shall after approval in writing of the Landlord have the
right to put substituting tenant(s) in his place. The Landlord shall only
refuse the said approval if it can raise reasonable objections against
the proposed substituting tenant(s) on the basis of his solvency,
morality or line of business, etc. The lease Agreement(s) with the
substituting tenant(s) shall be submitted to the Landlord for approval
and shall be concluded at the satisfaction of the Landlord. The contents
of the lease agreements) with the substituting tenant(s) shall not
deviate from the contents of the present Agreement between the parties,
and shall start to run on the day that the present Agreement between the
parties terminates in the interim.
Thus drawn up and signed in duplicate in:
Arnhem, The Netherlands, on 31 March 1993
THE LANDLORD: /s/ Planoform Vastgoed B.V.
(Signature)
Best, The Netherlands, on 31.March 1993
THE TENANT: /s/ European Geographical Technologies B.V.
(Signature)
Initial Landlord: (Initial) Initial Tenant: (Initial)
<PAGE>
EXHIBIT 10.16
EXECUTION COPY
--------------
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
NAVIGATION TECHNOLOGIES CORPORATION,
SHIELDS ENTERPRISES, INC.,
NT ACQUISITIONS CORP.
AND
T. RUSSELL SHIELDS
DATED AS OF JUNE 24, 1996
<PAGE>
TABLE OF CONTENTS
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AGREEMENT AND PLAN OF REORGANIZATION...................................................... 1
ARTICLE I THE MERGER 2
1.01 Merger Agreement; Effective Date; Shareholders....................... 2
1.02 Conversion Formula................................................... 2
1.03 Treatment as Non-Taxable Transaction................................. 2
1.04 Restrictions on Stock................................................ 3
1.05 Shields Engagement Agreement......................................... 3
1.06 Merger Documents..................................................... 3
1.07 Adjustment of Merger Consideration................................... 3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF NAVTECH..................................... 3
2.01 Organization and Good Standing....................................... 4
2.02 Capitalization....................................................... 4
2.03 Authority; No Conflict............................................... 5
2.04 Shares of Common Stock............................................... 6
2.05 Litigation........................................................... 6
2.06 Insurance............................................................ 7
2.07 Finders.............................................................. 7
2.08 Full Disclosure...................................................... 7
2.09 Financial Statements................................................. 7
2.10 Absence of Certain Changes or Events................................. 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SEI........................................ 8
3.01 Organization......................................................... 8
3.02 Capitalization....................................................... 9
3.03 Authority Relative to this Agreement................................. 9
3.04 Financial Statements................................................. 10
3.05 Tax Matters.......................................................... 11
3.06 Absence of Certain Changes or Events................................. 12
3.07 Title and Related Matters............................................ 13
3.08 Intellectual Property Assets......................................... 13
3.09 Insurance............................................................ 16
3.10 Litigation........................................................... 16
3.11 Employee Benefit Plans............................................... 17
3.12 Bank Accounts........................................................ 22
3.13 Contracts............................................................ 22
3.14 Accounts Receivable.................................................. 23
3.15 Inventory............................................................ 24
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3.16 Consulting Commitments............................................... 24
3.17 Compliance with Law.................................................. 24
3.18 Labor Relations; Compliance.......................................... 26
3.19 Leases............................................................... 26
3.20 Finders.............................................................. 26
3.21 Corporate Minutes, Etc............................................... 26
3.22 Insider Transactions................................................. 27
3.23 Employees, Independent Contractors and Consultants................... 27
3.24 No Bonus Payments Contingent on Merger............................... 27
3.25 Full Disclosure...................................................... 28
ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING SUBSIDIARY........................... 28
4.01 Organization......................................................... 28
4.02 Capitalization....................................................... 28
4.03 Authority Relative to this Agreement................................. 28
ARTICLE V CONDUCT OF BUSINESS OF SEI PRIOR TO EFFECTIVE DATE............................. 30
5.01 Conduct of Business of SEI........................................... 30
5.02 Consents............................................................. 31
5.03 Notification of Changes; Disclosure Schedule Updates................. 32
5.04 Further Assurances................................................... 32
5.05 Litigation........................................................... 32
5.06 Cooperation.......................................................... 32
5.07 No Negotiations...................................................... 32
5.08 Negative Covenants................................................... 33
5.09 Negative Covenant of the Principal Shareholder....................... 33
ARTICLE VI CONDUCT OF BUSINESS OF NAVTECH AND SUBSIDIARY................................. 33
6.01 Conduct of Business of NavTech....................................... 33
6.02 Consents............................................................. 33
6.03 Notification of Changes; Disclosure Schedule Updates................. 33
6.04 Litigation........................................................... 34
6.05 Negative Covenants................................................... 34
6.06 Conduct of Business of Subsidiary.................................... 34
ARTICLE VII ADDITIONAL AGREEMENTS........................................................ 34
7.01 Access and Information............................................... 34
7.02 Registration Statement; Prospectus................................... 35
7.03 Further Assurances................................................... 35
7.04 Certain Defaults..................................................... 35
7.05 Communications....................................................... 35
7.06 Employment Agreement................................................. 36
7.07 Expenses............................................................. 36
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7.08 Satisfaction of Obligations to Umeh.................................. 36
7.09 Certain Information.................................................. 36
7.10 Reasonable Best Efforts.............................................. 37
7.11 Proprietary Rights Agreements........................................ 37
7.12 SEI Payments to Profit Sharing Plans................................. 37
7.13 Indemnity to Former Officers and Directors........................... 38
7.14 Tax Returns.......................................................... 38
ARTICLE VIII CONDITIONS PRECEDENT........................................................ 38
8.01 Conditions to NavTech's and SEI's Obligation to Effect the Merger.... 38
8.02 Conditions to Obligation of SEI to Effect the Merger................. 39
8.03 Conditions to Obligations of NavTech and Subsidiary
to Effect the Merger................................................. 41
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER............................................. 45
9.01 Termination.......................................................... 45
9.02 Effect of Termination................................................ 45
9.03 Amendment............................................................ 45
9.04 Extension; Waiver.................................................... 46
ARTICLE X INDEMNIFICATION................................................................ 46
10.01 Representations and Warranties of NavTech............................ 46
10.02 Termination of SEI's Representations and Warranties.................. 46
10.03 Indemnification Obligations of the Principal Shareholder and
other SEI Shareholders............................................... 46
ARTICLE XI CLOSING 46
11.01 Closing.............................................................. 46
11.02 Pre-Closing Actions.................................................. 47
11.03 Exchange of Additional Documents at the Closing...................... 47
11.04 Filing of Merger..................................................... 48
11.05 Authorization of Exchange............................................ 48
ARTICLE XII GENERAL PROVISIONS........................................................... 48
12.01 Notices.............................................................. 48
12.02 Cooperation.......................................................... 49
12.03 Governing Law; Arbitration; Injunctive and Other Relief.............. 49
12.04 Action by NavTech under this Agreement............................... 50
12.05 Waiver............................................................... 50
12.06 Interpretation....................................................... 50
12.07 Severability......................................................... 50
12.08 Miscellaneous........................................................ 50
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement"), dated as of
June 24, 1996, is made and entered into by and among Navigation Technologies
Corporation, a Delaware corporation ("NavTech"), Shields Enterprises, Inc., a
Delaware corporation ("SEI"), NT Acquisitions Corp., a Delaware corporation,
100% of the common stock of which is owned by NavTech ("Subsidiary"), and
T. Russell Shields, the chairman, a director and the principal shareholder of
SEI (the "Principal Shareholder"), with reference to the following:
A. SEI and NavTech desire that NavTech acquire 100% of the common stock
of SEI ("SEI Common Stock") in exchange for shares of Common Stock of NavTech
("NavTech Common Stock").
B. NavTech and SEI have agreed to accomplish this transaction through a
reverse triangular merger whereby Subsidiary will merge into SEI, and SEI will
be the surviving corporation.
C. The Boards of Directors and shareholders of NavTech, SEI and
Subsidiary have approved the proposed merger of Subsidiary into SEI (the
"Merger") in accordance with the Delaware General Corporation Law and the
Agreement and Plan of Merger in the form of Exhibit "A" attached hereto and made
a part hereof (the "Merger Agreement"). The Merger Agreement will be executed
prior to the Effective Date (as hereinafter defined) by SEI and Subsidiary, and
states, among other things, the manner and basis of converting the shares of SEI
Common Stock into shares of NavTech Common Stock, and converting the shares of
Subsidiary into shares of SEI Common Stock.
D. NavTech, SEI, Subsidiary and the Principal Shareholder desire to make
certain representations, warranties and agreements in connection with the
Merger, and also desire to prescribe various conditions precedent to or
concurrent with the Merger, not specifically set forth in the Merger Agreement.
NOW, THEREFORE, in consideration of the mutual premises and
representations, warranties and agreements herein contained, the parties agree
as follows:
<PAGE>
ARTICLE I
THE MERGER
1.01 Merger Agreement; Effective Date; Shareholders. Subject to the
----------------------------------------------
terms and conditions of this Agreement and the Merger Agreement, Subsidiary
shall be merged into SEI pursuant to the Merger Agreement, the separate
existence of Subsidiary shall cease and SEI shall be the surviving corporation
in the Merger and, except for any Excluded Stock (as defined below), NavTech
will be the owner of 100% of the outstanding shares of SEI Common Stock. The
Merger shall be consummated when a properly executed and certified copy of the
Merger Agreement is filed with the Secretary of the State of Delaware (the time
of completion of such filing being hereinafter referred to as the "Effective
Time" and the date thereof as the "Effective Date"). Holders of record of the
outstanding shares of SEI Common Stock immediately prior to the Effective Time
are hereinafter collectively referred to as the "SEI Shareholders."
1.02 Conversion Formula. At the Effective Time, each then outstanding
------------------
share of SEI Common Stock (other than those shares of SEI Common Stock held by
any of the SEI Shareholders who properly exercise any appraisal rights available
under applicable law (the "Excluded Stock")) shall be converted into a number of
shares of NavTech Common Stock determined as follows:
(a) Each outstanding share of SEI Common Stock other than the Excluded
Stock shall be converted into 6,543.09045 shares (the "Exchange Ratio") of
NavTech Common Stock. After aggregating all fractional shares due to each SEI
Shareholder into the nearest whole number of shares, the value of any remaining
fractional share shall be paid to such SEI Shareholder in cash in an amount
equal to such fraction multiplied by the initial offering price at which shares
of NavTech Common Stock have been or are being offered to the public, before
underwriting discounts (the "IPO Offering Price"), in the initial public
offering referred to in Section 8.01(b) (the "IPO").
(b) Each option to acquire shares of SEI Common Stock outstanding at the
Effective Time (the "SEI Options") shall be converted into an option to acquire
that number of shares of NavTech Common Stock (the "Exchange Options") equal to
the product obtained by multiplying (x) the aggregate number of shares of SEI
Common Stock which could be acquired upon exercise of such SEI Option by (y) the
Exchange Ratio. The per share exercise price for each converted SEI Option
shall be equal to the quotient obtained by dividing (x) the original exercise
price of such SEI Option by (y) the Exchange Ratio.
1.03 Treatment as Non-Taxable Transaction. The parties intend that the
------------------------------------
Merger shall constitute a non-taxable transaction under the Internal Revenue
Code of 1986, as amended. The parties shall treat the Merger in a manner
consistent with this Section 1.03 for all purposes on their respective books and
records, both for financial accounting and tax accounting purposes.
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1.04 Restrictions on Stock. All shares of NavTech Common Stock received
---------------------
by holders of SEI Common Stock in connection with the Merger will constitute
restricted securities and may not be sold or otherwise transferred unless
registered under the Securities Act of 1933, as amended (the "Act"), and state
securities or "blue sky" law or exempt from such registration. The stock
certificates evidencing the shares of NavTech Common Stock to be received in the
Merger will contain a legend to the foregoing effect.
1.05 Shields Engagement Agreement. On the Effective Date, the Shields
----------------------------
Engagement Agreement dated as of September 1, 1994 among NavTech, SEI and the
Principal Shareholder shall terminate, and all stock options granted by NavTech
thereunder shall terminate and be of no further force or effect. No such
options shall be exercised by SEI prior to the Effective Date.
1.06 Merger Documents. This Agreement, the Merger Agreement and all
----------------
other agreements, covenants and documents of any type to be executed or
delivered pursuant to or as contemplated by this Agreement on or prior to the
Effective Date are hereinafter collectively referred to as the "Merger
Documents". Any of the Merger Documents to be executed and/or delivered by
NavTech, Subsidiary or SEI shall hereinafter be referred to as the "NavTech
Merger Documents", "Subsidiary Merger Documents" and "SEI Merger Documents",
respectively.
1.07 Adjustment of Merger Consideration. In the event of any
----------------------------------
reclassification, recapitalization, stock split, combination, exchange of
shares, stock dividend or similar transaction with respect to the NavTech Common
Stock, or any change or conversion of NavTech Common Stock into other securities
or property or any other dividend or distribution, is made with respect thereto,
prior to the Effective Time, appropriate and proportionate adjustments shall be
made to the Exchange Ratio, share and per share price references (as applicable)
and all references to the Exchange Ratio and such other references in this
Agreement shall be deemed to be to such Exchange Ratio and such other references
as so adjusted.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF NAVTECH
Except as disclosed or excepted on the NavTech Schedule attached to this
Agreement as Exhibit "C" or in the June 15, 1996 draft preliminary prospectus
being prepared as part of NavTech's registration statement on Form S-1 under the
Securities Act of 1933 as amended, for purposes of the IPO, which is made a part
hereof, NavTech represents and warrants to SEI and the SEI Shareholders as set
forth below; provided, however, that all NavTech representations and warranties
are subject in their entirety to any contrary knowledge of the Principal
Shareholder and Richard Weiland, and no such representation or warranty is made
for their benefit. Any reference herein to the "best knowledge" of NavTech
shall mean the knowledge which is, or after due diligence and inquiry
appropriate under the circumstances would be, in the possession of the President
of NavTech (the "NavTech Responsible Officer"). For the purposes of this
ARTICLE II,"Materially Adverse Effect" means any materially adverse effect upon
(i) the business, assets, liabilities, financial condition or results of
operations of NavTech, or, (ii) as far as the NavTech
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Responsible Officer can reasonably foresee, upon the prospects of
NavTech, or (iii) upon the ability of NavTech to perform in all material
respects its obligations under this Agreement resulting from any act, omission,
situation, status, event, or undertaking, either singly or taken together.
2.01 Organization and Good Standing. NavTech is a corporation duly
------------------------------
organized, validly existing, and in good standing under the laws of the State of
Delaware and has corporate power and authority to carry on its business as it is
now being conducted. NavTech is duly qualified or licensed to do business in
each jurisdiction in which the nature of its business or properties makes such
qualification or licensing necessary, except to the extent that any failures to
qualify or obtain a license are not in the aggregate materially adverse to
NavTech.
2.02 Capitalization.
--------------
(a) As of the date hereof, the authorized common stock of NavTech
consists of 350,000,000 shares of common stock, par value $.001 per share, of
which 137,304,003 were issued and outstanding on May 31, 1996. The number of
shares of common stock outstanding may be changed as the result of the exercise
of outstanding options or the conversion of common stock to preferred stock
subsequent to May 31, 1996. As of the date hereof, the authorized preferred
stock of NavTech consists of 210,000,000 shares of preferred stock, of which
140,467,238 were issued and outstanding as of May 31, 1996. The number of shares
of preferred stock outstanding may be increased as the result of the exercise of
the conversion of common stock to preferred stock subsequent to May 31, 1996.
The Company expects to issue up to 30,000,000 shares of preferred stock in a
private financing in June, 1996 (the "Private Financing Shares"), which number
of shares is subject to adjustment in accordance with terms of a Stock Purchase
Agreement to be entered into by NavTech and others contemporaneously herewith
(the "Stock Purchase Agreement"). All of such outstanding shares have been, and
the Private Financing Shares will be, duly authorized and validly issued, fully
paid and nonassessable, and have been, and the Private Financing Shares will be,
issued in full compliance with all applicable federal and state securities laws.
(b) As of May 31, 1996, an aggregate of 33,766,092 shares of NavTech
Common Stock were available for purchase and issuance pursuant to NavTech's
stock option plans, of which, as of such date, 29,808,277 shares were subject to
issued options and 3,957,815 shares were reserved for issuance, which numbers
may change as the result of the exercise or termination of outstanding options
subsequent to May 31, 1996. In addition, NavTech has granted SEI options to
purchase 2,000,000 shares of NavTech Common Stock which options will be canceled
at the Effective Date, and NavTech will grant options for 10,000,000 shares to
T. Russell Shields on or prior to the Effective Date, in accordance with the
terms set forth in the Employment Agreement (as defined in Section 7.06 of this
Agreement). Except as set forth in this Section 2.02, since May 31, 1996,
NavTech has not authorized or issued any other options to purchase shares of
NavTech Common Stock. Except as set forth in this Section 2.02, as of the date
hereof, NavTech does not have any shares of its capital stock issued or
outstanding and does not have any other outstanding subscriptions, options,
warrants, rights or other agreements or
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commitments obligating NavTech to issue shares of its capital stock or
securities convertible into capital stock. Except as set forth in Section
2.02(c), as of the date hereof, NavTech has no declared and unpaid or non-
effected stock dividends or stock splits.
(c) Immediately prior to the occurrence of the IPO and pursuant to the
terms set forth in an amended Certificate of Incorporation substantially in the
form of Exhibit G hereto (the "Amended NavTech Certificate"), NavTech will
effect a reverse stock split with respect to the outstanding common stock of
NavTech and a conversion of all preferred stock of NavTech to NavTech Common
Stock. The Private Financing Shares shall convert to NavTech Common Stock on
the basis set forth in the Stock Purchase Agreement.
2.03 Authority; No Conflict.
----------------------
(a) This Agreement constitutes the legal, valid, and binding
obligation of NavTech, enforceable against NavTech in accordance with its terms.
NavTech has the power to enter into this Agreement, the Merger Agreement and the
other NavTech Merger Documents and to carry out its obligations under all of the
foregoing. The execution and delivery of this Agreement and the other NavTech
Merger Documents and the consummation of the transactions contemplated under all
of the Merger Documents, have been duly authorized by NavTech's Board of
Directors and, to the extent legally required, duly approved by NavTech's
shareholders. No other corporate proceedings on the part of NavTech are
necessary to authorize this Agreement, the Merger Agreement and the transactions
contemplated by the Merger Documents.
(b) Neither the execution and delivery of this Agreement nor the
consummation of the Merger will, directly or indirectly (with or without notice
or lapse of time):
(i) contravene, conflict with, or result in a violation of (A)
any provision of the Certificate of Incorporation or Bylaws of NavTech, or (B)
any resolution adopted by NavTech's Board of Directors or the NavTech
shareholders;
(ii) contravene, conflict with, or result in a violation of, or
give any governmental or quasi-governmental authority of any nature (including
any governmental agency, branch, department, official, or entity and any court
or other tribunal) ("Governmental Body") or other individual, corporation,
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, labor union, or other entity
("Person") the right to challenge this Agreement or the Merger or to exercise
any remedy or obtain any relief under any federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty ("Governmental Authorization"), or any award, decision, injunction,
judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered
by any Governmental Body or by any arbitrator to which NavTech, or any of the
assets owned or used by NavTech, may be subject;
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(iii) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any approval, consent,
license, permit, waiver, or other authorization issued, granted, given, or
otherwise made available by or under the authority of any Governmental Body or
pursuant to any Governmental Authorization that is held by NavTech or that
otherwise relates to the business of, or any of the assets owned or used by,
NavTech, except such approvals, consents, licenses, permits, waivers and
authorizations, the absence of which could not reasonably be expected to have a
Materially Adverse Effect;
(iv) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any material agreement, contract, obligation,
promise, or undertaking (whether written or oral and whether express or implied)
to which NavTech is legally bound;
(v) result in the imposition or creation upon or with respect
to any of the assets owned or used by NavTech of any charge, claim, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, transfer,
receipt of income, or exercise of any other attribute of ownership, except such
charges, claims, conditions, equitable interests, liens, options, pledges,
security interests, rights of first refusal, and restrictions the existence of
which could not reasonably be expected to have a Materially Adverse Effect.
(c) Except as described in this Agreement, no consent of any Person
who is not a party to this Agreement, nor consent of or filing with any
Governmental Authority, is required to be obtained on the part of NavTech to
permit, or avoid any material adverse consequence by reason of, the Merger.
2.04 Shares of Common Stock. The shares of NavTech Common Stock issuable
----------------------
pursuant to the Merger will, when issued and delivered to the SEI Shareholders
in accordance with the Merger Agreement, be duly and validly authorized and
issued (with no further action necessary on the part of the NavTech shareholders
or Board of Directors of NavTech), fully paid, nonassessable voting shares.
2.05 Litigation. There is no suit, action or proceeding pending or,
----------
to the best knowledge of NavTech, threatened against NavTech which, if adversely
determined, would materially and adversely affect the business, financial
condition or results of operations of NavTech, nor is there any judgment,
decree, injunction, ruling or order of any court, governmental department,
commission, agency, instrumentality or arbitrator outstanding against NavTech
having any such effect. There are no suits, actions or proceedings pending or,
to the best knowledge of NavTech, threatened against or affecting NavTech which
question or challenge the validity of this Agreement or the Merger.
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<PAGE>
2.06 Insurance. NavTech has insurance on its properties in such amounts
---------
as are reasonable and deemed adequate by its Board of Directors or management,
against all risks usually insured against by persons operating similar
properties or businesses in the localities where such properties are located
under, to the best of NavTech's knowledge, valid and enforceable policies issued
by insurers of recognized responsibility.
2.07 Finders. All negotiations relative to this Agreement and the
-------
transactions contemplated hereby have been carried on by NavTech directly with
SEI and without the intervention of any person, either as a result of the act of
NavTech, or, to the knowledge of NavTech, otherwise, in such a manner as to give
rise to any valid claim against any of the parties for a finder's fee or other
similar payment.
2.08 Full Disclosure. No statement by NavTech contained in this
---------------
Agreement and the Exhibits attached hereto or any written statement or
certificate furnished or to be furnished to SEI pursuant to the express
requirements hereof as of its respective date contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not materially and adversely misleading
in light of the circumstances under which they were made and the other
information set forth in the June 15, 1996 draft preliminary prospectus being
prepared as part of NavTech's registration statement on Form S-1 under the
Securities Act of 1933 as amended, for purposes of the IPO.
2.09 Financial Statements.
--------------------
(a) NavTech has delivered to SEI copies of NavTech's unaudited balance
sheet as of December 31, 1995, and the related statements of earnings,
shareholders' equity and cash flow for the year then ended, and copies of
NavTech's unaudited balance sheet as of March 31, 1996 and the related
statements of earnings for the three months than ended. The balance sheet as of
March 31, 1996 is hereinafter referred to as the "NavTech Balance Sheet", and
March 31, 1996 is hereinafter referred to as the "NavTech Balance Sheet Date".
(b) All financial statements delivered pursuant to Section 2.09(a)
hereof have been prepared in accordance with generally accepted accounting
principles consistently followed throughout the periods indicated ("GAAP"). The
financial statements present fairly the financial position of NavTech as of the
dates thereof and for the periods indicated, subject to normal year-end
adjustments, which are not expected to be, singly, or in the aggregate,
material. To its best knowledge, except as and to the extent reflected or
reserved against in such financial statements (including the notes thereto),
NavTech did not have, as of the dates of such financial statements, any
liabilities or obligations (absolute or contingent) of a nature required to be
reflected on a balance sheet (or the notes thereto) prepared in accordance with
GAAP. The reserves, if any, reflected on the NavTech Balance Sheet as of the
NavTech Balance Sheet Date are reasonable.
2.10 Absence of Certain Changes or Events. Since the date of this
------------------------------------
Agreement, NavTech has not declared, set aside or paid any dividend or other
distribution (whether in cash,
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stock or property) in respect of the capital stock of NavTech or effected any
redemption or other acquisition of its capital stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SEI
Except as disclosed or excepted on the SEI Schedule attached to this
Agreement as Exhibit "D" and made a part hereof, SEI represents and warrants to
NavTech and Subsidiary as set forth below. Any reference herein to the "best
knowledge" of SEI means the knowledge which is, or after due diligence and
inquiry appropriate under the circumstances would be, in the possession of the
Principal Shareholder, Fidelis N. Umeh, Mitchell Morris or Richard Weiland (the
"SEI Responsible Officers"), it being understood, however, that no SEI
Responsible Officer shall be under any obligation to personally conduct any due
diligence or inquiry. For the purposes of this ARTICLE III,"Materially Adverse
Effect" means any materially adverse effect (i) upon the business, assets,
liabilities, financial condition, or results of operations of SEI or, (ii) as
far as SEI Responsible Officers or the Principal Shareholder can reasonably
foresee, upon the prospects of SEI, or (iii) upon the ability of SEI to perform
in all material respects its obligations under this Agreement resulting from any
act, omission, situation, status, event, or undertaking, either singly or taken
together.
3.01 Organization. SEI is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Delaware and has
power and authority to carry on its business as it is now being conducted. SEI
is duly qualified or licensed to do business in each jurisdiction in which the
nature of its business or properties makes such qualification or licensing
necessary, except to the extent that any failures to qualify or obtain a license
could not reasonably be expected to have a Materially Adverse Effect. Section
3.01 of the SEI Schedule contains a true and complete listing of the locations
of all offices and facilities of SEI and a true and complete list of all states
in which SEI maintains any employees. Section 3.01 of the SEI Schedule contains
a true and complete list of all states in which SEI is duly qualified to
transact business as a foreign corporation. SEI does not own, or have any
agreement to acquire, any equity securities, other securities or any other
ownership interest of any nature whatsoever in a corporation, general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, labor union, or other entity or any direct or
indirect equity ownership interest in any other business.
As of the date hereof, SEI EnRoute L.L.C. has been completely liquidated in
accordance with the Liquidation Agreement among SEI EnRoute, L.L.C., SEI and
Yung Chun Tsau dated as of April 30, 1996.
Section 3.01 of the SEI Schedule contains true and compete copies of SEI's
Certificate of Incorporation and Bylaws, as in effect on the date hereof.
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<PAGE>
On the Effective Date, SEI will be the owner of record of, and have the
entire beneficial interest in, 31,143,636 shares of NavTech Common Stock.
3.02 Capitalization. The authorized capital stock of SEI consists of
--------------
20,000 shares of SEI Common Stock, of which 10,764 were outstanding as of the
date hereof, and an additional 657 shares of SEI common stock will be issued to
Fidelis N. Umeh in consideration for the Umeh Release Agreement (as defined in
Section 7.08) on or prior to the Effective Date. All of such outstanding shares
have been duly authorized and are validly issued, fully paid and nonassessable,
and have been issued in full compliance with all applicable federal and state
securities laws. Section 3.02 of the SEI Schedule contains a true and complete
list of the record holders of such outstanding shares. Except options to acquire
not more than 611.331913 shares of SEI Common Stock, at a price per share of not
less than an amount equal to the product obtained by multiplying $0.85 by the
Exchange Ratio, SEI does not have any outstanding subscriptions, options,
warrants, rights or other agreements or commitments obligating SEI to issue
shares of its capital stock or securities convertible into its capital stock.
Any repurchases by SEI of any of its securities have been and, through the
Effective Date, will be in accordance with all applicable laws.
3.03 Authority Relative to this Agreement.
------------------------------------
(a) This Agreement constitutes the legal, valid, and binding obligation
of each of SEI and the Principal Shareholder, and is enforceable against each of
SEI and the Principal Shareholder in accordance with its terms. SEI has the
power to enter into this Agreement, the Merger Agreement and the other SEI
Merger Documents and to carry out its obligations under all of the foregoing.
The execution and delivery of this Agreement and the other SEI Merger Documents,
and the consummation of the transactions contemplated under all of the Merger
Documents, have been duly authorized by SEI's Board of Directors and, following
such authorization by SEI's Board of Directors, were duly approved by the SEI
Shareholders. No other corporate proceedings on the part of SEI are necessary to
authorize this Agreement, the Merger Agreement and the transactions contemplated
by the Merger Documents.
(b) Neither the execution and delivery of this Agreement by SEI and the
Principal Shareholder nor the consummation of the Merger will, directly or
indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A)
any provision of the Certificate of Incorporation or Bylaws of SEI, or (B) any
resolution adopted by SEI's Board of Directors or the SEI Shareholders;
(ii) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to challenge this Agreement
or the Merger or to exercise any remedy or obtain any relief under, any
Governmental Authorization other than appraisal rights
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available to the SEI Shareholders under the Delaware General Corporation Law, or
any award, decision, injunction, judgment, order, ruling, subpoena, or verdict
entered, issued, made, or rendered by any Governmental Body or by any arbitrator
to which SEI, or any of the assets owned by SEI, may be subject;
(iii) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any approval, consent,
license, permit, waiver, or other authorization issued, granted, given, or
otherwise made available by or under the authority of any Governmental Body or
pursuant to any Governmental Authorization that is held by SEI or that otherwise
relates to the business of, or any of the assets owned or used by, SEI, except
such approvals, consents, licenses, permits, waivers and authorizations, the
absence of which could not reasonably be expected to have a Materially Adverse
Effect;
(iv) cause SEI to become subject to, or to become liable for the
payment of, any Taxes (as defined in Section 3.05(b) below);
(v) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any material agreement, contract, obligation,
promise, or undertaking (whether written or oral and whether express or implied)
to which SEI is legally bound;
(vi) result in the imposition or creation upon or with respect
to any of the assets owned or used by SEI of any charge, claim, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, transfer,
receipt of income, or exercise of any other attribute of ownership, except such
charges, claims, conditions, equitable interests, liens, options, pledges,
security interests, rights of first refusal, and restrictions the existence of
which could not reasonably be expected to have a Materially Adverse Effect.
(c) Except as described in this Agreement, no consent of any Person
who is not a party to this Agreement, nor consent of or filing with any
Governmental Authority, is required to be obtained on the part of SEI to permit,
or avoid any material adverse consequence by reason of, the Merger and to
permit, or avoid any material adverse consequence by reason of, the continuation
by SEI as a subsidiary of NavTech of the business activities of SEI as
previously conducted by SEI without material adverse change.
3.04 Financial Statements.
--------------------
(a) SEI has delivered to NavTech copies of SEI's balance sheets as of
September 30, 1995, September 30, 1994, and the related statements of earnings,
shareholders' equity and cash flow for the years then ended, together with the
independent auditor's report thereon, and copies
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of SEI's unaudited balance sheet as of April 30, 1996 and the related
statements of earnings for the seven months than ended. The balance sheet as of
April 30, 1996 is hereinafter referred to as the "Balance Sheet", and April 30,
1996 is hereinafter referred to as the "Balance Sheet Date."
(b) All financial statements delivered pursuant to Section 3.04(a)
hereof have been prepared in accordance with GAAP. The restatement of any of the
financial statements of SEI for any period ending on or before the Balance Sheet
Date in accordance with GAAP would not have resulted in the creation or
imposition of any material liability upon SEI of any nature whatsoever,
including without limitation any liability for Taxes or under any Plan of SEI,
as defined in Section 3.11 below. The financial statements present fairly the
financial position of SEI as of the dates thereof and for the periods indicated,
subject, in the case of the unaudited financial statements, to normal year-end
adjustments, which are not singly, or in the aggregate, material. To its best
knowledge, except as and to the extent reflected or reserved against in such
financial statements (including the notes thereto), SEI did not have, as of the
dates of such financial statements, any liabilities or obligations (absolute or
contingent) of a nature required to be reflected on a balance sheet (or the
notes thereto) prepared in accordance with GAAP. The reserves, if any, reflected
on the Balance Sheet as of the Balance Sheet Date are reasonable.
(c) SEI has no material liabilities, obligations or commitments of any
nature (absolute, accrued, contingent or otherwise, whether matured or
unmatured) ("Liabilities") except (i) Liabilities fully reflected or reserved
against on the Balance Sheet, (ii) Liabilities incurred subsequent to the
Balance Sheet Date in the ordinary course of business and consistent in nature
and amount with past practice and (iii) Liabilities relating to the transactions
contemplated by this Agreement, including, without limitation, the Merger.
(d) To the best knowledge of SEI, there exists no material weakness in
SEI's system of internal controls for the maintenance of its books of account.
3.05 Tax Matters.
-----------
(a) SEI has duly and timely, properly and accurately filed all Tax (as
defined below) returns and reports required to be filed by it, including all
federal, foreign, state and local Tax returns and estimates for all years and
periods (and portions thereof) for which any such returns, reports or estimates
were due, except for such returns, reports and estimates the failure of which to
be timely filed could not reasonably be expected to have a Materially Adverse
Effect. All such returns, reports and estimates were prepared in the manner
required by applicable law. SEI has duly paid all Taxes and other charges due
to, or claimed to be due from SEI by, federal, state, local or foreign taxing
authorities. There are no pending assessments, asserted deficiencies or claims
for additional Taxes that have not been paid. The reserves for Taxes, if any,
reflected on the Balance Sheet, together with any amounts shown on Schedule
3.05(a) of the SEI Schedule, are sufficient to satisfy in full any and all
liability for Taxes for all periods through and including the Effective Time. To
the best knowledge of SEI, there have been no examinations of any of SEI's Tax
returns or reports by any applicable governmental agency. No state of facts
exists or
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has existed which would constitute grounds for the assessment of further Tax
liability beyond that shown on the respective Tax reports, returns or estimates.
There are no outstanding agreements or waivers extending the statutory period of
limitation applicable to any Tax return or the return or report for any period.
(b) "Tax" or "Taxes" shall mean all Federal, state, county, municipal
and foreign taxes of every kind (including without limitation, gross and net
income, gross and net receipts, capital gains, excess profits and minimum taxes,
taxes on tax preferences, capital, net worth, franchise, sales, use, rental,
value-added, stamp, documentary, excise, motor vehicle, license, qualification,
property and other similar taxes), charges and withholdings, levies, imposts,
duties, fees and deductions imposed by any government or political subdivision
thereof, quasi-governmental authority or taxing jurisdiction or authority,
together with all interest, additions to tax, penalties and similar add-ons
payable with respect thereto, enacted or imposed upon SEI or any of its property
or income.
(c) SEI validly elected to be taxed as an S Corporation pursuant to
Subchapter S of the Internal Revenue Code of 1986, as amended, effective with
its fiscal year beginning October 1, 1987, and has remained qualified as an S
Corporation at all times subsequent thereto.
3.06 Absence of Certain Changes or Events. Since the Balance Sheet
------------------------------------
Date, SEI has not (a) suffered any material adverse change in its financial
condition or in the operations of its business; (b) suffered any damage,
destruction or loss, whether covered by insurance or not, materially and
adversely affecting its properties or business; (c) declared, set aside or paid
any dividend (or other distribution) (whether in cash, stock or property) in
respect of the capital stock of SEI or any redemption or other acquisition of
its capital stock; (d) granted any increase in excess of 10% in the compensation
payable or to become payable by SEI to any officer or employee earning in excess
of One Hundred Thousand Dollars ($100,000) per year, (e) engaged in any activity
or entered into any material commitment or transaction (including without
limitation any borrowing or capital expenditure) other than in the ordinary
course of business or as contemplated by this Agreement, including, without
limitation, the Merger; (f) incurred any liabilities (absolute or contingent)
except in the ordinary course of business and consistent with past practice or
as contemplated by this Agreement, including, without limitation, the Merger;
(g) made any capital expenditure or commitment for additions to property, plant
or equipment in excess of $250,000 in the aggregate; (h) except as provided in
Section 3.13(j), paid, loaned or advanced any amount to, or sold, transferred or
leased any properties or assets to, or entered into any agreement or arrangement
with any officer, director or shareholder or any affiliate or associate of any
of the foregoing (the "SEI Affiliates"); (i) made any amendment to or terminated
(other than by expiration in accordance with its terms) any agreement which, if
not so amended or terminated, would be required to be disclosed on the SEI
Schedule; (j) adopted any new or amended any existing Plan or Other Benefit
Obligation (as defined in Section 3.11(a) below); or (k) agreed to take any
action described in this Section 3.06 or which would constitute a breach of any
of the representations contained in this Agreement.
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3.07 Title and Related Matters. SEI does not own any real property.
-------------------------
Section 3.07 of the SEI Schedule contains a complete and accurate list of all
leaseholds or other interests therein owned by SEI. SEI owns all the properties
and assets (whether personal and whether tangible or intangible) that it
purports to own, including all of the properties and assets reflected on the
Balance Sheet (except for assets held under capitalized leases disclosed in
Section 3.07 of the SEI Schedule and personal property sold since the Balance
Sheet Date in the ordinary course of business and consistent with past
practice), and all of the properties and assets purchased or otherwise acquired
by SEI since the Balance Sheet Date (except for personal property acquired and
sold since the Balance Sheet Date in the ordinary course of business and
consistent with past practice). All properties and assets reflected in the
Balance Sheet are free and clear of any charge, claim, condition, equitable
interest, lien, encumbrance, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, transfer,
receipt of income, or exercise of any other attribute of ownership, except, with
respect to (i) security interests described in Section 3.07 of the SEI Schedule
securing specified liabilities or obligations, with respect to which no default
(or event that, with notice or lapse of time or both, would constitute a
default) exists, (ii) liens for taxes not yet due, (iii) liens of landlords,
vendors, warehousemen and mechanics , if any, as are not material in character,
amount or expense and which could not reasonably be expected to have a
Materially Adverse Effect and (iv) such imperfections of title, easement and
encumbrances, if any, as are not material in character, amount or expense and
could not reasonably be expected to have a Materially Adverse Effect. All
properties material to the operations of SEI are reflected on the Balance Sheet
to the extent GAAP requires the same to be reflected.
3.08 Intellectual Property Assets.
----------------------------
(a) Intellectual Property Assets--The term "Intellectual Property
----------------------------
Assets" includes:
(i) the names "Shields Enterprises, Inc.", "SEI Information
Technology", "SEI", "SEI EnRoute", and all other fictional business names,
trading names, registered and unregistered trademarks, service marks, and
applications (collectively, "Marks");
(ii) all patents, patent applications, and inventions and
discoveries that have been developed and exploited by SEI;
(iii) all copyrights in both published works and unpublished works
(collectively, "Copyrights");
(iv) all rights in mask works (collectively, "Rights in Mask
Works"); and
(v) all know-how, trade secrets, confidential information,
customer lists, software, technical information, data, process technology,
plans, drawings, and blueprints (collectively, "Trade Secrets");
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owned, used, or licensed by SEI as licensee or licensor.
(b) Agreements. Section 3.08(b) of the SEI Schedule contains a complete
----------
and accurate list and summary description of material provisions, including any
royalties paid or received by SEI, of all material agreements, contracts,
obligations, promises, or undertakings (whether written or oral and whether
express or implied) relating to the Intellectual Property Assets to which SEI is
a party or by which SEI is bound, except for perpetual, paid-up licenses for
commonly available software programs with a value of less than Five Thousand
Dollars ($5,000) each under which SEI is the licensee. There are no outstanding
and, to the best knowledge of SEI, no threatened disputes or disagreements with
respect to any such agreement. To the best knowledge of SEI, the consummation
of the transactions contemplated by this Agreement will not alter or impair any
right, title or interest of SEI in the Intellectual Property Assets.
(c) Know-How Necessary for the Business.
-----------------------------------
(i) To the best knowledge of SEI, the Intellectual Property Assets
are all those necessary for the operation of SEI's business as it is currently
conducted (it being understood that SEI is now developing and will continue to
develop Intellectual Property Assets internally which will be necessary for the
conduct of its business as envisioned in its business plans).
(ii) To the best knowledge of SEI, in connection with the execution
of its business plan (copies of which have been delivered to NavTech), SEI will
not be required to license or otherwise acquire rights to use intellectual
property rights owned or controlled by a third party on terms or conditions that
could reasonably be expected to have a Materially Adverse Effect.
(iii) Except as set forth in Section 3.08(c) of the SEI Schedule, all
current employees of SEI have executed written agreements with SEI that assign
to SEI all rights to any inventions, improvements, discoveries, or Intellectual
Property Assets relating to the business of SEI.
(d) Marks.
------
(i) Section 3.08(d) of the SEI Schedule contains a complete and
accurate list of all material Marks used by SEI in its business. SEI is the
owner of all right, title, and interest in and to each of the Marks, or has the
right to use each of the Marks, free and clear of all liens, security interests,
charges, encumbrances, and other adverse claims.
(ii) All Marks that have been registered with the United States
Patent and Trademark Office are currently in compliance with all formal legal
requirements (including the timely post-registration filing of affidavits of use
and incontestability and renewal applications), and are valid and enforceable,
and are not subject to any maintenance fees or taxes or actions falling due
within ninety days after the date of this Agreement.
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(iii) No Mark is now or, to the best knowledge of SEI, has been
involve any opposition, invalidation, or cancellation and, to the best of SEI's
knowledge, no such action is threatened with the respect to any of the Marks.
(iv) To the best of SEI's knowledge, there is no potentially
interfering Mark or Mark application of any third party.
(v) No Mark has been challenged or, to the best of SEI's knowledge,
is infringed or threatened in any way. None of the Marks used by SEI is alleged
to infringe or, to the best of SEI's knowledge, infringes any trade name,
trademark, or service mark of any third party.
(vi) All products and materials containing a Mark bear the proper
federal registration notice where permitted by law.
(e) Patents.
-------
(i) Section 3.08(e) of the SEI Schedule contains a complete and
accurate list of patent applications for which SEI is the assignee. To the best
knowledge of SEI, all of SEI's right, title, and interest in and to the subject
matter of each such patent application is free and clear of all liens, security
interests, charges, encumbrances and other adverse claims.
(ii) SEI does not own any patents.
(iii) All patent applications that have been filed with the United
States Patent and Trademark Office are currently in compliance with all formal
legal requirements.
(iv) Notwithstanding anything to the contrary contained in this
Section 3.08(e), no representation or warranty is made hereby with respect to
any patent or patent applications pertaining to the "EnRoute" technology.
(f) Copyrights.
----------
(i) Section 3.08(f) of the SEI Schedule contains a complete and
accurate list of all material Copyrights used by SEI in its business. To the
best of SEI's knowledge, it is the owner of all right, title, and interest in
and to each of the Copyrights, free and clear of all liens, security interests,
charges, encumbrances and other adverse claims.
(ii) No Copyright has been challenged or, to the best of SEI's
knowledge, is infringed or has been threatened in any way. None of the subject
matter of any of the Copyrights is alleged to infringe or, to the best of SEI's
knowledge, infringes any copyright of any third party or is a derivative work
based on the work of a third party.
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(g) Maskworks. SEI does not own (directly or indirectly) or license any
---------
Maskwork.
(h) Trade Secrets.
-------------
(i) With respect to each material Trade Secret used by SEI in its
business, the documentation relating to such Trade Secret is current, accurate,
and sufficient in detail and content to reasonably identify and explain it and
to allow its full and proper use without reliance on the knowledge or memory of
any single individual.
(ii) SEI has taken all reasonable precautions to protect the secrecy,
confidentiality, and value of SEI's material Trade Secrets.
(iii) To the best of SEI's knowledge, the Trade Secrets are not part
of the public knowledge or literature, and have not been used, divulged, or
appropriated either for the benefit of any Person or to the detriment of SEI. No
Trade Secret is subject to any adverse claim or, to the best of SEI's knowledge,
has been challenged or threatened in any way.
3.09 Insurance. SEI has insurance on its property in such amounts as are
---------
reasonable and deemed adequate by its Board of Directors or management, against
all risks usually insured against by persons operating similar properties or
businesses in the localities where such properties are located under, to the
best of SEI's knowledge, valid and enforceable policies issued by insurers of
recognized responsibility and such policies shall not in any way be affected by,
or terminate or lapse by reason of, the Merger. Section 3.09 of the SEI
Schedule contains a list of (i) the principal policies of fire, liability and
other forms of insurance held by SEI, and (ii) all material losses suffered by
SEI within the last two (2) years for which a claim for insurance was made with
respect thereto. SEI has not done anything, either by way of action or
inaction, that might invalidate such policies in whole or in part.
3.10 Litigation. There are no suits, actions or proceedings pending or,
----------
to the best knowledge of SEI, threatened against or affecting SEI or which
question or challenge the validity of this Agreement. No claim has been made, or
to the knowledge of SEI or the Principal Shareholder threatened, alleging any
violation by SEI of any patent, copyright, trademark, mask work, proprietary
rights, trade secret or other intellectual property rights of others, and, to
the best knowledge of SEI, it has not infringed or caused the infringement of
the intellectual property rights of any third party. SEI makes no other
representation or warranty regarding infringement of the intellectual property
rights of any third party, except as expressly stated elsewhere in this
Agreement. There is no judgment, decree, injunction, ruling or order of any
court, governmental department, commission, agency, instrumentality or
arbitrator outstanding against SEI or the Principal Shareholder. SEI is not in
default under or in breach or violation of, nor, is there any valid basis for
any claim of default by SEI under, or breach or violation by SEI of, any
contract, commitment or restriction to which SEI is a party or to which it or
any of its properties is bound, which, if adversely determined, could reasonably
be expected to have a Materially Adverse Effect. To the best of SEI's knowledge,
no other party is in default under or in violation of, nor, to the
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best of SEI's knowledge, is there any valid basis for any claim of default
by any other party under or any breach or violation by any other party of, any
material contract, commitment, or restriction to which SEI is bound or by which
any of its properties is bound, where such defaults, breaches, or violations
would, in the aggregate, be materially adverse to SEI.
3.11 Employee Benefit Plans.
----------------------
(a) As used in this Section 3.11, the following terms have the meanings
set forth below.
(i) "Company Other Benefit Obligation" means an Other Benefit
Obligation owed, adopted, or followed by SEI or an ERISA Affiliate of SEI.
(ii) "Company Plan" means all Plans of which SEI or an ERISA
Affiliate of SEI is or was a Plan Sponsor, or to which SEI or an ERISA Affiliate
of SEI otherwise contributes or has contributed, or in which an SEI or an ERISA
Affiliate of SEI otherwise participates or has participated. All references to
Plans are to Company Plans unless the context requires otherwise.
(iii) "Company VEBA" means a VEBA whose members include employees of
SEI or any ERISA Affiliate of SEI.
(iv) "ERISA Affiliate" means, with respect to SEI, any other person
that, together with SEI, would be treated as a single employer under IRC (S)
414(b), (c), (m) or (o).
(v) "IRC" means, the Internal Revenue Code of 1986 or any successor
law, and regulations issued by the IRS pursuant to the Internal Revenue Code or
any successor law.
(vi) "Multi-Employer Plan" has the meaning given in ERISA (S)
3(37)(A).
(vii) "Other Benefit Obligations" means all obligations,
arrangements, or customary practices, whether or not legally enforceable, to
provide benefits, other than salary, as compensation for services rendered, to
present or former directors, employees, or agents, other than obligations,
arrangements, and practices that are Plans. Other Benefit Obligations include
consulting agreements under which the compensation paid does not depend upon the
amount of service rendered, sabbatical policies, severance payment policies, and
fringe benefits within the meaning of IRC (S) 132.
(viii) "PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
(ix) "Pension Plan" has the meaning given in ERISA (S) 3(2)(A).
(x) "Plan" has the meaning given in ERISA (S) 3(3).
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(xi) "Plan Sponsor" has the meaning given in ERISA (S) 3(16)(B).
(xii) "Qualified Plan" means any Plan that meets or purports to meet
the requirements of IRC (S) 401(a).
(xiii)"Title IV Plans" means all Pension Plans that are subject to
Title IV of ERISA, 29 U.S.C. (S) 1301 et seq., other than Multi-Employer Plans.
(xiv) "VEBA" means a voluntary employees' beneficiary association
under IRC (S) 501(c)(9).
(xv) "Welfare Plan" has the meaning given in ERISA (S) 3(1).
(b) Disclosure:
(i) Section 3.11(b)(i) of the SEI Schedule contains a complete and
accurate list of all Company Plans, Company Other Benefit Obligations, and
Company VEBAs, and identifies as such all Company Plans that are (A) Qualified
Plans or (B) Multi-Employer Plans.
(ii) Section 3.11(b)(ii) of the SEI Schedule contains a complete and
accurate list of (A) all ERISA Affiliates of SEI, and (B) all Plans of which any
such ERISA Affiliate is or was a Plan Sponsor, in which any such ERISA Affiliate
participates or has participated, or to which any such ERISA Affiliate
contributes or has contributed.
(iii) Section 3.11(b)(iii) of the SEI Schedule sets forth, for each
Multi-Employer Plan, as of its last valuation date, the amount of potential
withdrawal liability of SEI and the ERISA Affiliates of SEI, calculated
according to information made available pursuant to ERISA (S) 4221(e).
(iv) Section 3.11(b)(iv) of the SEI Schedule sets forth a
calculation of the liability of SEI for post-retirement benefits other than
pensions, made in accordance with Financial Accounting Statement 106 of the
Financial Accounting Standards Board, regardless of whether SEI is required by
this Statement to disclose such information.
(v) Section 3.11(b)(v) of the SEI Schedule sets forth the
approximate financial cost of all obligations owed under any Company Plan or
Company Other Benefit Obligation that is not subject to the disclosure and
reporting requirements of ERISA.
(c) SEI has delivered to NavTech or provided NavTech with access to:
(i) all documents that set forth the terms of each Company Plan,
Company Other Benefit Obligation, and Company VEBA and of any related trust,
including (A) all summary plan
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descriptions of Company Plans for which SEI is required to prepare, file, and
distribute summary plan descriptions, and (B) all summaries and descriptions
furnished to participants and beneficiaries regarding Company Plans, Company
Other Benefit Obligations, and Company VEBAs for which a plan description or
summary plan description is not required;
(ii) all personnel, payroll, and employment manuals and policies;
(iii) all collective bargaining agreements, if any, pursuant to which
contributions have been made or obligations incurred (including both pension and
welfare benefits) by SEI and the ERISA Affiliates of SEI and all collective
bargaining agreements pursuant to which contributions are being made or
obligations are owed by such entities;
(iv) a written description of any Company Plan or Company Other
Benefit Obligation that is not otherwise in writing;
(v) all registration statements filed with respect to any Company
Plan;
(vi) all insurance policies purchased by or to provide benefits under
any Company Plan;
(vii) all contracts with third party administrators, actuaries,
investment managers, consultants, and other independent contractors that relate
to any Company Plan, Company Other Benefit Obligation, or Company VEBA;
(viii) all reports submitted within the four years preceding the
date of this Agreement by third party administrators, actuaries, investment
managers, consultants, or other independent contractors with respect to any
Company Plan, Company Other Benefit Obligation, or Company VEBA;
(ix) all notifications to employees of their rights under ERISA (S)
601 et seq. and IRC (S) 4980B;
(x) the Form 5500 filed in each of the most recent three plan years
with respect to each Company Plan, including all schedules thereto and the
opinions of independent accountants;
(xi) all notices that were given by SEI or any ERISA Affiliate of
SEI or any Company Plan to the IRS, the PBGC, or any participant or beneficiary,
pursuant to statute, within the four years preceding the date of this Agreement,
including notices that are expressly mentioned elsewhere in this Section 3.11;
(xii) all notices that were given by the IRS, the PBGC, or the
Department of Labor to SEI, any ERISA Affiliate of SEI, or any Company Plan
within the four years preceding the date of this Agreement;
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(xiii) with respect to Qualified Plans and VEBAs, the most recent IRS
determination letter for each Plan of SEI that is a Qualified Plan; and
(xiv) with respect to Title IV Plans, the Form PBGC-1 filed for each
of the three most recent plan years.
(d) Except as set forth in Section 3.11(d) of the SEI Schedule:
(i) SEI has performed all of its material obligations under all
Company Plans, Company Other Benefit Obligations, and Company VEBAs. SEI has
made appropriate entries in its financial records and statements for all
material obligations and material liabilities under such Plans, VEBAs, and
Obligations that have accrued but are not due.
(ii) No statement, either written or oral, has been made by SEI to
any Person with regard to any Plan or Other Benefit Obligation that was not in
accordance with the Plan or Other Benefit Obligation and that could have an
adverse economic consequence to SEI or to NavTech.
(iii) SEI, with respect to all Company Plans, Company Other Benefits
Obligations, and Company VEBAs, is, and each Company Plan, Company Other Benefit
Obligation, and Company VEBA is, in full compliance with ERISA, the IRC, and
other applicable laws including the provisions of such laws expressly mentioned
in this Section 3.11, and with any applicable collective bargaining agreement.
(A) No transaction prohibited by ERISA (S) 406 and no
"prohibited transaction" under IRC (S) 4975(c) have occurred for which an
exemption is not available with respect to any Company Plan.
(B) SEI has no liability to the IRS with respect to any
Plan, including any liability imposed by Chapter 43 of the IRC.
(C) SEI has no liability to the PBGC with respect to any
Plan or has any liability under ERISA (S) 502 or (S) 4071.
(D) All filings required by ERISA and the IRC as to each Plan
have been timely filed, and all notices and disclosures to participants required
by either ERISA or the IRC have been timely provided.
(E) All contributions and payments made or accrued with
respect to all Company Plans, Company Other Benefit Obligations, and Company
VEBAs are deductible under IRC (S) 162 or (S) 404. No amount, or any asset of
any Company Plan or Company VEBA, is subject to tax as unrelated business
taxable income.
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(iv) Each Company Plan can be terminated within thirty days, without
payment of any additional material contribution or amount.
(v) Since the Balance Sheet Date, there has been no establishment or
amendment of any Company Plan, Company VEBA, or Company Other Benefit
Obligation.
(vi) No event has occurred or circumstance exists that could result
in a material increase in premium costs of Company Plans and Company Other
Benefit Obligations that are insured, or a material increase in benefit costs of
such Plans and Obligations that are not insured.
(vii) Other than claims for benefits submitted by participants or
beneficiaries, no claim against, or legal proceeding involving, any Company
Plan, Company Other Benefit Obligation, or Company VEBA is pending or, to the
best knowledge of SEI, is threatened.
(viii) Each Qualified Plan of SEI is qualified in form and, to the
best knowledge of SEI, operation under IRC (S) 401(a); each trust for each such
Plan is exempt from federal income tax under IRC (S) 501(a). Each Company VEBA
is exempt from federal income tax. No event has occurred or circumstance exists
that will or could give rise to disqualification or loss of tax-exempt status of
any such Plan or trust.
(ix) No Company Plan is subject to Title IV of ERISA.
(x) Since the last valuation date for each Pension Plan of SEI and
each ERISA Affiliate of SEI, no event has occurred or circumstance exists that
would increase the amount of benefits under any such Plan.
(xi) To the best knowledge of SEI, no facts or circumstances exist
that may give rise to any liability of SEI or NavTech to the PBGC under Title IV
of ERISA.
(xii) Neither SEI nor any ERISA Affiliate of SEI has ever established,
maintained, or contributed to or otherwise participated in, or had an obligation
to maintain, contribute to, or otherwise participate in, any Multi-Employer
Plan.
(xiii) Except to the extent required under ERISA (S) 601 et seq. and
IRC (S) 4980B, SEI does not provide health or welfare benefits for any retired
or former employee and is not obligated to provide health or welfare benefits to
any active employee following such employee's retirement or other termination of
service.
(xiv) SEI has complied with the provisions of ERISA (S) 601 et seq.
and IRC (S) 4980B.
(xv) No payment that is owed or may become due to any director,
officer, employee, or agent of SEI will be non-deductible to SEI or subject to
tax under IRC (S) 280G or (S)
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4999; nor will SEI be required to "gross up" or otherwise compensate any such
person because of the imposition of any excise tax on a payment to such person.
(xvi) Except as otherwise set forth in this Agreement, the
consummation of the Merger will not result in the payment, vesting, or
acceleration of any benefit.
3.12 Bank Accounts. Section 3.12 of the SEI Schedule sets forth the
-------------
names and locations of all banks, trust companies, savings and loan
associations, and other financial institutions at which SEI maintains accounts
of any nature and the names of all persons authorized to draw thereon or make
withdrawals therefrom.
3.13 Contracts. Except as set forth in Section 3.13 of the SEI Schedule,
---------
(a) SEI has no agreements, contracts or commitments that provide for the
sale, licensing or distribution by SEI of any of its products, technology or
Intellectual Property Assets.
(b) SEI has no agreements, contracts or commitments that (i) required
expenditures by SEI, or resulted in payment to SEI, of more than One Million
Dollars ($1,000,000) in any one of the last three (3) fiscal years, (ii)
expressly provide for the expenditure by SEI or payment to SEI of more than One
Million Dollars ($1,000,000) in any one (1) fiscal year or (iii) expressly
provide for a term of more than two (2) years and require a payment or other
liquidated damages by SEI upon early termination.
(c) To the best of SEI's knowledge, it has no material purchase agreement,
contract or commitment that calls for fixed and/or contingent payments by SEI
that are in excess of the normal, ordinary and usual requirements of its
business.
(d) To the best of SEI's knowledge, there is no outstanding material sales
contract, commitment or proposal of SEI that is currently expected to result in
any loss (after allocation of overhead and administrative costs) upon completion
or performance thereof.
(e) No product liability or warranty claims have been communicated to or,
to the best of SEI's knowledge, threatened against SEI nor, to the best
knowledge of SEI, is there any specific situation, set of facts or occurrence
that provides a reasonable basis for such a claim. The reserve for liability in
respect of services and products of SEI included in the Balance Sheet is
reasonable and adequate for such purpose as of the Balance Sheet Date.
(f) Except as set forth in Section 3.13(f) of the SEI Schedule, SEI has no
outstanding agreements, contracts or commitments with officers, employees,
agents, consultants, advisors, salesmen, sales representatives, distributors or
dealers that are not cancelable by SEI in accordance with their respective terms
on notice of not longer than ninety (90) days and without liability, penalty or
premium. No representation is made with respect to the rights, if any, of "at
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will" employees. True and correct copies of each document or instrument set
forth in Section 3.13(f) of the SEI Schedule have been delivered to NavTech.
(g) SEI has no currently effective collective bargaining or union
agreements, contracts or commitments.
(h) SEI is not restricted by agreement from carrying on its business
anywhere in the world.
(i) SEI is not currently guaranteeing obligations of any person (other
than by endorsement of checks made payable to SEI) and is not a party to any
agreement to acquire or guarantee any obligations of any person.
(j) SEI has no outstanding loan or advance to any individual, except
advances in the form of cash advances for travel expenses which do not exceed
Two Thousand Dollars ($2,000) and airline tickets; nor is it party to any line
of credit, stand-by financing, revolving credit or other similar financing
arrangement of any sort which would permit the borrowing by SEI of any sum not
reflected in the financial statements delivered pursuant to Section 3.04(a).
(k) SEI has given no power of attorney to any person for any purpose
whatsoever, except the appointment of agents to accept service of process.
(l) To the best of SEI's knowledge, all material contracts, agreements and
instruments to which SEI is a party are valid, binding, in full force and
effect, and enforceable by SEI in accordance with their respective terms. No
such material contract, agreement or instrument contains any material liquidated
damages, penalty or similar provision. To the best knowledge of SEI, no party
to any such material contract, agreement or instrument intends to cancel,
withdraw, modify or amend such contract, agreement or arrangement.
(m) Neither SEI nor any employee of SEI (solely in his or her capacity as
an employee of SEI) is required to have, and neither has, any industrial
security clearance relating to classified information, and none is needed for
purposes of any contract with any United States government department, agency or
instrumentality, or any subcontract under such a contract. Neither SEI nor any
employee of SEI (solely in his or her capacity as an employee of SEI) has
possession of any classified document.
(n) Section 3.13(n) of the SEI Schedule lists all material agreements
pursuant to which SEI has agreed to supply to any third party any products or
provide any services or acquire or receive information. True and correct
copies of all such agreements have been delivered to NavTech.
3.14 Accounts Receivable. All accounts receivable of SEI, whether
-------------------
reflected on the Balance Sheet, or otherwise, represent sales, leases, or
licenses actually made in the ordinary
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course of business, are valid and binding obligations of the debtor and are not
subject to payment conditioned upon resale. Unless paid prior to the Effective
Date, the accounts receivable are or will be as of the Effective Date
collectible net of the respective reserves shown on the Balance Sheet or on the
accounting records of SEI as of the Effective Date (which reserves are adequate
and calculated consistent with past practice). Subject to such reserves, each of
the accounts receivable either has been or will be collected in full, without
any set-off, in the ordinary course of business. There is no contest, claim, or
right of set-off, under any agreement to which SEI is a party with any obligor
of an accounts receivable relating to the amount or validity of such accounts
receivable. Section 3.14 of the SEI Schedule contains a complete and accurate
list of all accounts receivable as of the Balance Sheet Date, which list sets
forth the aging of such accounts receivable.
3.15 Inventory. In all material respects, the inventory of SEI consists
---------
of a quality and quantity usable and marketable in the ordinary course of
business.
3.16 Consulting Commitments. Each consulting engagement or other
----------------------
agreement to provide services, whether oral or written (a "Consulting
Agreement"), pursuant to which SEI is legally bound to perform was made in the
ordinary course of business. To the best of SEI's knowledge, no outstanding
Consulting Agreement was made at any price (on both a per hour and aggregate
basis) materially below the current market price at the time made, or contains
terms and conditions materially more onerous than those usual and customary in
the industry.
3.17 Compliance with Law.
-------------------
(a) Except as set forth in Section 3.17 of the SEI Schedule:
(i) SEI is, and at all times since October 1, 1992 has been, in
full compliance with each federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty ("Legal
Requirements") that is or was applicable to it or to the conduct or operation of
its business or the ownership or use of any of its assets, except those Legal
Requirements with respect to which SEI's failure to comply could not reasonably
be expected to have a Materially Adverse Effect;
(ii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a violation by
SEI of, or a failure on the part of SEI to comply with, any Legal Requirement,
except those Legal Requirements with respect to which SEI's violation or failure
to comply could not reasonably be expected to have a Materially Adverse Effect,
or (B) may give rise to any obligation on the part of SEI to undertake, or to
bear all or any portion of the cost of, any remedial action of any nature which
could reasonably be expected to have a Materially Adverse Effect; and
(iii) SEI has not received, at any time since October 1, 1992, any
written notice or, to the best of SEI's knowledge, other communication (whether
oral or written) from any
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Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of, or failure to comply with, any Legal
Requirement, except those Legal Requirements with respect to which SEI's
violation or failure to comply could not reasonably be expected to have a
Materially Adverse Effect or (B) any actual, alleged, possible, or potential
obligation on the part of SEI to undertake, or to bear all or any portion of the
cost of, any remedial action of any nature which could reasonably be expected to
have a Materially Adverse Effect.
(b) Section 3.17(b) of the SEI Schedule contains a complete and accurate
list of each material Governmental Authorization that is held by SEI. Each
Governmental Authorization is valid and in full force and effect. Except as set
forth in Section 3.17(b) of the SEI Schedule:
(i) SEI is, and at all times since October 1, 1992 has been, in
substantial compliance with all of the terms and requirements of each material
Governmental Authorization;
(ii) no event has occurred or circumstance exists that may (with
or without notice or lapse of time) (A) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or requirement
of any material Governmental Authorization, except such violations or failures
to comply which could not reasonably be expected to have a Materially Adverse
Effect or (B) result directly or indirectly in the revocation, withdrawal,
suspension, cancellation, or termination of, or any modification to, any
material Governmental Authorization;
(iii) SEI has not received, at any time since October 1, 1992, any
written notice or, to the best of SEI's knowledge, other communication (whether
oral or written) from any Governmental Body or any other Person regarding (A)
any actual, alleged, possible, or potential violation of or failure to comply
with any term or requirement of any material Governmental Authorization, or (B)
any actual, proposed, possible, or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to any material Governmental
Authorization; and
(iv) all applications required to have been filed for the renewal of
material Governmental Authorizations have been duly filed on a timely basis with
the appropriate Governmental Bodies, and all other filings required to have been
made with respect to such Governmental Authorizations have been duly made on a
timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Section 3.17 of the SEI Schedule
collectively constitute all of the material Governmental Authorizations
necessary to permit SEI to lawfully conduct and operate its businesses in the
manner it currently conducts and operates such businesses and to permit SEI to
own and use its assets in the manner in which it currently owns and uses such
assets.
3.18 Labor Relations; Compliance. (a) There is no action, arbitration,
---------------------------
audit, hearing, investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal)
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commenced, brought, conducted, or heard by or before, or otherwise involving,
any Governmental Body or arbitrator against or affecting SEI relating to the
alleged violation of any Legal Requirement pertaining to labor relations or
employment matters, including any charge or complaint filed by an employee or
union with the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Body, organizational activity, or
other labor or employment dispute against or affecting SEI or its premises; (b)
there is no strike, labor dispute, slowdown, or stoppage actually pending or, to
the best of SEI's knowledge, threatened against SEI; (c) no application for
certification of a collective bargaining agent is pending and, to the best of
SEI's knowledge, no union organizing activities are taking place; (d) to the
best of SEI's knowledge, no grievance that might have an adverse effect on SEI
or the conduct of its business, nor any arbitration proceeding arising out of or
under any collective bargaining agreement is pending and no claims therefor
exist; (e) SEI is not subject to any collective bargaining agreement; and (f)
SEI has not experienced any material work stoppage or other material labor
difficulty. There is no lockout of any employees by SEI, and no such action is
contemplated by SEI. SEI has complied in all material respects with all Legal
Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing.
3.19 Leases. Section 3.19 of the SEI Schedule contains an accurate and
------
complete description of the terms of all material leases pursuant to which SEI
leases real or personal property, including without limitation whether or not
any consents to the consummation of the Merger are required under such leases.
To the best of SEI's knowledge, all such leases are valid, binding and
enforceable in accordance with their terms, in full force and effect, there are
no existing defaults thereunder by SEI or (to the best of SEI's knowledge) any
other party thereto, and, to the best of SEI's knowledge, no event of default
has occurred that (whether with or without notice, lapse of time, or the
happening or occurrence of any other event) would constitute a default
thereunder. SEI has delivered to NavTech or provided NavTech with access to true
and correct copies of all such leases.
3.20 Finders. All negotiations relative to this Agreement and the
-------
transactions contemplated hereby have been carried on by SEI directly with
NavTech and without the intervention of any person, either as a result of the
act of SEI, or, to the knowledge of SEI, otherwise, in such manner as to give
rise to any valid claim against any of the parties for a finder's fee or other
similar payment.
3.21 Corporate Minutes, Etc. The minute books, stock record books, stock
-----------------------
certificate book and other corporate records of SEI, all of which have been made
available to NavTech, are complete and correct and have been maintained in
accordance with sound business practices. The minute books of SEI contain
accurate records of all meetings held of, and corporate action taken by, the
shareholders, the board of directors, and committees of the board of directors
of SEI, and no meeting of any such shareholders, the board of directors, or any
committee has been held for which minutes have not been prepared and are not
contained in such minute books. The
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signatures appearing on all documents contained therein are the true signatures
of the persons purporting to have signed the same. At the Effective Time, all of
those books and records will be in the possession or under the control of SEI.
All actions reflected in such books and records were duly and validly taken in
compliance with the laws of the applicable jurisdictions.
3.22 Insider Transactions. Except as set forth in Section 3.22 of the SEI
--------------------
Schedule, no director or officer of SEI and no person related to any of them has
any interest in (i) any material equipment or other property, real or personal,
tangible or intangible, including without limitation any Intellectual Property
Assets, used in connection with or pertaining to the business of SEI, or (ii)
any creditor, supplier, customer, manufacturer, agent, representative, or
distributor of products of SEI; provided, however, that no such director or
officer or other person shall be deemed to have such an interest solely by
virtue of the ownership of less than 5% of the outstanding voting stock or debt
securities of any publicly-held company, the stock or debt securities of which
are traded on a recognized stock exchange or quoted on the National Association
of Securities Dealers Automated Quotation System.
3.23 Employees, Independent Contractors and Consultants.
--------------------------------------------------
(a) Section 3.23(a) of the SEI Schedule lists all currently effective
consulting, independent contractor or employment agreement and other material
agreements concluded with individual employees, officers, directors, independent
contractors or consultants to which SEI is a party. SEI has delivered to
NavTech or provided NavTech with access to true and correct copies of all such
written agreements (or in the case of the same form of agreement being used
multiple times, copies of such form agreement).
(b) Section 3.23(b) of the SEI Schedule contains a complete and accurate
list of the following information for each retired employee, officer and
director of SEI, or their dependents, receiving benefits or scheduled to receive
benefits in the future: name, pension benefit, pension option election, retiree
medical insurance coverage, retiree life insurance coverage, and other material
benefits.
(c) To the best of SEI's knowledge, no employee of SEI is a party to, or
is otherwise bound by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement, between such
employee and any other Person that in any way adversely affects or will affect
(i) the performance of his duties as an employee of SEI, or (ii) the ability of
SEI to conduct its business. To the best of SEI's knowledge, no officer, or
other key employee of SEI intends to terminate his employment with SEI.
3.24 No Bonus Payments Contingent on Merger. Except as provided in
--------------------------------------
Section 7.12 hereof, SEI has no obligation to make any payment to any employee
of SEI or any other person as a direct or indirect result of the Merger.
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3.25 Full Disclosure. (a) No statement by SEI contained in this
---------------
Agreement and the Exhibits attached hereto or any written statement or
certificate furnished to or to be furnished to NavTech pursuant to the express
requirements hereof as of its respective date contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not materially and adversely misleading
in light of the circumstances under which they were made.
(b) No information provided by SEI to NavTech for inclusion in the
preliminary prospectus being filed as part of NavTech's registration statement
on Form S-1 under the Securities Act of 1933 as amended, for purposes of the IPO
contains, and no such information provided by SEI to NavTech for inclusion in
any subsequent preliminary prospectus or the prospectus forming part of such
registration statement will contain, any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
contained in such prospectuses not materially misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING SUBSIDIARY
NavTech and Subsidiary, jointly and severally, represent and warrant to SEI
and the Principal Shareholder as follows:
4.01 Organization. Subsidiary is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Delaware.
Subsidiary was recently organized, has no prior business activities or
operations, and has no significant assets or liabilities or obligations other
than those relating to the Merger.
4.02 Capitalization. The authorized capital stock of Subsidiary consists
--------------
of 1,000 shares of common stock of which 100 shares are validly issued and
outstanding, fully paid and nonassessable and are owned by NavTech, free and
clear of all liens, claims and encumbrances.
4.03 Authority Relative to this Agreement.
------------------------------------
(a) This Agreement constitutes the legal, valid, and binding obligation
of Subsidiary, enforceable against Subsidiary in accordance with its terms.
Subsidiary has the power to enter into this Agreement, the Merger Agreement and
the other Subsidiary Merger Documents to which it is a party and to carry out
its obligations under all of the foregoing. The execution and delivery of this
Agreement and the other Subsidiary Merger Documents to which it is a party and
the consummation of the transactions contemplated under all of the Merger
Documents, have been duly authorized by Subsidiary's Board of Directors and, if
required, duly approved by Subsidiary's shareholder. No other corporate
proceedings on the part of Subsidiary are necessary to authorize this Agreement,
the Merger Agreement and the transactions contemplated by the Merger Documents.
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(b) Neither the execution and delivery of this Agreement nor the
consummation of the Merger will, directly or indirectly (with or without notice
or lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Certificate of Incorporation or Bylaws of Subsidiary, or (B)
any resolution adopted by the Board of Directors or Subsidiary's shareholder;
(ii) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to challenge this Agreement
or the Merger or to exercise any remedy or obtain any relief under, any
Governmental Authorization, or any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any
Governmental Body or by any arbitrator to which Subsidiary, or any of the assets
owned or used by Subsidiary, may be subject;
(iii) contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate, or modify, any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Governmental Authorization that is held by Subsidiary or that otherwise relates
to the business of, or any of the assets owned or used by, Subsidiary;
(iv) contravene, conflict with, or result in a violation or breach
of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any agreement, contract, obligation, promise,
or undertaking (whether written or oral and whether express or implied) to which
Subsidiary is legally bound;
(v) result in the imposition or creation upon or with respect to
any of the assets owned or used by Subsidiary of any charge, claim, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, transfer,
receipt of income, or exercise of any other attribute of ownership.
(c) Except as described in this Agreement, no consent of any Person who is
not a party to this Agreement, nor consent of, or filing with, any Governmental
Authority, is required to be obtained on the part of Subsidiary to permit, or
avoid any material adverse consequence by reason of, the Merger.
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<PAGE>
ARTICLE V
CONDUCT OF BUSINESS OF SEI PRIOR TO EFFECTIVE DATE
5.01 Conduct of Business of SEI. During the period from the date of this
--------------------------
Agreement to the earlier to occur of the Effective Date or the termination of
this Agreement pursuant to the provisions of ARTICLE IX, SEI shall conduct its
operations according to its ordinary and usual course of business, use its
reasonable best efforts consistent with its undertaking hereunder to preserve
intact its business organization, keep available the services of its officers
and significant employees and maintain satisfactory relationship with suppliers,
landlords, creditors, agents, customers and others having business relationships
with SEI all in accordance with its ordinary and usual course of business.
Prior to the Effective Date, SEI shall not, without the written consent of
NavTech or as otherwise expressly provided herein:
(a) amend its Certificate of Incorporation or By-laws or similar
governing documents;
(b) split, combine or reclassify any shares of its capital stock or
declare, pay, or set aside for payment any dividend (whether in cash, stock or
property) in respect of its capital stock, nor shall SEI, directly or
indirectly, redeem, purchase or otherwise acquire any share of its capital
stock;
(c) authorize or issue or sell any shares of its capital stock or
options, warrants to purchase, or rights to subscribe to, or enter into any
agreement, contract, or commitment with respect to, any shares of its capital
stock or any of its other securities, or make any other changes in its capital
structure, except for (i) the issuance of 657 shares of SEI common stock to
Fidelis N. Umeh in consideration for the Umeh Release Agreement and (ii) options
issued to employees, as specified in a schedule delivered to NavTech prior to
the date of this Agreement, for not more than 611.331913 shares of SEI common
stock, in the aggregate, at a price per share of not less $5,561.62, which
options shall be converted at the Effective Date into options to acquire shares
of NavTech Common Stock in accordance with Section 1.02(b);
(d) organize any new subsidiary, acquire any capital stock or other
equity securities of any corporation, or acquire any equity interest in any
business;
(e) permit any insurance policy to lapse (unless substitute policies with
at least the same coverage is obtained);
(f) sell any undivided interest in, or grant any type of exclusive right
with respect to, Intellectual Property Assets;
(g) enter into any agreements (A) other than in the ordinary course of
business, or (B) relating to any agreement involving expected payment by SEI of
One Hundred Thousand Dollars ($100,000) or more or (C) relating to any agreement
involving expected receipt by SEI of Two Million Dollars ($2,000,000) or more;
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<PAGE>
(h) grant any license or right in, to or under, any Intellectual Property
Asset, except such grants which occur in the ordinary course of business;
(i) commence or commit to commence development of a new line of business;
(j) commence or commit to commence development of a new product which is
expected to result in expenditures in excess of Two Hundred Fifty Thousand
Dollars ($250,000), in the aggregate;
(k) pledge, encumber or otherwise hypothecate any material tangible or
intangible asset, or enter into any loan or similar arrangement pursuant to
which SEI borrows or lends (excluding existing line of credit or similar
financing arrangement) in the aggregate in excess of Twenty-Five Thousand
Dollars ($25,000);
(l) adopt any new or amend any existing employee benefit arrangement of
the type required to be listed pursuant to Section 3.11, except as may be
required by applicable law;
(m) enter into any new leases (exclusive of renewals) for real or
personal property which cannot be terminated by SEI within one (1) year from
commencement without payment of penalty or premium or which calls for payments
during such one (1) year period in excess of One Hundred Thousand Dollars
($100,000);
(n) amend any existing employment or independent contractor agreement, or
enter into any new employment or independent contractor agreement that provides
for more than One Hundred Fifty Thousand Dollars ($150,000) per year in payments
(including, in the case of an employment agreement, salary and benefits) or
which cannot be terminated without premium or penalty upon no more than three
(3) months notice;
(o) license or otherwise obtain from any third party any software,
hardware or related proprietary right on the condition that SEI devote material
development or marketing efforts to such product or related proprietary right or
on the condition that SEI pay minimum royalties in excess of Seventy Five
Thousand Dollars ($75,000) in any twelve (12) month period; or
(p) exercise any rights it may have (whether now owned or hereafter
acquired) to acquire additional shares of NavTech Common Stock.
5.02 Consents. SEI shall use its reasonable best efforts to obtain at the
--------
earliest practicable date, and in any event prior to the Effective Date, all
material consents required to be obtained by any law, regulation, order,
agreement or instrument prior to consummating the Merger, whether such consent
is to be obtained from private parties or governmental or regulatory authorities
or agencies.
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5.03 Notification of Changes; Disclosure Schedule Updates. SEI shall
----------------------------------------------------
promptly notify NavTech in writing of the existence or happening of any fact,
event or occurrence which should be included in the SEI Schedule in order to
make the representations and warranties of SEI set forth in ARTICLE III true and
correct in all material respects as of the Effective Date (each additional
written disclosure by SEI pursuant to this Section 5.03 being hereinafter
referred to as a "Disclosure Schedule Update"). SEI will promptly notify NavTech
of the occurrence of any breach of any covenant of SEI in this Agreement or of
the occurrence of any event that may reasonably be expected to make the
satisfaction of the conditions in ARTICLE VIII impossible or unlikely.
5.04 Further Assurances. SEI shall execute and deliver such instruments
------------------
and take such other actions as NavTech may reasonably require in order to carry
out the intent of this Agreement.
5.05 Litigation. Prior to the earlier to occur of the Effective Date or
----------
the termination of this Agreement pursuant to the provisions of ARTICLE IX, SEI
shall immediately notify NavTech in writing of any suit or other legal or
administrating proceeding instituted or threatened against SEI. In addition, SEI
shall keep NavTech apprised of all material developments in litigation or
regulatory matters set forth in the SEI Schedule and shall provide NavTech a
reasonable opportunity to review and comment on any proposed filings in such
matters. SEI shall not commence or institute any suit or other legal or
administrative proceeding without first giving NavTech reasonable notice of no
less than seventy-two (72) hours of any such action.
5.06 Cooperation. SEI shall cause its officers, employees, attorneys,
-----------
agents, investment bankers, accountants, counsel and other representatives to
cooperate fully with NavTech until the Merger is consummated or this Agreement
is terminated.
5.07 No Negotiations. Until such time as the Effective Date has occurred
---------------
or such time that this Agreement is terminated pursuant to the provisions of
ARTICLE IX of this Agreement, none of SEI, the Principal Shareholder, acting in
his individual capacity, or, subject to each of their respective fiduciary
obligations, any of the officers, directors or employees of SEI, acting on
behalf of SEI, shall conduct or engage in any negotiations or discussions, of
whatever nature, with any persons other than NavTech or its authorized
representatives, regarding the sale, assignment or other transfer of right,
title or interest in and to any of the stock of SEI or in and to any of the
assets or properties, whether tangible or intangible, owned, held, licensed,
leased or used by SEI as of the date of this Agreement other than in the
ordinary course of business and consistent with the other provisions of this
Agreement.
5.08 Negative Covenants. Except as otherwise expressly permitted by this
------------------
Agreement, between the date of this Agreement and the earlier to occur of the
Effective Date or the termination of this Agreement pursuant to the provisions
of ARTICLE IX, SEI will not, without the prior consent of NavTech, take any
affirmative action, or fail to take any reasonable action
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<PAGE>
within its control, as a result of which any of the changes or events listed in
Section 3.06 is likely to occur.
5.09 Negative Covenant of the Principal Shareholder. Prior to the
----------------------------------------------
earlier to occur of the Effective Date or the termination of this Agreement
pursuant to the provisions of ARTICLE IX, the Principal Shareholder shall not
transfer, assign, pledge or otherwise encumber any SEI Common Stock owned or
controlled, directly or indirectly, by the Principal Shareholder.
ARTICLE VI
CONDUCT OF BUSINESS OF NAVTECH AND SUBSIDIARY
6.01 Conduct of Business of NavTech. During the period from the date of
------------------------------
this Agreement to the earlier to occur of the Effective Date or termination of
this Agreement pursuant to the provisions of ARTICLE IX, NavTech agrees that:
(a) it shall not merge with or agree to merge into another corporation,
except in a transaction in which NavTech is the surviving corporation and its
shareholders continue to hold shares of NavTech capital stock;
(b) it shall not authorize or issue any options to purchase shares of
NavTech Common Stock, except as contemplated in Section 2.02(b); and
(c) it shall execute and deliver such instruments and take such other
actions as SEI may reasonably require in order to carry out the intent of this
Agreement and shall cause its officers, employees, attorneys, agents, investment
bankers and other representatives to cooperate fully with SEI.
6.02 Consents. NavTech shall use its reasonable best efforts to obtain
--------
at the earliest practicable date, and in any event prior to the Effective Date,
all material consents required to be obtained by any law, regulation, order,
agreement or instrument prior to consummating the Merger, whether such consent
is to be obtained from private parties or governmental or regulatory authorities
or agencies.
6.03 Notification of Changes; Disclosure Schedule Updates. NavTech shall
----------------------------------------------------
promptly notify SEI in writing of the existence or happening of any fact, event
or occurrence which should be included in the NavTech Schedule in order to make
the representations and warranties of NavTech set forth in ARTICLE II true and
correct in all material respects as of the Effective Date (each additional
written disclosure by NavTech pursuant to this Section 6.03 being hereinafter
referred to as a "Disclosure Schedule Update"). Any information set forth in any
subsequent preliminary prospectus forming a part of NavTech's registration
statement described in the introductory paragraph of ARTICLE II shall be deemed
to be a NavTech Disclosure Schedule Update. NavTech will promptly notify SEI of
the occurrence of any breach of any covenant of
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NavTech in this Agreement or of the occurrence of any event that may reasonably
be expected to make the satisfaction of the conditions in ARTICLE VIII
impossible or unlikely.
6.04 Litigation. Prior to the earlier to occur of the Effective Date or
----------
the termination of this Agreement pursuant to the provisions of ARTICLE IX,
NavTech shall immediately notify SEI in writing of any suit or other legal or
administrating proceeding instituted or threatened against NavTech. In addition,
NavTech shall keep SEI apprised of all material developments in litigation or
regulatory matters set forth in the NavTech Schedule.
6.05 Negative Covenants. Except as otherwise expressly permitted by this
------------------
Agreement, between the date of this Agreement and the earlier to occur of the
Effective Date or the termination of this Agreement pursuant to the provisions
of ARTICLE IX, NavTech will not, without the prior consent of SEI, take any
affirmative action, or fail to take any reasonable action within its control, as
a result of which any of the changes or events listed in Section 2.10 is likely
to occur.
6.06 Conduct of Business of Subsidiary. During the period from the date
---------------------------------
of this Agreement to the Effective Date, Subsidiary shall not engage in any
business or activities of any nature except as provided in or contemplated by
this Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.01 Access and Information. Each party shall afford, upon reasonable
----------------------
notice, to the other and to its accountants, counsel and other representatives
full access during normal business hours throughout the period prior to the
earlier to occur of the Effective Date or the termination of this Agreement
pursuant to the provisions of ARTICLE IX, to all of its properties, books,
contracts, commitments and records and, during such period, shall furnish to
such other party all information concerning its business, properties and
personnel as the requesting party may reasonably request, provided that no
investigation pursuant to this Section 7.01 shall affect the parties' rights to
rely on any representations or warranties or the conditions to the obligations
of the parties to consummate the Merger. Each party hereby agrees, on behalf of
itself and its accountants, counsel and other representatives, that information
provided pursuant to this Section 7.01 will be used solely for the purposes of
evaluating and consummating the transactions contemplated by this Agreement and
that such information will be maintained in confidence by them, except to the
extent such information is in the public domain or disclosure is required by
law. It is expressly agreed that the covenant set forth in the immediately
preceding sentence shall also apply to any information furnished by the other
party prior to the date of this Agreement in anticipation of this Agreement or
otherwise in connection with the transactions contemplated hereby.
In the event that between the date hereof and the earlier to occur of the
Effective Date or termination of this Agreement pursuant to the provisions of
ARTICLE IX, any Governmental
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Body or Person shall commence any examination, review, investigation, action,
suit or proceeding against SEI or NavTech with respect to the Merger, the party
as to which such examination, review, investigation, action, suit or proceeding
is commenced shall give prompt notice thereof to the other parties, shall keep
the other parties informed as to the status thereof and shall permit the other
parties to observe and be present at each meeting, conference or other
proceeding and have access to and be consulted in connection with any document
filed or provided to such governmental authority in connection with such
examination, review, investigation, action, suit or proceeding.
7.02 Registration Statement; Prospectus. SEI shall cooperate, at
----------------------------------
NavTech's expense, with NavTech in assuring that the shares of NavTech Common
Stock to be issued to the SEI Shareholders in the Merger are offered and issued
in compliance with Federal and State securities laws, statutes, codes,
ordinances, rules and regulations.
7.03 Further Assurances. SEI and the Principal Shareholder shall use all
------------------
reasonable efforts to, as promptly as practicable, take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the Merger and the IPO, including, but not limited to, providing to NavTech such
information as may be reasonably requested by NavTech for inclusion in any
preliminary prospectus or prospectus being filed as part of NavTech's
registration statement on Form S-1 under the Securities Act of 1933, as amended,
for purposes of the IPO.
7.04 Certain Defaults. NavTech and SEI will give prompt written notice
----------------
to the other of (a) any notice of default received by either of them subsequent
to the date of this Agreement and prior to the earlier to occur of the Effective
Date or the termination of this Agreement pursuant to the provisions of ARTICLE
IX under any material instrument or material agreement to which either is a
party or by which either of them is bound, which default would, if not remedied,
result in any material adverse change in the financial condition or business of
either of them, or which would render materially incorrect any representation or
warranty made herein, and (b) any suit, action or proceeding instituted or, to
the knowledge of either party, threatened against or affecting either party
subsequent to the date of this Agreement and prior to the earlier to occur of
the Effective Date or the termination of this Agreement pursuant to the
provisions of ARTICLE IX.
7.05 Communications. Between the date hereof and prior to the earlier
--------------
to occur of the Effective Date or the termination of this Agreement pursuant to
the provisions of ARTICLE IX, neither NavTech nor SEI will furnish any written
communication to its shareholders or to the public generally if the subject
matter thereof relates to the transactions contemplated by this Agreement or the
Merger Agreement without furnishing to the other party copies of such written
materials a reasonable amount of time prior to the distribution of such
materials to its shareholders or the public generally and, in the event that the
other party reasonably objects to the distribution of such materials, NavTech or
SEI, as the case may be, will not distribute such materials to its shareholders
or the public generally.
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7.06 Employment Agreement. NavTech shall, concurrently with the Closing
--------------------
(as defined below) execute and deliver an employment agreement in the form of
Exhibit "E" attached hereto and made a part hereof (the "Employment Agreement")
with the Principal Shareholder.
7.07 Expenses. Except as provided in Section 7.02, whether or not the
--------
Merger is consummated, all costs and expenses incurred by NavTech and Subsidiary
in connection with this Agreement, the other Merger Documents and the
transactions contemplated hereby and thereby shall be paid by NavTech. Whether
or not the Merger is consummated, all costs and expenses incurred by SEI in
connection with this Agreement, the other Merger Documents and the transactions
contemplated hereby and thereby shall be paid by SEI; provided, that, as a
condition to NavTech's obligations to consummate the Merger, all costs and
expenses so incurred by SEI in excess of Two Hundred Thousand Dollars ($200,000)
that are paid or payable to legal or financial advisors engaged by SEI shall be
paid by the Principal Shareholder either directly or by reimbursement to SEI.
For the purposes of this Section 7.07, the parties hereby confirm their
understanding that legal costs and expenses incurred by Umeh in connection with
the negotiation of the termination of the Existing Umeh Agreement (as defined
below) and the Umeh Release Agreement (as defined below), and other related
agreements, shall not be deemed to be expenses incurred by SEI, and shall be the
personal obligations of Umeh. Between the date of this Agreement and the earlier
to occur of the Effective Date or termination of this Agreement pursuant to the
provisions of ARTICLE IX, SEI shall not pay or become obligated to pay any such
costs and expenses, directly or indirectly to, or on behalf of, Umeh.
7.08 Satisfaction of Obligations to Umeh. As of the Effective Date, all
-----------------------------------
outstanding obligations to Umeh under that certain Employment Agreement dated as
of December 29, 1988 (the "Existing Umeh Agreement") shall have been satisfied
in full and such Employment Agreement shall have been terminated and Umeh shall
execute and deliver a written release in favor of SEI, in substantially the form
of the June 17, 1996 draft release delivered to NavTech prior to the date hereof
(the "Umeh Release Agreement"). As a condition to NavTech's obligations to
consummate the Merger, all costs and expenses (including any payments to be made
directly to Umeh) relating to satisfaction of SEI's obligations to Umeh under
the Existing Umeh Agreement, except payments made pursuant to paragraphs 4, 5, 6
or 7 of the Existing Umeh Agreement and except obligations that are satisfied by
the issuance of SEI Common Stock to Umeh, shall be paid by the Principal
Shareholder.
7.09 Certain Information. Between the date of this Agreement and the
-------------------
earlier to occur of the Effective Date or termination of this Agreement pursuant
to the provisions of ARTICLE IX, SEI shall continue to prepare, and promptly
after such reports are prepared, furnish NavTech with copies of, SEI's monthly
financial reports which it has in the past customarily prepared for internal use
of management.
7.10 Reasonable Best Efforts. SEI, NavTech and Subsidiary shall use their
-----------------------
reasonable best efforts to cause all conditions to closing to be satisfied, but
nothing herein shall commit
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NavTech to proceed with the IPO if, in its sole discretion, NavTech's Board of
Directors determines not to do so.
7.11 Proprietary Rights Agreements. Between the date of this Agreement
-----------------------------
and the earlier to occur of the Effective Date or termination of this Agreement
pursuant to the provisions of ARTICLE IX, SEI shall require all new employees or
independent contractors to execute and deliver to SEI a confidentiality and
proprietary rights ownership agreement substantially in the form of Exhibit H.
In the event that the form of agreement set forth in Exhibit H materially
impairs SEI's ability to hire new employees or independent contractors, the
parties shall use their best efforts to mutually agree upon a substitute form of
confidentiality and proprietary rights ownership agreement.
7.12 SEI Payments to Profit Sharing Plans. SEI agrees that its payments
------------------------------------
to employees for the year ending September 30, 1996 under the Profit
Participation Plan ("PPP"), as described in that certain memorandum to PPP
participants, dated October 1, 1995, and the Corporate Profit Participation Plan
("CPP"), as described in the CPP description of September 12, 1986, shall not
exceed $1,800,000 in the aggregate, plus the amount of the participants'
contributions to the PPP and CPP, and an aggregate of $394,993 in carry forwards
under the CPP for the year ended September 30, 1995 (the "Carry Forward"), which
is the amount of such carry forwards as reflected on the Balance Sheet and is
not included in the $1,800,000 aggregate amount referred to above. The parties
agree and acknowledge that the PPP shall remain in effect through September 30,
1996. The parties further agree and acknowledge that (i) SEI shall amend the CPP
to provide that the CPP shall terminate upon the occurrence of the Effective
Date, (ii) the Principal Shareholder, in his capacity as a participant in the
CPP, shall not be entitled to any payment upon the termination of the CPP in
excess of his contribution to the CPP, except (A) such payments as he would have
been entitled absent the occurrence of the Merger and the termination of the CPP
(but excluding, for purposes of such calculation, the fees and expenses incurred
by SEI relative to the Merger and the IPO) and (B) his portion of the Carry
Forward, and (iii) Richard Weiland, in his capacity as a participant in the CPP,
shall not be entitled to any payment upon the termination of the CPP in excess
of his contribution to the CPP, except (A) such payments as he would have been
entitled absent the occurrence of the Merger and the termination of the CPP (but
excluding, for purposes of such calculation, the fees and expenses incurred by
SEI relative to the Merger and the IPO), (B) his portion of the Carry Forward
and (C) subject to the maximum amount payable to him under the CPP, an
additional payment not to exceed $150,000 (which amount is included in the
$1,800,000 aggregate amount referred to above). Following the date of this
Agreement and prior to the earlier to occur of the Effective Date or the
termination of this Agreement pursuant to ARTICLE IX, SEI shall not make
payments under the CPP to any person, except the Principal Shareholder and
Richard Weiland, and only the payments provided for herein shall be made if the
CPP is terminated as provided herein. SEI shall make the required payments under
the CPP within 90 days after the Effective Date, the calculation of which shall
be based on the financial results for SEI for the period October 1, 1995 through
the Effective Date, which results shall be calculated on a basis consistent with
past practice.
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7.13 Indemnity to Former Officers and Directors. For a period of six (6)
------------------------------------------
years following the Effective Date, to the extent provided in Article V of SEI's
Bylaws in effect on April 30, 1996, SEI shall indemnify each former director and
officer of SEI with respect to acts committed by him or her prior to the
Effective Date, except that the Principal Shareholder shall not be entitled to
indemnification with respect to any act, matter, cause or thing for which an
Indemnified Person is entitled to indemnification from the Principal Shareholder
under the Principal Shareholder Agreement.
7.14 Tax Returns. NavTech agrees to, or to cause Subsidiary to, prepare
-----------
and file all federal, state and local tax returns due by SEI on or after the
Effective Date (including those pertaining to short Tax years) in a timely
manner and pay all Taxes due in connection therewith, and to keep, preserve and
maintain SEI's records and make them available to the SEI Shareholders upon
reasonable notice and at reasonable times. Notwithstanding the preceding
sentence, NavTech shall not have any obligation to file any return with, or pay
any Tax to, any jurisdiction that SEI had not previously filed returns with, or
paid Tax to, prior to the Effective Date.
ARTICLE VIII
CONDITIONS PRECEDENT
8.01 Conditions to NavTech's and SEI's Obligation to Effect the Merger.
-----------------------------------------------------------------
The respective obligation of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions,
unless waived in writing by NavTech and SEI:
(a) No order shall have been entered, and not vacated, by a court or
administrative agency of competent jurisdiction, in any action or proceeding
which enjoins, restrains or prohibits consummation of the Merger.
(b) An initial public offering of NavTech Common Stock at an aggregate
offering price of at least $100,000,000 (including any shares concurrently
purchased directly by Philips Electronics N.V. or its affiliates and others) and
upon terms reasonably acceptable to NavTech shall be ready to be closed
immediately following the Effective Date.
(c) There shall be no litigation pending or threatened by any regulatory
body or private party in which (i) an injunction is or may be sought against the
transactions contemplated hereby, or (ii) relief is or may be sought against any
party hereto as a result of this Agreement, and in which, in the good faith
judgment of the Board of Directors of either NavTech or SEI (relying on the
advice of their respective legal counsel), such regulatory body or private party
has a reasonable possibility of prevailing and such relief would have a material
adverse effect on either such party.
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(d) Any and all consents from any governmental body or agency required
for the consummation of the Merger or for the continuation of the business of
SEI as a subsidiary of NavTech shall have been obtained, except such consents
with respect to which the failure to obtain could not reasonably be expected to
have a Materially Adverse Effect (as such term is defined in ARTICLE II or III,
as applicable) on NavTech or SEI.
(e) SEI and NavTech shall have received a certificate from an authorized
officer of Philips Electronics N.V. or an affiliate thereof ("Philips") to the
effect that Philips has received or obtained any consents or approvals required
to be received or obtained by it or any of its affiliates in order for the
transactions contemplated in this Agreement to be consummated.
8.02 Conditions to Obligation of SEI to Effect the Merger. The
----------------------------------------------------
obligation of SEI to effect the Merger shall be subject to the fulfillment at or
prior to the Effective Time of the following conditions, unless waived in
writing by SEI:
(a) NavTech and Subsidiary shall have performed in all material respects
their agreements contained in this Agreement required to be performed on or
prior to the Effective Date and the representations and warranties of NavTech
and Subsidiary contained in this Agreement shall be true as of the date of this
Agreement and shall be true on and as of the Effective Date; and SEI shall have
received a certificate of the President of NavTech, certifying to each of the
foregoing effects. It is agreed and understood that, after the date of this
Agreement, NavTech may deliver Disclosure Schedule Updates to SEI in the manner
contemplated by Section 6.03. Completion of the Closing shall constitute
conclusive evidence of the acceptance of such Disclosure Schedule Updates by
SEI, and a waiver by SEI of the condition to Closing pursuant to this clause (a)
to the extent of the matters described in such Disclosure Schedule Updates,
which acceptance and waiver shall be automatic without the necessity of any
other action by or on behalf of SEI pursuant to Sections 9.04 and 12.05.
(b) SEI shall have received from counsel to NavTech one or more opinions
dated on or prior to the Effective Date, reasonably satisfactory to SEI,
substantially to the effect that:
(i) NavTech is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has the corporate
power and authority to own, operate and lease its property and carry on its
business as now conducted;
(ii) NavTech has full corporate power and authority to execute,
deliver and perform its obligations under this Agreement and the other Merger
Documents. NavTech has taken all requisite corporate action to approve and adopt
this Agreement and all of the other Merger Documents and to approve and to
authorize the carrying out of the transactions contemplated hereunder and
thereunder, and this Agreement and the NavTech Merger Documents have been duly
executed and delivered by NavTech and constitute legal, valid and binding
obligations of NavTech, enforceable in accordance with their terms;
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(iii) Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has the
corporate power to enter into and carry out its obligations under this Agreement
and the other Merger Documents, and all of the outstanding shares of capital
stock of Subsidiary are validly issued, fully paid and nonassessable and are
owned of record by NavTech;
(iv) Subsidiary has full corporate power and authority to execute,
deliver and perform its obligations under this Agreement and the other Merger
Documents. Subsidiary has taken all requisite corporate action to approve and
adopt this Agreement and all of the other Subsidiary Merger Documents and to
approve and to authorize the carrying out of the transactions contemplated under
the Subsidiary Merger Documents, and the Subsidiary Merger Documents have been
duly executed and delivered by Subsidiary and constitute legal, valid and
binding obligations of Subsidiary, enforceable in accordance with their terms;
(v) The shares of NavTech Common Stock to be delivered in exchange
for the outstanding SEI Common Stock will, when issued as contemplated by this
Agreement and the Merger Agreement, be validly issued, fully paid and
nonassessable;
(vi) The execution, delivery and performance of this Agreement and
the other NavTech and Subsidiary Merger Documents by NavTech and Subsidiary, and
the consummation of the transactions contemplated by this Agreement and the
Merger Documents, will not result in a breach, violation or default under the
Certificate of Incorporation or Bylaws of NavTech or Subsidiary, or under any
judgment, decree, order, Governmental Authorization, agreement, indenture or
instrument of NavTech or Subsidiary or to which NavTech or Subsidiary is a party
which is disclosed in the NavTech Schedule as supplemented by any Disclosure
Schedule Update or otherwise actually known by such counsel;
(vii) Except for matters disclosed in such opinion, any public
documents filed by NavTech in order to comply with federal securities law and/or
the NavTech Schedule, such counsel does not know of any suit, action or legal,
administrative, arbitration or other proceeding or governmental investigation
pending or threatened to which NavTech or any of its subsidiaries, including
Subsidiary, is a party which might reasonably be expected to result in a
material adverse change in the business or financial condition of NavTech and
its subsidiaries, taken as a whole, or which seeks to prohibit, restrain or
enjoin the Merger;
(viii) Each of the Employment Agreement and the Principal Shareholder
Agreement (as defined in Section 8.02(e) below) has been duly executed and
delivered by NavTech and each such agreement constitutes the legal, valid and
binding obligation of NavTech, enforceable in accordance with its terms; and
(ix) To such counsel's knowledge, there is no material consent,
approval, authorization, order, registration, qualification or filing of or with
any court, regulatory authority or other governmental body required as a
condition to the consummation by NavTech and
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<PAGE>
Subsidiary of the transactions contemplated under the Merger Documents that has
not been obtained.
Such opinion may be limited by applicable insolvency, bankruptcy,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights ("Creditors' Exceptions"), by
customary exceptions to the availability of equitable remedies ("Equitable
Exceptions") and by (with respect to employee matters or indemnity obligations
for violation of federal or state securities laws) such limitations as may be
judicially imposed by reference to public policy considerations affecting
employee relations or the enforcement of federal or state securities laws
("Public Policy Exceptions"). Such opinion may rely on the opinions of other
counsel for NavTech with respect to appropriate matters. No opinion shall be
required with respect to federal and state antitrust and unfair competition laws
and regulations.
(c) The Merger pursuant to this Agreement and the Merger Agreement shall
have been approved in the manner required by law by the holders of the issued
and outstanding shares of SEI Common Stock entitled to vote thereon, and all
other corporate action required by law with respect to the Merger shall have
been taken. All statutory requirements for the valid consummation by SEI of the
transaction contemplated by this Agreement and the Merger Agreement shall have
been fulfilled; all authorizations, consents and approvals of all federal,
state, local and foreign governmental agencies and authorities required to be
obtained in order to permit consummation by SEI of the transactions contemplated
by this Agreement and the Merger Agreement shall have been obtained.
(d) NavTech shall have executed and delivered to the Principal
Shareholder the Employment Agreement.
(e) NavTech shall have executed and delivered to the Principal
Shareholder the Principal Shareholder Agreement in the form attached hereto as
Exhibit "F" and made a part hereof (the "Principal Shareholder Agreement").
8.03 Conditions to Obligations of NavTech and Subsidiary to Effect the
-----------------------------------------------------------------
Merger. The obligations of NavTech and Subsidiary to effect the Merger shall
- ------
be subject to the fulfillment at or prior to the Effective Time of the following
conditions, unless waived in writing by NavTech and Subsidiary:
(a) SEI shall have performed in all material respects its agreements
contained in this Agreement required to be performed on or prior to the
Effective Date and the representations and warranties of SEI contained in this
Agreement shall be true as of the date of this Agreement and on and as of the
Effective Date, without giving effect to any Disclosure Schedule Update; and
NavTech shall have received a certificate of the Principal Shareholder and the
President of SEI, certifying to each of the foregoing effects. It is agreed and
understood that, after the date of this Agreement, SEI may deliver Disclosure
Schedule Updates to NavTech in the manner contemplated by Section 5.03.
Completion of the closing shall constitute conclusive evidence of
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the acceptance of such Disclosure Schedule Updates by NavTech, and a waiver by
NavTech of the condition to closing pursuant to this clause (a) to the extent of
the matters described in such Disclosure Schedule Updates, which acceptance and
waiver shall be automatic without the necessity of any other action by or on
behalf of NavTech or Subsidiary pursuant to Sections 9.04, 12.04 and 12.05. The
acceptance of such Disclosure Schedule Updates and such waiver by NavTech will
not, in and of itself, negate, limit or impair any of NavTech's rights under the
Principal Shareholder Agreement.
(b) Any and all consents from other parties to contracts material to
SEI's business and of any other governmental body or agency required for the
consummation of the Merger or for the continuation of the business of SEI as a
subsidiary of NavTech have been obtained.
(c) NavTech shall have received from Neal, Gerber & Eisenberg an opinion,
dated the Effective Date, reasonably satisfactory to NavTech, substantially to
the effect that:
(i) SEI is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the corporate
power and authority to own, operate and lease its property and carry on its
business as now conducted;
(ii) To such counsel's knowledge, SEI's authorized and outstanding
or reserved capital stock, and all outstanding capital stock, is, of record, as
stated in such opinion (which shall be consistent with SEI's representations,
warranties and agreements in this Agreement) and all of the outstanding shares
(and warrants or options for the purchase thereof) of SEI Common Stock are or
have been duly authorized, validly issued and, in the case of shares, fully paid
and nonassessable;
(iii) SEI has full corporate power and authority to execute,
deliver and perform its obligations under this Agreement and the other Merger
Documents. SEI and the SEI Shareholders have taken all requisite corporate
action to approve and adopt this Agreement and the other Merger Documents and to
approve and to authorize the carrying out of the transactions contemplated
hereunder and thereunder, and this Agreement and the other SEI Merger Documents
have been duly executed and delivered by SEI and constitute legal, valid and
binding obligations of SEI, enforceable in accordance with their terms;
(iv) The execution, delivery and performance of this Agreement and
the other SEI Merger Documents by SEI and the consummation of the transactions
contemplated hereunder and thereunder will not result in a breach, violation or
default under the Certificate of Incorporation or By-laws of SEI or under any
judgment, decree, order, Governmental Authorization or license, agreement,
indenture or instrument of SEI or to which SEI is a party which is disclosed in
the SEI Schedule as supplemented by any Disclosure Schedule Update or otherwise
actually known by such counsel;
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(v) Except for matters disclosed in such opinion or in the SEI
Schedule, as supplemented by any Disclosure Schedule Update, such counsel does
not know of any suit, action or legal, administrative, arbitration or other
proceeding or governmental investigation pending or threatened to which SEI is a
party which might reasonably be expected to result in a material adverse change
in the business or financial condition of SEI or which seeks to prohibit,
restrain or enjoin the Merger;
(vi) To such counsel's knowledge, there is no material consent,
approval, authorization, order, registration, qualification or filing of or with
any court, regulatory authority or other governmental body required as a
condition to the consummation by SEI of the transactions contemplated by the
Merger Documents that has not been obtained;
(vii) The Employment Agreement, the Umeh Release Agreement, and the
Principal Shareholder Agreement have been duly executed and delivered by the
Principal Shareholder and Umeh, as applicable, and constitute the legal, valid
and binding obligation of such parties, enforceable in accordance with their
terms;
(viii) Except as disclosed in such opinion, to such counsel's
knowledge, no SEI Shareholder has exercised any shareholders' appraisal rights
within the meaning of the Delaware General Corporation Law.
Such opinion may be limited by Creditors' Exceptions, Equitable Exceptions
and Public Policy Exceptions. Such opinion may rely, to the extent such
counsel may consider reasonable, on the opinion of other counsel for SEI or any
of the SEI Shareholders with respect to appropriate matters. No opinion shall
be required with respect to federal and state antitrust and unfair competition
laws and regulations or the non-competition provision set forth in the
Employment Agreement.
(d) NavTech shall have received from Day, Berry & Howard, an opinion,
dated the Effective Date, reasonably satisfactory to NavTech, substantially to
the effect that the issuance of NavTech Common Stock in connection with the
Merger does not require registration under the Securities Act of 1933, as
amended.
(e) The Merger pursuant to this Agreement and the Merger Agreement shall
have been approved in the manner required by law by the holders of the issued
and outstanding shares of SEI Common Stock entitled to vote thereon, and all
other corporate action required by law with respect to the Merger shall have
been taken. All statutory requirements for the valid consummation by NavTech and
Subsidiary of the transactions contemplated by this Agreement and the Merger
Agreement shall have been fulfilled; all authorizations, consents and approvals
of all federal, state, local and foreign governmental agencies and authorities
required to be obtained in order to permit consummation by NavTech and
Subsidiary of the transactions contemplated by this Agreement and the Merger
Agreement shall have been obtained.
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<PAGE>
(f) Shareholders of SEI owning, in the aggregate, not more than one
percent (1%) of the outstanding shares of SEI Common Stock shall have exercised
their appraisal rights in connection with the Merger pursuant to Section 262 of
the Delaware Corporation Law.
(g) The Principal Shareholder shall have executed and delivered to
NavTech the Employment Agreement.
(h) Umeh shall have executed and delivered to SEI and NavTech the Umeh
Release Agreement.
(i) The Principal Shareholder shall have executed and delivered to
NavTech the Principal Shareholder Agreement.
(j) SEI shall have delivered such other documents as NavTech may
reasonably request for the purpose of (i) enabling its counsel to provide the
opinion referred to in Section 8.02(b), (ii) evidencing the accuracy of any of
SEI's representations and warranties, (iii) evidencing the performance by SEI
of, or the compliance by SEI with, any covenant or obligation required to be
performed or complied with by SEI, (iv) evidencing the satisfaction of any
condition referred to in this ARTICLE VIII, or (v) otherwise facilitating the
consummation or performance of the Merger.
(k) Except as contemplated by this Agreement, there must not have been
made or threatened by any Person any claim asserting that such Person is the
holder or the beneficial owner of, or has the right to acquire or to obtain
beneficial ownership of, any stock of, or any other voting, equity, or ownership
interest in, SEI.
(l) No order shall have been entered, and not vacated, by a court or
administrative agency of competent jurisdiction, in any action or proceeding
which imposes any restrictions or qualifications upon NavTech's ownership of
SEI, or its operation and management thereof, following the Merger, or which
imposes any restrictions or requirements on any direct or indirect shareholder
of NavTech as a result of the Merger.
(m) Upon the request of NavTech not more than five (5) days prior to the
Effective Date, SEI shall have delivered to NavTech an officer's certificate, in
form and substance reasonably satisfactory to NavTech, setting forth (i) the
number of shares of SEI Common Stock that will be outstanding at the Effective
Time, (ii) the aggregate number of shares of SEI Common Stock that may be
acquired by the exercise of rights under all SEI Options that will be
outstanding at the Effective Time and (iii) confirming that no additional SEI
Common Stock or SEI Options will be issued.
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ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.01 Termination. This Agreement may be terminated at any time prior to
-----------
the Effective Time:
(a) by either SEI or NavTech if a material breach of any provision of
this Agreement has been committed by any other party and such breach has not
been waived and cannot be cured;
(b) by mutual agreement of the Boards of Directors of SEI and NavTech; or
(c) by the Board of Directors of either SEI or NavTech if the Effective
Date shall not have occurred on or before October 1, 1996, or such later date as
the parties may agree upon.
9.02 Effect of Termination. Each party's right of termination under
---------------------
Section 9.01 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 9.01, all
further obligations of the parties under this Agreement will terminate;
provided, however, that if this Agreement is terminated by a party because of
the breach of the Agreement by any other party or because one or more of the
conditions to the terminating party's obligations under this Agreement is not
satisfied as a result of any other party's failure to comply with its
obligations under this Agreement, the terminating party's right to pursue all
legal remedies will survive such termination unimpaired. In the event that this
Agreement is terminated by mutual agreement of the parties pursuant to Section
9.01(b), each party shall bear its own expenses in connection with the non-
consummated transaction, and there shall be no liability on the part of the
Principal Shareholder or SEI, NavTech, Subsidiary, or their respective officers
or directors. Notwithstanding the termination of this Agreement, the provisions
of Sections 7.01 with respect to confidentiality shall survive for a period of
five (5) years following such termination.
9.03 Amendment. This Agreement may be amended by the boards of directors
---------
of SEI and NavTech at any time, but only by an instrument in writing signed on
behalf of each of them. The Principal Shareholder agrees to give his written
consent to any such amendment requiring shareholder approval, both as a
shareholder of SEI and as a shareholder of NavTech.
9.04 Extension; Waiver. At any time prior to the Effective Date, the
-----------------
Principal Shareholder on behalf of himself and SEI, and NavTech on behalf of
itself and Subsidiary, may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies of the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or
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conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE X
INDEMNIFICATION
10.01 Representations and Warranties of NavTech. In the event the Merger
-----------------------------------------
is consummated, NavTech and Subsidiary shall be liable with respect to any
breach of any warranty or representation contained in Articles II and IV hereof
only to the extent, if any, that NavTech or Subsidiary would be liable under
applicable securities laws irrespective of the terms and conditions of this
Agreement.
10.02 Termination of SEI's Representations and Warranties. The
---------------------------------------------------
representations and warranties of SEI contained in ARTICLE III hereof shall
expire, lapse and be of no further force or effect from and after the Effective
Date and after such date, SEI shall have no liability of any nature (including
liability to indemnify NavTech) on account of the breach of any such
representation or warranty and no SEI Shareholder shall have any right of
contribution against SEI in such respect. The expiration and lapse of such
representations shall not affect or limit the indemnification obligations of the
Principal Shareholder pursuant to Section 10.03.
10.03 Indemnification Obligations of the Principal Shareholder and other
------------------------------------------------------------------
SEI Shareholders. Notwithstanding anything else in this Agreement or in any
- ----------------
of the Merger Documents to the contrary, the SEI Shareholders shall have no
liability to SEI, NavTech or Subsidiary with respect to any aspect of this
Agreement other than as explicitly set forth in the Principal Shareholder
Agreement or in any other agreement or document to be executed and delivered by
any SEI Shareholder individually at or prior to the Closing pursuant to this
Agreement.
ARTICLE XI
CLOSING
11.01 Closing. The closing (the "Closing") of the transactions
-------
contemplated by this Agreement and the Merger Agreement shall take place at the
offices of Sullivan & Cromwell, 125 Broad Street, New York, New York at 10:00
a.m. New York Time on the day on which the last of the conditions set forth in
ARTICLE VIII hereof is fulfilled or waived or such other date, time and place as
NavTech and SEI may agree (the "Closing Date").
11.02 Pre-Closing Actions. Prior to the Closing, NavTech and SEI shall
-------------------
take the following actions:
(a) NavTech shall deposit with LaSalle National Trust, N.A., 135 South
LaSalle Street, Suite 1825, Chicago, Illinois (the "Exchange Agent"), a
sufficient number of shares of NavTech Common Stock to complete the Merger on
the Closing Date and shall instruct the
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Exchange Agent to distribute NavTech Common Stock so deposited in accordance
with Section 1.02 hereof to the SEI Shareholders who have theretofore delivered
their shares of SEI Common Stock to the Exchange Agent, as soon as practical
after the Effective Time. It is understood by the parties that in order for the
Exchange Agent to distribute NavTech Common Stock to the SEI Shareholders on the
same day as the day on which the Effective Time occurs the Exchange Agent must
receive such shareholders' shares of SEI Common Stock and a transmittal letter
in a form reasonably acceptable to NavTech and the Exchange Agent (the
"Transmittal Letter") at least five (5) days prior to the Effective Date. The
parties hereto shall use their reasonable best efforts to effectuate the
distribution of the NavTech Common Stock to the SEI Shareholders as soon as
practicable after the Effective Time upon receipt of shares of SEI Common Stock
certificates and duly executed Transmittal Letters.
(b) SEI shall assist the SEI Shareholders in delivering their shares of
SEI Common Stock to the Exchange Agent together with the Transmittal Letters at
least five (5) days prior to the Effective Date. Such Transmittal Letters shall
include the addresses to which the Exchange Agent shall deliver such SEI
Shareholders' NavTech Common Stock.
(c) NavTech, Subsidiary and SEI shall take all necessary steps to pre-
clear the Merger Agreement with the Secretary of State of Delaware (including
without limitation filing fully executed and acknowledged copies of the Merger
Agreement and appropriate officers' certificates with such Secretary of State),
in order that on the Closing Date the Merger Agreement may be filed with such
Secretary of State upon the exchange of documents required in Sections 8.02 and
8.03 hereof.
11.03 Exchange of Additional Documents at the Closing. At the Closing,
-----------------------------------------------
the following documents as well as any other appropriate documents specified
herein, properly executed, shall be delivered by and to the appropriate parties:
(i) Officer's Certificates as specified in Sections 8.02(a) and
8.03(a);
(ii) Opinions of counsel, as specified in Section 8.02(b) and
8.03(b).
(iii) Employment Agreement;
(iv) Umeh Release Agreement; and
(v) the Principal Shareholder Agreement.
11.04 Filing of Merger. Concurrent with the exchange of documents
----------------
referred to in Section 11.03, and subject to the provisions of the Merger
Agreement, NavTech, SEI and Subsidiary hereby authorize the filing of the Merger
Agreement in the office of the Secretary of State of Delaware.
-47-
<PAGE>
11.05 Authorization of Exchange. As soon as practical after receipt of
-------------------------
confirmation of the effectiveness of the Merger from the Secretary of State of
Delaware, NavTech shall notify the Exchange Agent of such effectiveness and
authorize the exchange of NavTech Common Stock for SEI Common Stock and the
distribution of NavTech Common Stock to the SEI Shareholders in accordance with
the instructions contained in the Transmittal Letters accompanying the delivery
of the shares of SEI Common Stock to the Exchange Agent.
ARTICLE XII
GENERAL PROVISIONS
12.01 Notices. All notices, consents, waivers, and other communications
-------
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(confirmation requested), in each case to the appropriate addresses and
telecopier numbers set forth below (or to such other addresses and telecopier
numbers as a party may designate by notice to the other parties):
(a) if to NavTech or Subsidiary, to NavTech, Attention: Ronald A.
Brumback, President and COO, 740 E. Arques Avenue, Sunnyvale, California 94086
(Facsimile No. 408-736-3734), with copies to Martin L. Budd, Esquire, Day, Berry
& Howard, One Canterbury Green, Stamford, Connecticut 06901-2047 (Facsimile No.
203-977-7301) and Samuel J. Rozel, Esq., Senior Vice President & General
Counsel, Philips Electronics North America Corp., 100 East 42nd Street, New
York, New York 10017 (Facsimile No. 212-850-5362); and
(b) if to SEI: Mitchell Morris, SEI Information Technology, 212 East Ohio
Street, 2nd Floor, Chicago, Illinois 60611 (Facsimile No. 312-440-8373), with a
copy to Marshall E. Eisenberg, Esq., Neal, Gerber & Eisenberg, Two North LaSalle
Street, Suite 2200, Chicago, Illinois 60602 (Facsimile No. 312-269-1747).
(c) if to the Principal Shareholder, T. Russell Shields, 160 E. Pearson
#3108, Chicago, IL 60611 (Facsimile No. 312-266-1194) with a copy to Marshall E.
Eisenberg, Esq., Neal, Gerber & Eisenberg, Two North LaSalle Street, Suite 2200,
Chicago, Illinois 60602 (Facsimile No. 312-269-1747).
12.02 Cooperation. SEI, the Principal Shareholder, NavTech and
-----------
Subsidiary each agree to execute and deliver such other documents, certificates,
agreement, and other writings and to take such other actions as may be necessary
or desirable in order to expeditiously consummate or implement the transactions
contemplated by this Agreement.
12.03 Governing Law; Arbitration; Injunctive and Other Relief. This
-------------------------------------------------------
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of Delaware
-48-
<PAGE>
applicable to agreements made and to be performed entirely in Delaware. Each
party hereby irrevocably consents to the exclusive jurisdiction of the federal
and state courts located in Chicago, Illinois with respect to any actions which
may arise in connection with this Agreement and are not required by this Section
12.03 to be arbitrated. Except as provided in this Section 12.03, any
controversy or claim arising out of or relating to this Agreement, or the breach
thereof, shall be settled by arbitration administered by the American
Arbitration Association in Chicago, Illinois in accordance with its Commercial
Arbitration Rules, and judgment on the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof.
Within fifteen (15) days after the commencement of arbitration, NavTech, on
behalf of itself and Subsidiary, and the Principal Shareholder, on behalf of
himself and SEI, shall each select one person to act as arbitrator and the two
selected shall select a third arbitrator within ten (10) days of their
appointment. If the arbitrators so selected are unable or fail to agree upon
the third arbitrator, or either party fails to appoint an arbitrator, such
arbitrator or arbitrators shall be selected by the American Arbitration
Association.
Each of the parties to this Agreement acknowledges that a breach of this
Agreement may cause the other party irreparable harm which may not be adequately
compensated by money damages. Therefore, in the event of a breach or threatened
breach by a party, injunctive or other equitable relief will be available to the
other party, and any arbitrator acting pursuant to this Agreement shall have the
authority to provide such injunctive or other equitable relief. Unless
otherwise specified herein, remedies provided herein are not exclusive.
The arbitrators shall have the authority to award such remedies or relief
that a court of the State of Delaware could order or grant in an action governed
by Delaware law, including, without limitation, specific performance of any
obligation created under this Agreement, the issuance of an injunction, or the
imposition of sanctions for abuse or frustration of the arbitration process.
The arbitration proceedings shall be conducted in Chicago, Illinois.
Notwithstanding the foregoing, any party may bring and pursue an action in
any Federal or State court located in Chicago, Illinois seeking provisional
relief, including a temporary restraining order or preliminary injunction,
pending an arbitration proceeding. Any provisional relief obtained shall be
discontinued once the arbitrators have assumed jurisdiction and ordered such
discontinuance.
Process in any action or proceeding referred to in this Section 12.03 may
be served on any party anywhere in the world.
12.04 Action by NavTech under this Agreement. No action by NavTech under
--------------------------------------
or pursuant to this Agreement, including its giving of any consent or waiver or
its agreement to any amendment, modification or termination, may be taken by
NavTech except by action of NavTech's SEI Negotiating Committee, or such other
person or persons as NavTech's SEI Negotiating Committee shall authorize in
writing to act in its stead for a specified purpose.
-49-
<PAGE>
NavTech's SEI Negotiating Committee consists on the date hereof of William E.
Curran, Michael S. Hasley and Ronald A. Brumback. NavTech shall notify SEI and
the Principal Shareholder of any changes in the composition of NavTech's SEI
Negotiating Committee by notice pursuant to this Agreement.
12.05 Waiver. The rights and remedies of the parties to this Agreement
------
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) all waivers shall be in writing
and signed by the party granting the waiver, provided, however, the Principal
Shareholder may act on behalf of himself and SEI, and NavTech may act on behalf
of itself and Subsidiary; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on any other party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
12.06 Interpretation. The headings contained in this Agreement are for
--------------
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Where the context so requires, the masculine
gender shall refer to the feminine or neuter.
12.07 Severability. If any provision of this Agreement is held invalid or
------------
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
12.08 Miscellaneous. This Agreement (a) may be executed by the several
-------------
parties on separate counterparts, (b) constitutes the entire agreement (along
with the documents referred to in this Agreement) and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, and (c) is not intended to confer upon any
other person any rights or remedies hereunder, except as provided in Section
7.13.
-50-
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
NAVIGATION TECHNOLOGIES
CORPORATION
By: /s/ Thomas A. Lerone
--------------------------------
Title: Chief Financial Officer
-----------------------------
SHIELDS ENTERPRISES, INC.
By: /s/ Mitchell Morris
--------------------------------
Title: Treasurer
-----------------------------
NT ACQUISITIONS CORP.
By: /s/ Ronald Brumback
--------------------------------
Title: President
-----------------------------
T. RUSSELL SHIELDS
/s/ T. Russell Shields
-----------------------------------
-51-
<PAGE>
EXHIBIT LIST
<TABLE>
<CAPTION>
Paragraph Reference Exhibit
- ----------------------------- ------------------------------------
<C> <S> <C> <C>
1. Recital C A -- Merger Agreement
2. Omitted B -- INTENTIONALLY OMITTED
3. ARTICLE II C -- NavTech Schedule
4. ARTICLE III D -- INTENTIONALLY OMITTED
5. 7.06 E -- Employment Agreement
6. 8.03(e) F -- Principal Shareholder Agreement
7. 2.02(c) G -- Amended Certificate of Incorporation
8. 7.11 H -- Form of Proprietary Rights Agreement
</TABLE>
<PAGE>
EXHIBIT A
TO
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
MERGER AGREEMENT
----------------
See Exhibit 10.16
<PAGE>
EXHIBIT B
TO
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
INTENTIONALLY OMITTED
<PAGE>
EXHIBIT C
TO
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
NAVTECH SCHEDULE
----------------
See June 15, 1996 draft preliminary prospectus being prepared as part of
NavTech's registration statement on Form S-1 under the Securities Act of 1933 as
amended, for purposes of the IPO, which is made a part hereof,
<PAGE>
EXHIBIT D
TO
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
Intentionally omitted
----------------------
<PAGE>
EXHIBIT E
TO
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
EMPLOYMENT AGREEMENT
--------------------
See Exhibit 10.11
<PAGE>
EXHIBIT F
TO
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
PRINCIPAL SHAREHOLDER AGREEMENT
-------------------------------
See Exhibit 10.19
<PAGE>
EXHIBIT G
TO
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
NAVTECH AMENDED CERTIFICATE OF INCORPORATION
--------------------------------------------
See Exhibit 3.1
<PAGE>
EXHIBIT H
TO
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
FORM OF PROPRIETARY RIGHTS AGREEMENT
-------------------------------------
<PAGE>
EXECUTION COPY
--------------
EXHIBIT H
TO PLAN OF REORGANIZATION
SHIELDS ENTERPRISES, INC.
PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
In consideration of my employment or continued employment by Shields
Enterprises, Inc. and the compensation now and hereafter paid to me, I hereby
make the representations, warranties and covenants contained in this Agreement.
For purposes of this Agreement, "Company" shall mean Shields Enterprises, Inc.
and its subsidiaries.
1. Recognition of Company's Rights; Nondisclosure. At all times during
----------------------------------------------
the term of my employment and thereafter, I will hold in strictest confidence
and will not disclose, use, lecture upon or publish any of the Company's
Proprietary Information (defined below), except as such disclosure, use or
publication may be required in connection with my work for the Company, or
unless an officer of the Company expressly authorizes such in writing. I hereby
assign to the Company any rights I may have or acquire in such Proprietary
Information and recognize that all Proprietary Information shall be the sole
property of the Company and its assigns and the Company and its assigns shall be
the sole owner of all trade secret rights, patent rights, copyrights and all
other rights throughout the world (collectively, "Proprietary Rights") in
connection therewith.
The term "Proprietary Information" shall mean trade secrets, confidential
knowledge, data or any other proprietary information of the Company. By way of
illustration but not limitation, "Proprietary Information" includes (a) trade
secrets, inventions, ideas, processes, formulas, source and object codes, data,
programs, other works of authorship, know-how, improvements, discoveries,
developments, designs and techniques (hereinafter collectively referred to as
"Inventions"); and (b) information regarding plans for research, development,
new products, marketing and selling, business plans, budgets and unpublished
financial statements, licenses, prices and costs, suppliers and customers; and
information regarding the skills, identity or compensation of other employees of
the Company.
2. Third Party Information. I understand, in addition, that the Company
-----------------------
has received and in the future will receive from third parties confidential or
proprietary information ("Third Party Information") subject to a duty on the
Company's part to maintain the confidentiality of such information and to use it
only for certain limited purposes. During the term of my employment and
thereafter, I will hold Third Party Information in the strictest confidence and
will not disclose (to anyone other than Company personnel who need to know such
information in connection with their
H-61
<PAGE>
work for the Company) or use, except in connection with my work for the Company,
Third Party Information unless expressly authorized by an officer of the Company
in writing.
3. Assignment of Inventions.
------------------------
3.1 Assignment. I hereby assign to the Company all my right, title
----------
and interest in and to any and all Inventions (and all Proprietary Rights with
respect thereto) whether or not patentable or registrable under copyright or
similar statutes, made or conceived or reduced to practice or learned by me,
either alone or jointly with others, during the period of my employment with the
Company. Inventions assigned to or as directed by the Company by this paragraph
3 are hereinafter referred to as "Company Inventions." I recognize that this
Agreement does not require assignment of any invention (hereinafter referred to
as a "Personal Invention") that I develop entirely on my own time without using
the Company's equipment, supplies, facilities, or trade secret information
except for those inventions that either:
(1) Relate at the time of conception or reduction to practice
of the invention to the Company's business, or actual or demonstrably
anticipated research or development of the Company; or
(2) Result from any work performed by me for the Company.
3.2 Government. I also assign to or as directed by the Company all
----------
my right, title and interest in and to any and all Inventions, full title to
which is required to be in the United States by a contract between the Company
and the United States or any of its agencies.
3.3 Works for Hire. I acknowledge that all original works of
--------------
authorship which are made by me (solely or jointly with others) within the scope
of my employment and which are protectable by copyright are "works made for
hire," as that term is defined in the United States Copyright Act (17 U.S.C.,
Section 101).
4. Enforcement of Proprietary Rights. I will assist the Company in every
---------------------------------
proper way to obtain and from time to time enforce United States and foreign
Proprietary Rights relating to Company Inventions in any and all countries. To
that end I will execute, verify and deliver such documents and perform such
other acts (including appearances as a witness) as the Company may reasonably
request for use in applying for, obtaining, perfecting, evidencing, sustaining
and enforcing such Proprietary Rights and the assignment thereof. In addition,
I will execute, verify and deliver assignments of such Proprietary Rights to the
Company or its designee. My obligation to assist the Company with respect to
Proprietary Rights relating to such Company Inventions in any and all countries
shall continue beyond the termination of my employment, but the Company shall
compensate me at a reasonable rate after my termination for the time actually
spent by me at the Company's request on such assistance.
H-62
<PAGE>
In the event the Company is unable for any reason, after reasonable
effort, to secure my signature on any document needed in connection with the
actions specified in the preceding paragraph, I hereby irrevocably designate and
appoint the Company and its duly authorized officers and agents as my agent and
attorney in fact, which appointment is coupled with an interest, to act for and
in my behalf to execute, verify and file any such documents and to do all other
lawfully permitted acts to further the purposes of the preceding paragraph with
the same legal force and effect as if executed by me. I hereby waive and
quitclaim to the Company any and all claims, of any nature whatsoever, which I
now or may hereafter have for infringement of any Proprietary Rights assigned
hereunder to the Company.
5. Obligation to Keep Company Informed. During the period of my
-----------------------------------
employment and for six (6) months after termination of my employment with the
Company, I will promptly disclose to the Company fully and in writing all
Inventions authored, conceived or reduced to practice by me, either alone or
jointly with others. In addition, I will promptly disclose to the Company all
patent applications filed by me or on my behalf within a year after termination
of employment. At the time of each such disclosure, I will advise the Company in
writing of any Inventions that I believe fully qualify as a Personal Invention;
and I will at that time provide to the Company in writing all evidence necessary
to substantiate that belief. The Company will keep in confidence and will not
disclose to third parties without my consent any proprietary information
disclosed in writing to the Company pursuant to this Agreement relating to
Inventions that qualify fully as a Personal Invention. I will preserve the
confidentiality of any Invention that does not fully qualify as a Personal
Invention.
I agree to keep and maintain adequate and current records (in the form of
notes, sketches, drawings and in any other form that may be required by the
Company) of all Proprietary Information developed by me and all Inventions made
by me during the period of my employment at the Company, which records shall be
available to and remain the sole property of the Company at all times.
6. Prior Inventions. Inventions, if any, patented or unpatented, which
----------------
I made prior to the commencement of my employment with the Company are excluded
from the scope of this Agreement. To preclude any possible uncertainty, I have
set forth on Exhibit H-1 attached hereto a complete list of all Inventions that
I have, alone or jointly with others, conceived, developed or reduced to
practice or caused to be conceived, developed or reduced to practice prior to
the commencement of my employment with the Company, that I consider to be my
property or the property of third parties and that I wish to have excluded from
the scope of this Agreement. If disclosure of any such Invention on Exhibit A
would cause me to violate any prior confidentiality agreement, I understand that
I am not to list such Inventions in Exhibit A but am to inform the Company that
all such Inventions have not been listed for that reason.
7. Additional Activities. I agree that during the period of my
---------------------
employment by the Company I will not, without the Company's express written
consent, engage in any employment or business activity other than for the
Company. I agree further that for the period of my employment by the Company and
for one (1) year after the date of termination of my employment by the
H-63
<PAGE>
Company I will not (i) induce any employee of the Company to leave the employ of
the Company or (ii) solicit the business of any client or customer of the
Company (other than on behalf of the Company), or (iii) engage in any business
or perform any service in any state or territory in which the Company does
business at the time of my employment termination, in competition with the
business of the Company relating to creating, managing, adapting, applying,
distributing, selling or licensing navigable street map databases and related
database creation, access and update software or any logical extensions thereof,
or relating to the development, analysis, implementation, operation,
application, evaluation, and enhancement of computer systems and the provision
of general consulting and other services in the field of data processing, or
have any interest, whether as proprietor, partner, employee, stockholder,
principal, agent, consultant, director, officer, or in any other capacity or
manner whatsoever, in any enterprise which shall so engage, or (iv) engage in
any manner of work which is secured through the use of, or which makes use of,
any SEI confidential information which was in your possession or of which you
were aware except with SEI's written consent.
8. No Improper Use of Materials. During my employment by the Company I
----------------------------
will not improperly use or disclose any confidential information or trade
secrets, if any, of any former employer or any other person to whom I have an
obligation of confidentiality, and I will not bring onto the premises of the
Company any unpublished documents or any property belonging to any former
employer or any other person to whom I have an obligation of confidentiality
unless consented to in writing by that former employer or person. I will use in
the performance of my duties only information which is generally known and used
by persons with training and experience comparable to my own, which is common
knowledge in the industry or otherwise legally in the public domain, or which is
otherwise provided or developed by the Company.
9. No Conflicting Obligation. I represent that my performance of all the
-------------------------
terms of this Agreement and as an employee of the Company does not and will not
breach any agreement to keep in confidence information acquired by me in
confidence or in trust prior to my employment by the Company. I have not
entered into, and I agree I will not enter into, any agreement either written or
oral in conflict herewith.
10. Return of Company Documents. When I leave the employ of the Company, I
---------------------------
will deliver to the Company any and all drawings, notes, memoranda,
specifications, devices, formulas, and documents, together with all copies
thereof, and any other material containing or disclosing any Company Inventions,
Third Party Information or Proprietary Information of the Company. Prior to
leaving, upon the Company's request, I will cooperate with the Company in
completing and signing the Company's documentation in furtherance of my
obligations under this paragraph.
11. Legal and Equitable Remedies. Because my services are personal and
----------------------------
unique and because I may have access to and become acquainted with the
Proprietary Information of the Company, the Company shall have the right to
enforce this Agreement and any of its provisions by injunction, specific
performance or other equitable relief, without bond and without prejudice to any
other rights and remedies that the Company may have for a breach of this
Agreement.
H-64
<PAGE>
12. Notices. Any notices required or permitted hereunder shall be given
-------
to the appropriate party at the address specified below or at such other address
as the party shall specify in writing. Such notice shall be deemed given upon
personal delivery to the appropriate address or if sent by certified or
registered mail, three (3) days after the date of mailing.
13. General Provisions.
------------------
13.1 Governing Law. This Agreement will be governed by and construed
-------------
according to the laws of the State of [INSERT EMPLOYEE'S STATE OF RESIDENCE].
13.2 Entire Agreement. This Agreement is the final, complete and
----------------
exclusive agreement of the parties with respect to the subject matter hereof and
supersedes and merges all prior discussions between us. No modification of or
amendment to this Agreement, nor any waiver of any rights under this Agreement,
will be effective unless in writing and signed by the party to be charged. Any
subsequent change or changes in my duties, salary or compensation will not
affect the validity or scope of this Agreement. As used in this Agreement, the
period of my employment includes any time during which I have been or may be
retained by the Company as a director or consultant.
13.3 Severability. If one or more of the provisions in this Agreement
------------
are deemed unenforceable by law, then such provision will be deemed stricken
from this Agreement and the remaining provisions will continue in full force and
effect.
13.4 Successors and Assigns. This Agreement will be binding upon my
----------------------
heirs, executors, administrators and other legal representatives and will be for
the benefit of the Company, its successors, and its assigns.
13.5 Survival. The provisions of this Agreement shall survive the
--------
termination of my employment and the assignment of this Agreement by the Company
to any successor in interest or other assignee.
13.6 Employment. I agree and understand that nothing in this
----------
Agreement shall confer any right with respect to continuation of employment by
the Company, nor shall it interfere in any way with my right or the Company's
right to terminate my employment at any time, with or without cause.
13.7 Waiver. No waiver by the Company of any breach of this Agreement
------
shall be a waiver of any preceding or succeeding breach. No waiver by the
Company of any right under this Agreement shall be construed as a waiver of any
other right. The Company shall not be required to give notice to enforce strict
adherence to all terms of this Agreement.
H-65
<PAGE>
This Agreement shall be effective as of the first day of my employment
with the Company, namely: _____________________________________.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE
COMPLETELY FILLED OUT EXHIBIT A TO THIS AGREEMENT.
Dated: ______________________________ _____________________________________
Signature
_____________________________________
(Printed Name)
_____________________________________
(Address)
_____________________________________
Accepted and Agreed To:
Shields Enterprises, Inc.
By: _________________________________
Title: ______________________________
H-66
<PAGE>
EXHIBIT H-1 TO PROPRIETARY
INFORMATION INVENTIONS AGREEMENT
TO: Shields Enterprises, Inc.
FROM: ______________________________________________________________
DATE: ______________________________________________________________
SUBJECT: Previous Inventions and Improvements
1. The following is a complete list of all inventions or improvements
relevant to the subject matter of my employment by Shields Enterprises, Inc.
(the "Company") that have been made or conceived or first reduced to practice by
me alone or jointly with others prior to my engagement by the Company:
[_] No inventions or improvements.
[_] See below;
___________________________________________________________________
___________________________________________________________________
[_] Due to confidentiality agreements with prior employer, I cannot
disclose certain inventions that would otherwise be included on the
above-described list.
[_] Additional sheets attached.
2. I propose to bring to my employment the following devices, materials
and documents of a former employer or other person to whom I have an obligation
of confidentiality that are not generally available to the public, which
materials and documents may be used in my employment pursuant to the express
written authorization of my former employer or such other person (a copy of
which is attached hereto):
. No material.
. See below.
____________________________________________________________________
____________________________________________________________________
[_] Additional sheets attached.
H-67
<PAGE>
Exhibit 10.17
AGREEMENT
AGREEMENT, dated as of June 21, 1996, among Shields Enterprises, Inc., a
Delaware corporation ("SEI"), and Fidelis N. Umeh ("Umeh").
W I T N E S S E T H:
WHEREAS, SEI and Umeh are parties to that certain Agreement, dated December
29, 1988, relative to, among other things, Umeh's employment by SEI (the
"Existing Agreement");
WHEREAS, it is contemplated that SEI will enter into an Agreement and Plan
of Reorganization (the "Reorganization Agreement") with Navigation Technologies
Corporation, a Delaware corporation ("NavTech"), NT Acquisitions Corporation, a
Delaware corporation and a wholly-owned subsidiary of NavTech ("Subsidiary"),
and T. Russell Shields pursuant to which Subsidiary will merge into SEI (the
"Merger");
WHEREAS, the Reorganization Agreement will require, as a condition to the
Merger, that, as of the effective date of the Merger, all outstanding
obligations to Umeh under the Existing Agreement will have been satisfied in
full, the Existing Agreement will have been terminated and Umeh will have
executed and delivered a written release in favor of SEI (the "Conditions");
WHEREAS, SEI and Umeh desire, among other things, to enter into this
Agreement for the purpose of satisfying the Conditions;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Termination of Existing Agreement. The Existing Agreement will
---------------------------------
terminate in its entirety, and be of no further force or effect whatsoever, on
the Effective Date (as such term is defined in Section 4) upon the satisfaction
or waiver of the conditions set forth in Section 4; provided, however, that
notwithstanding the foregoing, Umeh will continue to be entitled to receive from
SEI the compensation, fringe benefits, reimbursement for expenses and benefits
under the profit participation plans contemplated by
<PAGE>
Sections 4, 5, 6 and 7, respectively, of the Existing Agreement to the extent
not paid and satisfied through the Effective Date; and, further provided, that
Umeh's non-competition and nondisclosure covenants contained in Sections 9 and
10, respectively, of the Existing Agreement shall survive any such termination.
2. Issuance of SEI Shares. In consideration of the termination of the
----------------------
Existing Agreement, and in lieu of any and all compensation or other benefits
that would otherwise be due and owing to Umeh by SEI or any of its affiliates
pursuant to the Existing Agreement by reason of the Merger and/or termination of
Umeh's employment with SEI (including, without limitation, any amounts that
would be payable pursuant to Sections 8 and 12 of the Existing Agreement), SEI
will issue to Umeh on the Effective Date (or, if requested by written notice
from Umeh to SEI, promptly upon such earlier date as Umeh may request following
receipt by Umeh of advice from his counsel that the initial public offering of
NavTech common stock referred to in Section 4 is reasonably likely to be
completed) 657 shares of SEI common stock, resulting (after such issuance) in
there being an aggregate of 11,421 shares of SEI common stock outstanding
immediately prior to the consummation of the Merger. Notwithstanding the
foregoing, the number of shares of SEI common stock to be issued to Umeh
pursuant to this Section 2 (and, correspondingly, the number of shares of SEI
common stock to be outstanding immediately prior to the consummation of the
Merger) will be subject to increase or decrease depending upon whether the
number of shares of NavTech common stock to be issued to SEI's shareholders
pursuant to the Merger (the "Merger Shares") is more or less than 42,000,000 (as
currently constituted prior to the reverse stock split referred to in the
Reorganization Agreement and excluding, for purposes of this calculation, the
sum of (i) the number of shares of NavTech common stock owned of record and
beneficially solely by SEI immediately prior to the consummation of the Merger
plus (ii) 1,585,000 shares of NavTech common stock). The amount of such
increase or decrease in the number of shares of SEI common stock to be issued to
Umeh shall be the number of shares of SEI common stock exchangeable (at the
exchange ratio established by the Reorganization Agreement) into ten percent
(10%) of such increase or decrease in the number of Merger Shares (being
similarly calculated prior to the reverse stock split to be more or less than
42,000,000 shares). The shares of SEI common stock to be issued to Umeh
pursuant to this Section 2 are hereinafter referred to as the "Umeh Shares". In
the event that on or prior to the
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Effective Date there is any change in the capitalization of SEI or NavTech other
than as contemplated in the latest draft of the Reorganization Agreement
provided to Umeh prior to the date hereof or any other change in the
Reorganization Agreement not specifically approved in writing by Umeh, the
number of Umeh Shares shall be recalculated in a fair and equitable manner
consistent with the intent of the parties as reflected in this Agreement based
upon the present capitalization of SEI and NavTech (prior to the reverse stock
split) and the latest draft of the Reorganization Agreement provided to Umeh
prior to the date hereof.
3. Releases. Effective as of the Effective Date, Umeh hereby releases SEI
--------
and its officers, directors, shareholders, employees, representatives, agents,
affiliates, successors and assigns from and against any and all claims, actions
and causes of action, known or unknown, that he may have against the released
persons under or with respect to the Existing Agreement and any transactions
contemplated thereby; provided, however, that this release shall not extend or
apply to the agreements and covenants of SEI contained in this Agreement.
Effective as of the Effective Date, SEI hereby releases Umeh from and against
any and all claims, actions, and causes of actions, known or unknown, that it
may have against Umeh under or with respect to the existing Agreement; provided,
however, that this release shall not extend or apply to the agreements and
covenants of Umeh contained in this Agreement.
4. Effective Date. As used in this Agreement, "Effective Date" means the
--------------
date upon which the Merger is consummated in the manner contemplated by the
Merger Agreement or such earlier date that the Umeh Shares are issued to Umeh in
the manner contemplated in Section 2. In either case, the issuance of the Umeh
Shares pursuant to this Agreement shall be deemed to have occurred prior to the
consummation of the Merger, with the effect that the Umeh Shares shall be deemed
to be issued and outstanding shares of SEI common stock as of the effective time
of the Merger entitling Umeh to receive shares of NavTech common stock in
exchange for the Umeh Shares pursuant to the Merger.
Notwithstanding anything to the contrary contained herein, this Agreement
shall terminate and be of no further force or effect whatsoever (except as
provided in the immediately following paragraph) in the event that (i) the
Merger is not consummated by October 1, 1996 or (ii) an initial public offering
of NavTech
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<PAGE>
common stock (which initial public offering is a condition to NavTech's and
SEI's obligation to consummate the Merger) shall not close immediately prior to
or concurrently with the consummation of the Merger, or shall not be ready to
close immediately following the consummation of the Merger.
Upon any termination of this Agreement, Umeh shall immediately transfer to
SEI any and all of the Umeh Shares that were issued to him prior to such
termination. Umeh agrees to immediately execute and deliver to SEI any and all
documents, instruments and agreements (including, without limitation, stock
certificates together with stock powers endorsed in blank or to SEI's order) as
may be reasonably required in order to effectuate the foregoing transfer, and
Umeh hereby appoints SEI as his agent and attorney-in-fact to execute and
deliver any and all such documents, instruments and agreements for and on his
behalf (which appointment is agreed to be irrevocable and coupled with an
interest in the Umeh Stock). Unless and until the Merger is consummated, Umeh
shall not sell, transfer, assign, pledge, hypothecate or otherwise dispose of
the Umeh Shares (except in the manner contemplated in this paragraph) and shall
keep and maintain the Umeh Shares free and clear of any and all liens, pledges,
security interests, claims and other encumbrances of any kind or nature
whatsoever. In addition, until the Merger is consummated, SEI shall be entitled
to possession of the stock certificate(s) evidencing the Umeh Shares. SEI shall
provide Umeh with copies of the stock certificate(s) evidencing the Umeh Shares
promptly upon their issuance.
5. General Provisions.
------------------
(a) Expenses. Each party shall bear its own expenses incident to this
--------
Agreement and the transactions contemplated hereby, including, without
limitation, all fees of counsel, accountants and consultants.
(b) Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by
delivery in person, by messenger, by overnight courier service, by
facsimile transmission or by registered or certified mail to the
respective parties at the following addresses (or at such other address
for a party it shall have specified in a
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<PAGE>
notice given in accordance with this Section 5(b)):
(i) if to SEI:
SEI Information Technology
212 East Ohio
2nd Floor
Chicago, Illinois 60611
Attention: Mitchell Morris
Telecopy: 312 440-8373
with a copy to:
Neal, Gerber & Eisenberg
Two North LaSalle Street
Suite 2200
Chicago, Illinois 60602
Attention: Marshall E. Eisenberg, Esq.
Telecopy: 312-269-1747
(ii) if to Umeh:
Fidelis N. Umeh
1121 East 49th Street
Chicago, Illinois 60615-1907
Telecopy: 312-538-0709
with a copy to:
McDermott Will & Emery
227 W. Monroe Street
Chicago, Illinois 60606
Attention: John H. McDermott, Esq.
Telecopy: 312-984-3669
(c) Headings. The descriptive headings contained in this Agreement are for
--------
convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(d) Severability. If any term or other provision of this Agreement is
------------
invalid, illegal or incapable of being enforced by virtue of any law or
public policy, all other
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<PAGE>
terms and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
(e) Entire Agreement. This Agreement constitutes the entire agreement of
----------------
the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both written and
oral, among the parties hereto with respect to the subject matter
hereof.
(f) Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective
successors and assigns.
(g) Amendment; Waiver. This Agreement may not be amended or modified
-----------------
except by an instrument in writing signed by, or on behalf of, all of
the parties hereto. Any party to this Agreement may (i) extend the
time for the performance of any of the obligations or other acts of
any other party or (ii) waive compliance with any of the agreements or
conditions of any other party contained herein. Any such extension or
waiver shall be valid only if set forth in an instrument in writing
signed by the party to be bound thereby. Any waiver of any term or
condition shall not be construed as a waiver of any subsequent breach
or a subsequent waiver of the same term or condition, or a waiver of
any other term or condition, of this Agreement. The failure of any
party to assert any of its rights hereunder shall not constitute a
waiver of any of such rights.
(h) Governing Law: Arbitration: Injunctive and Other Relief. This
-------------------------------------------------------
Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of
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<PAGE>
Illinois applicable to agreements made and to be performed entirely in
Illinois. Each party hereby irrevocably consents to the exclusive
jurisdiction of the federal and state courts located in Chicago,
Illinois with respect to any actions which may arise in connection
with this Agreement and are not required by this Section 5(h) to be
arbitrated. Except as provided in this Section 5(h), any controversy
or claim arising out of or relating to this Agreement, or the breach
thereof, shall be settled by arbitration administered by the American
Arbitration Association in accordance with its commercial Arbitration
Rules, and judgment on the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof.
Within fifteen (15) days after the commencement of arbitration, each
party shall each select one person to act as arbitrator and the two
selected shall select a third arbitrator within ten (10) days of their
appointment. If the arbitrators so selected are unable or fail to
agree upon the third arbitrator, or if either party fails to appoint
an arbitrator, such arbitrator or arbitrators shall be selected by the
American Arbitration Association.
Each of the parties to this Agreement acknowledges that a breach of
this Agreement may cause the other party irreparable harm which may
not be adequately compensated by money damages. Therefore, in the
event of a breach or threatened breach by a party, injunctive or other
equitable relief will be available to the other party, and any
arbitrator acting pursuant to this Agreement shall have the authority
to provide such injunctive or other equitable relief. Remedies
provided herein are not exclusive.
The arbitrators shall have the authority to award such remedies or
relief that a court of the State of Illinois could order or grant in
an action governed by Illinois law, including, without limitation,
specific performance of any obligation created under this Agreement,
the issuance of an injunction, or the imposition of sanctions for
abuse or frustration of the arbitration process. The
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<PAGE>
arbitration proceedings shall be conducted in Chicago, Illinois.
Notwithstanding the foregoing, any party may bring and pursue an
action in any Federal or State court located in Chicago, Illinois
seeking provisional relief, including a temporary restraining order or
preliminary injunction, pending an arbitration proceeding. Any
provisional relief obtained shall be discontinued once the arbitrators
have assumed jurisdiction and ordered such discontinuance.
(i) Further Action. Each of the parties hereto shall use all reasonable
--------------
efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things reasonably necessary, proper or advisable
under applicable law, and execute and deliver such documents and other
papers, as may be required to carry out the provisions of this
Agreement and consummate and make effective the transactions
contemplated by this Agreement.
(j) Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the
same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
SHIELDS ENTERPRISES, INC.,
a Delaware corporation
By: /s/ Mitchell Morris
---------------------------
/s/ Fidelis N. Umeh
------------------------------
Fidelis N. Umeh
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<PAGE>
EXHIBIT 10.18
EXECUTION COPY
--------------
PRINCIPAL SHAREHOLDER AGREEMENT
THIS PRINCIPAL SHAREHOLDER AGREEMENT (the "PSA") is made and entered into
as of June 24, 1996, by and among Navigation Technologies Corporation, a
Delaware corporation ("NavTech"), Shields Enterprises, Inc., a Delaware
corporation ("SEI"), T. Russell Shields, an individual residing in Chicago,
Illinois (the "Principal Shareholder"), and LaSalle National Trust, N.A., a
national banking association with an office in Chicago, Illinois, as escrow
agent ("Escrow Agent"), with reference to the following:
A. This PSA is being entered into in anticipation of the merger (the
"Merger") contemplated under an Agreement and Plan of Reorganization
between, among other parties, NavTech and SEI of even date herewith
pursuant to which SEI will become a wholly-owned subsidiary of NavTech (the
"Plan of Reorganization").
B. The Principal Shareholder is chairman, a director and the majority
shareholder of SEI. As a condition to NavTech entering into the Plan of
Reorganization and consummating the Merger, the Principal Shareholder is
entering into this PSA.
C. This PSA shall become effective upon the Effective Date of the Merger
and shall have no effect unless and until such Merger occurs.
D. Unless otherwise indicated, all capitalized terms used herein shall
have the same meaning as specified in the Plan of Reorganization.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
INDEMNIFICATION BY THE PRINCIPAL SHAREHOLDER
1.01 From and after the consummation of the Merger, the Principal
Shareholder hereby agrees to indemnify and hold harmless each of NavTech, SEI,
and Philips Electronics, N.V. and its affiliates (solely in their capacity as a
controlling person of NavTech)("Philips") (NavTech, SEI and Philips are
hereinafter collectively referred to as the "Indemnified Persons"), from and
against and/or in respect of any and all Claims (as defined below) (each an
"Indemnified Claim") asserted against or suffered by an Indemnified Person as a
result of (i) any breach by SEI on or before the Effective Date of a
representation or warranty contained in the Plan of Reorganization, (ii) any
breach by SEI or the Principal Shareholder on or before the Effective Date of
any of their respective covenants or obligations contained in the Plan of
Reorganization, or (iii) any liability of SEI for Taxes for any period on or
before the Effective Date other than those Taxes (A)
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reserved for on the Balance Sheet or set forth in Section 3.05(a) of the SEI
Schedule, (B) arising in the normal course of SEI's operations after the Balance
Sheet Date (provided that any Taxes that SEI incurs because it is not a valid S
Corporation under the Internal Revenue Code of 1986, as amended, for any period
prior to the Effective Date, or any Federal income taxes or state or local taxes
on or measured by income in any jurisdiction in which SEI has claimed S
Corporation status (as defined in Subchapter S of the Internal Revenue Code of
1986, as amended) that SEI incurs for any period prior to the Effective Date for
any reason, will not be considered as arising in the normal course of SEI's
operations), and (C) arising upon, and attributable to the consummation of the
Merger. For the purposes of this Section 1.01 of the PSA, all representations
and warranties of SEI under the Plan of Reorganization shall be deemed to have
been made by SEI as of the Effective Date without giving effect to any
Disclosure Schedule Update, provided however, that the Principal Shareholder
shall have no obligation to indemnify the Indemnified Persons with respect to
any item disclosed in any Disclosure Schedule Update or any covenant or
condition waived by NavTech as provided in Section 9.03 prior to the Effective
Date (collectively the "Excepted Items"), if such Excepted Items were not known
to, or knowable (with reasonable investigation under the circumstances) by, SEI
at the time the Plan of Reorganization was entered into or did not result from
the breach by SEI or any shareholder, employee, director or agent thereof of any
covenant or obligation in the Plan of Reorganization, as the case may be.
Except as provided in the preceding sentence: (Y) the right to indemnification
hereunder based on representations, warranties, covenants, and obligations made
under the Plan of Reorganization will not be affected by any investigation
conducted, or any knowledge acquired (or capable of being acquired), at any time
whether before or after the execution and delivery of the Plan of Reorganization
or the Effective Date, with respect to the accuracy or inaccuracy of or
compliance with, any such representation, warranty, covenant, or obligation; and
(Z) the waiver of any condition based on the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or
obligation, will not affect the right to indemnification based on such
representations, warranties, covenants, and obligations.
1.02 For purposes of this PSA:
(a) A "Change of Control" shall have occurred on any date on which
any person or group of related persons (other than (X) the Principal Shareholder
and his Family (as defined in the Employment Agreement between NavTech and the
Principal Shareholder of even date herewith) or any persons under his or their
control together with one or more other persons, groups or entities acting in
concert or (Y) Philips Electronics N.V. and its affiliates) shall have acquired
control of NavTech or SEI (though the acquisition of voting shares, acquisition
of assets, merger or otherwise).
(b) "Claims" shall mean all claims, demands, losses, costs,
expenses, obligations, liabilities, actions, suits and damages that have been
asserted against an Indemnified Person, including, without limitation,
diminution in value and deficiencies (net of any insurance proceeds actually
received but without giving effect to any tax benefits attributable thereto),
whether or not involving a Third Party Claim (as defined below), interest and
penalties, reasonable attorneys' fees
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<PAGE>
and costs, and all amounts paid in settlement of any claim, action or suit, but
excluding any taxes on any indemnity payments. Notwithstanding the foregoing,
"Claims" shall include incidental or consequential damages only to the extent
that an Indemnified Person is or may be liable to pay such amount to a third
party by reason of an actual claim asserted by a third party, but shall exclude
any and all incidental and consequential damages otherwise suffered by an
Indemnified Person (e.g., loss of business profits by an Indemnified Person).
(c) "Tax Claim" shall mean any liability of SEI for (i) state or
local taxes on or measured by income in any jurisdiction in which SEI has
claimed S Corporation status (as defined in Subchapter S of the Internal Revenue
Code of 1986, as amended) and (ii) Federal income taxes, in each case together
with any interest or penalties related thereto.
(d) "Non-Tax Claim" shall mean any Claim other than a Tax Claim.
ARTICLE II
LIMITATION OF LIABILITY
2.01 With respect to Non-Tax Claims, the Principal Shareholder shall have
no obligation to indemnify any Indemnified Person hereunder until the aggregate
amount of all Non-Tax Claims for which indemnification is required to be
provided under this PSA (without regard to which Indemnified Person or Persons
are so entitled to such indemnification) exceeds One Million Dollars
($1,000,000) in the aggregate with respect to all Non-Tax Claims. In addition,
the Principal Shareholder shall have no obligation to indemnify any Indemnified
Person hereunder with respect to any Non-Tax Claim having an Applicable Claims
Period of eighteen (18) months which is brought after a Change of Control. The
preceding sentences shall not apply to any Tax Claim. With respect to Non-Tax
Claims, in no event shall the liability of the Principal Shareholder to provide
indemnification to the Indemnified Persons exceed, in the aggregate, Ten Million
Dollars ($10,000,000) (the "Non-Tax Indemnity Cap").
2.02 With respect to Tax Claims, in no event shall the liability of the
Principal Shareholder to provide indemnification to the Indemnified Persons
exceed, in the aggregate, Ten Million Dollars ($10,000,000) (the "Tax Indemnity
Cap").
2.03 The reasonably necessary costs and expenses (including legal fees)
incurred by the Principal Shareholder for the defense of any Non-Tax Claims or
Tax Claims ("Defense Costs") shall be treated as the payment of Claims for
purposes of computing the aggregate indemnification provided under the Non-Tax
Indemnity Cap or the Tax Indemnity Cap, respectively. For purposes of
determining whether the Non-Tax Indemnity Cap or Tax Indemnity Cap has been
satisfied, indemnity payments made, and Defense Costs incurred, by the Principal
Shareholder hereunder in connection with Non-Tax Claims shall be applied solely
to the Non-Tax Indemnity Cap, and indemnity payments made, and Defense Costs
incurred, by the Principal Shareholder hereunder in connection with Tax Claims
shall be applied solely to the Tax Indemnity Cap.
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<PAGE>
2.04 The indemnity provided hereunder by the Principal Shareholder shall
be the sole liability of the Principal Shareholder or any other SEI shareholder
with respect to any warranty, representation, covenant or obligation of SEI or
the Principal Shareholder under the Plan of Reorganization; provided that, if
the property held in the Escrow Fund is not sufficient to satisfy any Claim of
any Indemnified Person within the limits set forth in Section 2.01 and Section
2.02 at the time such Claim is payable (regardless of the reason for such
insufficiency), the Principal Shareholder shall remain personally liable for the
satisfaction of any such Claim to the extent of the balance of the Non-Tax
Indemnity Cap or Tax Indemnity Cap, as the case may be.
ARTICLE III
DEFENSE OF INDEMNIFIED CLAIMS
3.01 In case any Non-Tax Claim is brought by a third party at any time
after the Indemnified Parties have delivered to the Principal Shareholder
Notices of Damages (as defined in Section 6.01(d)) specifying Claims, in the
aggregate, in excess of One Million Dollars ($1,000,000), or a Tax Claim is
brought at any time (in either case a "Third Party Claim"), the Principal
Shareholder shall be entitled to, but shall not be obligated to, assume and
control the defense thereof (at his own expense), with counsel reasonably
satisfactory to NavTech, by delivering written notice to NavTech of his election
to so assume the defense thereof within ten (10) days following receipt by the
Principal Shareholder of written notification from an Indemnified Person of such
Third Party Claim. The giving of notice of any such Claim or threatened Claim to
the Principal Shareholder by the Indemnified Person is a condition precedent to
the obligation of indemnity of the Principal Shareholder hereunder provided,
however, that any delay or failure in giving notice shall not relieve the
Principal Shareholder of any obligation to indemnify hereunder other than to the
extent the Principal Shareholder has been prejudiced by any such delay or
failure in giving notice. If the Principal Shareholder elects to assume the
defense of any such Claim, then the Indemnified Person (and NavTech if it is not
the Indemnified Person) shall be entitled to participate in said defense (at its
own expense). All parties shall cooperate reasonably with each other in the
defense of any Third Party Claim, including making available all records,
witnesses and information reasonably necessary to the defense of such Claim,
provided that all Indemnified Persons shall be indemnified hereunder for any out
of-pocket expenses paid to third parties reasonably incurred in providing such
cooperation that would not otherwise have been incurred by such Indemnified
Persons, which amounts shall be included in determining whether Notices of
Damages specifying Non-Tax Claims have aggregated One Million Dollars, and
determining whether the Non-Tax Indemnity Cap or the Tax Indemnity Cap, as the
case may be, has been reached.
3.02 An Indemnified Person may settle any Non-Tax Claim without the
approval of the Principal Shareholder, but if an Indemnified Person does so, the
Principal Shareholder shall have no obligation to indemnify the Indemnified
Person hereunder except to the extent that the Indemnified Person can thereafter
establish, to the Principal Shareholder's satisfaction or in arbitration
pursuant to Section 9.01 hereof, the amount of Damages that the Indemnified
Person would have been required to pay or incur with respect to any such Non-Tax
Claim if not so
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<PAGE>
settled, provided, however, that the Principal Shareholder in no event shall be
liable to pay Damages in any such case in excess of the settlement amount.
3.03 The Principal Shareholder shall not be entitled to settle any Claim
without obtaining the advance written approval of any Indemnified Person unless
such settlement (i) does not require or involve any commitments or concessions
by NavTech or any other Indemnified Person (other than those customary in
respect of cash settlements, such as confidentiality agreements), (ii) does not
place any restrictions upon any Indemnified Person (other than those customary
in respect of cash settlements, such as confidentiality agreements), (iii) with
respect to any Non-Tax Claim, does not prejudice any position of an Indemnified
Person with respect to Taxes, and (iv) fully resolves and disposes of the Claim
with respect to all Indemnified Persons without any cost to any Indemnified
Person. Any other settlements shall require the advance written approval of the
Indemnified Person or Persons affected thereby, which may be withheld by any
such Indemnified Person in his or its sole discretion. In the event that the
Principal Shareholder receives a bona fide settlement offer for a specified
amount of money (a "Proposed Settlement"), a copy of which shall have been
delivered to each of the Indemnified Persons affected by it (with a copy to the
Escrow Agent), and the Principal Shareholder gives written notice to each of
such Indemnified Persons that he desires to accept such Proposed Settlement, but
approval of such settlement is withheld by one or more Indemnified Persons
pursuant to the preceding sentence, the Principal Shareholder shall only be
required to provide indemnification up to the amount of the Proposed Settlement
unless the Principal Shareholder agrees, or the Indemnified Person or
Indemnified Persons establish in arbitration as provided in Section 9.01 hereof,
that the Proposed Settlement would have had a materially adverse effect on the
business, assets, liabilities, financial condition or results of operation of
NavTech, in which case the Principal Shareholder shall be required to provide
indemnification hereunder without any effect being given to the Proposed
Settlement.
3.04 To the extent that a Claim is made by an Indemnified Person against
the Principal Shareholder, and the Principal Shareholder establishes that there
have been no Damages recoverable by the Indemnified Person in respect of such
Claim, the Principal Shareholder is not responsible for any costs and expenses
(including legal fees) that may have been incurred by the Indemnified Person.
ARTICLE IV
ESCROW FUND
4.01 Deposit of Escrow Fund. The Principal Shareholder hereby represents
----------------------
that as of the date of the Plan of Reorganization and on the Effective Date, the
Principal Shareholder is and will be the sole owner, free and clear of any lien,
encumbrance, charge or security interest whatsoever, of the number of shares of
SEI Common Stock identified in Section 3.02 of the SEI Schedule as being held in
the name of the Principal Shareholder. On or prior to the Effective Date, the
Principal Shareholder agrees to tender to the Exchange Agent all such shares of
SEI Common Stock for conversion into shares of NavTech Common Stock, in
accordance with the
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terms of the Plan of Reorganization. The Principal Shareholder shall also
deliver to the Exchange Agent a Transmittal Letter in accordance with Section
11.02 of the Plan of Reorganization, in a form reasonably acceptable to NavTech
and the Exchange Agent, directing the Exchange Agent to deposit with the Escrow
Agent on the Effective Date one or more certificates representing (i) an
aggregate, Ten Million (10,000,000) shares (prior to giving effect to the
reverse stock split (the "Reverse Split") referred to in Section 2.02(c) of the
Plan of Reorganization (currently expected to be 1 for 10)) of NavTech Common
Stock (the "Tax Escrow Shares") and (ii) an aggregate, Ten Million (10,000,000)
shares (prior to giving effect to the Reverse Split) of NavTech Common Stock
(the "Non-Tax Escrow Shares" and together with the Tax Escrow Shares, the
"Escrow Shares"). The Principal Shareholder shall also deliver to the Escrow
Agent an assignment and stock powers endorsed in blank (STAMP signature
guaranteed) with respect to the Escrow Shares to allow the Escrow Agent to carry
out the purposes of this Agreement. So long as the Escrow Shares are held by the
Escrow Agent hereunder, the Principal Shareholder agrees that he will not make,
nor agree to make, any transfer or disposition of any of the Escrow Shares, or
any interest therein of any nature whatsoever, other than by will or the laws of
descent and distribution (provided any such Escrow Shares shall remain subject
to this Agreement). The balance of the Exchange Shares remaining after deposit
of the Escrow Shares with the Escrow Agent shall be delivered by the Exchange
Agent to the Principal Shareholder.
4.02 Receipt of Escrow Fund. The Escrow Agent will accept delivery and
-----------------------
receipt of certificates representing the Escrow Shares and any Additional Escrow
Securities (as defined in Section 4.04 below and which shall also be considered
Escrow Shares) solely in its capacity as Escrow Agent, to be held and disbursed
in accordance with the terms and conditions of this PSA. The Escrow Shares
shall be registered on the books of NavTech in the name of the Principal
Shareholder while they are held in the Escrow Fund, but the certificates for
such shares shall be legended to reflect this Agreement. While such shares are
registered in the name of the Principal Shareholder, the Principal Shareholder
will be the shareholder of record for all purposes, including the receipt of
notice of meetings, voting and consensual purposes, except as otherwise provided
in this PSA.
4.03 Separate Account. The Escrow Agent agrees that the Escrow Shares and
-----------------
any other property delivered to the Escrow Agent hereunder shall be maintained
by the Escrow Agent in a separate account (the "Escrow Fund") segregated for the
sole benefit of the Indemnified Persons and the Principal Shareholder pursuant
to the terms of this PSA, free and clear of all liens, encumbrances, charges or
security interests whatsoever created by the Escrow Agent, and that the Escrow
Fund will not be commingled with any funds or accounts of the Escrow Agent or of
other customers of the Escrow Agent.
4.04 Voting Rights; Distributions, Etc.
----------------------------------
(a) Subject to Section 4.04(c), the Principal Shareholder shall be
entitled to exercise any and all voting and/or consensual rights and powers
accruing to an owner of the
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Escrow Shares for any purpose not inconsistent with (i) the provisions of this
PSA and applicable law, and (ii) the preservation of the value of the Escrow
Shares.
(b) Subject to Section 4.04(c), the Principal Shareholder shall be
entitled to receive and retain all cash dividends, interest and other cash
distributions payable in respect of the Escrow Shares to the extent that such
distributions are made in the ordinary course of NavTech's business (and not as
a result of the recapitalization, reorganization, merger, consolidation,
disposition of assets, liquidation or dissolution of NavTech). Except as
described in the foregoing sentence and subject to Section 4.04(c), (i) all cash
and other property at any time and from time to time received or receivable by
or distributed or distributable to the owner of the Escrow Shares from NavTech
(whether in the ordinary course of NavTech's business or representing or
resulting from stock dividends, stock splits or reclassifications, the
recapitalization, reorganization, merger, consolidation, disposition of assets,
liquidation or dissolution of such issuer, the exercise by the Principal
Shareholder of warrants, rights or options deemed to be Additional Escrow
Securities (as defined below), or any other action or cause) in exchange or
substitution for or otherwise in respect of any or all of the Escrow Shares, and
(ii) all shares and other securities and all warrants, rights and options
distributed with respect to the Escrow Shares and not yet properly exercised or
converted (such shares, securities, warrants, rights and options together with
the certificates and/or other instruments or writings representing them being
hereinafter collectively called the "Additional Escrow Securities"), shall be
deposited with and held by the Escrow Agent in the Escrow Fund for application
in accordance with this PSA.
(c) Upon the occurrence of a Final Determination Date (as defined in
Article VI below), unless the Principal Shareholder shall have exercised his
rights to substitute cash for Escrow Shares pursuant to Section 6.01(c) of this
PSA, the Escrow Agent, at the written direction of NavTech, shall assume and
exercise any and all voting and consensual rights and powers accruing to an
owner of that number of the Escrow Shares (determined as provided in Section
6.01 (c)) necessary to satisfy the claim for Damages with respect to which the
Final Determination Date has occurred, and all powers of the Principal
Shareholder described in Section 4.04(b) to receive the dividends, interest and
other cash distributions described in such Section shall cease with respect to
such number of Escrow Shares, and all such rights shall thereupon become vested
in the Escrow Agent. During the five (5) day period following the Final
Determination Date, unless the Principal Shareholder shall have exercised his
rights to substitute cash for Escrow Shares pursuant to Section 6.01(c), neither
the Principal Shareholder nor NavTech shall be entitled to direct the Escrow
Agent with respect to the matters set forth in the previous sentence, and any
dividends, interest and any other distributions with respect to such number of
the Escrow Shares declared or received during such five (5) day period shall be
distributed in accordance with Section 6.01(c). The Principal Shareholder
agrees that neither NavTech nor any of its representatives shall have any
liability to the Principal Shareholder, or to any person claiming rights against
NavTech by, through or under the Principal Shareholder, in any way arising out
of or in connection with NavTech's or any such representative's exercise of, or
failure to exercise, any of its rights or powers under this Section 4.04(c).
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(d) The Escrow Agent shall give the Principal Shareholder and
NavTech notice when any cash is received by the Escrow Agent. Any cash held in
the Escrow Fund shall be invested in (i) obligations issued or guaranteed by the
United States of America or any agency or instrumentality thereof, or (ii)
certificates of deposit with national banks or corporations endowed with trust
powers having capital and surplus in excess of $100 million as the Principal
Shareholder shall instruct the Escrow Agent in writing to utilize (or, in the
absence of such instruction within ten (10 ) days after notice is given to the
Principal Shareholder that cash is being held in escrow, as NavTech may instruct
in writing) or (iii) shares of NavTech Common Stock (but only to the extent that
such cash has not been received by the Escrow Agent pursuant to Section 7.02 or
Section 7.05 of this PSA). Interest earned on the Escrow Fund shall be
considered currently reportable income of the Principal Shareholder for income
tax purposes and the Principal Shareholder shall be entitled to receive and
retain such interest. In the event any cash amounts are held in the Escrow Fund,
the Escrow Agent shall deliver a statement at least annually documenting any
interest payments.
ARTICLE V
ESCROW AGENT
5.01 Records and Accounts. The Escrow Agent shall maintain records of all
--------------------
property deposited in and monies and investments pertaining to the Escrow Fund
and shall furnish such information and reports relating thereto as may
reasonably be requested by NavTech or the Principal Shareholder. NavTech and
the Principal Shareholder, and their duly authorized representatives, shall have
the right at all reasonable times on reasonable advance notice to inspect the
accounts and records of the Escrow Agent relating to the Escrow Fund.
5.02 Rights and Duties of Escrow Agent
---------------------------------
(a) The Escrow Agent shall be entitled to compensation for its
services for opening the escrow provided for in this PSA and for its services
for the period commencing on the date of this PSA until the Escrow Fund shall
have been distributed, at such rate as the Escrow Agent and NavTech have agreed
in a separate fee letter. The Escrow Agent shall also be entitled to payment of
its routine and customary out-of-pocket expenses including reasonable counsel
fees incurred in its routine administration of the Escrow Fund. Such
compensation and expenses (collectively, "Escrow Expenses") shall be paid by
NavTech.
(b) The duties and responsibilities of the Escrow Agent shall be
limited to those expressly set forth in this PSA and the Escrow Agent shall not
be charged with knowledge of any other agreement or instrument; provided,
however, that with the Escrow Agent's written consent, the duties and
responsibilities in this Escrow Agreement may be amended at any time or times by
an instrument in writing signed by the other parties.
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(c) The Escrow Agent is authorized, in its sole discretion, to
disregard any and all notices or instructions given by NavTech, SEI or the
Principal Shareholder or by any other person, firm or corporation, except only
such notices or instructions provided for in this PSA.
(d) The Escrow Agent shall be protected in acting upon any
certificate, written agreement, report of an independent expert or notice
delivered pursuant to this Escrow Agreement which the Escrow Agent in good faith
believes to be genuine and what it purports to be.
(e) In consideration of its acceptance of the appointment as Escrow
Agent, the other parties hereto, jointly and severally, agree to indemnify and
hold the Escrow Agent harmless as to any liability incurred by it to any person,
firm or corporation by reason of its having accepted the same or in carrying out
any of the terms hereof, and to reimburse the Escrow Agent for all its expenses
(excluding the Escrow Expenses), including, among other things, reasonable
counsel fees and court costs, incurred by reason of its position hereunder or
actions taken pursuant hereto, except any liability resulting from the gross
negligence, willful misconduct or act of bad faith of the Escrow Agent. As
between themselves, NavTech and SEI on the one hand, and the Principal
Shareholder on the other hand, agree in the event that NavTech and SEI cannot
agree upon an allocation between them of the liability to pay expenses of the
Escrow Agent described in the foregoing sentence, NavTech and SEI hereby agree
to submit the determination of such allocation to arbitration as provided in
Section 9.01.
(f) The Escrow Agent may consult with independent legal counsel in
the event of any dispute or question as to the construction of any of the
provisions hereof or its duties hereunder, and it shall incur no liability and
shall be fully protected in acting in good faith in accordance with the opinion
and instructions of such counsel.
(g) In the event of any disagreement between NavTech and SEI on the
one hand, and the Principal Shareholder on the other hand, or between them and
any other person, resulting in adverse claims or demands being made in
connection with the Escrow Fund, or in the event that the Escrow Agent, in good
faith, is in doubt as to what action it should take hereunder, the Escrow Agent
shall refuse to comply with any claims or demands on it or refuse to take any
other action hereunder, so long as such disagreement continues or such doubt
exists, and in any such event, the Escrow Agent shall not be or become liable in
any way or to any person for its failure or refusal to act, and the Escrow Agent
shall continue so to refrain from acting until (i) the rights of NavTech, SEI,
the Principal Shareholder and any such other person shall have been fully and
finally adjudicated by an arbitrator or court of competent jurisdiction, or (ii)
all differences shall have been adjusted and all doubt resolved by agreement
among NavTech, SEI, the Principal Shareholder, and any such other person (as the
case may be), and the Escrow Agent shall have been notified thereof in writing
signed by or on behalf of all such persons. The rights of the Escrow Agent under
this subsection are in addition to any other rights which it may have by law or
otherwise, including the right of the Escrow Agent to interplead any dispute to
a court of competent jurisdiction.
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(h) The Escrow Agent may resign by an instrument in writing
delivered to NavTech, SEI and the Principal Shareholder to take effect not
sooner than thirty (30) days following its delivery to NavTech and the Principal
Shareholder, whereupon NavTech, SEI and the Principal Shareholder by mutual
agreement shall immediately designate in writing a successor Escrow Agent. Such
successor Escrow Agent shall be subject to the same duties and obligations and
shall have the same rights, privileges and immunities specified in this PSA. Any
such successor Escrow Agent shall file with NavTech, SEI and the Principal
Shareholder its written acceptance of the duties specified in this PSA and its
agreement to act in said capacity. In the event that NavTech, SEI and the
Principal Shareholder fail to agree on a successor Escrow Agent as specified
herein, any of them may apply to the American Arbitration Association to
designate a successor Escrow Agent.
(i) NavTech, SEI and the Principal Shareholder shall have the right,
at any time, by agreement, to remove the Escrow Agent and appoint a successor
Escrow Agent. The appointment of the successor Escrow Agent shall not be
effective until such successor Escrow Agent has agreed in writing to become a
party to this Agreement.
ARTICLE VI
APPLICATION OF ESCROW FUND
6.01 Notification of Claims: Furnishing of Particulars.
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(a) Whenever any Indemnified Person becomes aware of any Claim for
which it believes in good faith Damages (as defined below) might be incurred by
it, such Indemnified Person shall give notice thereof ("Notice of Damages") to
the Escrow Agent (and to NavTech if the Notice of Damages is delivered by an
Indemnified Person other than NavTech) as soon as reasonably practicable. The
Escrow Agent shall then promptly deliver a copy of such Notice of Damages to the
Principal Shareholder and a written confirmation of such delivery to such
Indemnified Person (and NavTech, if applicable). Such notice shall provide
reasonable detail of the nature of the Claim and the basis for indemnity claimed
(including, if applicable, specific references to relevant sections of the Plan
of Reorganization) with respect to such Claim, and, if reasonably ascertainable,
a nonbinding estimate of the amount of the potential Damages. Any delay or
failure by such Indemnified Person to give notice shall not affect any rights
which any Indemnified Person may otherwise have other than to the extent the
Principal Shareholder has been prejudiced by any such delay or failure in giving
notice.
(b) The Principal Shareholder shall be deemed to have concurred
that it has an obligation to indemnify the affected Indemnified Person with
respect to the Claim described in any Notice of Damages, unless within the
Objection Period (as defined below in Section 6.01(e)(v)) the Principal
Shareholder shall have sent to the Escrow Agent, NavTech and the affected
Indemnified Person (if other than NavTech) notice questioning the propriety of
such claim, in which case such claim, unless settled by mutual agreement among
the Principal Shareholder and
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such Indemnified Person, shall be promptly referred for arbitration pursuant to
Section 9.01 hereof, provided that the commencement of such arbitration may be
postponed for a reasonable period of time at the request of the Principal
Shareholder or the Indemnified Person if the underlying Claim giving rise to the
Notice of Damages is or is likely to be the subject of litigation or another
contested proceeding with a third party that has not yet been resolved, and the
person requesting such postponement reasonably believes that such proceeding
could be prejudiced if the arbitration were not so postponed. Notwithstanding
the foregoing sentence, any claim for Damages based upon a non-appealable final
judgment, decree or award of court of competent jurisdiction requiring the
payment of money by any Indemnified Person shall be conclusive as to the amount
of the Claim, and the only issue for consideration in arbitration is whether the
Principal Shareholder has an obligation to indemnify such Indemnified Person
with respect to the Claim. Any determination as a result of any arbitration
procedure shall be a conclusive determination of the matter or matters
considered and shall be binding upon the Principal Shareholder and the
Indemnified Persons and the Damages determined as a result of any arbitration
procedure shall be deemed finally determined under this PSA. Each party to the
arbitration shall bear its own expenses of the arbitration.
(c) Distributions to the Indemnified Persons. As soon as
----------------------------------------
practicable after the fifth (5th) business day following the Final Determination
Date relating to any claim of Damages as to which Damages to an Indemnified
Person have been found, the Escrow Agent shall make a distribution from the
Escrow Fund to the Indemnified Person, provided that no Indemnified Person other
than NavTech shall be entitled to any such distribution unless the Escrow Agent
has also been notified in writing by NavTech (which may act in its sole and
absolute discretion) that it approves such distribution. Any such distributions
shall consist of (i) first, any cash held by the Escrow Agent, and to the extent
any such cash is insufficient to satisfy the claim of Damages, and (ii) second,
the number of shares of NavTech Common Stock with a value, valued at Fair Market
Value (as defined below) on the Final Determination Date, equal to the aggregate
amount of Damages, rounded up or down to the nearest whole share in the case of
the NavTech Common Stock, for which a Notice of Damages has been given by an
Indemnified Person to the Principal Shareholder, NavTech (if other than the
Indemnified Person) and the Escrow Agent and which have been finally determined
pursuant to this Article VI to be due the Indemnified Person and still remains
unpaid, all as certified to the Escrow Agent by the Indemnified Person. The
number of shares of NavTech Common Stock described above shall be delivered to
the Indemnified Person together with stock powers endorsed in blank and shall
thereafter be the property of the Indemnified Person, free and clear of the
provisions of this PSA and any claims of the Principal Shareholder.
Notwithstanding the foregoing, the Principal Shareholder shall have the right to
provide cash to the Escrow Agent within five (5) days following the Final
Determination Date which the Escrow Agent shall use first to satisfy any claim
of Damages before distributing Escrow Shares, in which case the Escrow Agent
shall distribute to the Principal Shareholder a number of Escrow Shares with a
Fair Market Value on the date such cash is provided equal to the amount of such
cash, and this Agreement shall no longer apply to such shares.
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(d) At any time at which the Escrow Agent is required pursuant to
this PSA to deliver less than all of the Escrow Shares to any person, the Escrow
Agent shall tender to NavTech's transfer agent the certificate or certificates
for NavTech Common Stock held by the Escrow Agent for conversion into one or
more certificates representing the shares to be delivered and the shares that
shall continue to be held in escrow. The parties agree to cooperate with the
Escrow Agent to facilitate such transfers and issuances of certificates.
(e) For purposes of this Agreement, the following terms shall have
the meaning set forth below:
(i) "Damages" shall mean the dollar value of any indemnity
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owed by the Principal Shareholder to any Indemnified Person in accordance with
Section 1.01 of this PSA.
(ii) "Fair Market Value" shall be (i) if the NavTech Common
-----------------
Stock is listed on a national securities exchange or admitted to unlisted
trading privileges on such exchange or approved for trading on NASDAQ, the
average for the five (5) trading days prior to the date of determination of Fair
Market Value of the last reported sale prices of the NavTech Common Stock on
such exchange or system; or (ii) if the NavTech Common Stock is not so listed or
admitted to unlisted trading privileges or approved for trading on NASDAQ, the
average for the five (5) trading days prior to the date of determination of Fair
Market Value of the average of the last reported bid and asked prices quoted
each day by National Quotation Bureau Inc.; or (iii) if the NavTech Common Stock
is not so listed or admitted to unlisted trading privileges or approved for
trading on NASDAQ and bid and asked prices are not so reported, an amount,
determined by agreement of the Principal Shareholder and NavTech, or failing
such agreement, by arbitration as provided in Section 9.01 of this PSA.
(iii) "Final Determination Date" means the date on which the
------------------------
Escrow Agent shall have received both
(A) either (i) an acknowledgment signed by the Principal Shareholder
or (ii) a copy of a final arbitration award, in either case which specifies
that the Principal Shareholder has an obligation to indemnify such
Indemnified Person with respect to a specified Claim as described in a
Notice of Claim or (iii) a written certificate from the Indemnified Person
certifying that the Principal Shareholder has been deemed to have concurred
with respect to such obligation pursuant to the first sentence of Section
6.01(b) and
(B) either (i) an acknowledgment signed by the Principal Shareholder
of the Amount of Damages relating to a Claim or (ii) a copy of a non-
appealable final judgment, decree or award of a court of competent
jurisdiction requiring the payment of money by an Indemnified Person in
respect of a Claim or (iii) a copy of a final arbitration award specifying
the amount of Damages relating to a Claim.
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(iv) "Notice of Damages" shall have the meaning assigned
-----------------
thereto in Section 6.01(a) of this PSA.
(v) "Objection Period" means (x) with respect to Tax Claims,
----------------
a period of thirty (30) days after delivery to the Principal Shareholder by the
Escrow Agent of a Notice of Damages with respect thereto and (y) with respect to
Non-Tax Claims, a period of thirty (30) days after delivery to the Principal
Shareholder by the Escrow Agent of one or more Notices of Damages with respect
to Non-Tax Claims aggregating One Million Dollars ($1,000,000) or more (or
thirty (30) days after delivery to the Principal Shareholder by the Escrow Agent
of any Notice of Damages with respect to Non-Tax Claims thereafter).
ARTICLE VII
FINAL NOTIFICATION OF CLAIMS
7.01 No payment under this PSA with respect to any Damages shall be due to
any Indemnified Person and no charge to or reduction of the Escrow Fund shall be
made unless a Notice of Damages shall have been received by the Escrow Agent and
the Principal Shareholder within the Applicable Claims Period as defined herein.
The Applicable Claims Period for any Non-Tax Claim: (i) in connection with the
offer, issuance or sale of securities by SEI, including without limitation, any
stock or notes, prior to the Effective Date shall be three (3) years from the
Effective Date, (ii) in connection with any Taxes other than Taxes described in
the definition of Tax Claims shall be the applicable statute of limitations,
including any waivers thereof, but in no event later than ten years from the
Effective Date, and (iii) based on any other Non-Tax Claim shall be eighteen
(18) months from the Effective Date. The Applicable Claims Period for any Tax
Claim shall be the applicable statute of limitations, including any waivers
thereof, but in no event later than ten years from the Effective Date. Without
the prior written consent of the Principal Shareholder, NavTech shall not agree
to any waiver of the applicable statute of limitations for any Claim related to
Taxes, unless NavTech reasonably believes that the failure to grant any such
waiver could cause a material adverse effect on the business or property of
NavTech.
7.02 (a) If at any time after the conclusion of all Applicable Claims
Periods during which Notices of Damages may be delivered with respect to Non-Tax
Claims, (i) the maximum potential amount of all Non-Tax Claims that are still
outstanding have been liquidated or otherwise can be determined with certainty,
and (ii) the Fair Market Value of all Non-Tax Escrow Shares and all other
property then held in the Escrow Fund in respect of the Non-Tax Escrow Shares is
in excess of the "Non-Tax Claims Limit" equal to (A) the maximum potential
amount and the interest and penalties that reasonably could be expected to be
imposed upon such maximum potential amount if there was no resolution of such
Non-Tax Claims for a period of an additional five (5) years, or (B) the then
remaining balance of the Non-Tax Indemnity Cap that remains available for the
provision of indemnification hereunder, if less than such amount in subsection
7.02(a)(ii)(A), the Escrow Agent shall promptly distribute any such excess
amount to the Principal Shareholder by first using Non-
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Tax Escrow Shares and upon exhaustion of the Non-Tax Escrow Shares, using any
cash held in respect of the Non-Tax Escrow Shares, provided that the Escrow Fund
thereafter contains Non-Tax Escrow Shares (valued at one-half (1/2) of Fair
Market Value) or cash (or any combination thereof) with an aggregate value at
least equal to the Non-Tax Claims Limit, or the Principal Shareholder
simultaneously provides cash to the Escrow Agent in an amount which, together
with the Non-Tax Escrow Shares (valued at one-half (1/2) of Fair Market Value)
and cash in the Escrow Fund, would have an aggregate value of at least such Non-
Tax Claims Limit.
(b) If at any time after the conclusion of all Applicable Claims Periods
during which Notices of Damages may be delivered with respect to Tax Claims, (i)
the maximum potential amount of all Tax Claims that are still outstanding have
been liquidated or otherwise can be determined with certainty, and (ii) the Fair
Market Value of all Tax Escrow Shares and all other property then held in the
Escrow Fund in respect of the Tax Escrow Shares is in excess of the "Tax Claims
Limit" equal to (A) the maximum potential amount and the interest and penalties
that reasonably could be expected to be imposed upon such maximum potential
amount if there was no resolution of such Tax Claims for a period of an
additional five (5) years, or (B) the then remaining balance of the Tax
Indemnity Cap that remains available for the provision of indemnification
hereunder, if less than such amount in subsection 7.02(b)(ii)(A), the Escrow
Agent shall promptly distribute any such excess amount to the Principal
Shareholder by first using Tax Escrow Shares and upon exhaustion of the Tax
Escrow Shares, using any cash held in respect of the Tax Escrow Shares, provided
that the Escrow Fund thereafter contains Tax Escrow Shares (valued at one-half
(1/2) of Fair Market Value) or cash (or any combination thereof) with an
aggregate value at least equal to the Tax Claims Limit, or the Principal
Shareholder simultaneously provides cash to the Escrow Agent in an amount which,
together with the Tax Escrow Shares (valued at one-half (1/2) of Fair Market
Value) and cash in the Escrow Fund, would have an aggregate value of at least
such Tax Claims Limit.
7.03 Upon the Non-Tax Final Release Date, which shall be the earlier to
occur of (i) the date upon which the Escrow Agent shall have paid Damages
pursuant to this Agreement with respect to Non-Tax Claims in an amount
aggregating the Non-Tax Indemnity Cap and (ii) the date which is the later to
occur of (X) the date which is eighteen months from the Effective Date and (Y)
the date upon which all open claims for Damages with respect to Non-Tax Claims
have been resolved, all remaining Non-Tax Escrow Shares and property then held
by the Escrow Agent in respect of the Non-Tax Escrow Shares shall be promptly
returned to the Principal Shareholder. Notwithstanding this Section 7.03, the
release of the Non-Tax Escrow Shares shall not diminish the liability, if any,
of the Principal Shareholder under this PSA.
7.04 Upon the Tax Final Release Date, which shall be the earlier to occur
of (i) the date upon which the Escrow Agent shall have paid Damages pursuant to
this Agreement with respect to Tax Claims in an amount aggregating the Tax
Indemnity Cap and (ii) the date which is the later to occur of (X) the close of
the last Applicable Claims Period with respect to Tax Claims and (Y) the date
upon which all open claims for Damages with respect to Tax Claims have been
resolved,
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all remaining Tax Escrow Shares and all property then held by the Escrow Agent
in respect of the Tax Escrow Shares shall be promptly returned to the Principal
Shareholder.
7.05 At any time prior to the later to occur of the Non-Tax Final Release
Date or the Tax Final Release Date, the Principal Shareholder shall have the
right to have the Escrow Agent release to him all of the Escrow Shares still
held in the Escrow Fund by paying to the Escrow Agent in cash an amount equal to
sum of (i) the balance of the Non-Tax Indemnity Cap that remains after
subtracting from the original Non-Tax Indemnity Cap the amount of all Damages
actually paid out by the Escrow Agent pursuant to this Agreement with respect to
Non-Tax Claims and (ii) the balance of the Tax Indemnity Cap that remains after
subtracting from the original Tax Indemnity Cap the amount of all Damages
actually paid out by the Escrow Agent pursuant to this Agreement with respect to
Tax Claims. The Escrow Agent shall give the Indemnified Persons at least five
(5) days notice prior to any release of the Escrow Shares pursuant to this
subsection.
ARTICLE VIII
TAX PROCEDURES
8.01 Upon the request of the Principal Shareholder, NavTech and SEI shall
provide (and shall cause their affiliates to provide) the Principal Shareholder,
promptly upon request, with such cooperation and assistance, documents and other
information, without charge, as may be reasonably requested by the Principal
Shareholder in connection with (i) the conduct of any audit or other examination
or any judicial or administrative proceeding involving any taxable period
pertaining to SEI through the Effective Date (the "Taxable Periods"), and (ii)
the preparation and filing of any amended tax returns. Such cooperation and
assistance shall include, without limitation, (i) the provision of books,
records, tax returns, documentation or other information relating to any
relevant tax return pertaining to the Taxable Periods, (ii) the execution of any
document that may be necessary or reasonably helpful in connection with the
filing of any amended tax returns with respect to the Taxable Periods or in
connection with any audit, proceeding, suit or action, including, without
limitation, the execution of irrevocable powers of attorney and (iii) the use of
reasonable best efforts to obtain any documentation from a governmental
authority or a third party that may be necessary or helpful in connection with
the foregoing. NavTech and SEI shall each make their employees and facilities
available on a mutually convenient basis during normal business hours to
facilitate such cooperation.
8.02 NavTech and SEI shall retain or cause to be retained all tax returns
related to the Taxable Periods, and all books, records, schedules, workpapers
and other documents relating thereto (collectively the "Tax Documents"), until
the expiration of the later of (i) all applicable statutes of limitations
(including any waivers or extensions thereof) and (ii) any retention periods
required by law. NavTech and SEI will, at least thirty (30) days prior thereto,
provide written notice to the Principal Shareholder of any intended destruction
of the documents referred to in the
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precedent sentence, and will not dispose of any of the foregoing documents
without first offering to transfer possession thereof to the Principal
Shareholder. NavTech's obligation under this Section 8.02 for Tax Documents
created prior to the Effective Date shall only extend to those Tax Documents
located at the premises of SEI on the Effective Date. Any failure by NavTech or
SEI to retain any Tax Documents as otherwise required hereunder shall not affect
any right to indemnification which any Indemnified Person may otherwise have
other than to the extent the Principal Shareholder has been prejudiced by any
such failure.
8.03 NavTech and SEI shall keep the Principal Shareholder advised as to
the status of tax audits and litigation involving any issue relating to any
Taxes or tax returns pertaining to the Taxable Periods. To the extent relating
to any such issue, NavTech and SEI shall promptly furnish to the Principal
Shareholder copies of any inquiries or requests for information from any taxing
authority or any other administrative, judicial or other governmental authority,
as well as copies of any relevant portions of any revenue agent's report or
similar report, notice or proposed adjustment or notice of deficiency.
8.04 Upon the receipt by NavTech or SEI of notice of any pending or
threatened Taxes audit, inquiry or assessment which may affect the liability for
Taxes relative to the Taxable Periods, NavTech and SEI shall promptly notify the
Principal Shareholder in writing of such receipt. Furthermore, NavTech and SEI
agree not to respond, without the consent of the Principal Shareholder, to a
notice of any pending or threatened Taxes audit, inquiry or assessment relative
to the Taxable Periods in a manner that would adversely affect the liability for
Taxes (or interest and/or penalties thereon).
8.05 The Principal Shareholder shall have the right to control, and to
represent the interests of all affected taxpayers in, any Taxes audit or
administrative, judicial or other proceeding relating, in whole or in part, to
any Taxes for the Taxable Period.
8.06 The Principal Shareholder shall not have any liability to provide
indemnification with respect to (i) any failure of NavTech or SEI to timely file
any return required to be so filed pursuant to Section 7.14 of the Plan of
Reorganization, or (ii) any errors or omissions on any such return, other than
any errors or omissions occasioned by erroneous or omitted information on the
books and records of SEI on the Effective Date.
8.07 In the event of a Change of Control, NavTech, SEI and the Principal
Shareholder shall continue to be bound by their respective obligations under
this PSA, except as provided in Section 2.01. If after a Change of Control,
either NavTech or SEI materially fails to perform its obligations under this
Article VIII, the Principal Shareholder shall not be required to provide
indemnification for any Damages that the Principal Shareholder establishes in
arbitration as provided in Section 9.01 hereof were caused by such failure to
perform by NavTech or SEI.
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8.08 The Principal Shareholder represents and warrants to NavTech that he
has no plan or intention to sell, exchange or otherwise dispose of a number of
shares of NavTech Common Stock received in the Merger that would reduce the SEI
Shareholders' ownership of NavTech stock to a number of shares having a value,
as of the date of the Merger, of less than 50% of the value of all of the
formerly outstanding stock of SEI as of the same date. In making this
representation, the Principal Shareholder has assumed that it is possible that
the SEI Shareholders other than the Principal Shareholder may harbor a plan or
intention to sell, exchange or dispose of all of the shares of NavTech Common
Stock that they receive in the Merger.
ARTICLE IX
MISCELLANEOUS
9.01 Governing Law; Arbitration; Injunctive and Other Relief. This
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Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of Delaware applicable to agreements made and to be performed
entirely in Delaware. Each party hereby irrevocably consents to the exclusive
jurisdiction of the federal and state courts located in Chicago, Illinois with
respect to any actions which may arise in connection with this Agreement and are
not required by this Section 9.01 to be arbitrated. Except as provided in this
Section 9.01, any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration administered
by the American Arbitration Association in accordance with its Commercial
Arbitration Rules, and judgment on the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof.
Within fifteen (15) days after the commencement of arbitration, the
affected Indemnified Person or NavTech, as the case may be, and the Principal
Shareholder shall each select one person to act as arbitrator and the two
selected shall select a third arbitrator within ten (10) days of their
appointment. If the arbitrators so selected are unable or fail to agree upon
the third arbitrator, or if either party fails to appoint an arbitrator, such
arbitrator or arbitrators shall be selected by the American Arbitration
Association.
Each of the parties to this Agreement acknowledges that a breach of this
Agreement may cause the other party irreparable harm which may not be adequately
compensated by money damages. Therefore, in the event of a breach or threatened
breach by a party, injunctive or other equitable relief will be available to the
other party, and any arbitrator acting pursuant to this Agreement shall have the
authority to provide such injunctive or other equitable relief. Remedies
provided herein are not exclusive.
The arbitrators shall have the authority to award such remedies or relief
that a court of the State of Delaware could order or grant in an action governed
by Delaware law, including, without limitation, specific performance of any
obligation created under this Agreement, the issuance of an injunction, or the
imposition of sanctions for abuse or frustration of the arbitration process.
The arbitration proceedings shall be conducted in Chicago, Illinois.
-17-
<PAGE>
Notwithstanding the foregoing, any party may bring and pursue an action in
any Federal or State court located in Chicago, Illinois seeking provisional
relief, including a temporary restraining order or preliminary injunction,
pending an arbitration proceeding. Any provisional relief obtained shall be
discontinued once the arbitrators have assumed jurisdiction and ordered such
discontinuance.
9.02 Assignment. This PSA may not be assigned by any party hereto without
----------
the consent of the other parties hereto. The terms and provisions of this PSA
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective heirs, personal representatives, guardians, executors,
legatees, successors and permitted assigns, and no person, firm, corporation or
other entity other than the parties hereto and, their respective heirs, personal
representatives, guardians, executors, legatees, successors and permitted
assigns, shall acquire or have any rights under or by virtue of this PSA, other
than as an Indemnified Person who makes a claim with NavTech's approval.
9.03 Amendment, Waiver, Consents. The parties hereto may by mutual
---------------------------
agreement amend any provision of this PSA and any party may grant consents or
waive any right to which it is entitled under this PSA or any condition to its
obligations hereunder, provided that each such amendment, consent or waiver
shall be in writing. Any amendment, waiver or consent by NavTech shall be
effective only if authorized by its Board of Directors by specific action
thereof.
9.04 Notices. All notices, consents, waivers, and other communications
-------
under this PSA must be in writing and will be deemed to have been duly given (i)
if mailed, seven (7) days after mailing (if mailed from outside the United
States, such mailing must be by air mail and said seven (7) days shall be
fourteen (14) days), (ii) if delivered, upon delivery, or (iii) if faxed, one
(1) business day after transmission and acknowledgment of receipt by telephone
or fax, in each case to the appropriate addresses and telecopier numbers set
forth below (or to such other addresses and telecopier numbers as a party may
designate by notice to the other parties):
(i) if to NavTech or SEI, to NavTech, General Counsel, 10400 West
Higgins Road, Suite 400, Rosemont, Illinois 60018 (Facsimile No.(847) 699-6556),
with copies to Martin L. Budd, Esquire, Day, Berry & Howard, One Canterbury
Green, Stamford, Connecticut 06901-2047 (Facsimile No. (203) 977-7301) and
Philips Electronics North America Corp., Attn: Samuel J. Rozel, Esquire, Senior
V.P., Secretary and General Counsel, 100 East 42nd Street, New York, NY 10017
(Facsimile No. (212) 850-7304);
(ii) if to the Principal Shareholder, T. Russell Shields, 160 E.
Pearson #3108, Chicago, Illinois 60611 (Facsimile No. (312) 266-1194), with a
copy to Marshall E. Eisenberg, Esquire, Neal, Gerber and Eisenberg, Two North
LaSalle Street, Suite 2200, Chicago, Illinois 60602 (Facsimile No.(312)
269-1747); and
-18-
<PAGE>
(iii) if to the Escrow Agent, to LaSalle National Trust, N.A., 135
South LaSalle Street, Suite 1825, Chicago, Illinois 60603, Attn: Estelita B.
Esmenda (Facsimile No. (312) 904-2236);
or to such other person or address as the parties shall have specified by notice
in writing to each other.
9.05 Days. Any reference to "days" in this PSA shall mean calendar days.
-----
9.06 Certifications. NavTech and SEI agree that they shall not
--------------
unreasonably withhold or delay, and the Principal Shareholder agrees that the
Principal Shareholder shall not unreasonably withhold or delay, execution and
delivery of any certification to the Escrow Agent called for in this PSA in
order to carry out the terms of this PSA.
9.07 Descriptive Headings. The descriptive headings of Articles and
--------------------
Sections herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this PSA,
and all provisions of this PSA will be enforced and construed as if no headings
had been used in this PSA.
9.08 Principal Shareholders Acts on Behalf of NavTech. Following the
------------------------------------------------
Effective Date, the acts of the Principal Shareholder in negotiating and
settling any Third Party Claim against NavTech, acting as Chairman and Chief
Executive Officer of NavTech, shall in no event be deemed to be an admission of
liability of the Principal Shareholder under this Agreement.
9.09 Counterparts. This PSA may be executed by the several parties on
------------
separate counterparts which, when taken together with counterparts signed by all
the other parties, shall constitute a single fully executed Agreement which
shall be as fully binding and effective as a counterpart which has been executed
by all parties.
-19-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this PSA to be duly
executed as of the date first above written.
NAVIGATION TECHNOLOGIES CORPORATION
By /s/ Thomas A. Lerone
----------------------------------------
Name:
Title: Chief Financial Officer
SHIELDS ENTERPRISES, INC.
By /s/ Mitchell Morris
----------------------------------------
Name:
Title: Treasurer
/s/ T. Russell Shields
----------------------------------------
T. Russell Shields
LASALLE NATIONAL TRUST, N.A.,
as Escrow Agent
By /s/ Estelita B. Esmenda
----------------------------------------
Name: Estelita B. Esmenda
Title: Assistant Vice President
-20-
<PAGE>
The terms and conditions of this PSA are hereby acknowledged
as of the date first above written.
PHILIPS ELECTRONICS, N.V.
By: /s/ Arie Westerlaken
----------------------------
Name:
Title: General Secretary
-21-
<PAGE>
EXHIBIT 10.19
EXECUTION COPY
--------------
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger dated as of June 24, 1996 (the "Merger
Agreement") is made and entered into by NT Acquisitions Corp., a Delaware
corporation ("Subsidiary"), and Shields Enterprises, Inc., a Delaware
corporation ("SEI" or "Surviving Corporation" and SEI and Subsidiary being
herein collectively referred to as the "Constituent Corporations").
WITNESSETH:
WHEREAS, Navigation Technologies Corporation, a Delaware corporation
("NavTech") owns all of the outstanding shares of stock of Subsidiary;
WHEREAS, the Constituent Corporations and NavTech have previously entered
into an Agreement and Plan of Reorganization of even date herewith (the
"Agreement and Plan of Reorganization") providing for certain representations,
warranties and agreements in connection with the transactions contemplated
herein; and
WHEREAS, the Boards of Directors of the Constituent Corporations deem it
advisable and in the best interests of the Constituent Corporations and in the
best interests of the shareholders of the Constituent Corporations that SEI be
acquired by NavTech through a merger ("Merger") of Subsidiary into SEI.
NOW, THEREFORE, the Constituent Corporations hereby agree as follows:
I. THE CONSTITUENT CORPORATIONS
1.01 SEI was incorporated under the laws of the State of Delaware on
September 30, 1987.
(a) SEI is authorized to issue an aggregate of 20,000 shares of
common stock ("SEI Common Stock").
(b) As of the date hereof, an aggregate of 10,764 shares of SEI
Common Stock are outstanding, and, prior to the Effective Time (as defined
below), SEI expects to issue 657 shares of SEI common stock to Fidelis N. Umeh
in consideration for the Umeh Release Agreement (as defined in the Agreement and
Plan of Reorganization).
A-1
<PAGE>
1.02 Subsidiary was incorporated under the laws of the State of Delaware
on June 6, 1996.
(a) Subsidiary is authorized to issue an aggregate of 3,000 shares
of common stock ("Subsidiary Stock").
(b) As of the date hereof, an aggregate of 100 shares of Subsidiary
Stock are outstanding.
II. THE MERGER
2.01 This Merger Agreement has been adopted and approved by the requisite
written consent of the shareholders of each of the Constituent Corporations. If
all of the conditions precedent to the consummation of the Merger specified in
the Agreement and Plan of Reorganization shall have been satisfied or duly
waived by the party entitled to satisfaction thereof, then unless terminated as
provided in the Agreement and Plan of Reorganization, this Merger Agreement
shall be filed with the Secretary of State of Delaware. Upon such filing, the
Merger shall become effective (the "Effective Time").
2.02 At the Effective Time, Subsidiary shall be merged into SEI and the
separate corporate existence of Subsidiary shall thereupon cease. SEI shall be
the surviving corporation in the Merger and the separate corporate existence of
SEI, with all its purposes, objects, rights, privileges, powers, immunities and
franchises, shall continue unaffected and unimpaired by the Merger.
2.03 The Surviving Corporation shall succeed to all of the purposes,
objects, rights, privileges, powers, immunities and franchises of Subsidiary,
all of the properties and assets of Subsidiary and all of the debts, choses in
action and other interests due or belonging to Subsidiary, and shall be subject
to, and responsible for, all of the debts, liabilities and obligations of
Subsidiary with the effect set forth in the Delaware General Corporation Law.
2.04 If, at any time after the Effective Time, the Surviving Corporation
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in the Surviving Corporation its
right, title or interest in, to or under any of the rights, properties or assets
of Subsidiary acquired or to be acquired by the Surviving Corporation as a
result of, or in connection with, the Merger or to otherwise carry out this
Merger Agreement, the officers and directors of the Surviving Corporation shall
and will be authorized to execute and deliver, in the name and on behalf of the
Constituent Corporations or otherwise, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of the
Constituent Corporations or otherwise, all such other actions and things as may
be necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to or under such rights, properties or assets in the Surviving
Corporation or to otherwise carry out this Merger Agreement.
A-2
<PAGE>
III. CERTIFICATE OF INCORPORATION, BY-LAWS AND
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
3.01 The Certificate of Incorporation and the By-Laws attached as Exhibit
A-1 and Exhibit A-2, respectively, shall be, unless and until amended or
repealed as provided by law, the Certificate of Incorporation and By-Laws of the
Surviving Corporation.
3.02 The directors and officers of Subsidiary immediately prior to the
Effective Time shall be the directors and officers of the Surviving Corporation
until their successors shall have been elected and shall qualify or until
otherwise provided by law.
IV. MANNER AND BASIS OF CONVERTING SHARES
OF THE CONSTITUENT CORPORATIONS
4.01 At the Effective Time:
(a) Each share of Subsidiary Stock which is outstanding immediately
prior to the Effective Time shall be converted at the Effective Time into one
share of SEI Common Stock.
(b) Each share of SEI Common Stock which is outstanding immediately
prior to the Effective Time (other than shares of SEI Common Stock held by any
of the shareholders of SEI who properly exercise any appraisal rights available
under applicable law (the "Excluded Stock")) shall be converted at the Effective
Time into 6,543.09045 shares (the "Exchange Ratio") of common stock of NavTech
("NavTech Common Stock"). After aggregating all fractional shares due to each
holder of such SEI Common Stock into the nearest whole number of shares, the
value of any remaining fractional share shall be paid to such shareholder in
cash in an amount equal to such fraction multiplied by the initial offering
price at which shares of NavTech Common Stock have been or are being
concurrently offered to the public, before underwriting discounts, in the
initial public offering referred to in Section 8.01(b) of the Agreement and Plan
of Reorganization.
(c) Each option to acquire shares of SEI Common Stock outstanding
immediately prior to the Effective Time (the "SEI Options") shall be converted
into an option to acquire that number of shares of NavTech Common Stock equal to
the product obtained by multiplying (x) the aggregate number of shares of SEI
Common Stock which could be acquired upon exercise of such SEI Option by (y)
the Exchange Ratio. The per share exercise price for each converted SEI Option
shall be equal to the quotient obtained by dividing (x) the original exercise
price of such SEI Option by (y) the Exchange Ratio.
(d) In the event of any reclassification, recapitalization, stock
split, combination, exchange of shares, stock dividend or similar transaction
with respect to the NavTech Common Stock, or any change or conversion of NavTech
Common Stock into other securities or property
A-3
<PAGE>
or any other dividend or distribution is made with respect thereto prior to the
Effective Time, appropriate and proportionate adjustments shall be made to the
Exchange Ratio, and all references to the Exchange Ratio in this Agreement shall
be deemed to be to such Exchange Ratio as so adjusted.
4.02 As soon as practicable after the Effective Time and after surrender
to the Exchange Agent (as defined in the Agreement and Plan of Reorganization),
of any certificate which prior to the Effective Time shall have represented any
shares of SEI Common Stock (other than any Excluded Stock) and a transmittal
letter in form reasonably acceptable to NavTech and the Exchange Agent
("Transmittal Letter"), NavTech shall cause to be distributed, in accordance
with the directions set forth in each Transmittal Letter, a certificate
representing the NavTech Common Stock into which any shares previously
represented by the surrendered certificate shall have been converted at the
Effective Time along with the check representing the value of any fractional
share as determined in Section 4.01 above. Until surrendered as contemplated by
the preceding sentence, each certificate which immediately prior to the
Effective Time shall have represented any shares of SEI Common Stock shall be
deemed at and after the Effective Time to represent only the shares of NavTech
Common Stock into which they shall have been converted hereunder. Upon such
surrender, there shall be paid to the person in whose name the certificate
representing such shares of NavTech Common Stock shall be issued, and without
interest, any dividends which shall have become payable with respect to such
shares of NavTech Common Stock between the Effective Time and the time of such
surrender. All dividends which shall be held by the Exchange Agent and which
shall be unclaimed at the end of one year from the Effective Time shall be
repaid by such Exchange Agent to NavTech after which time the holders of NavTech
Common Stock not receiving payment of such dividends shall as general creditors
look only to NavTech for payment thereof.
V. TERMINATION AND AMENDMENT
5.01 Notwithstanding the approval of this Merger Agreement by the
shareholders of SEI and Subsidiary, this Merger Agreement shall terminate
forthwith in the event that the Agreement and Plan of Reorganization shall be
terminated as therein provided.
5.02 This Merger Agreement may be amended by the parties hereto at any
time, but no amendment shall be made which would, as a matter of law, require
the further approval of the shareholders of NavTech or the shareholders of SEI
unless such approval shall have been obtained. This Merger Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto. Without limiting the foregoing, the parties hereto acknowledge
and agree that any modification of the manner or basis of converting SEI Common
Stock into NavTech Common Stock shall require further approval of the
shareholders of NavTech and the shareholders of SEI.
A-4
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Merger Agreement as
of the date first above written.
SHIELDS ENTERPRISES, INC.
By: /s/ Mitchell Morris
------------------------
, Treasurer
NT ACQUISITIONS CORP.
By: /s/ Ronald A. Brumback
------------------------
, President
<PAGE>
EXHIBIT A-1 and EXHIBIT A-2
---------------------------
TO AGREEMENT AND PLAN OF MERGER
-------------------------------
See Exhibits 3.1 and 3.4
<PAGE>
EXHIBIT 11.1
NAVIGATION TECHNOLOGIES CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET LOSS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
------------------------- -------------------------
THREE MONTHS THREE MONTHS
YEAR ENDED ENDED YEAR ENDED ENDED
DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31,
1995 1996 1995 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Weighted average shares
Convertible preferred
stock outstanding........ 8,323 11,254 8,323 11,254
Common stock outstanding.. 12,138 11,875 12,138 11,875
SAB No. 83 shares,
treasury stock method.... 1,653 1,653 1,653 1,653
Acquisition adjustment, as
if converted basis....... -- -- 2,849 2,849
-------- -------- -------- --------
22,114 24,782 24,963 27,631
======== ======== ======== ========
Net loss................... $(56,912) $(16,556) $(66,914) $(19,589)
Shares used in per share
computation............... 22,114 24,782 24,963 27,631
======== ======== ======== ========
Net loss per share......... $ (2.57) $ (0.67) $ (2.68) $ (0.71)
======== ======== ======== ========
</TABLE>
<PAGE>
EXHIBIT 16.1
SILICON VALLEY Telephone 408 282 1200
150 Almaden Boulevard Facsimile 408 262 1390
San Jose, CA 95113
PRICE WATERHOUSE LLP [LOGO]
July 12, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
We have read the statements made by Navigation Technologies Corporation under
"Change in Independent Auditor" (copy attached), which we understand will be
filed with the Commission, pursuant to Item 601(b)(16) of Regulation S-K, as
part of the Company's Registration Statement on Form S-1. We agree with the
statements concerning our firm contained in the third and fifth sentences.
Sincerely,
/s/ Price Waterhouse LLP
Price Waterhouse LLP
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
JURISDICTION OF
NAME INCORPORATION
---- ---------------
<S> <C>
European Geographic Technologies B.V..................... The Netherlands
Navigation Technologies North America, Inc. ............. Delaware
</TABLE>
<PAGE>
EXHIBIT 23.2
The Board of Directors
Navigation Technologies Corporation:
We consent to the use of our reports included herein and to the references
to our firm under the headings "Risk Factors--History of Substantial Losses
and Anticipated Future Losses," "Selected Consolidated Financial Data,"
"Experts" and "Change in Independent Auditor" in the prospectus.
Our report on Navigation Technologies Corporation and subsidiaries dated
June 4, 1996, except for the description of the reverse stock split in Note 7
which is as of July 12, 1996, contains an explanatory paragraph that states
that the Company has had recurring losses from operations since inception and
requires significant additional financing which raise substantial doubt about
the Company's ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
KPMG Peat Marwick LLP
Palo Alto, California
July 18, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
CONSOLIDATED FINANCIAL STATEMENTS OF NAVIGATION TECHNOLOGIES CORPORATION AS OF
AND FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS OF NAVIGATION TECHNOLOGIES CORPORATION AS OF AND FOR THE
THREE MONTH PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.<F1>
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996
<CASH> 23,573 8,315
<SECURITIES> 0 0
<RECEIVABLES> 990 488
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 24,912 10,314
<PP&E> 9,919 10,666
<DEPRECIATION> (4,881) (5,462)
<TOTAL-ASSETS> 30,026 15,613
<CURRENT-LIABILITIES> 8,128 10,031
<BONDS> 0 0
0 0
11 12
<COMMON> 12 11
<OTHER-SE> 1,780 (14,783)
<TOTAL-LIABILITY-AND-EQUITY> 30,026 15,613
<SALES> 0 0
<TOTAL-REVENUES> 3,673 646
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 48,673 12,905
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,220 320
<INCOME-PRETAX> (56,912) (16,556)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (56,912) (16,556)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (56,912) (16,556)
<EPS-PRIMARY> (2.57) (0.67)
<EPS-DILUTED> (2.57) (0.67)
<FN>
<F1> The financial data included herein does not include the financial data for
Shields Enterprises, Inc. which will be merged with Navigation Technologies
Corporation concurrently with the offering.
</FN>
</TABLE>
