1
As filed with the Securities and Exchange Commission on October 1, 1996
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ViaSat, Inc.
(Exact name of registrant as specified in its charter)
CALIFORNIA 3663 33-0174996
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
2290 COSMOS COURT
CARLSBAD, CALIFORNIA 92009
(619) 438-8099
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
MARK D. DANKBERG
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
VIASAT, INC.
2290 COSMOS COURT
CARLSBAD, CALIFORNIA 92009
(619) 438-8099
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
THOMAS A. EDWARDS, ESQ. GREGORY D. MONAHAN, ESQ. GARY APFEL, ESQ.
LATHAM & WATKINS VICE PRESIDENT, CHIEF FINANCIAL OFFICER KAYE, SCHOLER, FIERMAN, HAYS & HANDLER, LLP
701 "B" STREET, SUITE 2100 AND GENERAL COUNSEL 1999 AVENUE OF THE STARS, SUITE 1600
SAN DIEGO, CALIFORNIA 92101 VIASAT, INC. LOS ANGELES, CALIFORNIA 90067
(619) 236-1234 2290 COSMOS COURT (310) 788-1000
CARLSBAD, CALIFORNIA 92009
(619) 438-8099
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
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, 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 of 1933, 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
====================================================================================================================
Proposed
Proposed Maximum Amount of
Amount Maximum Aggregate Registration
Title of Each Class of to be Offering Offering Fee
Securities to be Registered Registered(1) Price Per Price
Share(2)
====================================================================================================================
Common Stock, $.01 par value ......... 2,530,000 shares $12.00 $30,360,000 $10,469
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(1) Includes 330,000 shares subject to Underwriters' option to cover
over-allotments.
(2) Estimated solely for the purpose of computing the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
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.
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ViaSat, Inc.
CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS OF FORM S-1
REGISTRATION STATEMENT
ITEM AND HEADING PROSPECTUS CAPTIONS
---------------- -------------------
1. Forepart of the Registration Statement and Outside Front Cover
Page of Prospectus.............................................. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus......... Inside Front and Outside Back Cover
Pages of Prospectus
3. Summary Information, Risk Factors and Ratio of Earnings to
Fixed Charges................................................... Prospectus Summary; Risk Factors;
Selected Financial Data
4. Use of Proceeds................................................. Prospectus Summary; Use of Proceeds
5. Determination of Offering Price................................. Outside Front Cover; Risk Factors;
Underwriting
6. Dilution........................................................ Dilution
7. Selling Security Holders........................................ Principal and Selling Shareholders
8. Plan of Distribution............................................ Outside Front Cover Page of
Prospectus; Underwriting
9. Description of Securities to be Registered...................... Description of Capital Stock
10. Interests of Named Experts and Counsel.......................... Not Applicable
11. Information with Respect to the Registrant...................... Prospectus Summary; Risk Factors;
Dividend Policy; Selected Financial
Data; Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business;
Management; Certain Transactions;
Description of Capital Stock; Shares
Eligible for Future Sale; Financial
Statements
12. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities...................................... Not Applicable
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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 OCTOBER 1, 1996
PROSPECTUS
2,200,000 SHARES
ViaSat, Inc.
COMMON STOCK
Of the 2,200,000 shares of Common Stock ("Common Stock") offered
hereby, 1,650,000 shares are being sold by ViaSat, Inc. ("ViaSat" or the
"Company") and 550,000 shares are being sold by certain shareholders of the
Company (the "Selling Shareholders"). The Company will not receive any of the
proceeds from the sale of shares by the Selling Shareholders. See "Principal and
Selling Shareholders."
Prior to this offering, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price will be
between $10.00 and $12.00. See "Underwriting" for information relating to the
determination of the initial public offering price. The Company has applied to
have the Common Stock approved for quotation and trading on The Nasdaq National
Market under the symbol "VSAT."
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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 6.
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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.
===================================================================================================================
Underwriting
Price to Discounts and Proceeds to Proceeds to
Public Commissions(1) Company(2) Selling
Shareholders
- -------------------------------------------------------------------------------------------------------------------
Per Share.......................... $ $ $ $
===================================================================================================================
Total (3)......................... $ $ $ $
===================================================================================================================
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting offering expenses payable by the Company, estimated to be
$650,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 330,000 shares of Common Stock solely to cover
over-allotments, if any. See "Underwriting." If such option is exercised
in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $____________, $____________
and $____________, respectively.
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The shares of Common Stock are offered severally by the Underwriters
when, as and if delivered to and accepted by them, subject to their right to
withdraw, cancel or reject orders in whole or in part and subject to certain
other conditions. It is expected that delivery of the certificates representing
the shares will be made against payment on or about __________, 1996 at the
office of Oppenheimer & Co., Inc., Oppenheimer Tower, World Financial Center,
New York, New York 10281.
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OPPENHEIMER & CO., INC.
NEEDHAM & COMPANY, INC.
UNTERBERG HARRIS
The date of this Prospectus is ____________, 1996.
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS 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, OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP MEMBERS
(IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE
WITH RULE 10b-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information appearing elsewhere in
this Prospectus. Except as otherwise noted, all information in this Prospectus
(i) assumes no exercise of the Underwriters' over-allotment option, (ii)
reflects the conversion of all outstanding shares of the Company's Preferred
Stock ("Preferred Stock") into Common Stock upon the closing of this offering
and (iii) has been adjusted to give effect to the 0.7335-for-one reverse stock
split of the Common Stock to be consummated prior to this offering.
THE COMPANY
ViaSat designs, produces and markets advanced digital satellite
telecommunications and wireless signal processing equipment. The Company has
achieved ten consecutive years of internally generated revenue growth and nine
consecutive years of profitability, primarily through defense-related
applications. More recently, the Company has been developing and marketing its
technology through strategic alliances for emerging commercial markets, such as
rural telephony, alternative carrier access and Internet/Intranet access by
satellite to multiple servers. ViaSat is a leading provider of Demand Assigned
Multiple Access ("DAMA") technology, which allows a large number of Very Small
Aperture Terminal ("VSAT") subscribers to economically share common satellite
transponders for high-performance voice, fax or data communications.
The Company believes that DAMA satellite technology is superior to
other existing VSAT networking technologies. The existing Time Division
Multiplex/Time Division Multiple Access ("TDM/TDMA") networking technology
features a "hub and spoke" architecture which requires all transmissions to be
routed through a central terrestrial hub. Unlike TDM/TDMA systems, DAMA provides
direct, on-demand switched networking capabilities which do not require a
terrestrial hub and allow faster and more efficient use of expensive satellite
transponder resources. In addition, the Company believes that its DAMA products,
commercially marketed under the tradename StarWire(TM), offer greater network
flexibility and permit up to 50% greater satellite capacity than competing DAMA
systems.
ViaSat's DAMA products include satellite modems, networking processors
and network control systems for managing large numbers of network subscribers.
The Company's DAMA technology consists of proprietary real-time firmware and
software designed to run on industry-standard digital signal processors. The
Company also has developed DAMA network control software that operates on
IBM-compatible personal computers running Windows NT(TM) operating systems. The
Company's DAMA technology operates on satellites in the military UHF and SHF
frequency bands, and commercial C and K(u) bands. In addition to DAMA products,
the Company offers network information security products, communications
simulation and test equipment, and spread spectrum digital radios for satellite
and terrestrial data networks.
The wireless communications industry has experienced significant
worldwide growth in both the government and commercial markets during the past
decade, primarily as a result of cost reductions and improvements in quality and
performance. As demand for wireless communications services grows, service
providers are expanding the associated infrastructure. A growing segment of the
wireless communications industry involves networked VSAT communication systems.
The Company believes DAMA products offer customers using VSAT networks a more
cost-effective opportunity than other existing VSAT networking technologies to
expand and better utilize existing satellite capacity. The Company believes it
can capitalize on this market opportunity through its leadership position with
respect to DAMA technology and related networking and software products.
BUSINESS STRATEGY
ViaSat's objective is to become a leading developer and supplier of
DAMA-based products to commercial markets and to retain a leadership position in
developing and supplying DAMA-based products to the government market. The
Company's strategy incorporates the following key elements:
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Maintain and Enhance Technology Leadership Position. The Company's
strategy is to maintain and enhance its leadership position in DAMA-based
satellite technology by continuing its participation in selected programs with
the U.S. Department of Defense and its prime contractors (collectively, the
"DOD") involving networking technology and other related real-time signal
processing and networking software. The Company is also investing in proprietary
research for commercial applications. The Company's objective is to continue to
offer high-performance, software-oriented products which provide the most
effective use of satellite power and bandwidth as well as offering the most
flexible platform for continued growth.
Leverage Technological Expertise into Commercial Markets. The Company's
strategy is to continue using its technological expertise developed in defense
applications to develop and market products to respond to the increasing demand
for DAMA-based VSAT solutions for commercial voice and data applications. The
Company is targeting commercial markets which it believes will offer high growth
potential and where ViaSat's technology will have competitive advantages, such
as rural telephony, alternative carrier access and Internet/Intranet access by
satellite to multiple servers. The Company believes its products are competitive
largely because of their technological advantages over competing products. The
Company's strategy is to capitalize on these technological advantages by
utilizing a "cost of ownership" marketing approach that emphasizes the overall
lower cost to customers over the operating life of the Company's products
because of the products' adaptability and more efficient use of limited
satellite capacity.
Develop Broad Base of Innovative Proprietary Products. The Company's
strategy is to continue to develop and market to both defense and commercial
customers a broad variety of signal processing and networking software products.
The Company has over 150 research engineers on staff and emphasizes offering
technologically-superior products. The Company generally retains certain
proprietary rights from the government-funded research and development of its
defense products and is also devoting a significant amount of its own resources
to independent product development.
Develop Strategic Alliances. The Company's strategy is to develop
strategic alliances with leading prime defense contractors and major
international telecommunications companies and equipment suppliers. The Company
targets those companies whose financial and technological resources and
established customer bases allow them to jointly introduce new technologies and
penetrate new markets sooner and at a lower cost than the Company could alone.
The Company has entered into strategic alliances with defense companies, such as
Hughes Defense Communications (formerly Magnavox) and Lockheed Martin, and
commercial telecommunications companies, such as AT&T Tridom and HCL Comnet.
Establish Global Presence. The Company's strategy is to develop its
products so that they may be marketed and used throughout the world. The Company
is a market leader in DAMA-based defense products for the United States and its
allies. The Company believes that the commercial market opportunities for the
Company's products are greater internationally. The Company believes its focus
on meeting applicable international communication standards and establishing key
international strategic alliances will enable it to effectively penetrate
foreign markets.
Address Rural Telephony Market. The Company believes there is a
substantial unmet demand for rural telephony services, especially in developing
countries. The Company's strategy is to capitalize on its networking software
expertise to develop technology for establishing regional rural telephony
network infrastructures of strategically located VSAT terminals capable of
handling multiple satellite telephone calls ("Point-of-Entry Terminals"). The
Company believes such an infrastructure would have a competitive advantage over
a single Point-of-Entry system by minimizing the ground transmission cost of
each satellite telephone call by permitting such calls to enter the Public
Switched Telephone Network (PSTN) through the Point-of-Entry Terminal closest
to the call's destination. The Company's strategy also includes seeking
partnerships with regional and local service providers to create distribution
channels for rural telephony infrastructures and to provide related retail
distribution services, including sales of Company-designed subscriber
terminals, installation and maintenance, as well as customer service, billing
and revenue collection.
THE OFFERING
Common Stock Offered by the Company.................... 1,650,000 Shares
Common Stock Offered by the Selling Shareholders....... 550,000 Shares
Common Stock to be Outstanding After the Offering...... 7,525,342 Shares(1)
Use of Proceeds........................................ For working capital and general corporate purposes.
See "Use of Proceeds."
Proposed Nasdaq National Market Symbol................. VSAT
- ------------
(1) Based on shares outstanding as of October 1, 1996. Does not include
330,000 shares of Common Stock issuable upon the full exercise of the
Underwriters' over-allotment option. Also does not include 375,509
shares of Common Stock issuable upon the exercise of outstanding
options. See "Capitalization."
The Company was incorporated in California in 1986. Its principal
executive offices are located at 2290 Cosmos Court, Carlsbad, California 92009,
and its telephone number is (619) 438-8099.
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SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED MARCH 31, THREE MONTHS ENDED
----------------------------------------------------- -------------------
JUNE 30, JUNE 30,
1992 1993 1994 1995 1996 1995 1996
------- ------- --------- -------- -------- ------- --------
(UNAUDITED)
STATEMENT OF INCOME DATA:
Revenues......................... $ 4,019 $5,072 $ 11,579 $22,341 $29,017 $6,768 $ 9,732
Cost of revenues................. 3,006 3,939 9,033 16,855 20,983 4,830 6,862
------- ------ -------- ------- ------- ------ -------
Gross profit................... 1,013 1,133 2,546 5,486 8,034 1,938 2,870
Operating expenses:
Selling, general and
administrative................. 503 740 1,554 2,416 3,400 918 1,040
Independent research and
development.................... -- 59 134 788 2,820 467 1,058
------- ------ -------- ------- ------- ------ -------
Income from operations........... 510 334 858 2,282 1,814 553 772
Interest income (expense)........ 7 (17) (45) (87) (231) (29) (32)
------- ------- --------- -------- -------- ------- --------
Income before income taxes....... 517 317 813 2,195 1,583 524 740
Provision (benefit) for income
taxes............................ 159 93 328 888 (50) (17) 262
------- ------ -------- ------- -------- ------- -------
Net income....................... $ 358 $ 224 $ 485 $ 1,307 $ 1,633 $ 541 $ 478
====== ===== ======= ====== ====== ===== ======
Pro forma net income
per share(1)................... $ 0.27 $ 0.08
====== =======
Shares used in per share
calculations(1)............... 6,001 6,003
MARCH 31, JUNE 30, 1996
--------------------------------------------------- -----------------------
1992 1993 1994 1995 1996 ACTUAL AS ADJUSTED(2)
------ ----- ------ ------ ------ ------ --------------
(UNAUDITED)
BALANCE SHEET DATA:
Cash and cash equivalents........ $ 101 $ 75 $ 9 $2,731 $2,297 $1,733 $17,963
Working capital.................. 912 964 1,486 2,808 4,651 4,850 21,080
Total assets..................... 1,750 2,550 4,986 9,377 13,262 13,248 29,478
Long-term debt, less current 50 124 297 1,220 1,747 1,531 1,531
portion........................
Total shareholders' equity....... 1,226 1,465 1,956 3,413 5,217 5,712 21,942
- ---------------
(1) For an explanation of the determination of the number of shares used in
computing pro forma net income per share, see Note 1 of Notes to
Financial Statements.
(2) As adjusted to reflect the sale of 1,650,000 shares of Common Stock
offered by the Company hereby at an assumed offering price of $11.00
per share, based on the midpoint of the offering price range set forth
on the cover page of this Prospectus, and the application of the net
proceeds therefrom as described under "Use of Proceeds." If the
Company issues 1,980,000 shares of Common Stock upon the full
exercise of the Underwriters' option to cover over-allotments, Cash
and cash equivalents, Working capital, Total assets and Total
shareholders' equity would be $21,338, $24,455, $32,853 and $25,317,
respectively. See "Use of Proceeds" and "Capitalization."
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RISK FACTORS
This Prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended (the "Securities
Act"). Discussions containing such forward-looking statements may be found
throughout this Prospectus, including without limitation in the materials set
forth under "Summary," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business." Actual events or results
may differ materially from those discussed in the forward-looking statements
as a result of various factors, including without limitation the risk factors
set forth below and the matters set forth in this Prospectus generally.
DEPENDENCE ON DEFENSE MARKET
Over 95% of the Company's revenues for the fiscal year ended March 31,
1996 and the quarter ended June 30, 1996 were derived from U.S. government
defense applications. Although the Company has invested heavily in developing
commercial satellite products, there can be no assurance that the percentage of
the Company's commercial business will increase. U.S. government business is
subject to various risks including (i) unpredictable contract or project
terminations, reductions in funds available for the Company's projects due to
government policy changes, budget cuts and contract adjustments and penalties
arising from post-award contract audits, and incurred cost audits in which the
value of the contract may be reduced, (ii) risks of underestimating ultimate
costs, particularly with respect to software and hardware development, for work
performed pursuant to fixed-price contracts where the Company commits to achieve
specified deliveries for a predetermined fixed price, (iii) limited
profitability from cost-reimbursement contracts under which the amount of profit
attainable is limited to a specified negotiated amount and (iv) unpredictable
timing of cash collections of certain unbilled receivables as they may be
subject to acceptance of contract deliverables by the customer and contract
close-out procedures, including government approval of final indirect rates. In
addition, substantially all of the Company's backlog scheduled for delivery can
be terminated at the convenience of the government since orders are often made
well in advance of delivery, and the Company's contracts typically provide that
orders may be terminated with limited or no penalties.
Certain of the Company's contracts individually contribute a
significant percentage of the Company's revenues. For the fiscal year ended
March 31, 1996 and the quarter ended June 30, 1996, the Company's largest
contracts (by revenues) were contracts related to the Company's UHF DAMA
technology, which generated approximately 42.8% and 70.3% of the Company's total
revenues for such periods, respectively, including a contract with Hughes
Defense Communications (formerly Magnavox) which generated approximately 9.4%
and 29.4% of the Company's total revenues for such periods, respectively.
Scheduled delivery pursuant to firm purchase orders under this contract are to
be completed in June 1997. Hughes Defense Communications is an affiliate of
Hughest Network Systems (HNS), which is the Company's principal competitor in
the commercial DAMA market. See "Business -- Competition." The Company's five
largest contracts (by revenues) generated approximately 36.5% and 64.0% of the
Company's total revenues for the fiscal year ended March 31, 1996 and the
quarter ended June 30, 1996, respectively. The Company expects revenues to
continue to be concentrated in a relatively small number of large U.S.
government contracts. Termination of such contracts, or the Company's inability
to renew or replace such contracts when they expire, could have a material
adverse effect on the Company's business, financial condition and results of
operations.
PENETRATION OF COMMERCIAL MARKETS; NEW PRODUCT INTRODUCTIONS
The Company's ability to grow will depend substantially on its ability
to apply its expertise and technologies to existing and emerging commercial
wireless communications markets. The Company's efforts to penetrate commercial
markets has resulted, and the Company anticipates that it will continue to
result, in increased sales and marketing and research and development expenses.
If the Company's net revenues do not correspondingly increase, the Company's
business, financial condition and results of operations could be materially
adversely affected. The Company's success in penetrating commercial markets also
depends upon the success of new product introductions by the Company, which will
be dependent upon several factors, including timely completion and introduction
of new product designs, achievement of acceptable product costs, establishment
of close working relationships with major customers for the design of their new
wireless communications systems incorporating the Company's products and market
acceptance. Sales of the Company's commercial StarWire(TM) products (see
"Business--Commercial Markets, Products and Customers--Commercial Products")
have not yet achieved profitability. The Company believes that as the market
expands for the StarWire(TM) products,
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average production costs for such products should decrease and sales of such
products should become profitable. However, there can be no assurance that the
market for such products will expand or that average production costs will
decrease. If the Company is unable to design, manufacture and market profitable
new products for existing or emerging commercial markets, its business,
financial condition and results of operations will be adversely affected. No
assurance can be given that the Company's product development efforts for
commercial products will be successful or that any new commercial products it
develops will achieve market acceptance. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
"Business--Commercial Markets, Products and Customers."
FLUCTUATIONS IN RESULTS OF OPERATIONS
The Company has experienced and expects to continue to experience
significant fluctuations in quarterly and annual revenues, gross margins and
operating results. The procurement process for most of the Company's current and
potential customers is complex and lengthy, and the timing and amount of
revenues is difficult to predict reliably. The Company recognizes a majority of
its revenues under the percentage of completion method which requires estimates
regarding costs that will be incurred over the life of a specific contract.
Actual results may differ from those estimates. In such event, the Company has
been and may in the future be required to adjust revenues in subsequent periods
relating to revisions of prior period estimates, resulting in fluctuations in
the Company's results of operations from period to period. In addition, a single
customer's order scheduled for delivery in a quarter can represent a significant
portion of the Company's potential revenues for such quarter. The Company has at
times failed to receive expected orders, and delivery schedules have been
deferred as a result of, among other factors, changes in customer requirements.
As a result of the foregoing and other factors, the Company's operating results
for particular periods have in the past been and may in the future be materially
adversely affected by a delay, rescheduling or cancellation of even one purchase
order. Moreover, purchase orders are often received and accepted substantially
in advance of delivery, and the failure to reduce actual costs to the extent
anticipated or an increase in anticipated costs before delivery could materially
adversely affect the gross margins for such orders, and as a result, the
Company's results of operations.
A large portion of the Company's expenses are fixed and difficult to
reduce should revenues not meet the Company's expectations, thus magnifying the
material adverse effect of any revenue shortfall. Furthermore, announcements by
the Company or its competitors of new products and technologies could cause
customers to defer or cancel purchases of the Company's products and services,
which could materially adversely affect the Company's business, financial
condition and results of operations or result in fluctuations in the Company's
results of operations from period to period. Additional factors that may cause
the Company's revenues, gross margins and results of operations to vary
significantly from period to period include mix of products and services sold;
manufacturing efficiencies, costs and capacity; price discounts; market
acceptance and the timing of availability of new products by the Company or its
customers; usage of different distribution and sales channels; warranty and
customer support expenses; customization of products and services; and general
economic and political conditions. In addition, the Company's results of
operations are influenced by competitive factors, including the pricing and
availability of, and demand for, competitive products. All of the above factors
are difficult for the Company to forecast, and these and other factors could
materially adversely affect the Company's business, financial condition and
results of operations or result in fluctuations in the Company's results of
operations from period to period. As a result, the Company believes that
period-to-period comparisons are not necessarily meaningful and should not be
relied upon as indications of future performance. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Quarterly Results
of Operations."
CONTRACT PROFIT EXPOSURE
The Company's products and services are provided primarily through
three types of contracts: fixed-price, time-and-materials and cost-reimbursement
contracts. Approximately 56.3% and 51.6% of the Company's total revenues for the
fiscal year ended March 31, 1996 and for the quarter ended June 30, 1996,
respectively, were derived from fixed-price contracts which require the Company
to provide products and services under a contract at a stipulated price. The
Company derived approximately 5.0% and 7.0% of its revenues during such periods
from time-and-materials contracts which reimburse the Company for the number of
labor hours expended at an established hourly rate negotiated in the contract,
plus the cost of materials utilized in providing such products or
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services. The balance of the Company's revenues for the fiscal year ended March
31, 1996 and the quarter ended June 30, 1996, respectively, were derived from
cost-reimbursement contracts under which the Company is reimbursed for actual
costs incurred in performing the contract to the extent that such costs are
within the contract ceiling and allowable, allocable and reasonable under the
terms of the contract, plus a fee or profit.
The Company assumes greater financial risk on fixed-price contracts
than on either time-and-materials or cost-reimbursement contracts. As the
Company increases its commercial business, it believes that an increasing
percentage of its contracts will be fixed-priced. Failure to anticipate
technical problems, estimate costs accurately or control costs during
performance of a fixed-price contract may reduce the Company's profit or cause a
loss. In addition, greater risks are involved under time-and-materials contracts
than under cost-reimbursement contracts because the Company assumes the
responsibility for the delivery of specified products or services at a fixed
hourly rate. Although management believes that it adequately estimates costs for
fixed-price and time-and-materials contracts, no assurance can be given that
such estimates are adequate or that losses on fixed-price and time-and-materials
contracts will not occur in the future.
To compete successfully for business, the Company must satisfy client
requirements at competitive rates. Although the Company continually attempts to
lower its costs, there are other companies that may provide the same or similar
products or services at comparable or lower prices than the Company. There can
be no assurance that the Company will be able to compete effectively on pricing
or other requirements, and as a result, the Company could lose clients or be
unable to maintain historic gross margin levels or to operate profitably.
DECLINING AVERAGE SELLING PRICES; FLUCTUATIONS IN GROSS MARGINS
Average selling prices for the Company's products may fluctuate from
period to period due to a number of factors, including product mix, competition
and unit volumes. In particular, the average selling prices of a specific
product tend to decrease over that product's life. To offset such decreases, the
Company intends to rely primarily on obtaining yield improvements and
corresponding cost reductions in the manufacture of existing products and on
introducing new products that incorporate advanced features and therefore can be
sold at higher average selling prices. However, there can be no assurance that
the Company will be able to obtain any such yield improvements or cost
reductions or introduce any such new products in the future. To the extent that
such cost reductions and new product introductions do not occur in a timely
manner or the Company's or its customers' products do not achieve market
acceptance, the Company's business, financial condition and results of
operations could be materially adversely affected.
The Company's gross margins in any period are affected by a number of
different factors. Because of the different gross margins on various products,
changes in product mix can impact gross margins in any particular period. In
addition, in the event that the Company is not able to adequately respond to
pricing pressures, the Company's current customers may decrease, postpone or
cancel current or planned orders, and the Company may not be able to secure new
customers or orders. As a result, the Company may not be able to achieve
desired production volumes or gross margins.
GOVERNMENT REGULATIONS
The Company's products are incorporated into wireless communications
systems that are subject to various government regulations. Regulatory changes,
including changes in the allocation of available frequency spectrum and in the
military standards and specifications ("MIL-STDs") which define the current
satellite networking environment, could significantly impact the Company's
operations by restricting development efforts by the Company's customers, making
current products obsolete or increasing the opportunity for additional
competition. There can be no assurance that regulatory bodies will not
promulgate new regulations that could have a material adverse effect on the
Company's business, financial condition and results of operations. Changes in,
or the failure by the Company to comply with, applicable domestic and
international regulations could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the
increasing demand for wireless communications has exerted pressure on regulatory
bodies worldwide to adopt new standards for such products and services,
generally following extensive investigation of and deliberation over
8
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competing technologies. The delays inherent in this governmental approval
process have caused and may continue to cause the cancellation, postponement or
rescheduling of the installation of communications systems by the Company's
customers, which in turn may have a material adverse effect on the sale of
products by the Company to such customers. See "Business--Government
Regulations."
The Company has benefitted and continues to benefit from the Small
Business Innovation Research ("SBIR") program, through which the government
provides research and development funding for companies with fewer than 500
employees. While the Company has already harvested significant benefits from the
SBIR program throughout the initial developmental stages of its core technology
base, the Company believes that its business, financial condition and results
of operations would not be materially adversely affected if the Company were to
lose its SBIR funding status.
EMERGING MARKETS IN WIRELESS COMMUNICATIONS
A number of the commercial markets for the Company's products in the
wireless communications area, including its DAMA products, have only recently
begun to develop. Because these markets are relatively new, it is difficult to
predict the rate at which these markets will grow, if at all. If the markets for
the Company's products in the commercial wireless communications area fail to
grow, or grow more slowly than anticipated, the Company's business, financial
condition and results of operations could be materially adversely affected.
Conversely, to the extent that growth in these markets results in capacity
limitations in the wireless communications area, the Company's business,
financial condition and results of operations could also be materially adversely
affected. See "Business--Commercial Markets, Products and Customers."
RURAL TELEPHONY MARKET
The Company's strategy includes focusing on establishing rural
telephony networking infrastructure for developing countries through strategic
alliances with regional and local service providers (see
"Business--Strategy--Address Rural Telephony Market"). There can be no assurance
that a substantial market for rural telephony equipment in developing countries
will ever develop, or if such a market does develop that fixed-site DAMA
VSAT-based equipment will capture a significant portion of that market. The
Company's ability to penetrate such markets will be dependent upon its ability
to develop equipment and software which can be utilized by the regional and
local service providers to develop and implement such infrastructure and for
such service providers to market and sell the use of such systems. Furthermore,
there can be no assurance that the regional and local service providers will be
able to successfully market subscriber terminals to rural subscribers. The
development and implementation of such rural telephony systems will be dependent
upon, among other things, the continued development of the necessary hardware
and software technologies (including the necessary expenditures of a large
amount of funds and resources), the implementation of cost-effective systems,
market acceptance for such systems and approval by the appropriate regulatory
agencies. There can be no assurance that the Company will be able to develop
equipment and software which can be utilized in such rural telephony systems and
accepted by regional and local service providers or that any regional or local
service providers will be able to develop, implement and market rural telephony
systems. Even if a market does develop for rural telephony, there can be no
assurance that the Company will be able to develop products incorporated into
and accepted by regional and local service providers or that regional and local
service providers will be able to develop and implement such systems.
Furthermore, if the Company successfully introduces such products and the
regional and local service providers successfully develop and implement such
systems, there is no assurance that the Company will generate enough revenues to
cover the Company expenditures in the development and marketing of such
products. Even if the Company is able to realize sales of such products, the
Company believes it is not likely that the Company will realize any significant
revenues from rural telephony applications any time in the foreseeable future,
including at least the next two years.
DEPENDENCE ON CONTRACT MANUFACTURERS; RELIANCE ON SOLE OR LIMITED SOURCES OF
SUPPLY
The Company's internal manufacturing capacity is limited. The Company
has recently begun to utilize contract manufacturers to produce its products and
expects to rely increasingly on such manufacturers in the future. The Company
also relies on outside vendors to manufacture certain components and
subassemblies, including printed wiring boards. Certain components,
subassemblies and services necessary for the manufacture of the Company's
products are obtained from a sole supplier or a limited group of suppliers. In
particular, Texas Instruments is a sole source supplier of digital signal
processing chips, which are critical components used by the Company in
substantially all of its products. There can be no assurance that the Company's
internal manufacturing capacity and that of its contract manufacturers and
suppliers will be sufficient to timely fulfill the Company's orders.
The Company's reliance on contract manufacturers and on sole suppliers
or a limited group of suppliers involves several risks, including a potential
inability to obtain an adequate supply of required components, and reduced
control over the price, timely delivery, reliability and quality of finished
products. From time to time, the Company enters into long-term supply agreements
with its manufacturers and suppliers. See Note 9 of Notes to Financial
Statements. Manufacture of the Company's products and certain of its components
and subassemblies is an extremely complex process, and the Company has from time
to time experienced and may in the future experience delays in the delivery of
and quality problems with products and certain components and subassemblies from
vendors. Certain of the Company's suppliers have relatively limited financial
and other resources. Any inability to obtain timely deliveries of components and
subassemblies of acceptable quality or any other circumstance that would require
the Company to seek alternative sources of supply, or to manufacture its
finished products or such components and subassemblies internally, could delay
or prevent the Company from timely delivery of its systems or raise issues
regarding quality, which could damage relationships with current or prospective
customers and have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Manufacturing."
COMPETITION
The markets for the Company's products and services are extremely
competitive, and the Company expects that competition will increase in such
markets. Many of the Company's competitors have entrenched
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market positions, established patents, copyrights, tradenames, trademarks,
service marks and intellectual property rights and substantial technological
capabilities. The Company's existing and potential competitors include large and
emerging domestic and international companies, many of which have significantly
greater financial, technical, manufacturing, marketing, sales and distribution
resources and management expertise than the Company. The Company believes that
its ability to compete successfully in the markets for its products and services
depends upon a number of factors within and outside its control, including
price, quality, availability, product performance and features, timing of new
product introductions by the Company, its customers and competitors, and
customer service and technical support. The Company's customers continuously
evaluate whether to develop and manufacture their own products and could elect
to compete with the Company at any time. Price competition in the markets in
which the Company currently competes is likely to increase, which could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Competition."
LIMITED PROTECTION OF THE COMPANY'S INTELLECTUAL PROPERTY
The Company's ability to compete may depend, in part, on its ability to
obtain and enforce intellectual property protection for its technology in the
United States and internationally. The Company relies on a combination of trade
secrets, copyrights, trademarks, service marks and contractual rights to protect
its intellectual property. There can be no assurance that the steps taken by the
Company will be adequate to deter misappropriation or impede third party
development of the Company's technology. In addition, the laws of certain
foreign countries in which the Company's products are or may be sold do not
protect the Company's intellectual property rights to the same extent as do the
laws of the United States. The failure of the Company to protect its proprietary
information could have a material adverse effect on the Company's business,
financial condition and results of operations.
Litigation may be necessary to protect the Company's intellectual
property rights and trade secrets, to determine the validity and scope of the
proprietary rights of others or to defend against claims of infringement or
invalidity. Such litigation could result in substantial costs and diversion of
resources and could have a material adverse effect on the Company's business,
financial condition and results of operations. There can be no assurance that
infringement, invalidity, right to use or ownership claims by third parties or
claims for indemnification resulting from infringement claims will not be
asserted in the future. If any claims or actions are asserted against the
Company, the Company may seek to obtain a license under a third party's
intellectual property rights. There can be no assurance, however, that a license
will be available under reasonable terms or at all. In addition, should the
Company decide to litigate such claims, such litigation could be extremely
expensive and time consuming and could materially adversely affect the Company's
business, financial condition and results of operations, regardless of the
outcome of the litigation. If the Company's products are found to infringe upon
the rights of third parties, the Company may be forced to incur substantial
costs to develop alternative products. There can be no assurance that the
Company would be able to develop such alternative products or that if such
alternative products were developed, they would perform as required or be
accepted in the applicable markets. See "Business--Intellectual Property."
REQUIREMENT FOR RESPONSE TO RAPID TECHNOLOGICAL CHANGE AND REQUIREMENT FOR
FREQUENT NEW PRODUCT INTRODUCTIONS
The wireless communications market is subject to rapid technological
change, frequent new product introductions and enhancements, product
obsolescence and changes in end-user requirements. The Company's ability to be
competitive in this market will depend in significant part upon its ability to
successfully develop, introduce and sell new products and enhancements on a
timely and cost-effective basis that respond to changing customer requirements.
Any success of the Company in developing new and enhanced products will depend
upon a variety of factors, including new product selection, integration of the
various elements of its complex technology, timely and efficient completion of
product design, timely and efficient implementation of manufacturing and
assembly processes and its cost reduction efforts, development and completion of
related software tools, product performance, quality and reliability and
development of competitive products by competitors. The Company may experience
delays from time to time in completing development and introduction of new
products. Moreover, there can be no assurance that the Company will be
successful in selecting, developing, manufacturing and marketing new products or
enhancements. There can be no assurance that errors will not be found in the
Company's products
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after commencement of deliveries, which could result in the
loss of or delay in market acceptance. The inability of the Company to introduce
in a timely manner new products that achieve market acceptance and thereby
contribute to revenues could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business--Research
and Development."
INTERNATIONAL OPERATIONS; RISKS OF DOING BUSINESS IN DEVELOPING COUNTRIES
The Company anticipates that international sales will account for an
increasing percentage of its revenues for the foreseeable future. The Company's
international sales may be denominated in foreign or U.S. currencies. The
Company does not currently engage in foreign currency hedging transactions. As a
result, a decrease in the value of foreign currencies relative to the U.S.
dollar could result in losses from transactions denominated in foreign
currencies. With respect to the Company's international sales that are U.S.
dollar-denominated, such a decrease could make the Company's products less
price-competitive. Additional risks inherent in the Company's international
business activities include various and changing regulatory requirements, cost
and risks of localizing systems in foreign countries, increased sales and
marketing and research and development expenses, availability of suitable export
financing, timing and availability of export licenses, tariffs and other trade
barriers, political and economic instability, difficulties in staffing and
managing foreign operations, difficulties in managing distributors, potentially
adverse taxes, complex foreign laws and treaties and the possibility of
difficulty in accounts receivable collections. Certain of the Company's customer
purchase agreements are governed by foreign laws, which may differ significantly
from U.S. laws. Therefore, the Company may be limited in its ability to enforce
its rights under such agreements and to collect damages, if awarded. There can
be no assurance that any of these factors will not have a material adverse
effect on the Company's business, financial condition and results of operations.
ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that a viable public market for the Common
Stock will develop or be sustained after this offering. The Company believes
that factors such as announcements of developments related to the Company's
business, announcements of technological innovations or new products or
enhancements by the Company or its competitors, developments in the Company's
relationships with its customers, partners, distributors and suppliers, changes
in analysts' estimates, regulatory developments, fluctuations in results of
operations and general conditions in the Company's market or the markets served
by the Company's customers or the economy could cause the price of the Common
Stock to fluctuate, perhaps substantially. In addition, in recent years the
stock market in general, and technology companies in particular have been
subject to significant price fluctuations, which have often been unrelated to
the operating performance of affected companies. Such fluctuations could
adversely affect the market price of the Common Stock. There can be no assurance
that the market price of the Common Stock will not experience significant
fluctuations in the future, including fluctuations that are unrelated to the
Company's performance.
CONTROL BY EXISTING SHAREHOLDERS
Following the completion of this offering, members of the Board of
Directors and the executive officers of the Company, together with members of
their families and entities that may be deemed affiliates of or related to such
persons or entities, will beneficially own approximately 36.1% of the
outstanding shares of Common Stock of the Company. Accordingly, these
shareholders will be able to elect all members of the Company's Board of
Directors and determine the outcome of corporate actions requiring shareholder
approval, such as mergers and acquisitions. This level of ownership may have a
significant effect in delaying, deferring or preventing a change in control of
the Company and may adversely affect the voting and other rights of other
holders of the Common Stock. See "Management--Executive Officers and Directors"
and "Principal and Selling Shareholders."
ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER PROVISIONS
Certain provisions of the Company's Amended and Restated Articles of
Incorporation and Amended and Restated Bylaws could discourage potential
acquisition proposals, could delay or prevent a change in control of the Company
and could make removal of management more difficult. Such provisions could
diminish the opportunities for a shareholder to participate in tender offers,
including tender offers that are priced above the then
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current market value of the Common Stock. The provisions also may inhibit
increases in the market price of the Common Stock that could result from
takeover attempts. Additionally, the Board of Directors of the Company, without
further shareholder approval, may issue up to 5,000,000 shares of Preferred
Stock, in one or more series, with such terms as the Board of Directors may
determine, including rights such as voting, dividend and conversion rights which
could adversely affect the voting power and other rights of the holders of
Common Stock. Preferred Stock may be issued quickly with terms which delay or
prevent the change in control of the Company or make removal of management more
difficult. Also, the issuance of Preferred Stock may have the effect of
decreasing the market price of the Common Stock. See "Description of Capital
Stock--Preferred Stock."
DEPENDENCE ON KEY PERSONNEL
The Company's future success depends in large part on the continued
service of its key technical, marketing and management personnel and on its
ability to continue to attract and retain qualified employees, particularly its
Chief Executive Officer, Mark D. Dankberg, and those highly skilled design,
process and test engineers involved in the manufacture of existing products and
the development of new products and processes. The competition for such
personnel is intense, and the loss of key employees could have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company does not have employment agreements with any of its
officers or employees. The Company has obtained, however, a key man insurance
policy on the life of Mr. Dankberg in the amount of $500,000, of which the
Company is the sole beneficiary. See "Business--Employees" and "Management."
MANAGEMENT'S DISCRETION OVER PROCEEDS OF THE OFFERING
The Company has no current specific plan for the net proceeds of this
offering. As a consequence, the Company's management will have discretion over
the proceeds for the foreseeable future. There can be no assurance that the
proceeds can or will be invested to yield a return as great as the Company has
historically experienced or any significant return at all. See "Use of
Proceeds."
DILUTION
The initial public offering price is expected to be substantially
higher than the net tangible book value per share of the Common Stock. Investors
purchasing shares of Common Stock in this offering will therefore incur
immediate and substantial net tangible book value dilution. To the extent that
stock options (currently outstanding or subsequently granted) to purchase Common
Stock are exercised, there will be further dilution. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of shares in the public market or the
prospect of such sales could adversely affect the market price of the Common
Stock. Upon completion of this offering, the Company will have outstanding
7,525,342 shares of Common Stock. Immediately upon the effectiveness of this
offering, the 2,200,000 shares offered hereby (plus any shares issued upon
exercise of the Underwriters' over-allotment option) will be freely tradeable.
Of the remaining shares, __________ are subject to lock-up agreements pursuant
to which the holders of such shares have agreed not to sell or otherwise dispose
of such shares for a period of 180 days after the date of the offering without
the prior written consent of the representatives of the Underwriters. The shares
not subject to lock-up agreements may be freely sold after the offering, subject
to certain volume and other limitations of Rule 144 under the Securities Act.
The Company intends to file a registration statement under the Securities Act
after this offering covering the sale of 1,384,143 shares of Common Stock
reserved for issuance under the Company's 1993 Stock Option Plan, 1996 Equity
Participation Plan and Employee Stock Purchase Plan. See "Shares Eligible for
Future Sale" and "Underwriting."
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CAPITALIZATION
The following table sets forth as of June 30, 1996 (i) the Company's
actual capitalization (as if the 0.7335-for-one reverse stock split of the
Common Stock to be consummated prior to this offering had occurred prior to June
30, 1996) and (ii) pro forma capitalization as adjusted to reflect the
conversion of all outstanding shares of Preferred Stock into Common Stock upon
the closing of this offering, the amendments to the Company's Articles of
Incorporation to increase the Company's authorized capital stock and the sale
of the 1,650,000 shares of Common Stock offered by the Company hereby at an
assumed offering price of $11.00 per share, based on the midpoint of the
offering price range set forth on the cover page of this Prospectus (after
deduction of the underwriting discounts and commissions and estimated offering
expenses), and the application of the net proceeds therefrom as described under
"Use of Proceeds."
AS OF JUNE 30, 1996
------------------------------------------
ACTUAL AS ADJUSTED
Total long-term debt, less current portion............................... $1,531,000 $1,531,000
Shareholders' equity(1):
Preferred Stock, $.01 par value, 3,225,000 shares authorized, 3,225,000
shares issued and outstanding actual; 5,000,000 shares
authorized, no shares issued or outstanding as adjusted........... 32,000 --
Common Stock, $.01 par value, 7,335,000 shares authorized,
3,386,396 shares issued and outstanding actual; 25,000,000 shares
authorized, 7,401,933 shares issued and outstanding as adjusted... 46,000 95,000
Paid-in capital..................................................... 754,000 16,967,000
Retained earnings................................................... 4,880,000 4,880,000
---------- ------------
Total shareholders' equity.......................................... 5,712,000 21,942,000
---------- ------------
Total capitalization............................................ $7,243,000 $ 23,473,000
========== ============
- ---------------
(1) Excludes 330,000 shares of Common Stock issuable by the Company upon
the full exercise of the Underwriters' over-allotment option. Also
excludes 265,683 shares of Common Stock issuable upon exercise of
options outstanding as of June 30, 1996 at an average exercise price of
$0.85 per share. See "Management--1993 Stock Option Plan," "--1996
Equity Participation Plan" and Note 6 of Notes to Financial Statements.
(2) Common Stock, Paid-in capital, Total shareholders' equity and Total
capitalization would be $98,000, $20,339,000, $25,317,000 and
$26,848,000, respectively, if the Underwriters' over-allotment option
is exercised in full.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,650,000 shares
of Common Stock being offered by the Company are estimated to be $16,230,000
($19,605,000 if the Underwriters' over-allotment option is exercised in full),
based on an assumed offering price of $11.00 per share and after deducting the
underwriting discounts and commissions and estimated offering expenses payable
by the Company. The Company intends to use the net proceeds of this offering for
working capital and general corporate purposes, including without limitation
facilities expansion, inventory financing, contract financing and debt
reduction. Pending their use, the proceeds will be invested in short-term,
investment-grade, interest-bearing securities. The Company will not receive any
of the proceeds from the sale of Common Stock by the Selling Shareholders. See
"Principal and Selling Shareholders."
DIVIDEND POLICY
To date, the Company has neither declared nor paid any dividends on the
Common Stock. The Company currently intends to retain all future earnings, if
any, for use in the operation and development of its business and, therefore,
does not expect to declare or pay any cash dividends on the Common Stock in the
foreseeable future. In addition, an equipment financing agreement of the Company
prohibits the payment of any cash dividends on the Company's capital stock.
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DILUTION
The pro forma net tangible book value of the Company as of June 30,
1996 was $5,712,000 or $0.99 per share. Pro forma net tangible book value per
share represents the amount of total tangible assets of the Company reduced by
the amount of its total liabilities, divided by the total number of shares of
Common Stock outstanding, including shares of Common Stock resulting from the
conversion of the Preferred Stock. After giving effect to the net proceeds from
the sale of 1,650,000 shares of Common Stock offered by the Company at an
assumed offering price of $11.00 per share, the pro forma net tangible book
value of the Company as of June 30, 1996 would have been $21,942,000 or $2.96
per share of Common Stock. This represents an immediate increase in net tangible
book value of $1.97 per share to existing shareholders and an immediate dilution
of $8.04 per share to new investors. The following table illustrates the per
share dilution in net tangible book value to new investors.
Assumed initial public offering price per share..................... $ 11.00
Net tangible book value per share................................... $ 0.99
Increase per share attributable to new investors.................... 1.97
--------
Pro forma net tangible book value per share after the offering...... 2.96
---------
Dilution per share to new investors................................. $ 8.04
=========
The following table summarizes, on a pro forma basis, as of June 30,
1996, the differences in total consideration paid and the average price per
share paid by existing shareholders and new investors with respect to the number
of shares of Common Stock purchased from the Company assuming an offering price
of $11.00 per share:
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------ --------------------------------- PRICE PAID
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ---------- -------------- ------------- ------------
Existing shareholders(1)..... 5,751,933 77.7% $ 832,000 4.4% $ 0.15
New investors(2)............. 1,650,000 22.3 18,150,000 95.6 11.00
----------- ---------- -------------- -------------
Total(2)............ 7,401,933 100% $ 18,982,000 100%
=========== ========== ============= =============
- ---------------
(1) Sales by Selling Shareholders in this offering will reduce the number
of shares of Common Stock held by existing shareholders to 5,201,933 or
approximately 70.3% (5,201,933 shares or approximately 67.3% if the
Underwriters' over-allotment option is exercised in full) and will
increase the number of shares of Common Stock held by new investors to
2,200,000 or approximately 29.7% (2,530,000 shares or approximately
32.7% if the Underwriters' over-allotment option is exercised in full)
of the total number of shares of Common Stock outstanding after the
closing of this offering.
(2) The Company has granted the Underwriters an option to purchase up to
330,000 shares of Common Stock to cover over-allotments, if any. If the
Underwriters' over-allotment option is exercised in full, the Company
will issue an aggregate of 1,980,000 shares of Common Stock to new
investors (25.6% of the total of 7,731,933 shares outstanding) and the
total consideration from new investors will be $21,780,000 (96.3% of
the total of $22,612,000 consideration paid for all shares
outstanding).
The information presented with respect to existing shareholders assumes
no exercise of the Underwriters' over-allotment option and no exercise of
outstanding options after June 30, 1996. As of June 30, 1996, options to
purchase 265,683 shares of Common Stock were outstanding. In addition, options
to purchase an aggregate of 118,460 shares of Common Stock were granted on July
1, 1996. An additional 750,000 shares of Common Stock will be reserved for
issuance under the 1996 Equity Participation Plan and 250,000 shares will be
reserved for issuance under the Employee Stock Purchase Plan. The issuance of
Common Stock under these plans will result in further dilution to new investors.
See "Management--1993 Stock Option Plan," "--1996 Equity Participation Plan" and
"--Employee Stock Purchase Plan."
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SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected financial data as of March 31, 1995 and 1996 and
for the years ended March 31, 1994, 1995 and 1996 have been derived from, and
are qualified by reference to, the audited financial statements of the Company
included elsewhere in this Prospectus. The selected financial data as of March
31, 1992, 1993 and 1994 and for the years ended March 31, 1992 and 1993 have
been derived from the audited financial statements of the Company not included
herein. The selected financial data as of June 30, 1996 and for the three months
ended June, 30, 1995 and 1996 have been prepared on a basis consistent with the
audited financial statements and derived from unaudited financial statements
also appearing herein which, in the opinion of management, include all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the financial position and results of operations of the
Company for the unaudited interim periods. The statement of operations data for
any particular period are not necessarily indicative of the results of
operations for any future period, including the Company's fiscal year ending
March 31, 1997. The data set forth below are qualified by reference to, and
should be read in conjunction with, the Financial Statements and Notes thereto
and the discussion thereof included elsewhere in this Prospectus.
YEARS ENDED MARCH 31, THREE MONTHS ENDED
---------------------------------------------------- --------------------
JUNE 30, JUNE 30,
1992 1993 1994 1995 1996 1995 1996
------- ------ -------- ------- ------- ------ -------
(UNAUDITED)
STATEMENT OF INCOME DATA:
Revenues......................... $ 4,019 $5,072 $ 11,579 $22,341 $29,017 $6,768 $ 9,732
Cost of revenues................. 3,006 3,939 9,033 16,855 20,983 4,830 6,862
------- ------ -------- ------- ------- ------ -------
Gross profit................... 1,013 1,133 2,546 5,486 8,034 1,938 2,870
Operating expenses:
Selling, general and
administrative................. 503 740 1,554 2,416 3,400 918 1,040
Independent research and
development.................... -- 59 134 788 2,820 467 1,058
------- ------ -------- ------- ------- ------ -------
Income from operations........... 510 334 858 2,282 1,814 553 772
Interest income (expense)........ 7 (17) (45) (87) (231) (29) (32)
------- ------- --------- -------- -------- ------- -------
517 317 813 2,195 1,583 524 740
Income before income taxes.......
Provision (benefit) for income
taxes............................ 159 93 328 888 (50) (17) 262
------- ------ -------- ------- -------- ------- -------
Net income....................... $ 358 $ 224 $ 485 $ 1,307 $ 1,633 $ 541 $ 478
====== ===== ======= ====== ====== ===== ======
Pro forma net income per share(1) $ 0.27 $ 0.08
====== ======
Shares used in per share 6,001 6,003
calculations(1)................
MARCH 31, JUNE 30, 1996
-------------------------------------------------- ------------------------
1992 1993 1994 1995 1996 ACTUAL AS ADJUSTED(2)
------ ------ ------ ------ ------ ------ --------------
(UNAUDITED)
BALANCE SHEET DATA:
Cash and cash equivalents........ $ 101 $ 75 $ 9 $2,731 $2,297 $1,733 $17,963
Working capital.................. 912 964 1,486 2,808 4,651 4,850 21,080
Total assets..................... 1,750 2,550 4,986 9,377 13,262 13,248 29,478
Long-term debt, less current 50 124 297 1,220 1,747 1,531 1,531
portion........................
Total shareholders' equity....... 1,226 1,465 1,956 3,413 5,217 5,712 21,942
- ---------------
(1) For an explanation of the determination of the number of shares used in
computing pro forma net income per share, see Note 1 of Notes to
Financial Statements.
(2) As adjusted to reflect the sale of 1,650,000 shares of Common Stock
offered by the Company hereby at an assumed offering price of $11.00
per share, and the application of the net proceeds therefrom as
described under "Use of Proceeds." If the Company issues 1,980,000
shares of Common Stock upon the full exercise of the Underwriters'
option to cover over-allotments, Cash and cash equivalents,
Working capital, Total assets and Total shareholders' equity would be
$21,338, $24,455, $32,853 and $25,317, respectively. See "Use of
Proceeds" and "Capitalization."
15
18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Act. Discussions containing such
forward-looking statements may be found throughout this Prospectus, including
without limitation in the materials set forth under "Summary," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business." Actual events or results may differ materially from those discussed
in the forward-looking statements as a result of various factors, including
without limitation the risks set forth under "Risk Factors" and the matters set
forth in this Prospectus generally.
Historically, the Company's revenues have been principally derived from
contracts with the DOD. The Company's DOD revenues have continued to grow
significantly despite government budgetary constraints. Since 1992, such
revenues have grown at a compounded annual growth rate of 63.9%. DOD revenues
amounted to $11.1 million, $21.2 million and $28.3 million for the fiscal years
ended March 31, 1994, 1995 and 1996, respectively, and $6.8 million and $9.6
million for the quarters ended June 30, 1995 and 1996, respectively. The Company
has achieved this growth rate entirely through internal growth, and not through
acquisitions.
The Company's products and services are provided primarily through
three types of contracts: fixed-price, time-and-materials and cost-reimbursement
contracts. Approximately 56.3% and 51.6% of the Company's total revenues for the
fiscal year ended March 31, 1996 and for the quarter ended June 30, 1996,
respectively, were derived from fixed-price contracts which require the Company
to provide products and services under a contract at a stipulated price. The
Company derived approximately 5.0% and 7.0% of its revenues during such periods
from time-and-materials contracts which reimburse the Company for the number of
labor hours expended at an established hourly rate negotiated in the contract,
plus the cost of materials utilized in providing such products or services. The
balance of the Company's revenues for the fiscal year ended March 31, 1996 and
the quarter ended June 30, 1996, respectively, were derived from
cost-reimbursement contracts under which the Company is reimbursed for all
actual costs incurred in performing the contract to the extent that such costs
are within the contract ceiling and allowable under the terms of the contract,
plus a fee or profit. See "Risk Factors--Contract Profit Exposure."
As of June 30, 1996, the Company had firm backlog of $38.0 million, of
which $34.7 million was funded. Of the $38.0 million in firm backlog,
approximately $30.0 million is expected to be delivered in the fiscal year
ending March 31, 1997 and the balance is expected to be delivered in the fiscal
year ending March 31, 1998. Such backlog includes $20.0 million in awards
received during the three months ended June 30, 1996, consisting of $13.2
million in UHF DAMA satellite communications awards, $4.5 million in awards for
the defense simulator business, $2.1 million in other defense awards and
$189,000 in commercial satellite communications awards. The Company's $38.0
million in firm backlog does not include an additional $25.9 million of customer
options. See "Business--Backlog."
Historically, a portion of the Company's revenue has been derived from
research and development contracts with the DOD. The research and development
efforts are conducted in direct response to the specific requirements of a
customer's order and, accordingly, expenditures related to such efforts are
included in cost of sales when incurred and the related funding (which includes
a profit component) is included in net revenues at such time. Revenues are
recognized using the percentage of completion method on these long-term
development contracts. Revenues for funded research and development during the
fiscal years ended March 31, 1994, 1995 and 1996 were approximately $9.7
million, $20.7 million and $19.5 million, respectively. See "Business--Research
and Development."
Beginning in fiscal 1995, production contracts for delivery of
previously developed equipment became a more significant percentage of total
revenues. Production contracts amounted to approximately 6.5% of fiscal 1995
total revenues, approximately 19.4% of fiscal 1996 total revenues and
approximately 32.2% of total revenues for the three months ended June 30, 1996.
Based on the significant increase in production revenues, the Company
16
19
began recognizing revenues and related costs of revenues when products are
delivered on most production orders in fiscal 1996.
The Company invests in independent research and development ("IR&D"),
which is not directly funded by a third party. The Company expenses IR&D costs
as they are incurred. IR&D expenses consist primarily of salaries and other
personnel-related expenses, supplies and prototype materials related to research
and development programs. IR&D expenses for governmental and commercial
applications were minimal prior to fiscal 1995. In the fourth quarter of fiscal
1995, the Company began investing a significant amount of IR&D funds primarily
in the development of satellite telephony and other satellite DAMA products. The
Company expended 9.7% and 10.9% of revenues in IR&D, respectively, in the fiscal
year ended March 31, 1996 and the quarter ended June 30, 1996. The Company
expects that IR&D expenditures will continue to increase in order to fund growth
in governmental and commercial applications. As a government contractor, the
Company is able to recover a portion of its IR&D expenses pursuant to its
government contracts.
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of total revenues,
certain income data for the periods indicated.
FISCAL YEARS ENDED THREE MONTHS ENDED
MARCH 31, JUNE 30,
--------------------------------- ------------------
1994 1995 1996 1995 1996
---- ---- ---- ---- ----
Revenues 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues 78.0 75.4 72.3 71.4 70.5
----- ----- ----- ----- -----
Gross profit 22.0 24.6 27.7 28.6 29.5
Operating expenses:
Selling, general and 13.4 10.8 11.7 13.6 10.7
administrative
Independent research and development 1.2 3.5 9.7 6.9 10.9
----- ----- ----- ----- -----
Income from operations 7.4 10.3 6.3 8.1 7.9
Income before income taxes 7.0 9.9 5.5 7.7 7.6
Net income 4.2 5.9 5.7 8.0 4.9
THREE MONTHS ENDED JUNE 30, 1996 VS. THREE MONTHS ENDED JUNE 30, 1995
Revenues. Revenues increased 44.0% from $6.8 million for the three
months ended June 30, 1995 to $9.7 million for the three months ended June 30,
1996. This increase was primarily due to Enhanced Manpack UHF Terminal ("EMUT")
DAMA modem production of $2.9 million and a $1.7 million increase in revenues
generated by contracts with the U.S. Air Force for UHF DAMA network control
stations and modems, offset in part by reduced activity in other product lines
and the completion of certain contracts.
Gross Profits. Gross profits increased 48.1% from $1.9 million (28.6%
of revenues) for the three months ended June 30, 1995 to $2.9 million (29.5% of
revenues) for the three months ended June 30, 1996. This increase primarily
reflects higher prices related to the recovery of allowable IR&D costs under
certain government contracts and improved contract profitability under certain
production contracts.
Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses increased 13.3% from $918,000 (13.6% of
revenues) for the three months ended June 30, 1995 to $1.0 million (10.7% of
revenues) for the three months ended June 30, 1996. This decrease in SG&A
expenses as a percentage of revenues reflects an increased expense in connection
with a large bid and proposal effort in the three months ended June 30, 1995
offset by the impact of a 44.0% growth in revenues between the two periods. SG&A
expenses consist primarily of personnel costs and expenses for business
development, marketing and sales, finance, contract administration and general
management. They also include bid and proposal costs. Certain SG&A expenses are
difficult to predict and vary based on specific government and commercial sales
opportunities.
Independent Research and Development. IR&D expenses increased 135.5%
from $467,000 (6.9% of revenues) in the three months ended June 30, 1995 to $1.1
million (10.9% of revenues) in the three months ended June 30, 1996. This
increase resulted primarily from higher IR&D expenses related to the Company's
StarWire(TM) DAMA product, which represented approximately 91.1% of total IR&D.
17
20
Interest Expense. Interest expense increased 44.2% from $43,000 for the
three months ended June 30, 1995 to $62,000 for the three months ended June 30,
1996. Interest expense relates to loans for the purchase of capital equipment,
which are generally four year fixed-rate term loans, and to short-term
borrowings under the Company's line of credit to cover working capital
requirements. Total outstanding equipment loans were $1.8 million at June 30,
1995 and $2.4 million at June 30, 1996. The Company owed no amounts on its line
of credit at the end of either period.
Interest Income. Interest income increased 114.3% from $14,000 for the
three months ended June 30, 1995 to $30,000 for the three months ended June 30,
1996. Interest income related to interest earned on short-term deposits of cash.
Provision (Benefit) for Income Taxes. The income tax benefit in the
three months ended June 30, 1995 was primarily attributable to the utilization
of research and development credits generated during the current period and the
impact of a United States Federal judicial decision which clarified the tax law
related to the utilization of research and development credits generated from
funded research and development. As of June 30, 1996, all of such income tax
benefit was utilized by the Company. The Company's effective tax rate for the
three months ended June 30, 1996 was 35.4%.
FISCAL YEAR ENDED MARCH 31, 1996 VS. FISCAL YEAR ENDED MARCH 31, 1995
Revenues. The Company's revenues increased 30.0% from $22.3 million in
fiscal 1995 to $29.0 million in fiscal 1996. This increase reflects the growth
in defense related production contracts, primarily associated with the Company's
EMUT DAMA modem products, which experienced a $5.3 million increase, and
Advanced Data Controller ("ADC") products, which experienced a $1.5 million
increase. Revenues from production orders (compared to funded research and
development) increased from $1.4 million (6.5% of revenues) in fiscal 1995 to
$5.6 million (19.4% of revenues) in fiscal 1996.
Revenues from UHF DAMA satellite communications products increased to
42.8% of revenues in fiscal 1996. This increase was due to the first EMUT DAMA
modem production deliveries in the fourth quarter of 1996. UHF DAMA business
area revenues grew from $7.1 million (31.7% of revenues) in fiscal 1995 to $12.4
million (42.8% of revenues) in fiscal 1996.
Gross Profits. Gross profits increased 46.4% from $5.5 million (24.6%
of revenues) in fiscal 1995 to $8.0 million (27.7% of revenues) in fiscal 1996.
This increase primarily reflects higher prices related to the recovery of
allowable IR&D costs under certain government contracts and improved contract
profitability under certain production contracts.
Selling, General and Administrative Expenses. SG&A expenses increased
40.7% from $2.4 million (10.8% of revenues) in fiscal 1995 to $3.4 million
(11.7% of revenues) in fiscal 1996. Increased spending was offset somewhat by
the continuing revenue growth. The Company continued to increase staff to
support IR&D related to its StarWire(TM) DAMA product, increased its business
development staff for defense programs, and added to finance and administrative
staffing. Bid and proposal efforts increased from $321,000 in fiscal 1995 to
$1.0 million in fiscal 1996.
Independent Research and Development. IR&D expenses increased 257.9%
from $788,000 (3.5% of revenues) in fiscal 1995 to $2.8 million (9.7% of
revenues) in fiscal 1996. Expenditures on the development of the Company's
StarWire(TM) DAMA product began in the last quarter of fiscal 1995 and have been
steadily increasing.
Interest Expense. Interest expense increased 128.1% from $114,000 in
fiscal 1995 to $260,000 in fiscal 1996. Total outstanding equipment loans for
the periods were $1.7 million at the end of fiscal 1995 and $2.5 million at the
end of fiscal 1996. There were no amounts outstanding under the Company's line
of credit at the end of either fiscal year.
18
21
Interest Income. Interest income increased 7.4% from $27,000 in fiscal
1995 to $29,000 in fiscal 1996. Interest income related to interest earned on
short-term deposits of cash.
Provision (Benefit) for Income Taxes. The income tax provision in
fiscal 1995 approximates the combined federal and state statutory rate of 40.0%.
The income tax benefit in fiscal 1996 was primarily attributable to the
utilization of research and development credits generated during the current
period and the impact of a United States Federal judicial decision which
clarified the tax law related to the utilization of research and development
credits generated from funded research and development.
FISCAL YEAR ENDED MARCH 31, 1995 VS. FISCAL YEAR ENDED MARCH 31, 1994
Revenues. The Company's revenues increased 92.9% from $11.6 million in
fiscal 1994 to $22.3 million in fiscal 1995. Funded development in the UHF DAMA
business area had the largest impact on revenue growth. Revenues for the UHF
DAMA business area increased 317.1% from $1.7 million (14.7% of revenues) in
fiscal 1994 to $7.1 million (31.7% of revenues) in fiscal 1995. Other increases
occurred in the simulator business area which increased from $2.2 million (18.9%
of revenues) in fiscal 1994 to $4.0 million (18.0% of revenues) in fiscal 1995,
and in the Joint Tactical Information Distribution System ("JTIDS") business
area which increased from $1.3 million (10.9% of revenues) in fiscal 1994 to
$2.6 million (11.8% of revenues) in fiscal 1995.
Gross Profits. Gross profits increased 111.5% from $2.5 million (22.0%
of revenues) in fiscal 1994 to $5.5 million (24.6% of revenues) in fiscal 1995.
This increase primarily reflects higher prices related to the recovery of
allowable IR&D costs under certain government contracts and improved contract
profitability under certain contracts.
Selling, General and Administrative Expenses. SG&A expenses increased
55.5% from $1.6 million (13.4% of revenues) in fiscal 1994 to $2.4 million
(10.8% of revenues) in fiscal 1995. This decrease in SG&A expenses as a
percentage of revenues was due to the larger growth in revenues during the
period. Near the end of fiscal 1995 the Company added administrative staff to
support increasing revenue and the associated increase in direct labor. The
Company added other indirect staff in both years to support the commercial DAMA
business. Bid and proposal efforts in fiscal 1995 were minimal due to the
concentration on performance in the existing defense backlog.
Independent Research and Development. IR&D expenses increased 488.1%
from $134,000 (1.2% of revenues) in fiscal 1994 to $788,000 (3.5% of revenues)
in fiscal 1995. Expenditures on the development of the Company's StarWire(TM)
DAMA product began in the last quarter of fiscal 1995, accounting for most of
the increase.
Interest Expense. Interest expense increased 142.6% from $47,000 in
fiscal 1994 to $114,000 in fiscal 1995. Total outstanding equipment loans for
the periods were $392,000 at the end of fiscal 1994 and $1.7 million at the end
of fiscal 1995, reflecting an increase in purchases of capital equipment to
support the increased requirements of development programs. There was $350,000
outstanding under the Company's line of credit at the end of fiscal 1994, and no
amounts outstanding at the end of fiscal 1995.
Interest Income. There was no material interest income in fiscal 1994
and $27,000 of interest income in fiscal 1995, which related to interest earned
on short-term deposits of cash.
Provision (Benefit) for Income Taxes. The income tax provisions in
fiscal 1994 and 1995 approximate the combined federal and state statutory rate
of 40.0%.
19
22
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain financial information for each
of the Company's last nine quarters. The information for each of these quarters
is unaudited but includes all adjustments, consisting only of normal recurring
adjustments, which the Company considers necessary for a fair presentation of
this information when read in conjunction with the Financial Statements and
Notes thereto appearing elsewhere in this Prospectus. The results of operations
for any quarter and any quarter-to-quarter trends are not necessarily indicative
of the results to be expected for any future periods.
QUARTERS ENDED
--------------------------------------------------------------------------------------
FISCAL YEAR 1995 FISCAL YEAR 1996 FISCAL YEAR 1997
------------------------------- ------------------------------- ----------------
JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1994 1994 1994 1995 1995 1995 1995(1) 1996 1996
---- ---- ---- ---- ---- ---- ------- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues $4,726 $5,489 $5,641 $6,485 $6,768 $7,388 $5,755 $9,106 $9,732
Cost of revenues 3,718 4,319 4,330 4,488 4,830 5,280 4,042 6,831 6,862
----- ----- ----- ----- ----- ----- ----- ----- -----
Gross profit 1,008 1,170 1,311 1,997 1,938 2,108 1,713 2,275 2,870
Operating expenses:
SG&A 478 576 639 723 918 844 815 823 1,040
IR&D 54 95 184 455 467 719 769 865 1,058
------ ------ ------ ------ ------ ------ ------ ------ -----
Income from operations 476 499 488 819 553 545 129 587 772
Income before income taxes 454 479 466 796 524 488 68 503 740
Net income 271 286 278 472 541 503 70 519 478
- ----------------
(1) The Company experienced reduced revenues, gross profit and income from
operations for the third quarter of fiscal 1996 due primarily to delays
on the EMUT contract. Production deliveries were scheduled to begin in
the third quarter of fiscal 1996, but were delayed at the customer's
request. Deliveries began instead in the fourth quarter of fiscal 1996.
The following table sets forth the above unaudited quarterly financial
information as a percentage of total net revenues.
QUARTERS ENDED
--------------------------------------------------------------------------------------
FISCAL YEAR 1995 FISCAL YEAR 1996 FISCAL YEAR 1997
------------------------------- ------------------------------- ----------------
JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1994 1994 1994 1995 1995 1995 1995 1996 1996
---- ---- ---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues 78.7 78.7 76.8 69.2 71.4 71.5 70.2 75.0 70.5
---- ---- ---- ---- ---- ---- ---- ---- ----
Gross profit 21.3 21.3 23.2 30.8 28.6 28.5 29.8 25.0 29.5
Operating expenses:
SG&A 10.1 10.5 11.3 11.1 13.6 11.4 14.2 9.0 10.7
IR&D 1.1 1.7 3.3 7.0 6.9 9.7 13.4 9.5 10.9
--- --- --- --- --- --- ---- --- ----
Income from operations 10.1 9.1 8.6 12.7 8.1 7.4 2.2 6.5 7.9
Income before income taxes 9.6 8.7 8.3 12.3 7.7 6.7 1.2 5.6 7.6
Net income 5.7 5.2 4.9 7.3 8.0 6.9 1.2 5.8 4.9
Historically, development contracts have been a significant source of
revenue. The Company recognizes a majority of its revenues under the percentage
of completion method which requires engineering estimates and assumptions
regarding costs that will be incurred over the life of a specific contract.
Actual results may differ from those estimates. In such event, the Company has
been required to adjust revenues in subsequent periods relating to revisions of
prior period estimates, resulting in fluctuations in the Company's results of
operations from period to period. See "Risk Factors--Fluctuations in Results of
Operations."
20
23
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations to date primarily from cash
flow from operations, bank line of credit financing and loans for the purchase
of capital equipment. Cash provided from operations for the fiscal years ended
March 31, 1994, 1995 and 1996 was $183,000, $3.3 million and $456,000,
respectively, and cash used in operating activities was $112,000 for the quarter
ended June 30, 1996. The relative decrease in cash generated from operations in
fiscal 1996 compared to fiscal 1995 was due to higher levels of accounts
receivable and inventory. The increase in accounts receivable resulted from an
increase in revenues. The growing share of revenues from production led to the
need to build inventory levels to support production demands. The Company
anticipates that in future periods the level of inventories will be higher than
historical levels.
Cash provided by financing activities, principally from equipment
financing and to a lesser extent from the sale of Common Stock, was $262,000 in
fiscal 1994, $1.1 million in fiscal 1995 and $1.0 million in fiscal 1996, and
cash used in financing activities was $65,000 for the quarter ended June 30,
1996. Purchases of property and equipment, primarily consisting of test
equipment and computers, were $511,000, $1.7 million and $1.9 million,
respectively, in fiscal 1994, 1995 and 1996, and $387,000 in the quarter ended
June 30, 1996.
At June 30, 1996, the Company had $1.7 million in cash and cash
equivalents, $4.8 million in working capital and $2.4 million in long-term debt,
consisting of equipment financing, and no amounts outstanding under the
Company's line of credit. In September 1995, the Company entered into a credit
facility with Union Bank, which includes a $4.0 million line of credit and $4.0
million in commitments for equipment financing. The line of credit allows the
Company to borrow, for general working capital purposes, the greater of $1.0
million or 80.0% of eligible accounts receivable plus 50.0% of the Company's
eligible inventory. It accrues interest at the bank's prime rate, which was
8.25% at June 30, 1996, and expires on September 15, 1997. The Company is
required to pay a fee equal to 0.25% of the unused portion of the line of credit
on an annual basis.
The equipment line consists of two loans, each of which allows the
Company to borrow, for purchases of equipment, machinery and software directly
related to the Company's principal line of business, up to $2.0 million while
limiting borrowings to an 80.0% advance against the purchase price, net of sales
tax, delivery and insurance. All borrowings under the first loan were made
before September 15, 1996, at which time all unpaid principal under such loan
was converted into a fully amortizing loan for a period of 36 months with a
maturity date of September 15, 1999. All borrowings under the second loan must
be made before September 15, 1997, at which time all unpaid principal under such
loan will be converted into a fully amortizing loan for a period of 36 months
with a maturity date of September 15, 2000. As of June 30, 1996, there was
approximately $1.0 million outstanding under the first loan and no amounts
outstanding under the second loan. The equipment loans accrue interest at the
bank's prime rate plus 0.35% per annum, or 8.6% as of June 30, 1996.
The credit agreement with Union Bank contains customary financial
covenants regarding, among other things, the maintenance of stated net worth
amounts, net income levels and specific liquidity and long-term solvency ratios.
In addition, the credit agreement restricts the Company's ability to borrow
money, except in the ordinary course of business or pursuant to agreements made
with Union Bank. Amounts borrowed are secured by substantially all of the
Company's assets.
The Company's future capital requirements will depend upon many
factors, including the progress of the Company's research and development
efforts, expansion of the Company's marketing efforts, and the nature and timing
of commercial orders. The Company believes that the net proceeds from the sale
of the Common Stock offered hereby, together with its current cash balances,
amounts available under its credit facility and net cash provided by operating
activities, will be sufficient to meet its working capital and capital
expenditure requirements for at least the next 12 months. Management intends to
invest the Company's cash in excess of current operating requirements in
short-term, interest-bearing, investment-grade securities.
21
24
BUSINESS
INTRODUCTION
ViaSat designs, produces and markets advanced digital satellite
telecommunications and wireless signal processing equipment. The Company has
achieved ten consecutive years of internally generated revenue growth and nine
consecutive years of profitability, primarily through defense-related
applications. More recently, the Company has been developing and marketing its
technology through strategic alliances for emerging commercial markets, such as
rural telephony, alternative carrier access and Internet/Intranet access by
satellite to multiple servers. ViaSat is a leading provider of DAMA technology,
which allows a large number of VSAT subscribers to economically share common
satellite transponders for high-performance voice, fax or data communications.
The Company believes that DAMA satellite technology is superior to
other existing VSAT networking technologies. The existing TDM/TDMA networking
technology features a "hub and spoke" architecture which requires all
transmissions to be routed through a central terrestrial hub. Unlike TDM/TDMA
systems, DAMA provides direct, on-demand switched networking capabilities which
do not require a terrestrial hub and allow faster and more efficient use of
expensive satellite transponder resources. In addition, the Company believes
that its DAMA products, commercially marketed under the tradename StarWire(TM),
offer greater network flexibility and permit up to 50% greater satellite
capacity than competing DAMA systems.
ViaSat's DAMA products include satellite modems, networking processors
and network control systems for managing large numbers of network subscribers.
The Company's DAMA technology consists of proprietary real-time firmware and
software designed to run on industry-standard digital signal processors. The
Company also has developed DAMA network control software that operates on
IBM-compatible personal computers running Windows NT(TM) operating systems. The
Company's DAMA technology operates on satellites in the military UHF and SHF
frequency bands, and commercial C and K(u) bands. In addition to DAMA products,
the Company offers network information security products, communications
simulation and test equipment, and spread spectrum digital radios for satellite
and terrestrial data networks.
INDUSTRY BACKGROUND
A broad array of new consumer, business and government markets, as well
as the development of new technologies, have driven the significant expansion of
the wireless communications industry. In addition to common consumer
applications such as paging, cellular telephony and new Personal Communications
Services ("PCS"), there is a wide range of other specialized terrestrial- and
space-based wireless applications. Such wireless applications include government
fixed and mobile wireless networking and commercial fixed-site, switched
satellite services, ViaSat's principal lines of business. The growth in
software-intensive wireless equipment markets stems from, among other things,
increasing dependence on voice and data networks of all types, regulatory
reform, advances in technology, decreasing costs of equipment and services,
economic growth in developing nations, the increasing importance of
communications infrastructure as a catalyst of economic growth, and increasing
user acceptance of and confidence in wireless solutions. This growth in wireless
equipment markets corresponds to a transition away from mere point to point
radio links connecting remote or mobile users towards offering more
comprehensive wireless network services. Market demands for wireless services
are being addressed by both terrestrial- and satellite-based systems.
Government Applications. Historically, the military has driven
development of many new wireless technologies -- pioneering applications of
satellite communications, digital radios, spread spectrum and mobile wireless
networks to connect widely dispersed operations. In many cases these
technologies have been extended and increased in scale for broader non-defense
use. Defense applications of wireless technologies also have evolved over the
same time period. The break-up of the Soviet Union has caused a de-emphasis on
strategic missions and a shift towards more localized tactical roles such as
peace-keeping, counter-terrorism, counter-insurgency and drug enforcement. These
missions create new demands for rapidly deployable, mobile connectivity. Overall
reductions in the defense budget have led to a numerically smaller, more
technologically-advanced force structure. As a result, defense networks
increasingly build around real-time transmission of digital
22
25
tactical data. Defense systems also are adopting and extending low cost
commercial technologies to meet their needs.
There has been a constantly shifting flow of technology between
government and commercial network applications. Both government and commercial
users developed fixed-site, long-haul applications. The government pioneered
mobile satellite terminals, as well as non-geosynchronous, high power and
extremely high frequency satellites. Commercial users adopted elements of these
technologies for Low Earth Orbit ("LEO") mobile telephony and high-powered
Direct Broadcast Satellite ("DBS") television systems. Now government agencies
are planning to integrate these technologies into still more advanced military
networks. Often, companies with both government and commercial expertise have
facilitated such technology transitions.
Commercial Applications. The recent worldwide trend toward
privatization of public telephone operators and deregulation of local telephone
("local loop") services has resulted in increased competition in the delivery of
telephone services from alternative access providers. Many of these new access
providers, such as long-distance telephone carriers, must install or upgrade
infrastructure to support basic and enhanced services. In addition, worldwide
demand for basic telephone service has grown, especially in developing
countries. As new infrastructure is established to deliver local telephone
service, the technology exists to provide cost-effective, satellite-based
wireless transmission systems, instead of a traditional wired approach, to
connect subscribers to the public telephone network.
A growing segment of the wireless communications industry involves
VSATs, which are communications systems utilizing fixed-site satellite
terminals. Historically, these systems were primarily designed for certain
specific data applications. But recent improvements in VSAT technology for
satellite-based wireless voice and data networks have led to their increasing
use in a variety of broader, higher system throughput commercial applications
such as mobile and rural telephony and more complicated data transmissions.
Satellite telephony systems are being utilized by developing countries that lack
a terrestrial-based telecommunication infrastructure, and which seek to provide
telephone service for large areas fairly rapidly and on a cost-effective basis.
Additionally, even where terrestrial systems exist, satellite systems are used
to fill in coverage for remote areas.
Evolution of VSAT Technology. The commercial VSAT business began with
U.S. customers who operated large, sophisticated private terrestrial networks
using TDM/TDMA technology. Customers such as chain retailers, hotels and auto
dealers operated private data networks with hundreds or thousands of sites and a
high flow of transactions from remote terminals to host mainframe computers for
credit card validations, point-of-sale data collection, reservations or similar
applications. Customers who used VSATs for data networking still relied on
terrestrial providers for telephone service and possibly other
telecommunications needs for their sites. Sales of such VSAT systems are often
quite sensitive to prices from telephone carriers for equivalent packet
transaction services. Users with large networks generally are the only ones who
can justify the significant one-time cost of a VSAT network management hub.
TDM/TDMA technology, while more established than DAMA technology,
features a "hub and spoke" architecture which requires all transmissions to be
routed through a central hub and is most useful for remote to mainframe network
connections. Remote-to-remote TDM/TDMA connections require two satellite hops.
DAMA is better suited for remote-to-remote connections than TDM/TDMA because the
voice quality is better and DAMA networks use expensive satellite transponders
more efficiently. DAMA satellite technology allows individual subscribers to
request links on demand directly to any other subscriber with a single satellite
hop. DAMA allows users to make exactly the connections needed, lasting only for
the duration of a voice call, fax, electronic mail or digital file transfer.
DAMA technology has been under development for many years by the DOD to serve
large networks of fixed and mobile subscribers sharing a limited amount of
satellite capacity, but is only recently being deployed in significant
quantities.
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[TDM/TDMA Hub Spoke Graphic] [DAMA Fully Connected Graphic]
(TDM/TDMA vs. DAMA)
The Company believes the opportunities for government and commercial
ground station equipment sales are increasing. The government is investing over
$1.0 billion over several years in the UHF space segment alone for tactical
communications. DAMA is applicable to several different satellite bands,
including government UHF and SHF and commercial C, K(u) and K(a) bands. DAMA is
also being required by commercial customers who believe that it is better suited
for their applications than the earlier VSAT technologies.
THE VIASAT ADVANTAGE
In light of the limitations of the TDM/TDMA architecture, and the
magnitude of the potential market for primary telecommunications services
compared to the more limited market for data transaction services, ViaSat
believes that DAMA networks will better serve the emerging international market
for VSAT, voice and data services. Virtually all of the VSAT equipment makers
are now adding DAMA products to their line of products. This represents a
discontinuity in the VSAT market. VSAT vendors are now developing new
transmission waveforms, multiple access techniques, DAMA protocols, DAMA control
software, subscriber terminals and interface protocols to support the targeted
applications (voice, fax, dial-up data, video conferencing or others), which
creates an opportunity for new equipment suppliers such as the Company.
The Company believes that its DAMA-based products have technological
advantages over competing DAMA products in offering practical solutions for
telecommunications applications through several means:
Flexibility
Since communications networks are evolving so quickly, a
system such as the Company's that can be easily extended and configured
has a competitive advantage.
-- REAL-TIME DIGITAL SIGNAL PROCESSING FIRMWARE. The Company's
technology involves extensive use of real-time digital signal
processing firmware to implement both signal processing and DAMA
networking protocol functions. This approach was developed and
proven under several government programs, especially UHF DAMA. The
Company believes that digital signal processing firmware offers
great flexibility in adding new features and that product costs
should decrease if prices of Texas Instruments digital signal
processing chips and associated peripherals continue to decline.
The Company's digital signal processing design allows common
hardware to be applied to both government and commercial markets.
-- WINDOWS NT(TM)-BASED NETWORK CONTROL. ViaSat believes that it is
the only company using an Intel PC/Windows NT(TM) computer
platform for its network control system. Most vendors still use
Unix platforms. ViaSat developed and proved Windows NT(TM) as a
viable network control platform under government funded UHF and
SHF DAMA programs. Windows NT(TM) has several advantages which the
Company believes support its technical leadership position:
-- True real-time multi-tasking, allowing many functions to be
moved from specialized VSAT hardware into an industry-standard
personal computer. Such functions can be developed more
quickly and are more easily modified to support new
communications applications and interfaces.
-- Lower overall costs and faster time to market in terms of
development hardware and software tools, a more readily
available pool of experienced software engineers, lower
recurring cost of network control computer platforms, less
expensive networking and communications interfaces and lower
operator training costs than Unix-based systems.
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-- DOD approved access-control is built directly into the
network-controller computer operating system. This includes
secure remote-access via many built-in communication paths.
The Company believes computer security is essential technology
for mission critical telecommunication tasks such as billing.
-- STANDARD VSAT PLATFORM. ViaSat believes that it is the only
company building on a standard "open systems" VSAT platform for
commercial and SHF DAMA products. Open systems enable mix and
match of satellite equipment and baseband terrestrial interfaces
on a circuit by circuit basis. The architecture supports third
party interface cards for faster time to market for specialized
terrestrial interfaces. While open systems architecture does not
offer the lowest possible manufacturing cost for any single fixed
terminal configuration, it is consistent with two other strategic
objectives: (i) rapid time to market by building on industry
standard third-party hardware and software and (ii) flexibility to
support a broad array of services and applications consistent with
the Company's target distribution channels of service providers.
-- INTERNALLY-DEVELOPED TECHNOLOGY. Many competing VSAT providers are
primarily systems integrators with little internally-developed
technology, particularly in the software and firmware areas. The
Company believes its extensive internal technology development
capability gives it an advantage in flexibility, time-to-market
and product quality.
Capacity
ViaSat's narrow-spacing technology, developed during the
course of its government DAMA contracts, has less unused bandwidth
between voice channels than other DAMA systems, and this, along with
more precise power-usage control software, allows ViaSat's DAMA
products to achieve up to 50% greater satellite capacity than competing
DAMA systems.
Certification
ViaSat is currently the only provider of DAMA products which
has received certification from the U.S. government that one of its
DAMA products meets the required military specifications for 5 kHz
products in accordance with MIL-STD 188-182. The rigorous military
certification process may take up to several months to complete.
STRATEGY
ViaSat's objective is to become a leading developer and supplier of
DAMA-based products to commercial markets and to retain a leadership position in
developing and supplying DAMA-based products to the government market. The
Company's strategy incorporates the following key elements:
Maintain and Enhance Technology Leadership Position. The Company's
strategy is to maintain and enhance its leadership position in DAMA-based
satellite technology by continuing its participation in selected DOD programs
involving networking technology and other related real-time signal processing
and networking software. The Company is also investing in proprietary research
for commercial applications. The Company's objective is to continue to offer
high-performance, software-oriented products which provide the most effective
use of satellite power and bandwidth as well as offering the most flexible
platform for continued growth.
Leverage Technological Expertise into Commercial Markets. The Company's
strategy is to continue using its technological expertise developed in defense
applications to develop and market products to respond to the increasing demand
for DAMA-based VSAT solutions for commercial voice and data applications. The
Company is targeting commercial markets which it believes will offer high growth
potential and where ViaSat's technology will have competitive advantages, such
as rural telephony, alternative carrier access and Internet/Intranet access by
satellite to multiple servers. The Company believes its products are competitive
largely because of their technological advantages over competing products. The
Company's strategy is to capitalize on these technological advantages by
utilizing a "cost of ownership" marketing approach that emphasizes the overall
lower cost to customers over the operating life of the Company's products
because of the products' adaptability and more efficient use of limited
satellite capacity.
Develop Broad Base of Innovative Proprietary Products. The Company's
strategy is to continue to develop and market to both defense and commercial
customers a broad variety of signal processing and networking
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software products. The Company has over 150 research engineers on staff and
emphasizes offering technologically-superior products. The Company generally
retains certain proprietary rights from the government-funded research and
development of its defense products and is also devoting a significant amount of
its own resources to independent product development.
Develop Strategic Alliances. The Company's strategy is to develop
strategic alliances with leading prime defense contractors and major
international telecommunications companies and equipment suppliers. The Company
targets those companies whose financial and technological resources and
established customer bases allow them to jointly introduce new technologies and
penetrate new markets sooner and at a lower cost than the Company could alone.
The Company has entered into strategic alliances with defense companies, such as
Hughes Defense Communications (formerly Magnavox) and Lockheed Martin, and
commercial telecommunications companies, such as AT&T Tridom and HCL Comnet.
Establish Global Presence. The Company's strategy is to develop its
products so that they may be marketed and used throughout the world. The Company
is a market leader in DAMA-based defense products for the United States and its
allies. The Company believes that the commercial market opportunities for the
Company's products are greater internationally. The Company believes its focus
on meeting applicable international communication standards and establishing key
international strategic alliances will enable it to effectively penetrate
foreign markets.
Address Rural Telephony Market. The Company believes there is a
substantial unmet demand for rural telephony services, especially in developing
countries. The Company's strategy is to capitalize on its networking software
expertise to develop technology for establishing regional rural telephony
network infrastructures of strategically located VSAT terminals capable of
handling multiple satellite telephone calls ("Point-of-Entry Terminals"). The
Company believes such an infrastructure would have a competitive advantage over
a single Point-of-Entry system by minimizing the ground transmission cost of
each satellite telephone call by permitting such calls to enter the Public
Switched Telephone Network (PSTN) through the Point-of-Entry Terminal closest to
the call's destination. The Company's strategy also includes seeking
partnerships with regional and local service providers to create distribution
channels for rural telephony infrastructures and to provide related retail
distribution services, including sales of Company-designed subscriber terminals,
installation and maintenance, as well as customer service, billing and revenue
collection.
TECHNOLOGY
The Company's VSAT technology is focused on DAMA which allows
individual subscribers to request links on demand to any other subscriber
through one satellite hop. TDM/TDMA technology, while more established than DAMA
technology, features a "hub and spoke" architecture which requires all
transmissions to be routed through a central hub and is most useful for remote
to mainframe network connections. Remote-to-remote TDM/TDMA connections require
two satellite hops. DAMA is better suited for remote-to-remote connections than
TDM/TDMA because the voice quality is better and DAMA networks use expensive
satellite transponders more efficiently.
DAMA technology has been under development for many years by the DOD,
but is only recently being deployed in significant quantities. DAMA is
applicable to several different satellite bands, including government UHF and
SHF and commercial C, K(u) and K(a) bands. A major objective for the DOD is to
improve capacity of extremely expensive government-owned satellite transponders.
The government expects DAMA to increase capacity for UHF tactical users by as
much as a factor of ten, depending on the application and traffic usage,
compared to dedicated non-DAMA links.
A DAMA system consists of (i) a set of subscribers with DAMA-capable
terminals, (ii) a network management terminal which orchestrates access to a
shared satellite resource, and (iii) satellite transponder capacity managed by
the network controller and shared by subscribers. DAMA subscribers use
networking protocols to interact with the controller and each other. The essence
of DAMA is that the network controller allocates a shared satellite resource to
a particular combination of subscribers only when they request it, and then
terminates the connection when they are finished.
DAMA protocols may be either "open" or "proprietary." Open standards
are published so that multiple manufacturers can develop equipment that works
together. The DOD has designated two different open DAMA standards defining
over-the-air interfaces for narrowband UHF satellite communications channels.
MIL-STD 188-182 defines an interoperable waveform for channels with 5 kHz
bandwidth, and MIL-STD 188-183 defines the 25 kHz channel waveform. The DOD is
currently defining open standards for SHF channels and for government DAMA use
of commercial C and K(u) band transponders. There are no widely accepted
commercial open DAMA standards, and no open standards have evolved for TDM/TDMA
VSATs.
DAMA vs. TDM/TDMA. DAMA is being sought by customers who see that it is
a better fit than TDM/TDMA VSATs for non-transaction applications such as voice
and fax. The principal limitations of TDM/TDMA for non-transaction applications
are:
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Capacity Limitations and Costs
-- The TDM/TDMA hub and spoke architecture is primarily designed for
rapid service for sporadic, short, burst transactions between a
remote site and a mainframe computer. The hubs typically only
support a maximum instantaneous aggregate data rate of 256 kbps to
approximately 1 Mbps divided among the entire subscriber
population (often several thousand terminals). This is a severe
bottleneck for sustained circuit-type services like telephony, fax
or peer-to-peer file transfers, which often dominate when the VSAT
becomes the primary communication means for a site, as in
telephony uses. In contrast, a comparable DAMA system has a much
higher aggregate capacity. For small networks the TDM/TDMA hub
performance is not a capacity bottleneck, but the typical hub
price of approximately $1.0 million, amortized over a small
number of subscribers, is usually prohibitively expensive. The
equipment cost for a comparable DAMA system for voice use, in
contrast, would be significantly less.
Transmission Time
-- The hub and spoke architecture requires all calls (voice or data)
between two remote nodes to be routed through the hub. This causes
each call to traverse two separate satellite hops in each
direction (remote A-to-satellite-to-hub and then
hub-to-satellite-to-remote B, with the return path from remote B
to remote A also traversing two satellite hops). The additional
time delay due to the extra satellite hops is striking for voice
communications and is unacceptable to many users. Plus, the two
satellite hops consume more expensive transponder resources per
call than a single hop DAMA connection.
DAMA vs. Dedicated SCPC. In contrast to DAMA, which allows individual
subscribers to request links to other subscribers on demand, dedicated Single
Channel Per Carrier ("SCPC")-based systems maintain dedicated, unswitched links
between subscribers, such as for long distance trunk lines. Dedicated links
provide high quality transmissions, but only between particular subscriber sets.
In order to provide connections among many sites, an SCPC-based system would
require a dedicated link between each subscriber and each other subscriber,
which would be prohibitively expensive. As a result, DAMA is a much more
attractive solution for managing large numbers of network subscribers, as DAMA
provides transmissions of equally high quality, without restricting the
subscribers' ability to establish links on demand to any other subscriber.
Mobile Satellite vs. Fixed-site DAMA. The obvious advantage of
commercial mobile satellite systems, such as Iridium(TM) and GlobalStar(TM), is
that they allow subscribers to be mobile. A mobile satellite terminal can be
used by either a mobile or a fixed subscriber, while a fixed terminal cannot be
used by a mobile subscriber. However, in order to gain mobility, mobile
terminals employ an omni-directional antenna which operates at lower frequencies
and provides less bandwidth than is available in the fixed-site DAMA satellite
bands. Less bandwidth corresponds to less capacity and fewer voice circuits.
Also, mobile satellite systems typically require a greater investment in unique
space-based satellite resources than fixed-site DAMA systems which use existing
capacity on general purpose communication satellites. The combination of lower
capacity plus higher capital investments means that mobile service providers are
projecting per-minute service costs that are five to ten times higher than that
possible through fixed-site DAMA-based systems. Therefore, the Company believes
that customers who require satellite telephony services at fixed locations will
find fixed-site DAMA services to be much more economical than using mobile
satellite phones -- even if they already own mobile satellite phones for mobile
use.
Non-DAMA Technology. The Company offers products outside of DAMA and
satellite communications that benefit from the Company's wireless networking
software and related technology. Important non-DAMA applications include:
-- Spread spectrum digital radios for real-time tactical data
networks among ground and airborne users. The JTIDS (Joint
Tactical Information Distribution System) radio builds on the
Company's software,
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firmware and hardware technology. The government is investing in
"digitized battlefield" communications in an effort to obtain
greater effectiveness from expensive tactical aircraft.
-- Information security modules that encrypt classified information
that can be broadcast and routed across unclassified wired or
wireless networks. This technology allows the government to make
better use of commercial networks for securely transmitting
classified information.
-- Equipment that tests wireless receivers in the presence of
complex, simulated radio wave environments. This technology allows
the government to thoroughly test sophisticated airborne radio
equipment without expensive flight exercises.
GOVERNMENT MARKETS, PRODUCTS AND CUSTOMERS
Government Markets
The Company believes it has an opportunity to build on its government
DAMA technology, software, hardware design and manufacturing base to capture
significant revenues in the government markets.
UHF DAMA Markets. The Company is considered a leader in the UHF DAMA
market. The DOD requires all UHF satellite communications terminals to meet open
DAMA standards. This mandate has helped stimulate the UHF DAMA market. ViaSat is
active in the following business segments:
-- UHF DAMA NETWORK CONTROL INFRASTRUCTURE. ViaSat has over $20.0
million in contracts with the U.S. Air Force for an initial
network control system. This includes development, production,
installation and support for four global sites. Each site serves
as a primary controller for seven channels and as an alternate for
seven channels. Each satellite has 38 channels, offering a
potential market for additional production, installation and
support services.
-- MANPACK TERMINALS. ViaSat has a contract with Hughes Defense
Communications (formerly Magnavox) for over 3,000 DAMA modems for
manpacks. The contract has options which allow the DOD in its
discretion to purchase up to an additional 4,000 of such modems.
-- AIRBORNE DAMA TERMINALS. The 5 kHz channel DAMA protocols were
designed to support U.S. Air Force aircraft. The U.S. Navy is also
a major user of airborne UHF terminals. ViaSat equipment has been
designed into a number of platforms, including P-3, S-3, Air Force
One, EP-3, ES-3, Tomahawk cruise missiles and others.
-- INTERNATIONAL UHF DAMA MARKET. Cooperative efforts among
multiple nations, such as in the Gulf War and Bosnia, require that
allies have a standard communications platform. There are
requirements for some units of NATO and other allies to have UHF
DAMA capable satellite terminals.
The Company's strategy includes actively working to expand the UHF DAMA
market as a whole, while sustaining its leading market share. Increasing the
market means extending UHF satellite communications capability to new users. UHF
satellite communications access and market size is limited in the following
ways:
-- AVAILABILITY OF SATELLITE CAPACITY. Without DAMA, many users are
denied access because higher priorities consume all channels. DAMA
expands capacity. The Company anticipates increases in the UHF
market, versus pre-DAMA levels, due to pent-up demand for service.
-- EQUIPMENT SIZE AND WEIGHT. Most users are mobile and thus size and
weight sensitive. They carry equipment in back-packs, or airframes
where communication gear displaces weapons or mission critical
payloads. Easier to carry, smaller, lighter equipment may expand
the market beyond a core group who require DAMA to complete their
mission.
-- EQUIPMENT PRICE. The Company believes that the UHF DAMA market can
expand by reducing the price of DAMA equipment. Embedded DAMA
radios are less expensive than stand-alone models, and offer
reduced size and weight.
-- IMPROVED DAMA SUBSCRIBER SERVICES. The current DAMA system is a
data "pipe." The Company anticipates that demand for DAMA can grow
by increasing the value of the content sent over the
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pipes. Several areas are being explored, including improved secure
voice quality, increased message routing capability, higher data
rates and improved service set-up times.
-- DAMA SIGNAL PROCESSING. Airborne DAMA is currently limited to
large, slow aircraft for surveillance, airlift, command and
control, or similar missions. High performance aircraft are
excluded because current satellite communications antennas degrade
mission performance or safety. A promising solution is to use low
profile, conformal antennas with active combiners. The Company has
a combiner contract with Lockheed Martin which, if successful,
opens the possibility of extending the UHF DAMA market to high
performance aircraft.
ViaSat is also applying the market expansion strategy to its Advanced
Data Controller ("ADC") products. ADC conforms to MIL-STD 188-184 for packet
processing. It provides error-free data transmission over noisy channels. ADC
works for terrestrial and satellite communications wireless links. The Company
is working to reduce size, weight and price for ADC products, and potentially
licensing other manufacturers to embed ViaSat's ADC digital signal processing
firmware directly into their radios.
Tri-band DAMA Markets. The U.S. government is a major consumer of
leased commercial satellite capacity in the C and K(u) bands. Since satellite
availability is limited, the government has specified the purchase of "tri-band"
terminals (i.e., terminals which can operate on any of three bands, SHF (X
band), C or K(u) band). This makes it easier for subscribers to use available
capacity in any band, as a function of time and location. The government
established the Commercial Satellite Communications Initiative ("CSCI") program
to manage:
-- Long term leases for commercial satellite transponders.
-- Contracts to purchase tri-band satellite terminals.
-- Bandwidth Management Centers to act as network controllers for the
tri-band terminals.
The DOD is defining an "open" standard for DAMA in SHF and commercial
satellite bands. The government owns and operates the Defense Satellite
Communication System ("DSCS") constellation at SHF. Bandwidth at SHF is much
greater than at UHF -- over 200 MHz per satellite compared to less than 2 MHz at
UHF. Still, SHF capacity is insufficient and could be improved via DAMA. More
effective SHF use should reduce the government's monthly lease on commercial
satellites used for overflow. The potential market for SHF DAMA capable
terminals may be as large as that for UHF DAMA terminals.
Extending DAMA to commercial satellites vastly increases the bandwidth
available for government users. Increased bandwidth should support many more
terminals, increasing the potential DAMA user equipment market.
In 1994, ViaSat was awarded a $2.0 million contract by the U.S. Air
Force for prototype demonstration of a draft SHF DAMA standard. This contract is
still underway. In February 1996, the Company delivered and installed equipment
which performs many, but not all, of the protocols in the draft. The DOD has not
yet designated a final version of SHF DAMA, nor has the DOD yet issued a mandate
for DAMA in SHF terminals.
The government tri-band DAMA market is very immature. This market will
likely not grow substantially until the DOD adopts a final standard and mandates
its use. However, there can be no assurance that the Company's products will be
procured by the government or prime contractors, even if a final standard
similar to the draft version is adopted. The Company is working to position its
SHF DAMA products through participation in government-industry standards working
groups and by providing proof-of-concept equipment through an existing SHF DAMA
contract with the U.S. Air Force. ViaSat also has been working with terminal
manufacturers to help ensure that its DAMA equipment integrates easily into
their products. Finally, the Company is working to maintain a prudent level of
commonality between the government and commercial DAMA modem platforms. The
benefit of commonality is that the larger commercial market offers economies of
scale that reduce manufacturing costs for the smaller government market. There
is a potential disadvantage if unique government product requirements increase
the cost of commercial products. The Company considers issues arising from this
trade-off on a case-by-case basis.
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Government Products
ViaSat's DAMA products for the government market include:
-- EMUT (ENHANCED MANPACK UHF TERMINAL) is a battery-operated UHF
satellite radio which Hughes Defense Communications (formerly
Magnavox) builds for the U.S. Army. ViaSat provides a DAMA modem
to Hughes under subcontract. EMUT is used to send encrypted voice,
electronic mail, fax or other data via satellite. The DAMA modem
allows the operator to automatically request a portion of a
satellite channel to a selected destination whenever the operator
asks to send a message or make a call. The EMUT radio, combined
with a portable satellite antenna, can be used to make a secure
voice or data call almost anywhere in the world.
-- INCS (INITIAL NETWORK CONTROL SYSTEM) is the DAMA network
management system for the U.S. Air Force. There are four sites
worldwide (Guam, Hawaii, Naples and Virginia) that manage
automatic DAMA access to 5 kHz band with UHF satellite channels.
The network control computer automatically allocates satellite
resources to subscriber terminals (such as EMUT) whenever a
subscriber requests a voice or data service. The INCS also keeps
track of which satellite terminals are active, how much capacity
is used and how much is available. ViaSat designs, installs and
supports the whole system at each site.
-- VM-200 (ALSO CALLED MD-1324) is ViaSat's stand-alone UHF DAMA
modem product. The modem can be used with many UHF satellite
radios having an industry standard 70 MHz interface. The VM-200
enables a satellite radio to connect to a DAMA network. VM-200
modems also are used in the INCS to communicate with subscribers.
The modems connect to external voice coders, computers or
encryption equipment and provide network access for those devices.
ViaSat's other government wireless networking products include:
-- JTIDS (JOINT TACTICAL INFORMATION DISTRIBUTION SYSTEM) is an
anti-jam radio and message protocol standard for communicating
real-time data among aircraft and ground units. It connects to
sensors (like radar), computers, and targeting systems and
provides information used for navigation, target identification,
tracking and fire control. JTIDS is currently used as the wireless
communication system for "digital battlefields." It allows
individual fighter planes to obtain a broad view of the
battlefield that is synthesized based on many different views from
many different participants.
-- CES/JCS (COMMUNICATION ENVIRONMENT SIMULATOR/JOINT COMMUNICATION
SIMULATOR) is used to simulate a realistic radio environment which
can be used to test how well surveillance or other radio systems
work in the presence of various and changing signals. It can
simulate friendly military signals, neutral signals, commercial
signals and enemy signals. The government uses the simulated total
environment to verify that a system under test can correctly
analyze specific target signals within a complicated and cluttered
composite signal.
-- EIP (EMBEDDABLE INFOSEC PRODUCT) is a plug-in module that encrypts
classified information so that it can be broadcast over wireless
systems (terrestrial or satellite) or sent over unclassified
wirelines. EIP is unique because it can work for packet data
systems instead of on circuits. For instance, EIP can encrypt
information for the Internet (or government equivalents). EIP also
can separate the addressing and routing information from a packet
and allow such information to remain unencrypted so that the
network can correctly route the packet to its destination.
-- ADC (ADVANCED DATA CONTROLLER) is a packet processing system which
provides error-free data transmission over noisy channels. ADC
works for terrestrial and satellite communications wireless lines.
Government Customers
The Company's major customers in the government DAMA market include:
-- Hughes Defense Communications (formerly Magnavox) is the customer
for the EMUT DAMA modem. Hughes is also a customer for the
Tomahawk Baseline Improvement Program which includes adding a UHF
DAMA satellite link to Tomahawk cruise missiles.
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-- The U.S. Air Force Electronics System Center ("ESC") is the
customer for the 5 kHz UHF DAMA Global Initial Network Control
System. ESC also procures stand-alone DAMA modems and
Control/Indicators for various Air Force user agencies.
-- Lockheed Martin is the customer for the VM-200 under the
Communications Improvement Program.
-- Lockheed Martin Loral is the customer for the airborne
DAMA-capable UHF satellite communications antenna combiner.
-- The U.S. Air Force Rome Labs has entered into a contract with the
Company for SHF and tri-band DAMA development and production.
-- The Company also has entered into a number of smaller contracts
with the DOD for UHF DAMA and ADC satellite equipment.
The Company's major government customers for other wireless networking
products include:
-- Lockheed Martin, the U.S. Air Force and Logicon are the customers
for JTIDS.
-- The U.S. Navy and U.S. Air Force are the customers for CES/JCS.
-- The U.S. Navy is the customer for EIP.
COMMERCIAL MARKETS, PRODUCTS AND CUSTOMERS
Commercial Markets
DAMA technology is increasingly being used in emerging commercial
telecommunications markets. In contrast to "pre-assigned" or "hub and spoke"
satellite networks, DAMA is well suited to primary "circuit-oriented"
telecommunication because it routes connections in real-time on a call-by-call
basis from any subscriber to any other subscriber with only one satellite hop.
See "--Industry Background" and "--Technology." DAMA commercial markets can be
segmented as follows:
-- TURN-KEY PRIVATE NETWORK EQUIPMENT SALES for corporations and
government agencies in developing nations. These customers require
voice and/or data services. Users manage their own networks and/or
contract for management services. They lease satellite capacity in
bulk. DAMA equipment is selected based primarily on purchase and
operating costs for specific needs. Customers typically need to
operate ten or more sites for a turn-key private network to be
economical.
-- "SHARED HUB" PRIVATE NETWORK SERVICE PROVIDERS. Customers with
small networks may use a satellite service provider. The provider
purchases a DAMA network and obtains transponder capacity at
wholesale rates. The provider manages small "virtual" nets for its
customers. Customers buy capacity from the provider at retail
daily, hourly or minute rates. Service providers have different
priorities than turn-key operators. Breadth and depth of service
offerings are more important to providers since they must attract
a broad base of customers. DAMA terminals must support a range of
telephone and data equipment. Providers generally prefer flexible
user terminal configurations to meet varying customer needs. They
profit from the spread between wholesale transponder lease costs
and retail minute prices, so DAMA performance is important.
Efficiency advantages (measured, for example, by voice circuits
per unit bandwidth) can offset a higher initial terminal purchase
price over the term of a service contract.
-- PUBLIC NETWORK CARRIER SERVICE PROVIDERS. Many telecommunications
carriers use satellite links as part of their long distance
networks. However, the satellite segment usually consists of a
pre-planned link establishing a particular geographic connection
at a fixed capacity. A satellite DAMA network can reduce costs for
independent carriers by bypassing transit switching charges
through a telecommunications hub city. Satellite DAMA can serve as
either a primary link or as a back-up when terrestrial links are
congested. DAMA satellite technology provides an economical
secondary connection because the satellite pool of trunk lines can
be quickly applied to any of the primary terrestrial routes. The
DAMA network's ability to reach many different destinations offers
a competitive advantage to a DAMA operator whose business is
selling wholesale minutes of long distance service to national or
regional carriers.
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-- PUBLIC NETWORK "LOCAL LOOP" SUBSCRIBER SERVICE PROVIDERS.
Subscriber services differ from the carrier services in that there
is a local loop interface between the DAMA satellite switch and a
subscriber telephone. This allows a subscriber with a small VSAT
terminal to connect directly into the public switched telephone
network by using a single dial-tone to call to other satellite
subscribers or to terrestrial phones through national (and/or
international) switches. While the Company believes the local loop
subscriber service has, by far, the greatest potential market
volume for equipment manufacturers and also represents the
greatest opportunity for service providers, there are numerous
technical, regulatory and business management hurdles to
implementing this service.
Commercial Products
STARWIRE(TM) is a satellite networking system consisting of two major
elements, a network control system and a subscriber terminal. The network
control system sends and receives messages over the satellite, while the
subscriber terminal switches all user interface ports (voice and data)
individually and connects them call-by-call to an available satellite modem.
StarWire(TM) provides toll-quality voice circuits on a demand basis, efficiently
sharing satellite resources and thereby reducing costs to the end-user and the
network service provider.
StarWire(TM) products include:
-- AURORA TERMINAL is a ten slot rack mountable chassis configured
with one VMM-101 and one TIM-201 (described below). The terminal
is expandable to six user traffic channels by inserting additional
VMM modems and TIM modules. Expansion beyond six channels is
possible by using additional Aurora chassis with VMM modems and
TIM modules installed.
-- VMM-101 is a DAMA modem module designed for the Aurora. The
VMM-101 is a single modem used for both user-data transmission and
order-wire control channels.
-- TIM-201 is a dual channel voice encoder/decoder module designed
for the Aurora. The TIM-201 has a fax modem on board, along with
an integrated echo canceller.
-- TMC-101 is a terminal monitor and control card designed for the
Aurora. The "EIP" version has an integrated LAN Ethernet port and
supports multiple daughter-cards for data communications and
additional external equipment control support.
-- STARWIRE(TM) NETWORK CONTROL TERMINAL (NCT) is a ten slot rack
mountable Aurora chassis with one Network Control Computer (NCC)
interface card and two VMM-101 modems (operating as DAMA system
control channel modems).
-- STARWIRE(TM) DAMA NETWORK CONTROL SOFTWARE (NCS) provides the
real-time network control and monitoring functions of the
StarWire(TM) DAMA networking system. The NCS software acts as a
switch to route calls through the network. In addition, the
StarWire(TM) NCS monitors all aspects of system operation as well
as collecting historical information about calls and maintaining
detailed call records for billing purposes.
-- STARWIRE(TM) NETWORK CONTROL COMPUTER (NCC) is computing and
networking equipment designed to support the operation of the NCS
software. The non-redundant configuration (NCC-100) provides for
one operator workstation/server, Ethernet interface, Windows
NT(TM) operating system and back-up media. The redundant
configuration (NCC-200) provides two operator
workstations/servers, Ethernet adapter cards, Windows NT(TM)
operating system and back-up media.
-- EXTERNAL DEVICE INTERFACE DRIVER (EDID) supports third party modem
and RF terminal equipment.
Commercial Customers
The Company is in the early stages of establishing sales for its
StarWire(TM) commercial DAMA product. Activities to date have primarily focused
on establishing distribution agreements with "in-country" service providers,
distributors and original equipment manufacturers ("OEMs"). The Company also has
delivered several test versions of the StarWire(TM) product for customer
evaluation and demonstration purposes. To date, the Company has received
purchase orders from its commercial customers to purchase approximately $3.0
million, and commitments to purchase an additional $1.0 million, of its
products. The Company's major customers in the commercial DAMA market include:
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-- AT&T Tridom - Tridom has the second largest VSAT revenues
(counting equipment and services) in the United States. Tridom
selected ViaSat as the private label manufacturer of a Tridom
"Clearlink"-labeled DAMA VSAT product through competitive bids.
Tridom has taken delivery of two test systems, one of which is
installed at a customer site in Indonesia.
-- HCL Comnet - HCL, located in India, operates the largest single
VSAT network in India for the national stock exchange. HCL
selected ViaSat's StarWire(TM) system for HCL's DAMA private
network products and services. ViaSat's contract with HCL provides
that HCL must use ViaSat as its exclusive supplier of DAMA
networks and that ViaSat may not supply DAMA networks to any other
India-based company, although ViaSat may supply such networks to
companies based in other areas which provide VSAT services in
India. HCL has placed an order for initial production systems.
-- ViaSat also has executed distribution agreements and purchase
contracts with companies operating VSAT networks in Mexico, the
Caribbean, South America and other regions.
RESEARCH AND DEVELOPMENT
The Company believes that its future success depends on its ability to
adapt to the rapidly changing satellite communications and related real-time
signal processing and networking software environment, and to continue to meet
its customers' needs. Therefore, the continued timely development and
introduction of new products is essential in maintaining its competitive
position. The Company develops most of its products in-house and currently has
a research and development staff which includes over 150 engineers. A
significant portion of the Company's research and development efforts in the
defense industry have generally been conducted in direct response to the
specific requirements of a customer's order and, accordingly, such amounts are
included in the cost of sales when incurred and the related funding (which
includes a profit component) is included in net revenues at such time. Revenues
for funded research and development during the fiscal years ended March 31,
1994, 1995 and 1996 were approximately $9.7 million, $20.7 million and $19.5
million, respectively. In addition, the Company invested $134,000, $788,000 and
$2.8 million, respectively, during the fiscal years ended March 31, 1994, 1995
and 1996 on independent research and development, which is not directly funded
by a third party. Funded research and development contains a profit component
and is therefore not directly comparable to independent research and
development. As a government contractor, the Company also is able to recover a
portion of its independent research and development expenses, consisting
primarily of salaries and other personnel-related expenses, supplies and
prototype materials related to research and development programs, pursuant to
its government contracts.
The Company has benefitted and continues to benefit from the SBIR
program, through which the government provides research and development funding
for companies with fewer than 500 employees. While the Company has already
harvested significant benefits from the SBIR program throughout the initial
developmental stages of its core technology base, the Company believes that its
business, financial condition and results of operations would not be materially
adversely affected if the Company were to lose its SBIR funding status. The
Company plans to leverage from this technology base to further develop products
for commercial applications.
MANUFACTURING
The Company's manufacturing objective is to produce products that
conform to its specifications at the lowest possible manufacturing cost. The
Company is engaged in an effort to increase the standardization of its
manufacturing process in order to permit it to more fully utilize contract
manufacturers. As part of its program to reduce the cost of its manufacturing
and to support an increase in the volume of orders, the Company primarily
utilizes contract manufacturers in its manufacturing process. The Company
conducts extensive testing and quality control procedures for all products
before they are delivered to customers.
The Company also relies on outside vendors to manufacture certain
components and subassemblies used in the production of the Company's products.
Certain components, subassemblies and services necessary for the manufacture of
the Company's products are obtained from a sole supplier or a limited group of
suppliers. In particular, Texas Instruments is a sole source supplier of digital
signal processing chips, which are critical components used by the Company in
substantially all of its products. The Company intends to reserve its limited
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internal manufacturing capacity for new products and products manufactured in
accordance with a customer's custom specifications or expected delivery
schedule. Therefore, the Company's internal manufacturing capability for
standard products has been, and is expected to continue to be, very limited, and
the Company intends to rely on contract manufacturers for large scale
manufacturing. There can be no assurance that the Company's internal
manufacturing capacity and that of its contract manufacturers and suppliers will
be sufficient to fulfill the Company's orders in a timely manner. Failure to
manufacture, assemble and deliver products and meet customer demands on a timely
and cost effective basis could damage relationships with customers and have a
material adverse effect on the Company's business, financial condition and
operating results.
SALES AND MARKETING
The Company markets its products to the DOD and to commercial customers
worldwide primarily through the Company's internal sales and marketing staff of
nine people. After the Company has identified key potential customers in its
market segments, the Company makes sales calls with its sales, management and
engineering personnel. Many of the companies entering the wireless
communications markets possess expertise in digital processing and wired systems
but relatively little experience in DAMA wireless transmission. In order to
promote widespread acceptance of its products and provide customers with support
for their wireless transmission needs, the Company's sales and engineering teams
work closely with its customers to develop tailored solutions to their wireless
transmission needs. The Company believes that its customer engineering support
provides it with a key competitive advantage.
During the fiscal year ended March 31, 1996 and the quarter ended June
30, 1996, respectively, ViaSat sold products to approximately 42 and 23
customers of which DOD contracts accounted for approximately 97.5% and 98.6% of
total revenues.
BACKLOG
At June 30, 1996, the Company had firm backlog of $38.0 million, of
which $34.7 million was funded, not including options of $25.9 million. Of the
$38.0 million in firm backlog, approximately $30.0 million is expected to be
delivered in the fiscal year ending March 31, 1997 and the balance is expected
to be delivered in the fiscal year ending March 31, 1998. The Company had firm
backlog of $28.7 million, not including options of $28.0 million, at March 31,
1996, compared to firm backlog of $31.7 million, not including options of $27.3
million, at March 31, 1995. The Company includes in its backlog only those
orders for which it has accepted purchase orders. However, backlog is not
necessarily indicative of future sales. A majority of the Company's backlog
scheduled for delivery can be terminated at the convenience of the government
since orders are often made substantially in advance of delivery, and the
Company's contracts typically provide that orders may be terminated with limited
or no penalties. In addition, purchase orders may set forth product
specifications that would require the Company to complete additional product
development. A failure to develop products meeting such specifications could
lead to a termination of the related purchase order.
The backlog amounts as presented are comprised of funded and unfunded
components. Funded backlog represents the sum of contract amounts for which
funds have been specifically obligated by customers to contracts. Unfunded
backlog represents future contract or option amounts that customers may obligate
over the specified contract performance periods. The Company's customers
allocate funds for expenditures on long-term contracts on a periodic basis. The
Company is committed to produce products under its contracts to the extent funds
are provided. The funded component of the Company's backlog at June 30, 1996 was
approximately $34.7 million, and the funded components of the Company's backlog
at March 31, 1995 and 1996 were $29.6 million and $26.3 million, respectively.
The ability of the Company to realize revenues from government contracts in
backlog is dependent upon adequate funding for such contracts. Although funding
of its government contracts is not within the Company's control, the Company's
experience indicates that actual contract fundings have ultimately been
approximately equal to the aggregate amounts of the contracts.
GOVERNMENT CONTRACTS
A substantial portion of the Company's revenues are derived from
contracts and subcontracts with the DOD and other federal government agencies.
Many of the Company's contracts are competitively bid and awarded
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on the basis of technical merit, personnel qualifications, experience and price.
The Company also receives some contract awards involving special technical
capabilities on a negotiated, noncompetitive basis due to the Company's unique
technical capabilities in special areas. Future revenues and income of the
Company could be materially affected by changes in procurement policies, a
reduction in expenditures for the products and services provided by the Company,
and other risks generally associated with federal government contracts. See
"Risk Factors--Dependence on Defense Market" and "--Government Regulations."
The Company provides products under federal government contracts that
usually require performance over a period of one to five years. Long-term
contracts may be conditioned upon continued availability of Congressional
appropriations. Variances between anticipated budget and Congressional
appropriations may result in a delay, reduction or termination of such
contracts. Contractors often experience revenue uncertainties with respect to
available contract funding during the first quarter of the government's fiscal
year beginning October 1, until differences between budget requests and
appropriations are resolved.
The Company's federal government contracts are performed under
cost-reimbursement contracts, time-and-materials contracts and fixed-price
contracts. Cost-reimbursement contracts provide for reimbursement of costs (to
the extent allowable, allocable and reasonable under Federal Acquisition
Regulations) and for payment of a fee. The fee may be either fixed by the
contract (cost-plus-fixed fee) or variable, based upon cost control, quality,
delivery and the customer's subjective evaluation of the work (cost-plus-award
fee). Under time-and-materials contracts, the Company receives a fixed amount by
labor category for services performed and is reimbursed (without fee) for the
cost of materials purchased to perform the contract. Under a fixed-price
contract, the Company agrees to perform certain work for a fixed price and,
accordingly, realizes the benefit or detriment to the extent that the actual
cost of performing the work differs from the contract price. Contract revenues
for the fiscal year ended March 31, 1996 and the quarter ended June 30, 1996,
respectively, were approximately 38.7% and 41.4% from cost-reimbursement
contracts, approximately 5.0% and 7.0% from time-and-materials contracts and
approximately 56.3% and 51.6% from fixed-price contracts. See "Risk
Factors--Contract Profit Exposure."
The Company's allowable federal government contract costs and fees are
subject to audit by the Defense Contract Audit Agency. Audits may result in
non-reimbursement of some contract costs and fees. While the government reserves
the right to conduct further audits, audits conducted for periods through fiscal
1994 have resulted in no material cost recovery disallowances for the Company.
The Company's federal government contracts may be terminated, in whole
or in part, at the convenience of the government. If a termination for
convenience occurs, the government generally is obligated to pay the cost
incurred by the Company under the contract plus a pro rata fee based upon the
work completed. When the Company participates as a subcontractor, the Company is
at risk if the prime contractor does not perform its contract. Similarly, when
the Company as a prime contractor employs subcontractors, the Company is at risk
if a subcontractor does not perform its subcontract.
Some of the Company's federal government contracts contain options
which are exercisable at the discretion of the customer. An option may extend
the period of performance for one or more years for additional consideration on
terms and conditions similar to those contained in the original contract. An
option may also increase the level of effort and assign new tasks to the
Company. In the Company's experience, options are usually exercised.
The Company's eligibility to perform under its federal government
contracts requires the Company to maintain adequate security measures. The
Company has implemented security procedures which it believes are adequate to
satisfy the requirements of its federal government contracts.
GOVERNMENT REGULATIONS
Certain of the Company's products are incorporated into wireless
telecommunications systems that are subject to regulation domestically by the
Federal Communications Commission and internationally by other government
agencies. Although the equipment operators and not the Company are responsible
for compliance
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with such regulations, regulatory changes, including changes in the allocation
of available frequency spectrum and in the military standards which define the
current networking environment, could materially adversely affect the Company's
operations by restricting development efforts by the Company's customers,
obsoleting current products or increasing the opportunity for additional
competition. Changes in, or the failure by the Company to manufacture products
in compliance with, applicable domestic and international regulations could have
a material adverse effect on the Company's business, financial condition and
results of operations. In addition, the increasing demand for wireless
telecommunications has exerted pressure on regulatory bodies worldwide to adopt
new standards for such products, generally following extensive investigation and
deliberation over competing technologies. The delays inherent in this
governmental approval process have in the past caused and may in the future
cause the cancellation, postponement or rescheduling of the installation of
communication systems by the Company's customers, which in turn may have a
material adverse effect on the sale of products by the Company to such
customers.
The Company is also subject to a variety of local, state and federal
governmental regulations relating to the storage, discharge, handling, emission,
generation, manufacture and disposal of toxic or other hazardous substances used
to manufacture the Company's products. The failure to comply with current or
future regulations could result in the imposition of substantial fines on the
Company, suspension of production, alteration of its manufacturing processes or
cessation of operations.
The Company believes that it operates its business in material
compliance with applicable government regulations.
COMPETITION
The markets for the Company's products and services are extremely
competitive, and the Company expects that competition will increase in such
markets. See "Risk Factors--Competition." The Company faces intense competition
in both government and commercial wireless networking markets.
Government DAMA Competition. Competition in the government DAMA market
consists primarily of other companies offering DAMA capable modem, radio or
network control equipment that is compatible with the open MIL-STD protocols.
The government DAMA competitors are significantly larger companies than ViaSat
and include Titan Corporation, Rockwell International, Raytheon (E-Systems) and
GEC-Marconi. The Company believes that it is well-positioned among these
competitors because of its significant backlog of DAMA modem orders, its market
lead time with respect to 5 kHz DAMA product certification and its participation
in both the network control and subscriber terminal markets.
Government Non-DAMA Competition. There is also intense competition in
other wireless networking markets. The JTIDS market, in particular, is dominated
by two very large competitors (Rockwell and GEC-Marconi). The Company believes
its strategic alliance with Lockheed Martin provides the Company with a relative
advantage because Lockheed Martin is the single largest government contractor
and is also a large potential customer, as it manufactures and upgrades many
aircraft that are candidates for JTIDS radios.
The Company's simulation and test equipment and information security
products represent relatively new technologies in markets that are still small.
Most of the Company's competition in these markets stems from alternative
technologies that may or may not be applicable to any particular customer.
Commercial DAMA Competition. There is intense competition in the
commercial DAMA market from companies that have strong positions in the TDM/TDMA
VSAT business, as well as from other companies that seek to enter the VSAT
market using DAMA technology. Most of the leading TDM/TDMA VSAT companies are
offering DAMA products, including Hughes Network Systems (HNS), an affiliate of
Hughes Defense Communications (formerly Magnavox) (see "Risk Factors --
Dependence on Defense Market"), Scientific Atlanta, Gilat, STM Wireless and NEC.
In addition, there are also other types of competing DAMA technologies being
developed.
AT&T Tridom, which is one of the largest VSAT equipment and service
providers and which offers TDM/TDMA products, has entered into a strategic
alliance with the Company to sell the Company's products
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under an OEM agreement. The Company believes that this may allow it to compete
for customers seeking hybrid TDM/TDMA and DAMA VSAT solutions.
In different situations, DAMA products may be evaluated in comparison
with either TDM/TDMA technology, DAMA technology from other companies, dedicated
SCPC technology, mobile satellite technology or possibly terrestrial wireless
solutions. The Company believes that it has a good understanding of those
situations where DAMA systems in general, and its technology in particular,
offer the best overall value to its customers, and tends to focus its marketing
and selling efforts on those applications. DAMA technology is most attractive
for customers with telephone, fax or other circuit-oriented applications. DAMA
technology also allows networks to achieve much higher total capacity, with
better voice quality than TDM/TDMA networks.
The Company seeks to establish strategic alliances with satellite
service providers which would most benefit from its particular technological
advantages. The Company has established such relationships with a few key
companies, including HCL Comnet in India. The Company believes that its products
offer the lowest total cost of ownership for service providers considering the
flexibility of its equipment, its transponder capacity advantages and the
breadth of its service offerings.
INTELLECTUAL PROPERTY
The Company relies on a combination of trade secrets, copyrights,
trademarks, service marks and contractual rights to protect its intellectual
property. The Company attempts to protect its trade secrets and other
proprietary information through agreements with its customers, suppliers,
employees and consultants, and through other security measures. Although the
Company intends to protect its rights vigorously, there can be no assurance that
these measures will be successful. In addition, the laws of certain countries in
which the Company's products are or may be developed, manufactured or sold may
not protect the Company's products and intellectual property rights to the same
extent as the laws of the United States.
While the Company's ability to compete may be affected by its ability
to protect its intellectual property, the Company believes that, because of the
rapid pace of technological change in the wireless personal communications
industry, its technical expertise and ability to introduce new products on a
timely basis will be more important in maintaining its competitive position than
protection of its intellectual property and that patent, trade secret and
copyright protections are important but must be supported by other factors such
as the expanding knowledge, ability and experience of the Company's personnel,
new product introductions and frequent product enhancements. Although the
Company continues to implement protective measures and intends to defend
vigorously its intellectual property rights, there can be no assurance that
these measures will be successful. See "Risk Factors--Limited Protection of
the Company's Intellectual Property."
There can be no assurance that third parties will not assert claims
against the Company with respect to existing and future products. In the event
of litigation to determine the validity of any third party's claims, such
litigation could result in significant expense to the Company and divert the
efforts of the Company's technical and management personnel, whether or not such
litigation is determined in favor of the Company. The wireless communications
industry has been subject to frequent litigation regarding patent and other
intellectual property rights. Leading companies and organizations in the
industry have numerous patents that protect their intellectual property rights
in these areas. In the event of an adverse result of any such litigation, the
Company could be required to expend significant resources to develop
non-infringing technology or to obtain licenses to the technology which is the
subject of the litigation. There can be no assurance that the Company would be
successful in such development or that any such license would be available on
commercially reasonable terms.
EMPLOYEES
As of June 30, 1996, the Company had 244 employees (11 of which were
temporary employees), including over 150 in research and development, nine in
marketing and sales, 36 in production, and 49 in corporate, administration and
production coordination. The Company believes that its future prospects will
depend, in part, on its ability to continue to attract and retain skilled
engineering, marketing and management personnel, who are in great demand. In
particular, there is a limited supply of highly qualified engineers with
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appropriate experience. See "Risk Factors--Dependence on Key Personnel." Each of
the Company's employees is required to sign an Invention and Confidential
Disclosure Agreement upon joining the Company. Under such agreement, each
employee agrees that any inventions developed by such employee during the term
of employment are the exclusive property of the Company and that such employee
will not disclose or use in any way information related to the Company's
business or products, either during the term of such employee's employment or at
any time thereafter. The Company currently employs over 150 engineers,
including 75 engineers who have masters degrees and seven engineers who have
doctorate degrees. None of the Company's employees are covered by a collective
bargaining agreement and the Company has never experienced any strike or work
stoppage. The Company believes that its relations with its employees are good.
PROPERTIES
The Company's headquarters are located in an approximately 37,000
square foot leased facility in Carlsbad, California. This facility houses the
Company's management, marketing and sales personnel. The lease for this facility
terminates in November 1998 with an option to renew for one additional period of
five years. The Company also leases another facility in Carlsbad, California
containing approximately 49,000 square feet for research and development,
application engineering and manufacturing coordination activities. This lease
terminates in August 1999 with options to renew for two additional periods of
two years each. In addition, the Company leases two smaller sales facilities
aggregating approximately 2,600 square feet located in Boston, Massachusetts,
and Melbourne, Florida. The Boston lease terminates in May 1998 with an option
to renew for one additional period of two years. The Melbourne lease terminates
in March 1997 with no renewal options. The Company believes that its existing
facilities are adequate to meet its current needs and that suitable additional
or alternative space will be available on commercially reasonable terms as
needed.
LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings other than various
claims and lawsuits arising in the ordinary course of its business which, in the
opinion of the Company's management, are not individually or in the aggregate
material to its business.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company, and their ages as
of June 30, 1996, are as follows:
NAME AGE POSITION
- ---- --- --------
Mark D. Dankberg 41 Chairman of the Board, President and Chief Executive Officer
Gregory D. Monahan 50 Vice President, Chief Financial Officer and General Counsel
Thomas E. Carter 42 Vice President-- Engineering
Andrew M. Paul 40 Vice President-- Commercial Operations
James P. Collins 52 Vice President-- Business Development
Mark J. Miller 36 Vice President, Chief Technical Officer and Secretary
Steven R. Hart 43 Vice President and Chief Technical Officer
Robert W. Johnson 46 Director
Jeffrey M. Nash 48 Director
B. Allen Lay 61 Director
Mr. Dankberg was a founder of the Company and has served as Chairman of
the Board, President and Chief Executive Officer of the Company since its
inception in May 1986. Prior to joining the Company, he was Assistant Vice
President of M/A-COM Linkabit from 1979 to 1986 and Communications Engineer for
Rockwell International from 1977 to 1979. Mr. Dankberg holds B.S.E.E. and M.E.E.
degrees from Rice University.
Mr. Monahan has served as Vice President, Chief Financial Officer and
General Counsel of the Company since December 1988. Prior to joining the
Company, Mr. Monahan was Assistant Vice President of M/A-COM Linkabit from 1978
to 1988. Mr. Monahan holds a J.D. degree from the University of San Diego and
B.S.M.E. and M.B.A. degrees from the University of California, Berkeley.
Dr. Carter has served as Vice President -- Engineering of the Company
since November 1990. Prior to joining the Company, Dr. Carter served in several
positions including Business Area Manager, Program Manager and System
Engineering Department Manager in the Military Electronics and Avionics Division
of TRW Inc. Dr. Carter holds a Ph.D. in Electrical Engineering from the
University of Southern California and B.S.E.E. and M.S.E.E. degrees from Rice
University.
Mr. Paul has served as Vice President -- Commercial Operations of the
Company since March 1993. Prior to joining the Company, Mr. Paul served as Vice
President and General Manager of the Western Region of Evernet Systems, Inc.
from 1992 to 1993. Previously, Mr. Paul was Vice President of Sales at ComStream
Corp. from 1989 to 1992. Mr. Paul holds a B.A. degree from Stanford University.
Mr. Collins has served as Vice President -- Business Development of the
Company since December 1988. Prior to joining the Company, Mr. Collins was
Assistant Vice President of M/A-COM Linkabit from 1982 to 1988. Mr. Collins was
a Director of Marketing at General Dynamics from 1976 to 1982 and prior to that
served on active duty in the U.S. Army for ten years. Mr. Collins currently
serves in the U.S. Army Reserve and was recently selected for assignment as a
Brigadier General. He holds a B.A. degree from Hofstra University and an M.S.
degree in Geodetic Science from Ohio State University.
Mr. Miller was a founder of the Company and has served as Vice
President and Chief Technical Officer of the Company since 1993 and as
Engineering Manager and Secretary since 1986. Prior to joining the Company, Mr.
Miller was a Staff Engineer at M/A-COM Linkabit from 1983 to 1986. Mr. Miller
holds a B.S.E.E. degree from the University of California, San Diego and a
M.S.E.E. degree from the University of California, Los Angeles.
Mr. Hart was a founder of the Company and has served as Vice President
and Chief Technical Officer since 1993 and as Engineering Manager since 1986.
Prior to joining the Company, Mr. Hart was a Staff Engineer and Manager at
M/A-COM Linkabit
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from 1982 to 1986. Mr. Hart holds a B.S. in Mathematics from the University of
Nevada, Las Vegas and a M.A. in Mathematics from the University of California,
San Diego.
Mr. Johnson has been a director of the Company since 1986. Mr. Johnson
has been self-employed as a private investor and consultant from 1988 to the
present. From 1983 to 1988, Mr. Johnson was a Principal of Southern California
Ventures ("SCV"). Mr. Johnson currently is a director of STAC Inc., a
publicly-held company which manufactures semiconductors and software for data
storage and communications, Proxima Corporation, a publicly-held company which
manufactures computer display equipment, and TransTech Information Management
Systems, Inc., a privately held company which manufactures software for the
towing and recovery industry.
Dr. Nash has been a director of the Company since 1987. Since August
1995, he has been President, Chief Executive Officer and a director of TransTech
Information Management Systems, Inc., a privately held company which
manufactures software for the towing and recovery industry. From 1994 to the
present, Dr. Nash has been Chairman of the Board of Digital Perceptions, Inc.,
and, from 1989 to 1994, was the Chief Executive Officer and President of Visqus
as well as Conner Technology, Inc., both subsidiaries of Conner Peripherals,
Inc. Dr. Nash is currently a director of REMEC, Inc., a publicly-held company
which manufactures microwave multi-function modules, Proxima Corporation, a
publicly-held company which manufactures computer display equipment, and Esscor,
Inc., a privately-held electrical utility simulation company.
Mr. Lay has been a director of the Company since 1996. Since 1983, he
has been a General Partner of SCV. Mr. Lay is Chief Executive Officer and a
director of Vestro Natural Foods Inc., a publicly-held natural foods marketing
company. Mr. Lay is also a director of Pair Gain Technology, Inc., a
publicly-held telecommunications company, Physical Optics Company, a
privately-held optical systems and subsystems company, Kofax Imaging Systems, a
privately-held document imaging systems company, and Medclone Inc., a
privately-held biotech company.
Members of the Company's Board of Directors are each elected for one
year terms at the annual shareholders meeting. The Company intends to recruit
an additional outside director with experience in industries complementary to
the Company's business following the closing of this offering.
COMMITTEES OF THE BOARD OF DIRECTORS
Audit Committee. Following the closing of this offering, the Board of
Directors will establish an audit committee (the "Audit Committee"), which will
consist of two or more independent directors. The Audit Committee will be
established to make recommendations concerning the engagement of independent
public accountants, review with the independent public accountants the plans and
results of the audit engagement, approve professional services provided by the
independent public accountants, review the independence of the independent
public accounts, consider the range of audit and non-audit fees and review the
adequacy of the Company's internal accounting controls.
Compensation Committee. Following the closing of this offering, the
Board of Directors will establish a compensation committee (the "Compensation
Committee"), which will consist of two or more non-employee or independent
directors to the extent required by Rule 16b-3 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), to determine compensation for the
Company's executive officers and awards under the Company's 1996 Equity
Participation Plan and Employee Stock Purchase Plan.
The Board of Directors initially will not have a nominating committee
or any other committee.
COMPENSATION OF DIRECTORS
During the fiscal year ended March 31, 1996, Messrs. Johnson, Nash and
Lay each received options to purchase 3,668 shares of Common Stock at an
exercise price of $1.36 per share. Other than such options, the directors of the
Company received no compensation from the Company for services rendered as a
director during the fiscal year ended March 31, 1996. The Company expects that,
following the closing of this offering, its independent directors will be paid
in a manner and at a level consistent with industry practice.
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EXECUTIVE COMPENSATION
The following table sets forth certain information concerning
compensation for the fiscal year ended March 31, 1996 received by the Chief
Executive Officer and the five other most highly compensated executive officers
of the Company (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
FISCAL YEAR COMPENSATION
COMPENSATION AWARDS
---------------------- ------------
NUMBER OF
SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL POSITION(S) SALARY BONUS OPTIONS COMPENSATION(1)
--------------------- ------ ----- ------- ---------------
Mark D. Dankberg.......................... $165,000 $35,000 14,670 $5,726
Chairman of the Board, President and
Chief Executive Officer
Thomas E. Carter.......................... 131,500 10,000 40,343 4,723
Vice President-- Engineering
Gregory D. Monahan........................ 124,000 8,000 14,670 4,703
Vice President, Chief Financial
Officer and General Counsel
Andrew M. Paul............................ 125,938 5,000 8,802 2,274
Vice President-- Commercial Operations
Steven R. Hart............................ 112,500 8,000 3,668 4,716
Vice President, Chief Technical
Officer and Secretary
Mark J. Miller............................ 112,000 8,000 3,668 1,582
Vice President and Chief Technical
Officer
- ---------------
(1) Includes contributions to the Company's 401(k) Plan.
The following table sets forth certain information concerning
individual grants of stock options made by the Company during the fiscal year
ended March 31, 1996 to each of the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(1)
------------------------------------------------------ ------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS EXERCISE OR
UNDERLYING GRANTED TO BASE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED FISCAL 1996 PER SHARE DATE 5% 10%
- ---- ------- ------------ --------- ---------- ------- -------
Mark D. Dankberg...... 14,670 12.54% $1.50 6/26/00 $28,078 $35,431
Thomas E. Carter...... 40,343 34.47 1.36 6/26/00 70,195 88,578
Gregory D. Monahan.... 14,670 12.54 1.36 6/26/00 25,526 32,210
Andrew M. Paul........ 8,802 7.52 1.36 6/26/00 15,315 19,326
Steven R. Hart........ 3,668 3.13 1.50 6/26/00 7,020 8,858
Mark J. Miller........ 3,668 3.13 1.36 6/26/00 6,381 8,053
- ---------------
(1) These amounts represent assumed rates of appreciation in the price of
the Common Stock during the terms of the options in accordance with
rates specified in applicable federal securities regulations. Actual
gains, if any, on stock option exercises will depend on the future
price of the Common Stock and overall stock market conditions. There is
no representation that the rates of appreciation reflected in this
table will be achieved.
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The following table sets forth certain information concerning exercises
of stock options by the Named Executive Officers during the fiscal year ended
March 31, 1996, and the number of options and value of unexercised options held
by each of the Named Executive Officers at March 31, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR-END OPTIONS AT FISCAL YEAR-END(1)
-------------------------- -----------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- ----------- ----------- ------------- ----------- -------------
Mark D. Dankberg...... -- -- 0 14,670 -- $ 0
Thomas E. Carter...... -- -- 37,225 72,800 $34,738 27,013
Gregory D. Monahan.... 8,215 $5,705 0 28,093 -- 8,720
Andrew M. Paul........ -- -- 5,135 18,338 2,800 5,200
Steven R. Hart........ -- -- 0 3,668 -- 0
Mark J. Miller........ -- -- 0 3,668 -- 0
- ---------------
(1) The dollar values have been calculated by determining the difference
between the fair market value of the securities underlying the options
as determined in good faith by the Board of Directors at the applicable
date and the exercise price of the options.
1993 STOCK OPTION PLAN
In 1993, the Company adopted the ViaSat, Inc. 1993 Stock Option Plan
(the "1993 Stock Option Plan") to enable key employees, consultants and
non-employee directors of the Company to acquire a proprietary interest in the
Company, and thus to create in such persons an increased interest in and a
greater concern for the welfare of the Company. The 1993 Stock Option Plan
provided for aggregate option grants of up to 733,500 shares. As of June 30,
1996, options to purchase an aggregate of 265,683 shares of Common Stock at
prices ranging from $0.34 to $1.50 were outstanding under the 1993 Stock Option
Plan. In addition, options to purchase an aggregate of 118,460 shares of Common
Stock were granted on July 1, 1996 at prices ranging from $4.09 to $4.50 per
share. No additional grants will be made under the 1993 Stock Option Plan after
the consummation of this offering.
1996 EQUITY PARTICIPATION PLAN
In connection with this offering, the Company has adopted the ViaSat,
Inc. 1996 Equity Participation Plan (the "1996 Equity Participation Plan")
designed to update and replace the 1993 Stock Option Plan. The 1996 Equity
Participation Plan provides for the grant to executive officers, other key
employees, consultants and non-employee directors of the Company of a broad
variety of stock-based compensation alternatives such as nonqualified stock
options, incentive stock options, restricted stock and performance awards.
Grants under the 1996 Equity Participation Plan may provide participants with
rights to acquire shares of Common Stock.
The 1996 Equity Participation Plan will be administered by the
Compensation Committee, which is authorized to select from among the eligible
participants the individuals to whom options, restricted stock purchase rights
and performance awards are to be granted and to determine the number of shares
to be subject thereto and the terms and conditions thereof. The members of the
Compensation Committee who are not affiliated with the Company will select from
among the eligible participants the individuals to whom nonqualified stock
options are to be granted, except as set forth below, and will determine the
number of shares to be subject thereto and the terms and conditions thereof. The
Compensation Committee is also authorized to adopt, amend and rescind rules
relating to the administration of the 1996 Equity Participation Plan.
Nonqualified stock options will provide for the right to purchase
Common Stock at a specified price which may be less than fair market value on
the date of grant (but not less than par value), and usually will become
exercisable in installments after the grant date. Nonqualified stock options may
be granted for any reasonable term.
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45
Incentive stock options will be designed to comply with the provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), and will be
subject to restrictions contained in the Code, including exercise prices equal
to at least 100% of fair market value of Common Stock on the grant date and a
ten year restriction on their term, but may be subsequently modified to
disqualify them from treatment as an incentive stock option.
Restricted stock may be sold to participants at various prices (but not
below par value) and made subject to such restrictions as may be determined by
the Compensation Committee. Restricted stock, typically, may be repurchased by
the Company at the original purchase price if the conditions or restrictions are
not met. In general, restricted stock may not be sold, or otherwise transferred
or hypothecated, until restrictions are removed or expire. Purchasers of
restricted stock, unlike recipients of options, will have voting rights and will
receive dividends prior to the time when the restrictions lapse.
Performance awards may be granted by the Compensation Committee on an
individual or group basis. Generally, these awards will be based upon specific
agreements and may be paid in cash or in Common Stock or in a combination of
cash and Common Stock. Performance awards may include "phantom" stock awards
that provide for payments based upon increases in the price of the Company's
Common Stock over a predetermined period. Performance awards also may include
bonuses which may be granted by the Compensation Committee on an individual or
group basis and which may be payable in cash or in Common Stock or in a
combination of cash and Common Stock.
Upon the closing of this offering, the Company estimates that it will
issue to recently-hired executive officers and other key employees of the
Company options to purchase approximately 15,000 shares of Common Stock pursuant
to the 1996 Equity Participation Plan.
A maximum of 750,000 shares will be reserved for issuance under the
1996 Equity Participation Plan.
EMPLOYEE STOCK PURCHASE PLAN
In connection with this offering, the Company has adopted the ViaSat,
Inc. Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") to assist
employees of the Company in acquiring a stock ownership interest in the Company
and to encourage them to remain in the employment of the Company. The Employee
Stock Purchase Plan is intended to qualify under Section 423 of the Code. A
maximum of 250,000 shares of Common Stock will be reserved for issuance under
the Employee Stock Purchase Plan. The Employee Stock Purchase Plan permits
eligible employees to purchase Common Stock at a discount through payroll
deductions during specified six-month offering periods. No employee may purchase
more than $25,000 worth of stock in any calendar year. The price of shares
purchased under the Employee Stock Purchase Plan will be equal to 85% of the
fair market value of the Common Stock on the first or last day of the offering
period, whichever is lower. The Employee Stock Purchase Plan will be
administered by the Compensation Committee.
401(K) PLAN
The Company adopted a tax-qualified employee savings and retirement
plan (the "401(k) Plan") effective January 1990 covering all employees who have
been employed by the Company for at least 90 days and who are at least 21 years
of age. Pursuant to the 401(k) Plan, employees may elect to reduce their current
compensation by not less than 1.0% nor more than 15.0% of eligible compensation
and have the amount of such reduction contributed to the 401(k) Plan. The 401(k)
Plan permits, but does not require, additional cash contributions to the 401(k)
Plan by the Company. The trustee under the 401(k) Plan invests the assets of the
401(k) Plan in designated investment options. The 401(k) Plan is intended to
qualify under Section 401 of the Internal Revenue Code so that contributions to
the 401(k) Plan, and income earned on plan contributions, are not taxable to
employees until withdrawn from the 401(k) Plan, and so that contributions by the
Company are deductible by the Company when made for income tax purposes.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended March 31, 1996, each director of the
Company, including Mark D. Dankberg, Chairman, President and Chief Executive
Officer of the Company, participated in all discussions and decisions regarding
salaries and incentive compensation for all employees and consultants of the
Company, except that Mr. Dankberg was excluded from discussions regarding his
own salary and incentive compensation.
Mr. Johnson, individually, and Mr. Lay, through his position as a
General Partner of SCV, had an interest in the Company's sale of Series A
Convertible Preferred Stock and the related transactions described under
"Certain Transactions."
CERTAIN TRANSACTIONS
In June 1986, the Company sold 3,000,000 shares of Series A Convertible
Preferred Stock to SCV and certain of its affiliates, including Robert W.
Johnson, a director of the Company, at a price of $0.10 per share in a private
placement transaction. Each outstanding share of Series A Convertible Stock will
automatically convert into one share of Common Stock upon the closing of this
offering. For a description of the rights, preferences and privileges of the
Series A Convertible Preferred Stock, see Note 5 of Notes to Financial
Statements.
In connection with the sale of the Series A Convertible Preferred Stock
in June 1986, the Company entered into a Shareholders Agreement with SCV and
certain of its affiliates, including Robert W. Johnson, a director of the
Company, providing for the corporate governance of the Company. The Shareholders
Agreement will terminate upon the closing of this offering.
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47
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of October 1, 1996, and as adjusted
to reflect the sale of the shares offered by this Prospectus (i) by each of the
Company's directors and each of the Named Executive Officers, (ii) by all
directors and executive officers as a group, (iii) by each person who is known
by the Company to own beneficially more than 5% of the Common Stock, and (iv) by
the Selling Shareholders. Unless otherwise indicated, the address for all
shareholders listed in the table is c/o ViaSat, 2290 Cosmos Court, Carlsbad,
California 92009.
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR OWNED AFTER
TO OFFERING(1) OFFERING(1)
------------------- --------------------
NUMBER OF SHARES
NAME AND ADDRESS NUMBER PERCENT(2) OFFERED NUMBER PERCENT(2)
- ---------------- ------ ---------- ------- ------ ----------
Southern California Ventures.... 1,995,120 33.96% 455,377 1,539,743 20.46%
406 Amapula Avenue, Suite 205
Torrance, California 90501
Mark D. Dankberg(3)............. 885,335 15.06 29,340 855,995 11.37
Steven R. Hart(4)............... 661,434 11.26 25,673 635,761 8.45
Mark J. Miller(5)............... 367,915 6.26 18,338 349,577 4.64
Maureen Miller.................. 293,519 5.00 7,335 286,184 3.80
3042 Spearman Lane
Spring Valley, California 91978
Robert W. Johnson(6)............ 183,375 3.12 -- 183,375 2.44
Thomas E. Carter(7)............. 183,925 3.10 9,536 174,389 2.30
Gregory D. Monahan(8)........... 175,560 2.99 -- 175,560 2.33
Jeffrey M. Nash(9).............. 165,038 2.81 -- 165,038 2.19
James P. Collins................ 115,893 1.97 4,401 111,492 1.48
Andrew M. Paul(10).............. 89,634 1.52 -- 89,634 1.19
B. Allen Lay(11)................ -- -- -- -- --
All directors and executive
officers
as a group (10 persons)(12)..... 2,828,109 47.53 87,288 2,740,821 36.06
- ---------------
(1) Assumes no exercise of the Underwriters' over-allotment option. Except
as indicated in the footnotes to this table, to the Company's
knowledge, each shareholder identified in the table possesses sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by such shareholder.
(2) Applicable percentage of ownership for each shareholder is based on
5,875,342 shares of Common Stock outstanding as of October 1, 1996
(including 2,365,538 shares of Common Stock to be issued upon
conversion of the Preferred Stock), together with applicable options
for such shareholder. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission (the
"Commission"), and includes voting and investment power with respect to
the shares. Shares of Common Stock subject to outstanding options which
are currently vested or which vest within 60 days are deemed
outstanding for computing the percentage ownership of the person
holding such options, but are not deemed outstanding for computing the
percentage ownership of any other person.
(3) Includes options to purchase 5,135 shares of Common Stock exercisable
within 60 days of October 1, 1996. Excludes options to purchase 24,206
shares of Common Stock not exercisable within such 60-day period.
(4) Includes options to purchase 1,284 shares of Common Stock exercisable
within 60 days of October 1, 1996. Excludes options to purchase 6,051
shares of Common Stock not exercisable within such 60-day period.
(5) Includes options to purchase 1,284 shares of Common Stock exercisable
within 60 days of October 1, 1996. Excludes options to purchase 6,051
shares of Common Stock not exercisable within such 60-day period.
(6) Excludes options to purchase 3,668 shares of Common Stock not
exercisable within 60 days of October 1, 1996.
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48
(7) Includes options to purchase 48,228 shares of Common Stock exercisable
within 60 days of October 1, 1996. Excludes options to purchase 39,059
shares of Common Stock not exercisable within such 60-day period.
(8) Includes options to purchase 5,684 shares of Common Stock exercisable
within 60 days of October 1, 1996. Excludes options to purchase 26,479
shares of Common Stock not exercisable within such 60-day period.
(9) Excludes options to purchase 3,668 shares of Common Stock not
exercisable within 60 days of October 1, 1996.
(10) Includes options to purchase 13,350 shares of Common Stock exercisable
within 60 days of October 1, 1996. Excludes options to purchase 15,990
shares of Common Stock not exercisable within such 60-day period.
(11) Excludes options to purchase 3,668 shares of Common Stock not
exercisable within 60 days of October 1, 1996. Mr. Lay is a General
Partner of SCV and may therefore be deemed to have beneficial ownership
of 1,995,120 shares of Common Stock held by SCV. Mr. Lay disclaims
beneficial ownership of such shares.
(12) Includes options to purchase 63,411 shares of Common Stock exercisable
within 60 days of October 1, 1996. Excludes options to purchase 181,211
shares of Common Stock not exercisable within such 60-day period.
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DESCRIPTION OF CAPITAL STOCK
The following summary description of the capital stock of the Company
does not purport to be complete and is subject to the provisions of the
Company's Amended and Restated Articles of Incorporation and Amended and
Restated Bylaws, which are included as exhibits to the Registration Statement of
which this Prospectus forms a part and by the provisions of applicable law.
Upon the closing of this offering, the authorized capital stock of the
Company will consist of 25,000,000 shares of Common Stock, par value $.01 per
share, and 5,000,000 shares of Preferred Stock, par value $.01 per share, after
giving effect to amendments to the Company's Articles of Incorporation that have
been approved by the Company's Board of Directors and shareholders.
COMMON STOCK
As of October 1, 1996, there were 3,509,804 shares of Common Stock
outstanding held of record by 177 shareholders, and 3,225,000 shares of
Preferred Stock outstanding held of record by two shareholders. Upon the
closing of this offering, there will be 7,525,342 shares of Common Stock
outstanding, including 1,650,000 shares to be issued by the Company hereunder
and 2,365,538 shares to be issued upon conversion of the Preferred Stock.
Holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the shareholders of the Company. Additionally,
cumulative voting is permitted in connection with the election of directors so
long as at least one shareholder has given notice at the meeting prior to the
voting of that shareholder's intention to cumulate votes. Subject to the
preferences that may be applicable to any outstanding preferred stock, the
holders of Common Stock are entitled to a ratable distribution of any dividends
that may be declared by the Board of Directors out of funds legally available
therefor. 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, subject to the prior liquidation rights
of any outstanding preferred stock. The Common Stock has no preemptive,
redemption or conversion rights. The outstanding shares of Common Stock are, and
the shares offered by the Company in the offering, when issued and paid for,
will be fully paid and nonassessable. The rights, preferences and privileges of
holders of Common Stock are subject to, and may be adversely affected by, the
rights of the holders of shares of any preferred stock which the Company may
designate and issue in the future. See "Dividend Policy."
PREFERRED STOCK
Upon the closing of this offering, each outstanding share of Series A
Convertible Preferred Stock will be converted into one share of Common Stock,
and the Series A Convertible Preferred Stock will be automatically retired.
Thereafter, the Board of Directors will be authorized, without further
shareholder approval, to issue up to 5,000,000 shares of Preferred Stock in one
or more series and to fix the rights, preferences, privileges and restrictions
granted or imposed upon any unissued shares of Preferred Stock and to fix the
number of shares constituting any series and the designations of such series.
The issuance of Preferred Stock may have the effect of delaying or
preventing a change in control of the Company. The issuance of Preferred Stock
could decrease the amount of earnings and assets available for distribution to
the holders of Common Stock or could adversely affect the rights and powers,
including voting rights, of the holders of the Common Stock. In certain
circumstances, such issuance could have the effect of decreasing the market
price of the Common Stock. As of the closing of the offering, no shares of
Preferred Stock will be outstanding, and the Company currently has no plans to
issue any shares of Preferred Stock.
LISTING
Application has been made to approve the shares of Common Stock for
quotation and trading on The Nasdaq National Market under the symbol "VSAT."
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is
- --------------------.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, the Company will have outstanding
7,525,342 shares of Common Stock. Of these shares, the 2,200,000 shares sold in
the offering (plus any shares issued upon exercise of the Underwriters'
over-allotment option) will be freely tradeable without restriction under the
Securities Act, unless purchased by "affiliates" of the Company as that term is
defined in Rule 144 under the Securities Act.
In general, under Rule 144 as currently in effect, a shareholder (or
shareholders whose shares are aggregated) who has beneficially owned shares
constituting "restricted securities" (generally defined as securities acquired
from the Company or an affiliate of the Company in a non-public transaction) for
at least two years, is entitled to sell within any three-month period a number
of shares that does not exceed the greater of one percent of the outstanding
Common Stock or the average weekly trading volume in the Common Stock during the
four calendar weeks preceding the date on which notice of such sale is filed
pursuant to Rule 144. Sales under Rule 144 are also subject to certain
provisions regarding the manner of sale, notice requirements and the
availability of current public information about the Company. A shareholder (or
shareholders whose shares are aggregated) who is not an affiliate of the Company
for at least 90 days prior to a proposed transaction and who has beneficially
owned "restricted securities" for at least three years is entitled to sell such
shares under Rule 144 without regard to the limitations described above.
Currently __________ shares of Common Stock are qualified for sale under this
rule. The Commission has proposed to amend Rule 144 to reduce the two and three
year holding periods specified above to one and two years, respectively.
Of the remaining ____________ shares, holders of ____________ shares,
including all officers and directors of the Company, have entered into
contractual "lock-up" agreements generally providing that they will not directly
or indirectly offer, sell, contract to sell or grant any option to purchase or
otherwise transfer or dispose of shares of Common Stock or other equity
securities of the Company or any securities exercisable for or convertible into
Common Stock or other equity securities of the Company owned by them for a
period of 180 days after the closing of the offering without the prior written
consent of representatives of the Underwriters.
The Company has entered into a Stock Restriction Agreement with each of
its shareholders for the purpose of limiting the sale, succession or other
transfer of the Common Stock during the lifetime or upon the death of each
shareholder. The Stock Restriction Agreement provides that the Company's
shareholders will not transfer their shares of Common Stock during their
lifetime or upon their death, except in limited instances, without first
offering such shares for sale to the Company. In addition, the Stock Restriction
Agreement requires each shareholder to approve an offer to purchase all of the
outstanding Common Stock if such offer is accepted by shareholders owning at
least two-thirds of the outstanding shares. The Stock Restriction Agreement with
respect to each shareholder will terminate upon the closing of this offering,
regardless of whether any of such shareholder's shares are included in this
offering.
The Company intends to file a registration statement under the
Securities Act after the offering covering the sale of 1,384,143 shares of
Common Stock reserved for issuance under the 1993 Stock Option Plan, the 1996
Equity Participation Plan and the Employee Stock Purchase Plan. See
"Management--1993 Stock Option Plan," "--1996 Equity Participation Plan" and
"--Employee Stock Purchase Plan." Such registration statement will automatically
become effective upon filing. Accordingly, shares registered under such
registration statement will, subject to Rule 144 volume and other limitations
applicable to affiliates of the Company, be available for sale in the public
market, except to the extent that such shares are subject to vesting
restrictions.
Prior to the offering, there has been no public market for the Common
Stock and no predictions can be made as to the effect, if any, that sales of
shares of Common Stock will have on the market price of the Common Stock
prevailing from time to time. Nevertheless, sales of significant numbers of
shares of the Common Stock in the public market could adversely affect the
market price of the Common Stock and could impair the Company's future ability
to raise capital through an offering of its equity securities.
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UNDERWRITING
Under the terms and subject to the conditions of the Underwriting
Agreement, the Underwriters named below, for whom Oppenheimer & Co., Inc.,
Needham & Company, Inc. and Unterberg Harris are acting as representatives (the
"Representatives"), have severally agreed to purchase from the Company and
Selling Shareholders, and the Company and Selling Shareholders have agreed to
sell to each Underwriter, the aggregate number of shares of Common Stock set
forth opposite their respective names in the table below. The Underwriting
Agreement provides that the obligations of the Underwriters to pay for and
accept delivery of the shares of Common Stock are subject to certain conditions
precedent, and that the Underwriters are committed to purchase and pay for all
shares if any shares are purchased.
NAME NUMBER OF SHARES
---- ----------------
Oppenheimer & Co., Inc............................................
Needham & Company, Inc............................................
Unterberg Harris..................................................
----------
Total.................................................... 2,200,000
==========
The Representatives have advised the Company that the Underwriters
propose to offer the shares of Common Stock to the public at the initial public
offering price set forth on the cover page of this Prospectus, and to certain
dealers (who may include the Underwriters) at such price less a concession not
in excess of $_____ per share, of which $_____ may be reallowed to other
dealers. After the offering to the public, the offering price and other selling
terms may be changed by the Representatives. No such reduction shall change the
amount of the proceeds to be received by the Company and the Selling
Shareholders as set forth on the cover page of this Prospectus.
The Company has granted an option to the Underwriters, exercisable
during the 30-day period after the date of this Prospectus, to purchase up to
330,000 shares of Common Stock at the same price per share set forth on the
cover page of this Prospectus solely to cover over-allotments, if any. To the
extent that the Underwriters exercise such option, each of the Underwriters will
be committed, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number of shares of Common Stock to
be purchased by such Underwriter, as shown in the above table, bears to the
total shown.
In connection with the offering, certain Underwriters and selling group
members (if any) or their respective affiliates may engage in passive market
making transactions in the Common Stock on The Nasdaq National Market in
accordance with Rule 10b-6A under the Exchange Act during the two business day
period before commencement of offers or sales of the Common Stock. The passive
market making transactions must comply with applicable volume and price limits
and be identified as such. In general, a passive market maker may display its
bid at a price not in excess of the highest independent bid for such security;
if all independent bids are lowered below the passive market maker's bid,
however, such bid must then be lowered when certain purchase limits are
exceeded.
The Underwriting Agreement contains covenants of indemnity and
contribution between the Company and the Underwriters and the Selling
Shareholders against certain civil liabilities that may be incurred in
connection with this offering, including liabilities under the Securities Act.
Pursuant to the terms of lock-up agreements, all officers, directors,
Selling Shareholders and certain other shareholders of the Company have agreed
with the Representatives not to sell, otherwise dispose of, contract to sell,
grant any option to sell, transfer or otherwise dispose of, directly or
indirectly, shares of Common Stock or other equity securities of the Company or
securities exchangeable for or convertible into shares of Common Stock or other
equity securities of the Company for a period of 180 days after the date of this
Prospectus, without the prior written consent of the Representatives. The
Company has agreed not to sell, contract to sell, grant any option to sell,
transfer or otherwise dispose of, directly or indirectly, shares of Common Stock
49
52
or other equity securities of the Company for a period of 180 days after the
date of this Prospectus, without the prior written consent of the
Representatives, except that the Company may issue securities pursuant to the
1993 Stock Option Plan, the 1996 Equity Participation Plan and the Employee
Stock Purchase Plan and upon the exercise of outstanding stock options or
purchase rights under such plans. See "Shares Eligible for Future Sale."
The Underwriters will not make sales to accounts over which they
exercise discretionary authority (i) in excess of five percent of the number of
shares of Common Stock offered hereby, and (ii) unless they obtain specific
written consent of the customer.
Prior to the offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock has been
determined by negotiation among the Company, the Selling Shareholders and the
Representatives. Among the factors considered in determining the initial public
offering price were prevailing market and economic conditions, revenues and
earnings of the Company, estimates of the business potential and prospects of
the Company, the present state of the Company's business operations, the
Company's management and other factors deemed relevant.
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed upon for
the Company by Latham & Watkins, San Diego, California. Certain legal matters in
connection with the offering will be passed upon for the Underwriters by Kaye,
Scholer, Fierman, Hays & Handler, LLP, Los Angeles, California.
EXPERTS
The financial statements of the Company as of March 31, 1995 and 1996,
and for each of the three years in the period ended March 31, 1996 included in
this Prospectus have been so included in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on
Form S-1 under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus, which constitutes a part of the Registration Statement,
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 hereby made to
such Registration Statement, exhibits and schedules filed as part of the
Registration Statement. 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 document filed as an exhibit to the Registration Statement or such other
document. Each such statement is qualified in all respects by such reference to
such exhibit.
After consummation of the offering, the Company will be subject to the
informational and reporting requirements of the Exchange Act and, in accordance
therewith, will be required to file reports, proxy and information statements,
and other information with the Commission. Such reports, proxy statements and
other information, as well as the Registration Statement of which this
Prospectus is a part and the exhibits and schedules thereto, can be inspected
and copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as at
the following regional offices: 7 World Trade Center, Suite 1300, New York, New
York 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials also can be obtained from the Public Reference Section
of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Electronic reports, proxy and information
statements, and other information filed through the Commission's Electronic Data
Gathering, Analysis and Retrieval system are publicly available through the
Commission's Web site (http://www.sec.gov).
50
53
INDEX TO FINANCIAL STATEMENTS
PAGES
-----
VIASAT, INC.
Report of Independent Accountants......................................... F-2
Balance Sheet............................................................. F-3
Statement of Income....................................................... F-4
Statement of Shareholders' Equity......................................... F-5
Statement of Cash Flows................................................... F-6
Notes to Financial Statements............................................. F-7
F-1
54
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of ViaSat, Inc.
The recapitalization described in Note 1 to the financial statements has not
been consummated at September 30, 1996. When it has been consummated, we will
be in a position to furnish the following report:
"In our opinion, the accompanying balance sheet and the related statements
of income, of shareholders' equity and of cash flows present fairly, in all
material respects, the financial position of ViaSat, Inc. at March 31, 1996
and 1995, and the results of its operations and its cash flows for each of
the three years in the period ended March 31, 1996, in conformity with
generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally
accepted auditing standards which 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, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above."
PRICE WATERHOUSE LLP
San Diego, California
June 11, 1996
F-2
55
VIASAT, INC.
BALANCE SHEET
ASSETS
MARCH 31, PRO FORMA
------------------------------------- JUNE 30, SHAREHOLDERS'
1995 1996 1996 EQUITY
------------------ ---------------- ------------------ ------------------
(UNAUDITED) (UNAUDITED)
(NOTE 1)
Current assets:
Cash and cash equivalents ................ $ 2,731,000 $ 2,297,000 $ 1,733,000
Accounts receivable ...................... 4,300,000 6,171,000 5,923,000
Inventory ................................ 204,000 1,223,000 1,476,000
Deferred income taxes .................... 134,000 484,000 558,000
Other current assets ..................... 64,000 170,000 445,000
----------- ----------- -----------
Total current assets ......................... 7,433,000 10,345,000 10,135,000
Property and equipment, net .................. 1,896,000 2,789,000 2,877,000
Other assets ................................. 48,000 128,000 236,000
----------- ----------- -----------
Total assets ................................. $ 9,377,000 $13,262,000 $13,248,000
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ......................... $ 1,480,000 $ 2,774,000 $ 2,388,000
Accrued liabilities ...................... 2,669,000 2,157,000 2,000,000
Current portion of notes payable ......... 476,000 763,000 897,000
----------- ----------- -----------
Total current liabilities .................... 4,625,000 5,694,000 5,285,000
----------- ----------- -----------
Notes payable ................................ 1,220,000 1,747,000 1,531,000
Other liabilities ............................ 119,000 604,000 720,000
----------- ----------- -----------
Total long-term liabilities .............. 1,339,000 2,351,000 2,251,000
----------- ----------- -----------
Commitments (Note 9)
Shareholders' equity:
Series A, convertible preferred stock,
$.01 par value; 3,225,000 shares
authorized, issued and outstanding actual,
no shares outstanding pro forma .......... 32,000 32,000 32,000 --
Common stock, $.01 par value, 7,335,000 shares
authorized; 3,207,339, 3,342,101 and
3,386,396 issued and outstanding actual,
respectively; 5,751,933 shares issued and
outstanding pro forma ................... 44,000 46,000 46,000 78,000
Paid in capital .............................. 568,000 737,000 754,000 754,000
Retained earnings ............................ 2,769,000 4,402,000 4,880,000 4,880,000
----------- ----------- ----------- -----------
Total shareholders' equity ................... 3,413,000 5,217,000 5,712,000 $ 5,712,000
----------- ----------- ----------- ===========
Total liabilities and shareholders' equity ... $ 9,377,000 $13,262,000 $13,248,000
=========== =========== ===========
See accompanying notes to financial statements.
F-3
56
VIASAT, INC.
STATEMENT OF INCOME
YEAR ENDED MARCH 31,
------------------------------------------------------
1994 1995 1996
------------ -------------- ---------------
Revenues ............................... $ 11,579,000 $ 22,341,000 $ 29,017,000
Cost of revenues ....................... 9,033,000 16,855,000 20,983,000
------------ ------------ ------------
Gross profit ........................ 2,546,000 5,486,000 8,034,000
Operating expenses:
Selling, general and ................ 1,554,000 2,416,000 3,400,000
administrative
Independent research and development 134,000 788,000 2,820,000
------------ ------------ ------------
Income from operations ................. 858,000 2,282,000 1,814,000
Other income (expense):
Interest income ........................ 2,000 27,000 29,000
Interest expense ....................... (47,000) (114,000) (260,000)
------------ ------------ ------------
Income before income taxes ............. 813,000 2,195,000 1,583,000
Provision (benefit) for income taxes ... 328,000 888,000 (50,000)
------------ ------------ ------------
Net income ............................. $ 485,000 $ 1,307,000 $ 1,633,000
============ ============ ============
Pro forma net income per share ......... $ 0.27
Shares used in computing pro forma ============
net income per share ................ 6,000,894
============
THREE MONTHS ENDED
---------------------------------
JUNE 30, JUNE 30,
1995 1996
-------------- ---------------
(UNAUDITED) (UNAUDITED)
Revenues ............................... $ 6,768,000 $ 9,732,000
Cost of revenues ....................... 4,830,000 6,862,000
------------ ------------
Gross profit ........................ 1,938,000 2,870,000
Operating expenses:
Selling, general and ................ 918,000 1,040,000
administrative
Independent research and development 467,000 1,058,000
------------ ------------
Income from operations ................. 553,000 772,000
Other income (expense):
Interest income ........................ 14,000 30,000
Interest expense ....................... (43,000) (62,000)
------------ ------------
Income before income taxes ............. 524,000 740,000
Provision (benefit) for income taxes ... (17,000) 262,000
------------ ------------
Net income ............................. $ 541,000 $ 478,000
============ ============
Pro forma net income per share ......... $ 0.08
Shares used in computing pro forma ============
net income per share ................ 6,003,110
============
See accompanying notes to financial statements.
F-4
57
VIASAT, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
PREFERRED STOCK COMMON STOCK
------------ -- ----------- ------------- -- -----------
NUMBER OF NUMBER OF PAID IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
----------- ----------- ------------- ----------- ------- --------
Balance at March 31, 1993........... 3,225,000 $32,000 2,949,697 $40,000 $416,000 $ 977,000
Issuance of common stock......... 17,311 6,000
Net income.......................
485,000
--------- ------- --------- ------- -------- ----------
Balance at March 31, 1994........... 3,225,000 32,000 2,967,008 40,000 422,000 1,462,000
Issuance of common stock......... 240,331 4,000 146,000
Net income....................... 1,307,000
--------- ------- --------- ------- -------- ----------
Balance at March 31 , 1995.......... 3,225,000 32,000 3,207,339 44,000 568,000 2,769,000
Issuance of common stock......... 134,762 2,000 169,000
Net income....................... 1,633,000
--------- ------- --------- ------- -------- ----------
Balance at March 31, 1996........... 3,225,000 32,000 3,342,101 46,000 737,000 4,402,000
Issuance of common stock
(unaudited)......................... 44,295 17,000
Net income (unaudited)........... 478,000
--------- ------- --------- ------- -------- ----------
Balance at June 30, 1996 (unaudited) 3,225,000 $32,000 3,386,396 $46,000 $754,000 $4,880,000
========= ======= ========= ======= ======== ==========
See accompanying notes to financial statements.
F-5
58
VIASAT, INC.
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED
YEAR ENDED MARCH 31, ------------------------------
------------------------------------------- JUNE 30, JUNE 30,
1994 1995 1996 1995 1996
------------- ------------- ------------ ----------- --------------
(UNAUDITED) (UNAUDITED)
Cash flows from operating activities:
Net income .................................. $ 485,000 $ 1,307,000 $ 1,633,000 $ 541,000 $ 478,000
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation .......................... 316,000 542,000 982,000 198,000 299,000
Loss on disposal of fixed assets ...... 83,000
Deferred income taxes ................. (66,000) (13,000) (350,000) (228,000) (74,000)
Increase (decrease) in cash resulting from
changes in:
Accounts receivable ...................... (2,256,000) (265,000) (1,871,000) (1,061,000) 248,000
Inventory ................................ (15,000) (189,000) (1,019,000) (480,000) (253,000)
Other assets ............................. (53,000) (43,000) (186,000) 34,000 (383,000)
Accounts payable ......................... 670,000 530,000 1,294,000 184,000 (386,000)
Accrued liabilities ...................... 1,019,000 1,331,000 (512,000) (383,000) (157,000)
Other liabilities ........................ -- 119,000 485,000 (294,000) 116,000
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
operating activities ............... 183,000 3,319,000 456,000 (1,489,000) (112,000)
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchases of property and equipment ......... (511,000) (1,701,000) (1,875,000) (432,000) (387,000)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from short-term bank borrowings .... 170,000 -- 1,400,000
Repayment of short-term bank borrowings ..... (150,000) (350,000) (1,400,000)
Proceeds from issuance of notes payable ..... 289,000 1,650,000 2,778,000 190,000 75,000
Repayment of notes payable .................. (53,000) (346,000) (1,964,000) (118,000) (157,000)
Proceeds from issuance of common stock ...... 6,000 150,000 171,000 5,000 17,000
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities ............... 262,000 1,104,000 985,000 77,000 (65,000)
----------- ----------- ----------- ----------- -----------
Net (decrease) increase in cash and cash
equivalents .................................... (66,000) 2,722,000 (434,000) (1,844,000) (564,000)
Cash and cash equivalents at beginning of
period ......................................... 75,000 9,000 2,731,000 2,731,000 2,297,000
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of period ..... $ 9,000 $ 2,731,000 $ 2,297,000 $ 887,000 $ 1,733,000
=========== =========== =========== =========== ===========
Supplemental information:
Cash paid for interest ...................... $ 48,000 $ 116,000 $ 260,000 $ 43,000 $ 62,000
=========== =========== =========== =========== ===========
Cash paid for income taxes .................. $ 121,000 $ 642,000 $ 468,000 $ 38,000 $ 210,000
=========== =========== =========== =========== ===========
See accompanying notes to financial statements.
F-6
59
VIASAT, INC.
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
ViaSat, Inc. (the "Company") designs, produces and markets advanced
digital satellite telecommunications and wireless signal processing equipment.
Management Estimates and Assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash Equivalents
Cash equivalents consist of highly liquid investments with original
maturities of 90 days or less.
Revenue Recognition
The majority of the Company's revenues are derived from services
performed for the United States Government and its prime contractors under a
variety of contracts including cost-plus-fixed fee, fixed-price, and time and
materials type contracts. Such sales amounted to $28,305,000, $21,226,000 and
$11,143,000 for the years ended March 31, 1996, 1995 and 1994, respectively.
Included in these revenues are sales to a significant customer under various
subcontracts totaling $5,269,000 and $4,166,000 during the years ended March 31,
1996 and 1995, respectively. Sales to this customer were not significant during
the year ended March 31, 1994. Generally, revenues are recognized as services
are performed using the percentage of completion method, measured primarily by
costs incurred to date compared with total estimated costs at completion or
based on the number of units delivered. The Company provides for anticipated
losses on contracts by a charge to income during the period in which they are
first identified.
Contract costs, including indirect costs, are subject to audit and
negotiations with Government representatives. These audits have been completed
and agreed upon through fiscal year 1994. Contract revenues and accounts
receivable are stated at amounts which are expected to be realized upon final
settlement.
Unbilled Accounts Receivable
Unbilled receivables consist of costs and fees earned and billable on
contract completion or other specified events. The majority of unbilled
receivables is expected to be collected within one year. The amount of contract
retention included in unbilled accounts receivable as of March 31, 1996 and 1995
is $45,000 and $22,000, respectively, and is expected to be collected beyond one
year.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist primarily of cash equivalents
and trade accounts receivable which are generally not collateralized. The
Company limits its exposure to credit loss by placing its cash equivalents with
high credit quality financial institutions. Concentrations of credit risk with
respect to receivables are limited because the Company's primary customers are
various agencies of the United States Government and its prime contractors.
Inventories
Inventories are valued at the lower of cost or market, cost being
determined by the first-in, first-out method.
F-7
60
Software Costs
Software product development costs incurred from the time technological
feasibility is reached until the product is available for general release to
customers are capitalized and reported at the lower of cost or net realizable
value. Through March 31, 1996, no significant amounts were expended subsequent
to reaching technological feasibility.
Property and Equipment
Equipment, computers, and furniture and fixtures are recorded at cost,
and depreciated over estimated useful lives of 3 to 7 years under the
straight-line method. Additions to property and equipment together with major
renewals and betterments are capitalized. Maintenance, repairs and minor
renewals and betterments are charged to expense. When assets are sold or
otherwise disposed of, the cost and related accumulated depreciation or
amortization are removed from the accounts and any resulting gain or loss is
recognized.
Long-lived Assets
The Company assesses potential impairments to its long-lived assets
when there is evidence that events or changes in circumstances have made
recovery of the asset's carrying value unlikely. An impairment loss would be
recognized when the sum of the expected future net cash flows is less than the
carrying amount of the asset. No such impairment losses have been identified by
the Company.
Warranty Reserves
The Company provides limited warranties on certain of its products for
periods of up to three years. The Company recognizes warranty reserves based
upon an estimate of total warranty costs, with amounts expected to be incurred
within twelve months classified as a current liability.
Income Taxes
Income taxes are provided utilizing the liability method. The liability
method requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the carrying
amounts and tax bases of assets and liabilities. Additionally, under the
liability method, changes in tax rates and laws will be reflected in income in
the period such changes are enacted.
Fair Value of Financial Instruments
At March 31, 1996, the carrying amounts of the Company's financial
instruments, including cash equivalents, trade receivables and accounts payable,
approximated their fair values due to their short term maturities. At March 31,
1996, the estimated fair value of the Company's long-term debt approximated its
carrying value.
New Accounting Pronouncement
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). The
Company does not intend to adopt the measurement provisions of SFAS 123 with
regard to employee-based stock compensation, and will adopt the disclosure
provisions during the fiscal year ending March 31, 1997.
Pro forma net income per share
Pro forma net income per share is computed based on the weighted
average number of common shares and common stock equivalents, using the treasury
stock method, outstanding during the respective periods after giving retroactive
effect to the conversion, which will occur upon the closing of the Company's
initial public offering, of all outstanding shares of preferred stock into
2,365,538 shares of common stock. Pursuant to Securities and Exchange Commission
Staff Accounting Bulletin No. 83, all issuances of common stock and all stock
options granted within one year prior to the Company's planned initial public
offering have been included as outstanding for all periods using the treasury
stock method. Historical earnings per share are not presented because such
amounts are not deemed meaningful due to the significant change in the Company's
capital structure that will occur in connection with the planned initial public
offering.
Recapitalization
In contemplation of the Public Stock Offering, the Company expects to
file Amended and Restated Articles of Incorporation to effect a .7335 for 1
reverse stock split of all outstanding shares of common stock and stock
F-8
61
options. All shares and per share data in the accompanying financial statements
have been adjusted retroactively to give effect to the reverse stock split. The
Amended and Restated Articles of Incorporation will increase the authorized
stock of the Company such that the Company will be authorized to issue 5,000,000
shares of $0.01 par value preferred stock, and 25,000,000 shares of $0.01 par
value common stock.
Interim results (unaudited)
The accompanying balance sheet at June 30, 1996 and the related
statements of income and of cash flows for the three months ended June 30, 1995
and 1996, and the statement of shareholders' equity for the three months ended
June 30, 1996 are unaudited. In the opinion of management, these statements have
been prepared on the same basis as the audited financial statements and include
all adjustments, consisting only of normal recurring adjustments, necessary for
the fair statement of results of the interim periods. The data disclosed in
these notes to the financial statements at such dates and for such periods are
also unaudited.
Pro forma shareholders' equity (unaudited)
The unaudited pro forma information presented in the accompanying
balance sheet as of June 30, 1996 reflects the conversion of all outstanding
preferred stock into 2,365,538 shares of common stock, which will occur upon
completion of the Company's planned initial public offering.
2. COMPOSITION OF CERTAIN BALANCE SHEET CAPTIONS
March 31, June 30,
------------------------------- ----------------
1995 1996 1996
------------------ ----------- ----------------
(Unaudited)
Accounts receivable:
Billed ............................. $ 2,890,000 $ 5,653,000 $ 4,695,000
Unbilled ........................... 1,410,000 518,000 1,228,000
----------- ----------- -----------
$ 4,300,000 $ 6,171,000 $ 5,923,000
=========== =========== ===========
Inventory:
Raw materials ...................... $ 67,000 $ 753,000 $ 994,000
Work in process .................... 137,000 402,000 458,000
Finished goods ..................... 68,000 24,000
----------- ----------- -----------
$ 204,000 $ 1,223,000 $ 1,476,000
----------- ----------- -----------
Property and equipment:
Machinery and equipment ............ $ 1,288,000 $ 2,313,000 $ 2,580,000
Computer equipment ................. 1,564,000 2,213,000 2,326,000
Furniture and fixtures ............. 179,000 380,000 387,000
----------- ----------- -----------
3,031,000 4,906,000 5,293,000
Less accumulated depreciation ..... (1,135,000) (2,117,000) (2,416,000)
----------- ----------- -----------
$ 1,896,000 $ 2,789,000 $ 2,877,000
=========== =========== ===========
Accrued liabilities:
Accrued vacation ................... $ 406,000 $ 591,000 $ 650,000
Accrued 401(k) matching contribution 275,000 444,000 145,000
Current portion of warranty reserve 67,000 413,000 564,000
Accrued bonus ...................... 488,000 347,000 144,000
Collections in excess of revenues .. 773,000 237,000 106,000
Income taxes payable ............... 601,000 40,000 326,000
Other .............................. 59,000 85,000 65,000
----------- ----------- -----------
$ 2,669,000 $ 2,157,000 $ 2,000,000
=========== =========== ===========
F-9
62
3. SHORT-TERM BANK BORROWINGS
The Company has a $4,000,000 line of credit with a bank which allows it
to borrow the greater of $1,000,000 or 80% of eligible accounts receivable plus
50% of the Company's eligible inventory at the bank's prime rate (8.25% at March
31, 1996). There were no borrowings outstanding as of March 31, 1996 and 1995.
The Company is required to pay a fee equal to 0.25% of the unused portion of the
line of credit on an annual basis. The credit agreement includes covenants
which, among other things, require the Company to maintain stated net worth
amounts plus specific liquidity and long-term solvency ratios as well as a
minimum net income level. The line of credit expires on September 15, 1997.
Amounts borrowed are secured by substantially all of the Company's assets.
4. NOTES PAYABLE
Notes payable are as follows:
MARCH 31,
------------------------------- JUNE 30,
1995 1996 1996
----------------- ------------ ----------------
(UNAUDITED)
Bank installment loans, with various expiration dates through
September 1999, total monthly payments of $74,000 with
interest rates ranging between 8% and 12%,
collateralized by equipment $ 1,092,000 $ 1,989,000 $ 1,947,000
Finance company installment loans, with various expiration
dates through April 1999, total monthly payments of
$20,000 with interest rates ranging between 10.23% and
11.81%, collateralized by equipment 604,000 521,000 481,000
----------- ----------- -----------
1,696,000 2,510,000 2,428,000
Less current portion (476,000) (763,000) (897,000)
----------- ----------- -----------
$ 1,220,000 $ 1,747,000 $ 1,531,000
=========== =========== ===========
Principal maturities of notes payable as of March 31, 1996 are
summarized as follows:
Year Ending March 31,
1997 763,000
1998 932,000
1999 623,000
2000 192,000
----------
$2,510,000
==========
5. CONVERTIBLE PREFERRED STOCK
At March 31, 1996, the Company had 3,225,000 shares of its convertible
$.01 par value Series A preferred stock (preferred stock) outstanding with a
liquidation preference of $.10 per share. Each share of preferred stock is
convertible at the option of the holder into one share of common stock subject
to adjustment for stock splits and certain other transactions (Note 1).
Holders of the preferred stock have votes per share equivalent to the number
of shares of common stock to which the preferred stock may be converted.
Each share of preferred stock shall automatically convert at its then
effective conversion price (i) upon the closing of any public offering of the
Company's common stock at an offering price of not less than $.50 per share and
having an aggregate offering price of at least $3,000,000, or (ii) immediately
prior to the closing of a merger, consolidation or combination of the Company
with any other corporation, or (iii) immediately prior to a sale of
substantially all of the Company's assets in which the Company receives at least
$3,000,000 in cash or negotiable securities.
F-10
63
Each share of preferred stock is entitled to receive dividends on a
cumulative basis at the annual rate of $.009 per share, when and as declared by
the Board of Directors. Such dividends have preference over any distribution to
holders of common stock. Undeclared cumulative dividends amounted to $260,000 at
March 31, 1996.
6. COMMON STOCK AND OPTIONS
In July 1993, the Company adopted the 1993 Stock Option Plan (the Plan)
which authorizes 733,500 shares to be granted no later than July 2003. The Plan
provides for the grant of both incentive stock options and non-qualified stock
options which are subject to a three year vesting period. The option prices
represent the estimated fair market value of the Company's common stock as
determined by the Company's Board of Directors.
Transactions under the stock option plan are summarized as follows:
Number Option Price
of Shares per share
Outstanding at March 31, 1994
(all granted in fiscal 1994) 54,829 $ .34
Options granted 61,137 $ .48
Options granted 74,450 $ .82
-------
Outstanding at March 31, 1995 190,416 $ .34 - $ .82
Options granted 128,033 $ 1.36
Options canceled (147) $ .82
Options exercised (8,215) $ .34 - $ .82
-------
Outstanding at March 31, 1996 310,087 $ .34 - $1.36
Options granted (unaudited) -
Options canceled (unaudited) (183) $ 1.36
Options exercised (unaudited) (44,221) $ .34 - $1.36
-------
Outstanding at June 30, 1996 (unaudited) 265,683
=======
At March 31, 1996, options to purchase 77,570 shares of the Company's
Common Stock were currently exercisable at $.34 to $.82 per share.
The Company also granted certain officers and employees the opportunity
to purchase at fair market value 254,855 shares and 124,805 shares of the
Company's common stock in fiscal 1995 and 1996, respectively.
F-11
64
7. INCOME TAXES
The provision (benefit) for income taxes includes the following:
YEAR ENDED MARCH 31, THREE MONTHS
----------------------------------------------------------- ENDED JUNE 30,
1994 1995 1996 1996
----------------- ------------------- --------------- -------------------
(UNAUDITED)
Current tax provision
Federal $ 361,000 $ 708,000 $ 344,000 $ 420,000
State 109,000 193,000 9,000 25,000
--------- --------- --------- ---------
470,000 901,000 353,000 445,000
--------- --------- --------- ---------
Deferred tax provision:
Federal (109,000) (10,000) (310,000) (141,000)
State (33,000) (3,000) (93,000) (42,000)
--------- --------- --------- ---------
(142,000) (13,000) (403,000) (183,000)
--------- --------- --------- ---------
Total provision (benefit) for
income taxes $ 328,000 $ 888,000 $ (50,000) $ 262,000
========= ========= ========= =========
Significant components of the Company's deferred tax assets and
liabilities are as follows:
MARCH 31,
----------------------------- JUNE 30,
1995 1996 1996
------------ ------------- -----------
(UNAUDITED)
Deferred tax assets:
Warranty reserve $ 36,000 $ 219,000 $ 349,000
Accrued vacation 129,000 190,000 209,000
Other 60,000 142,000 180,000
--------- --------- ---------
Total deferred tax assets 225,000 551,000 738,000
Deferred tax liabilities:
Depreciation (91,000) (14,000) (18,000)
--------- --------- ---------
Net deferred tax assets $ 134,000 $ 537,000 $ 720,000
========= ========= =========
F-12
65
A reconciliation of the provision for income taxes to the amount
computed by applying the statutory federal income tax rate to income before
income taxes is as follows:
THREE MONTHS
ENDED
YEAR-ENDED MARCH 31, JUNE 30,
---------------------------------------------- ------------
1994 1995 1996 1996
------------ ------------- ----------- ------------
UNAUDITED
Tax expense at statutory rate $ 276,000 $ 746,000 $ 538,000 $ 252,000
State tax provision (benefit),
net of federal benefit 87,000 153,000 (60,000) 7,000
Research tax credit -- (18,000) (480,000) --
Other (35,000) 7,000 (48,000) 3,000
--------- --------- --------- ---------
$ 328,000 $ 888,000 $ (50,000) $ 262,000
========= ========= ========= =========
The Company's income tax benefit for the fiscal year ended March 31,
1996 was primarily attributable to the utilization of research and development
credits generated in the period and the impact of a favorable United States
Federal judicial decision which clarified the tax law related to the utilization
of research and development credits generated from the Company's funded research
and development.
8. EMPLOYEE BENEFITS
The Company has a voluntary deferred compensation plan under Section
401(k) of the Internal Revenue Code. The Company may make discretionary
contributions to the plan which vest equally over six years. Employees who have
completed 90 days of service and are at least 21 years of age are eligible to
participate in the plan. Participants are entitled, upon termination or
retirement, to their vested portion of the plan assets which are held by an
independent trustee. Discretionary contributions accrued by the Company during
fiscal years 1996, 1995 and 1994 amounted to $444,000, $275,000 and $45,000,
respectively. The cost of administering the plan is not significant.
9. COMMITMENTS
The Company leases office facilities under noncancelable operating
leases with terms ranging from one to five years which expire between March 7,
1997 and August 11, 1999. Certain of the Company's facilities leases contain
option provisions which allow for extension of the lease terms. Rent expense
was $608,000, $493,000 and $387,000 in fiscal years 1996, 1995 and 1994,
respectively.
Future minimum lease payments are as follows:
Year Ending March 31,
---------------------
1997 $ 655,000
1998 650,000
1999 335,000
2000 135,000
================
$ 1,775,000
================
Additionally, the Company enters into long term purchase commitments
with certain of its vendors to purchase materials used to manufacture products
delivered under long term contracts. At March 31, 1996, the Company had
commitments to purchase $2,689,000 and $11,000 of materials in fiscal 1997 and
1998, respectively. Purchases under these contracts totaled $692,000 during the
year ended March 31, 1996.
F-13
66
10. SUBSEQUENT EVENTS (UNAUDITED)
In July 1996, the Company granted certain officers and employees the
opportunity to purchase 118,607 shares of the Company's Common Stock at $4.09
per share. Additionally, the Company granted options to purchase 118,460 shares
of Common Stock to certain officers and employees at an exercise price of $4.09
per share.
The Company currently intends to complete an initial public offering of
its Common Stock. Upon the closing of the offering, after giving effect to the
conversion of the Convertible Preferred Stock and an amendment of the Company's
Amended and Restated Articles of Incorporation to eliminate all references to
the previously outstanding Convertible Preferred Stock, the Company's authorized
Capital Stock will consist of 25,000,000 shares of Common Stock, $0.01 par
value, and 5,000,000 shares of Preferred Stock with terms as determined by the
Board of Directors.
F-14
67
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, ANY SELLING SHAREHOLDERS OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.
--------------------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary..........................
Risk Factors................................
Capitalization..............................
Use of Proceeds.............................
Dividend Policy.............................
Dilution....................................
Selected Financial Data.....................
Management's Discussion and Analysis of
Financial Condition and Results of
Operations... ..........................
Business....................................
Management..................................
Certain Transactions........................
Principal and Selling Shareholders..........
Description of Capital Stock................
Shares Eligible for Future Sale.............
Underwriting................................
Legal Matters...............................
Experts.....................................
Available Information.......................
Index to Financial Statements...............
--------------------
UNTIL ____________, 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
2,200,000 SHARES
VIASAT, INC.
COMMON STOCK
_____________________
PROSPECTUS
____________________
OPPENHEIMER & CO., INC.
NEEDHAM & COMPANY, INC.
UNTERBERG HARRIS
____________, 1996
68
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is an itemized statement of expenses incurred in
connection with this Registration Statement. All such expenses will be paid by
the Company.
Securities and Exchange Commission registration fee... $ 10,469
NASD filing fee....................................... 3,536
NASDAQ NMS listing fee................................ *
Legal fees and expenses............................... *
Accounting fees and expenses.......................... *
Printing and engraving expenses....................... *
Blue Sky fees and expenses............................ *
Transfer agent and registrar fees..................... *
Miscellaneous......................................... *
--------
TOTAL....................................... $650,000
========
- ---------------
* To be filed by amendment.
All of the above items are estimates, except the Securities and Exchange
Commission registration fee and the NASD filing fee.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 204 of the California General Corporation Law (the "CGCL")
provides for the indemnification of directors and officers in terms sufficiently
broad to indemnify directors and officers of the Company under certain
circumstances from liabilities (including reimbursement for expenses incurred)
arising under the Securities Act. The Amended and Restated Articles of
Incorporation and Amended and Restated Bylaws of the Company provide for the
indemnification of directors and officers against monetary damages to the
fullest extent permissible under California law.
The Company's Amended and Restated Articles of Incorporation also
authorize the Company to indemnify its agents (as defined in Section 317 of the
CGCL) for breach of duty to the Company and its shareholders through bylaw
provisions, or through agreements with the agents, or otherwise, in excess of
the indemnification otherwise permitted by Section 317 of the CGCL, subject to
the limits on such excess indemnification set forth in Section 204 of the CGCL.
The general effect of Section 317 of the CGCL and Article V of the Company's
Amended and Restated Bylaws is to provide for indemnification of its agents to
the fullest extent permissible under California law. Reference is also made to
the indemnification provisions of the underwriting agreement which provides for
indemnification by the underwriters of the Company and its officers and
directors for certain liabilities arising under the Securities Act or otherwise.
In addition, the Company intends to enter into separate indemnification
agreements with each of its directors to effectuate the indemnity provisions
described above and to purchase director's and officer's liability insurance.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
(a) Securities sold.
The following table sets forth the date of sale, title and amount of
shares of Common Stock sold by the Company within the past three years which
were not registered under the Securities Act:
II-1
69
Date of Sale Title No. of Shares Offering Price
------------ ----- ------------- --------------
03/01/94 Common Stock 140,832 $ 67,200
10/04/94 Common Stock 114,023 93,270
06/26/95 Common Stock 124,805 170,150
07/01/96 Common Stock 118,607 485,100
------- -------
498,267 $ 815,720
======= =======
In addition, the Company has granted stock options under the 1993 Stock
Option Plan since such plan's inception. For a description of these options to
employees and directors of the Company, see "Management--1993 Stock Option
Plan."
(b) Underwriters and other purchasers.
Underwriters were not retained in connection with the sale of any of
the Company's currently outstanding securities. All sales were made in private
sales to employees or directors of the Company.
(c) Consideration.
The Common Stock was sold by the Company for cash in the amounts set
forth in Item 15(a) above.
(d) Exemption from registration claimed.
The Company relied upon an exemption from registration under Section
4(2) of the Securities Act in connection with each of these transactions. All
sales were made through non-public offerings.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
EXHIBIT
NUMBERS DESCRIPTION OF EXHIBIT
------- ----------------------
1.1 Form of Underwriting Agreement.(1)
3.1 Amended and Restated Articles of Incorporation.(2)
3.2 Amended and Restated Bylaws.(2)
4.1 Form of Common Stock Certificate.(2)
5.1 Opinion of Latham & Watkins.(2)
10.1 Preferred Stock Purchase Agreement, dated as of June 11, 1986, by and among the Company,
Southern California Ventures, Robert W. Johnson and Thomas A. Tisch.(1)
10.2 Shareholders' Agreement, dated June 11, 1986, by and among Southern California Ventures, Robert
W. Johnson, Thomas A. Tisch, the Company, Mark D. Dankberg, Steven R. Hart and Mark J. Miller.(1)
10.3 Form of Stock Restriction Agreement by and between the Company and each shareholder of the
Company.(1)
10.4 Form of Invention and Confidential Disclosure Agreement by and between the Company and each
employee of the Company.(1)
10.5 ViaSat, Inc. 1993 Stock Option Plan (the "1993 Stock Option Plan").(1)
II-2
70
EXHIBIT
NUMBERS DESCRIPTION OF EXHIBIT
- ------- ----------------------
10.6 Form of Incentive Stock Option Agreement under the 1993 Stock Option Plan.(1)
10.7 Form of Nonqualified Stock Option Agreement under the 1993 Stock Option Plan.(1)
10.8 The 1996 Equity Participation Plan of ViaSat, Inc. (the "1996 Equity Participation Plan").(2)
10.9 Form of Incentive Stock Option Agreement under the 1996 Equity Participation Plan.(2)
10.10 Form of Nonqualified Stock Option Agreement under the 1996 Equity Participation Plan.(2)
10.11 The ViaSat, Inc. Employee Stock Purchase Plan.(2)
10.12 ViaSat, Inc. 401(k) Profit Sharing Plan.(1)
10.13 Loan Agreement, dated as of September 15, 1995, by and between the Company and Union Bank.(1)
10.14 Business Loan Agreement, dated as of April 5, 1994, as amended, by and between the Company and
Scripps Bank.(1)
10.15 Equipment Financing Agreement, dated April 28, 1994, by and between the Company and Heritage
Leasing Capital.(1)
10.16 Equipment Financing Agreement, dated May 13, 1994, by and between the Company and Heritage
Leasing Capital.(1)
10.17 Equipment Financing Agreement, dated September 19, 1994, by and between the Company and
Heritage Leasing Capital.(1)
10.18 Equipment Financing Agreement, dated December 6, 1994, by and between the Company and Heritage
Leasing Capital.(1)
10.19 Sublease, dated as of August 20, 1993, by and between Whittaker Corporation and the Company
(2290 Cosmos Court, Carlsbad, California).(1)
10.20 Lease Agreement, dated December 8, 1994, by and between The Campus, LLC and the Company (The
Campus, Carlsbad, California).(1)
10.21 Lease, dated March 21, 1995, by and between Nagog Development Company and the Company (125
Nagog Park, Acton, Massachusetts).(1)
10.22 Lease, dated March 8, 1996, by and between Harry and Wendy Brandon and the Company (1900 S.
Harbor City Blvd., Melbourne, Florida).(1)
10.23 Basic Ordering Agreement, dated November 8, 1994, as amended, by and between the Company and
AT&T acting through its Tridom division.(1)
10.24 Supply & Services Contract, dated June 2, 1996, by and between HCL Comnet Systems and Services
Limited and the Company.(2)
10.25 Basic Ordering Agreement Subcontract, dated March 4, 1994, by and between Magnavox Electronic
Systems Company and the Company.(2)
10.26 Award/Contract, effective March 29, 1996, as amended, issued by Electronic Systems Center/MCK
Air Force Materiel Command, USAF to the Company.(2)
10.27 Award/Contract, effective October 2, 1995, issued by Electronic Systems Center/
MCK Air Force Materiel Command, USAF to the Company.(2)
II-3
71
EXHIBIT
NUMBERS DESCRIPTION OF EXHIBIT
- ------- ----------------------
10.28 Subcontract, dated May 1, 1996, by and between Lockheed Martin Tactical Defense Systems and the
Company.(2)
10.29 Award/Contract, effective September 29, 1993, as amended, issued by Information Technology
Acquisition Center to the Company.(2)
10.30 Letter Contract, dated October 21, 1994, by and between McDonnell Douglas Corporation and the
Company.(2)
10.31 Award/Contract, effective July 30, 1991, issued by Electronic Systems Division Air Force
Systems Command, USAF to the Company.(2)
10.32 Award/Contract, effective September 27, 1993, as amended, issued by Contracting Officer Naval
Research Laboratory to the Company.(2)
10.33 Award Contract, effective September 21, 1994, as amended, issued by Technical Contract
Management Office to the Company.(2)
10.34 Fixed Price Contract, dated as of October 18, 1995, by and between the Company and
Spectragraphics.(1)
11.1 Statement re computation of per share earnings.(1)
21.1 Subsidiaries.(1)
23.1 Consent of Price Waterhouse LLP.(1)
23.2 Consent of Latham & Watkins (contained in Exhibit 5.1).
24.1 Power of Attorney (contained on signature page).
27.1 Financial Data Schedule.(1)
- ---------------
(1) Filed herewith.
(2) To be filed by amendment.
(b) Financial Statement Schedules.
All required information is set forth in the financial statements
included in the Prospectus constituting part of this Registration Statement.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the 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, 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.
II-4
72
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities 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 Securities 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-5
73
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Carlsbad,
State of California, on October 1, 1996.
ViaSat, Inc.
By: /s/ MARK D. DANKBERG
---------------------------------
Mark D. Dankberg
Chairman, President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Mark D. Dankberg and Gregory D.
Monahan, his true and lawful attorney-in-fact, each acting alone, with full
power of substitution and resubstitution for him and in his name, place and
stead, in any and all capacities to sign any and all amendments including
post-effective amendments and any registration statement filed pursuant to Rule
462(b) under the Securities Act of 1933 to this registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorneys-in-fact or their substitutes, each acting
alone, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ MARK D. DANKBERG Chairman of the Board, President and Chief October 1, 1996
- --------------------------------------- Executive Officer (Principal Executive
Mark D. Dankberg Officer)
/s/ GREGORY D. MONAHAN Vice President, Chief Financial Officer and October 1, 1996
- --------------------------------------- General Counsel (Principal Financial Officer
Gregory D. Monahan and Principal Accounting Officer)
/s/ ROBERT W. JOHNSON
- --------------------------------------- Director October 1, 1996
Robert W. Johnson
/s/ JEFFREY M. NASH Director October 1, 1996
- ---------------------------------------
Jeffrey M. Nash
/s/ B. ALLEN LAY Director October 1, 1996
- ---------------------------------------
B. Allen Lay
II-6
74
EXHIBIT INDEX
The following exhibits are filed as part of this Form S-1 Registration
Statement.
EXHIBIT
NUMBERS DESCRIPTION OF EXHIBIT
- ------- ----------------------
1.1 Form of Underwriting Agreement.(1)
3.1 Amended and Restated Articles of Incorporation.(2)
3.2 Amended and Restated Bylaws.(2)
4.1 Form of Common Stock Certificate.(2)
5.1 Opinion of Latham & Watkins.(2)
10.1 Preferred Stock Purchase Agreement, dated as of June 11, 1986, by and among the Company,
Southern California Ventures, Robert W. Johnson and Thomas A. Tisch.(1)
10.2 Shareholders' Agreement, dated June 11, 1986, by and among Southern California Ventures, Robert
W. Johnson, Thomas A. Tisch, the Company, Mark D. Dankberg, Steven R. Hart and Mark J. Miller.(1)
10.3 Form of Stock Restriction Agreement by and between the Company and each shareholder of the
Company.(1)
10.4 Form of Invention and Confidential Disclosure Agreement by and between the Company and each
employee of the Company.(1)
10.5 ViaSat, Inc. 1993 Stock Option Plan (the "1993 Stock Option Plan").(1)
10.6 Form of Incentive Stock Option Agreement under the 1993 Stock Option Plan.(1)
10.7 Form of Nonqualified Stock Option Agreement under the 1993 Stock Option Plan.(1)
10.8 The 1996 Equity Participation Plan of ViaSat, Inc. (the "1996 Equity Participation Plan").(2)
10.9 Form of Incentive Stock Option Agreement under the 1996 Equity Participation Plan.(2)
10.10 Form of Nonqualified Stock Option Agreement under the 1996 Equity Participation Plan.(2)
10.11 The ViaSat, Inc. Employee Stock Purchase Plan.(2)
10.12 ViaSat, Inc. 401(k) Profit Sharing Plan.(1)
10.13 Loan Agreement, dated as of September 15, 1995, by and between the Company and Union Bank.(1)
10.14 Business Loan Agreement, dated as of April 5, 1994, as amended, by and between the Company and
Scripps Bank.(1)
10.15 Equipment Financing Agreement, dated April 28, 1994, by and between the Company and Heritage
Leasing Capital.(1)
10.16 Equipment Financing Agreement, dated May 13, 1994, by and between the Company and Heritage
Leasing Capital.(1)
10.17 Equipment Financing Agreement, dated September 19, 1994, by and between the Company and
Heritage Leasing Capital.(1)
10.18 Equipment Financing Agreement, dated December 6, 1994, by and between the Company and Heritage
Leasing Capital.(1)
10.19 Sublease, dated as of August 20, 1993, by and between Whittaker Corporation and the Company
(2290 Cosmos Court, Carlsbad, California).(1)
75
EXHIBIT
NUMBERS DESCRIPTION OF EXHIBIT
- ------- ----------------------
10.20 Lease Agreement, dated December 8, 1994, by and between The Campus, LLC and the Company (The
Campus, Carlsbad, California).(1)
10.21 Lease, dated March 21, 1995, by and between Nagog Development Company and the Company (125
Nagog Park, Acton, Massachusetts).(1)
10.22 Lease, dated March 8, 1996, by and between Harry and Wendy Brandon and the Company (1900 S.
Harbor City Blvd., Melbourne, Florida).(1)
10.23 Basic Ordering Agreement, dated November 8, 1994, as amended, by and between the Company and
AT&T acting through its Tridom division.(1)
10.24 Supply & Services Contract, dated June 2, 1996, by and between HCL Comnet Systems and Services
Limited and the Company.(2)
10.25 Basic Ordering Agreement Subcontract, dated March 4, 1994, by and between Magnavox Electronic
Systems Company and the Company.(2)
10.26 Award/Contract, effective March 29, 1996, as amended, issued by Electronic Systems Center/MCK
Air Force Materiel Command, USAF to the Company.(2)
10.27 Award/Contract, effective October 2, 1995, issued by Electronic Systems Center/MCK Air Force
Materiel Command, USAF to the Company.(2)
10.28 Subcontract, dated May 1, 1996, by and between Lockheed Martin Tactical Defense Systems and the
Company.(2)
10.29 Award/Contract, effective September 29, 1993, as amended, issued by Information Technology
Acquisition Center to the Company.(2)
10.30 Letter Contract, dated October 21, 1994, by and between McDonnell Douglas Corporation and the
Company.(2)
10.31 Award/Contract, effective July 30, 1991, issued by Electronic Systems Division Air Force
Systems Command, USAF to the Company.(2)
10.32 Award/Contract, effective September 27, 1993, as amended, issued by Contracting Officer Naval
Research Laboratory to the Company.(2)
10.33 Award Contract, effective September 21, 1994, as amended, issued by Technical Contract
Management Office to the Company.(2)
10.34 Fixed Price Contract, dated as of October 18, 1995, by and between the Company and
Spectragraphics.(1)
11.1 Statement re computation of per share earnings.(1)
21.1 Subsidiaries.(1)
23.1 Consent of Price Waterhouse LLP.(1)
23.2 Consent of Latham & Watkins (contained in Exhibit 5.1).
24.1 Power of Attorney (contained on signature page).
27.1 Financial Data Schedule.(1)
- ---------------
(1) Filed herewith.
(2) To be filed by amendment.
1
EXHIBIT 1.1
_____________ Shares
VIASAT, INC.
Common Stock
UNDERWRITING AGREEMENT
September __, 1996
Oppenheimer & Co., Inc.Needham & Company, Inc.
Volpe, Welty & Company
c/o Oppenheimer & Co., Inc.
Oppenheimer Tower
World Financial Center
New York, New York 10281
On behalf of the several Underwriters named on Schedule I attached hereto.
Ladies and Gentlemen:
ViaSat, Inc., a California corporation (the "Company"), and the selling
shareholders named on Schedule II attached to this Agreement (the "Selling
Shareholders") propose to sell to you and the other underwriters named on
Schedule I attached to this Agreement (the "Underwriters"), for whom you are
acting as Representatives, an aggregate of _________ shares (the "Firm Shares")
of the Company's Common Stock, $.01 par value (the "Common Stock"). Of the
_________ Firm Shares, _____________ are to be issued and sold by the Company
and _____________ are to be sold by the Selling Shareholders. In addition, the
Company proposes to grant to the Underwriters an option to purchase up to an
additional _________ shares (the "Option Shares") of Common Stock solely for the
purpose of covering over-allotments in connection with the sale of the Firm
Shares. The Firm Shares and the Option Shares are together called the "Shares."
2
1. Sale and Purchase of the Shares. On the basis of the
representations, warranties and agreements contained in, and subject to the
terms and conditions of, this Agreement:
(a) The Company and the Selling Shareholders agree severally and
not jointly, to sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase, at $[ ]
per share (the "Initial Price"), the number of Firm Shares (adjusted by
the Representatives to eliminate fractions) which bears the same
proportion to the total number of Firm Shares to be sold by the Company
or the Selling Shareholders, as the case may be, as the number of Firm
Shares set forth opposite the name of such Underwriter on Schedule I
attached to this Agreement bears to the total number of Firm Shares to
be sold by the Company and the Selling Shareholders.
(b) The Selling Shareholders grant to the Underwriters an option to
purchase, severally and not jointly, all or any part of the Option
Shares at the Initial Price. The number of Option Shares to be
purchased by each Underwriter shall be the same percentage (adjusted by
the Representatives to eliminate fractions) of the total number of
Option Shares to be purchased by the Underwriters as such Underwriter
is purchasing of the Firm Shares. Such option may be exercised only to
cover over-allotments in the sales of the Firm Shares by the
Underwriters and may be exercised in whole or in part at any time on or
before 12:00 noon, New York City time, on the business day before the
Firm Shares Closing Date (as defined below), and [ONLY ONCE] thereafter
within 30 days after the date of this Agreement, in each case upon
written or facsimile notice, or verbal or telephonic notice confirmed
by written or facsimile notice, by the Representatives to the Company
no later than 12:00 noon, New York City time, on the business day
before the Firm Shares Closing Date or at least two business days
before the Option Shares Closing Date (as defined below), as the case
may be, setting forth the number of Option Shares to be purchased and
the time and date (if other than the Firm Shares Closing Date) of such
purchase.
2. Delivery and Payment. Delivery of the certificates for the Firm
Shares shall be made by the Company and the Custodian (as hereinafter defined)
on behalf of the Selling Shareholders to the Representatives for the respective
accounts of the Underwriters, and payment of the purchase price by certified or
official bank check or checks payable in New York Clearing House (next day)
funds to the Company and the Custodian, respectively, shall take place at the
offices of Oppenheimer & Co., Inc., Oppenheimer Tower, World Financial Center,
New York, New York 10281, at 10:00 a.m., New York City time, on the third
business day following the date of this Agreement, provided, however, that if
the Shares sold hereunder are priced and this Agreement is entered into after
4:30 p.m., New York City time, on any business day, payment and delivery in
respect of the Firm Shares shall take place on the fourth business day following
the date of this Agreement; in either case unless another time shall be
2
3
agreed upon by the Company, the Selling Shareholders and the Representatives
(such time and date of delivery and payment are called the "Firm Shares Closing
Date").
In the event the option with respect to the Option Shares is exercised,
delivery of the certificates for the Option Shares shall be made by the Company
to the Representatives for the respective accounts of the Underwriters, and
payment of the purchase price by certified or official bank check or checks
payable in New York Clearing House (next day) funds to the Company shall take
place at the offices of Oppenheimer & Co., Inc. specified above at the time and
on the date (which may be the same date as, but in no event shall be earlier
than, the Firm Shares Closing Date) specified in the notice referred to in
Section 1(b) (such time and date of delivery and payment are called the "Option
Shares Closing Date"). The Firm Shares Closing Date and the Option Shares
Closing Date are called, individually, a "Closing Date" and, together, the
"Closing Dates."
Certificates evidencing the Shares shall be registered in such names
and shall be in such denominations as the Representatives shall request at least
two full business days before the Firm Shares Closing Date or, in the case of
Option Shares, [ON THE DAY OF NOTICE OF EXERCISE OF THE OPTION,] as described in
Section l(b) and shall be made available to the Representatives for checking and
packaging, at such place as is designated by the Representatives, on the full
business day before the Firm Shares Closing Date (or the Option Shares Closing
Date in the case of the Option Shares).
3. Registration Statement and Prospectus; Public Offering. The Company
has prepared in conformity with the requirements of the Securities Act of 1933,
as amended (the "Securities Act"), and the rules and regulations thereunder (the
"Rules") adopted by the Securities and Exchange Commission (the "Commission") a
registration statement on Form S-1 (No. 333-[ ]), including a preliminary
prospectus relating to the Shares, and has filed with the Commission the
Registration Statement (as hereinafter defined) and such amendments thereof as
may have been required to the date of this Agreement. Copies of such
Registration Statement (including all amendments thereof) and of the related
preliminary prospectus have heretofore been delivered by the Company to you. The
term "preliminary prospectus" means the preliminary prospectus (as described in
Rule 430 of the Rules) included at any time as a part of the Registration
Statement or filed with the Commission by the Company with the consent of the
Representatives pursuant to Rule 424(a) of the Rules. The Registration
Statement, as amended at the time and on the date it becomes effective (the
"Effective Date"), including all exhibits and information, if any, deemed to be
part of the Registration Statement pursuant to Rule 424(b) and Rule 430A of the
Rules, is called the "Registration Statement." The term "Prospectus" means the
prospectus in the form first used to confirm sales of the Shares (whether such
prospectus was included in the Registration Statement at the time of
effectiveness or was subsequently filed with the Commission pursuant to Rule
424(b) of the Rules). If the Company files a registration statement to register
a portion of the Shares and relies on Rule 462(b) for such registration
statement to become effective upon filing with the Commission (the "Rule 462(b)
Registration Statement"), then any
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reference to the "Registration Statement" herein shall be deemed to include both
the registration statement referred to above (No. 333-_____) and the Rule 462(b)
Registration Statement, as each such registration statement may be amended
pursuant to the Securities Act.
The Company and the Selling Shareholders understand that the
Underwriters propose to make a public offering of the Shares, as set forth in
and pursuant to the Prospectus, as soon after the Effective Date and the date of
this Agreement as the Representatives deem advisable. The Company and the
Selling Shareholders hereby confirm that the Underwriters and dealers have been
authorized to distribute or cause to be distributed each preliminary prospectus
and are authorized to distribute the Prospectus (as from time to time amended or
supplemented if the Company furnishes amendments or supplements thereto to the
Underwriters).
4. Representations and Warranties of the Company and the Selling
Shareholders. The Company and the Selling Shareholders hereby, jointly and
severally, represent and warrant to each Underwriter as follows:
(a) On the Effective Date, the Registration Statement and all other
registration statements and reports filed with the Commission by the
Company complied, and on the date of the Prospectus, on the date any
post-effective amendment to the Registration Statement shall become
effective, on the date any supplement or amendment to the Prospectus is
filed with the Commission, at all times that a prospectus must be
delivered by the Underwriters pursuant to the Securities Act and on
each Closing Date, the Registration Statement, the Prospectus (and any
amendment thereof or supplement thereto) and all other registration
statements and reports filed with the Commission by the Company will
comply, in all material respects, with the applicable provisions of the
Securities Act and the Rules and the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the rules and regulations
thereunder adopted by the Commission; the Registration Statement did
not, as of the Effective Date, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading; and on the other dates referred to above neither the
Registration Statement nor the Prospectus, nor any amendment thereof or
supplement thereto, will contain any untrue statement of a material
fact or will omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading. When any related preliminary prospectus was first filed
with the Commission (whether filed as part of the Registration
Statement or any amendment thereto or pursuant to Rule 424(a) of the
Rules) and when any amendment thereof or supplement thereto was first
filed with the Commission, such preliminary prospectus, as amended or
supplemented, complied in all material respects with the applicable
provisions of the Securities Act and the Rules and did not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading.
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Notwithstanding the foregoing, the Company and the Selling Shareholders
make no representation or warranty as to the last paragraph of the
cover page of the Prospectus, the paragraph with respect to
stabilization on the inside front cover page of the Prospectus and the
statements contained under the caption "Underwriting" in the Prospectus
(to the extent such statements relate to the Underwriters). The Company
and each of the Selling Shareholders acknowledge that the statements
referred to in the previous sentence constitute the only information
furnished in writing by the Representatives on behalf of the several
Underwriters specifically for inclusion in the Registration Statement,
any preliminary prospectus or the Prospectus.
(b) The financial statements of the Company and [ITS SUBSIDIARY (AS
DEFINED BELOW)] (including all notes and schedules thereto) included in
the Registration Statement and the Prospectus comply as to form in all
material respects with the requirements of the Securities Act and the
Rules and present fairly on a consolidated basis the financial
position, the results of operations and cash flows and the
shareholders' equity and the other information purported to be shown
therein of the Company [AND ITS SUBSIDIARY] at the respective dates and
for the respective periods to which they apply; and such financial
statements have been prepared in conformity with generally accepted
accounting principles, consistently applied throughout the periods
involved, and all adjustments necessary for a fair presentation of the
results for such periods have been made; and the other financial and
statistical information and the supporting schedules included in the
Prospectus and in the Registration Statement present fairly, in all
material respects, the information required to be stated therein.
(c) Price Waterhouse LLP, whose reports are filed with the
Commission as a part of the Registration Statement, are and, during the
periods covered by their reports, were independent public accountants
as required by the Securities Act and the Rules.
(d) The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the State of
California. [EXCEPT FOR THE COMPANY'S SUBSIDIARY LISTED IN EXHIBIT 21
TO THE REGISTRATION STATEMENT (THE "SUBSIDIARY"),] The Company does not
control, directly or indirectly, any corporation, partnership, joint
venture, association or other business organization. [THE SUBSIDIARY
HAS BEEN DULY ORGANIZED AND IS VALIDLY EXISTING AS A CORPORATION IN
GOOD STANDING UNDER THE LAWS OF THE JURISDICTION OF ITS ORGANIZATION.]
[EACH OF] The Company [AND ITS SUBSIDIARY] is duly qualified and in
good standing as a foreign corporation in each jurisdiction in which
the character or location of its assets or properties (owned, leased or
licensed) or the nature of its business makes such qualification
necessary or desirable, except for such jurisdictions where the failure
to so qualify would not have a material adverse effect on the assets or
properties, business, results of operations, prospects or condition
(financial or otherwise) of the Company [AND ITS SUBSIDIARY,
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TAKEN AS A WHOLE.] [EACH OF] The Company [AND ITS SUBSIDIARY] has all
requisite power and authority, and all necessary authorizations,
approvals, consents, orders, licenses, certificates and permits of and
from all governmental or regulatory agencies, bodies or authorities,
[INCLUDING THE FEDERAL COMMUNICATIONS COMMISSION (THE "FCC")] or any
other person or entity, to own, lease and license its assets and
properties and conduct its businesses as now being conducted and as
described in the Registration Statement and the Prospectus, except for
such authorizations, approvals, consents, orders, licenses,
certificates and permits the failure to so obtain would not have a
material adverse effect upon the assets or properties, business,
results of operations, prospects or condition (financial or otherwise)
of the Company [AND ITS SUBSIDIARY, TAKEN AS A WHOLE]; no such
authorization, approval, consent, order, license, certificate or permit
contains a materially burdensome restriction other than as disclosed in
the Registration Statement and the Prospectus; and the Company has all
such corporate power and authority, and such authorizations, approvals,
consents, orders, licenses, certificates and permits to enter into,
deliver and perform this Agreement and to authorize, issue and sell the
Shares (except as may be required under the Securities Act and state
Blue Sky or securities laws).
(e) Neither the Commission nor the Blue Sky or securities
authorities of any jurisdiction has issued an order suspending the
effectiveness of the Registration Statement, preventing or suspending
the use of any preliminary prospectus, the Prospectus, the Registration
Statement, or any amendment or supplement thereto, refusing to permit
the effectiveness of the Registration Statement or suspending the
registration or qualification of the Shares, nor has any of such
authorities instituted or threatened to institute any proceedings with
respect to such an order in any jurisdiction in which the Shares are to
be sold.
(f) [EACH OF] The Company [AND ITS SUBSIDIARY] owns, or
possesses adequate and enforceable rights to use, all trademarks,
trademark applications, trade names, service marks, copyrights,
copyright applications, licenses, know-how and other similar rights and
proprietary knowledge (collectively, "Intangibles") necessary or
desirable for the conduct of its business as described in the
Registration Statement and the Prospectus. Neither the Company nor its
Subsidiary has received any notice of, or is aware of, any infringement
of or conflict with asserted rights of others with respect to any
Intangibles which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a material adverse
effect upon the assets or properties, business, results of operations,
prospects or condition (financial or otherwise) of the Company [AND ITS
SUBSIDIARY, TAKEN AS A WHOLE].
(g) [EACH OF] The Company [AND ITS SUBSIDIARY] has good title
to each of the items of real and personal property which are reflected
in the financial statements referred to in Section 4(c) or are referred
to in the Registration Statement and the Prospectus as being owned by
it and valid and enforceable leasehold interests in each of the items
of real and personal property which
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are referred to in the Registration Statement and the Prospectus as
being leased by it, in each case free and clear of all liens,
encumbrances, claims, security interests and defects, other than those
described in the Registration Statement and the Prospectus and those
which do not and will not have a material adverse effect upon the
assets or properties, business, results of operations, prospects or
condition (financial or otherwise) of the Company [AND ITS SUBSIDIARY,
TAKEN AS A WHOLE].
(h) There is no litigation or governmental or other proceeding
or investigation before any court or before or by any public body,
agency or authority, including the FCC, pending or, to the best
knowledge of the Company after due inquiry, threatened (and the Company
does not know of any basis therefor) against, or involving the assets,
properties or business of, the Company [OR ITS SUBSIDIARY] which would
materially adversely affect the value or the operation of any such
assets or properties or the business, results of operations, prospects
or condition (financial or otherwise) of the Company [AND ITS
SUBSIDIARY, TAKEN AS A WHOLE], or which would prevent the consummation
of the transactions contemplated by this Agreement or is required to be
disclosed in the Prospectus.
(i) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, except as
described therein: (i) there has not been any material adverse change
in the assets or properties, business, results of operations, prospects
or condition (financial or otherwise) of the Company [OR OF ITS
SUBSIDIARY], whether or not arising from transactions in the ordinary
course of business; (ii) [NEITHER] the Company [NOR ITS SUBSIDIARY] has
not sustained any material loss or interference with its assets,
businesses or properties (whether owned or leased) from fire,
explosion, earthquake, hurricane, flood or other calamity, whether or
not covered by insurance, or from any labor dispute or any court or
legislative or other governmental or regulatory action, order or
decree; and (iii) since the date of the latest balance sheet included
in the Registration Statement and the Prospectus, except as reflected
therein, [NEITHER] the Company [NOR ITS SUBSIDIARY] has not (A) issued
any securities or incurred any liability or obligation, direct or
contingent, for borrowed money, except such liabilities or obligations
incurred in the ordinary course of business, (B) entered into any
transaction not in the ordinary course of business or (C) declared or
paid any dividend or made any distribution on any shares of its stock
or redeemed, purchased or otherwise acquired or agreed to redeem,
purchase or otherwise acquire any shares of its stock or other
securities.
(j) There is no document or contract of a character required
to be described in the Registration Statement and the Prospectus or to
be filed as an exhibit to the Registration Statement which is not
described or filed as required. Each agreement listed in the Exhibits
to the Registration Statement is in full force and effect and is valid
and enforceable by and against the Company or its Subsidiary, as the
case may be, in accordance with its terms, assuming the
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due authorization, execution and delivery thereof by each of the other
parties thereto. Neither the Company [NOR ITS SUBSIDIARY,] nor, to the
best knowledge of the Company after due inquiry, any other party is in
default in the observance or performance of any term or obligation to
be performed by it under any such agreement, and no event has occurred
which, with notice or lapse of time or both, would constitute such a
default, in any such case which default or event would have a material
adverse effect on the assets or properties, business, results of
operations, prospects or condition (financial or otherwise) of the
Company [AND ITS SUBSIDIARY, TAKEN AS A WHOLE]. No default exists, and
no event has occurred which, with notice or lapse of time or both,
would constitute a default, in the due performance and observance of
any term, covenant or condition, by the Company [OR ITS SUBSIDIARY] of
any other agreement or instrument to which the Company [OR ITS
SUBSIDIARY] is a party or by which it or its assets, properties or
business may be bound or affected which default or event would have a
material adverse effect on the assets or properties, business, results
of operations, prospects or condition (financial or otherwise) of the
Company [AND ITS SUBSIDIARY, TAKEN AS A WHOLE].
(k) [NEITHER] The Company [NOR ITS SUBSIDIARY] is not in
violation of any term or provision of its charter or by-laws, or of any
franchise, license, permit, judgment, decree, order, statute, rule or
regulation, where the consequences of such violation could have a
material adverse effect on the assets or properties, business, results
of operations, prospects or condition (financial or otherwise) of the
Company [AND ITS SUBSIDIARY, TAKEN AS A WHOLE].
(l) The Company [AND ITS SUBSIDIARY] has obtained all
authorizations, approvals, consents, orders, licenses, certificates and
permits which are required under federal, state and local statutes,
rules and regulations relating to pollution or protection of the
environment, including laws relating to emissions, discharges, releases
or threatened releases of pollutants, contaminants or hazardous,
radioactive or toxic materials or wastes into ambient air, surface
water, ground water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of pollutants, contaminants or hazardous, radioactive or
toxic materials or wastes. The Company [AND ITS SUBSIDIARY] complies in
all respects with all terms and conditions of the authorizations,
approvals, consents, orders, licenses, certificates and permits, and
are also in full compliance with all other limitations, restrictions,
obligations, schedules and timetables contained in such statutes, rules
and regulations or contained in any code, plan, order, decree,
judgment, notice or demand letter issued, entered, promulgated or
approved thereunder. Except as described in the Registration Statement
and the Prospectus, [NEITHER] the Company [NOR ITS SUBSIDIARY] is not
aware of, nor has the Company [OR ITS SUBSIDIARY] received notice of,
any past, present or future events, conditions, circumstances,
activities, practices, incidents, actions or plans which may interfere
with or prevent continued compliance, or which may give rise to any
common law or legal liability, or otherwise form the basis of any
claim, action, suit, proceeding, hearing or
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investigation, based on or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling,
or the emission, discharge, release or threatened release into the
environment, of any pollutant, contaminant or hazardous, radioactive or
toxic material or waste.
(m) Neither the execution, delivery and performance of this
Agreement by the Company nor the consummation of any of the
transactions contemplated hereby (including, without limitation, the
issuance and sale by the Company of the Shares and the sale by the
Selling Shareholders of the Shares to be sold by them) will give rise
to a right to terminate or accelerate the due date of any payment due
under, or conflict with or result in the breach or violation of any
term or provision of, or constitute a default (or an event which with
notice or lapse of time or both would constitute a default) under, or
require any consent or waiver under, or result in the execution or
imposition of any lien, charge or encumbrance upon any properties or
assets of the Company [OR ITS SUBSIDIARY] pursuant to the terms of, any
indenture, mortgage, deed of trust, note or other agreement or
instrument to which the Company [OR ITS SUBSIDIARY] is a party or by
which the Company or [ITS SUBSIDIARY] is bound or to which the Company
[OR ITS SUBSIDIARY] or any of its properties, assets or businesses is
subject or affected, or any franchise, license, consent, certificate,
permit, judgment, decree, order, notice, plan, code, statute, rule or
regulation, including, without limitation, the Communications Act,
applicable to the Company [OR ITS SUBSIDIARY] or violate any term or
provision of the Articles of Incorporation, as amended, and By-laws, as
amended, of the Company [OR THE CHARTER OR BY-LAWS OF ITS SUBSIDIARY],
except for such consents or waivers which have already been obtained
and are in full force and effect.
(n) The Company has authorized and outstanding capital stock
as set forth under the captions "Capitalization" and "Description of
Capital Stock" in the Prospectus. All of the outstanding Common Stock
and Series A Preferred Stock, par value, $.01 per share, have been duly
and validly issued and are fully paid and nonassessable and none of
them was issued in violation of any preemptive or other similar right.
[THE COMPANY OWNS ALL OF THE SHARES OF CAPITAL STOCK OR OTHER
BENEFICIAL INTERESTS OF ITS SUBSIDIARY, FREE AND CLEAR OF ALL LIENS,
CHARGES, CLAIMS, SECURITY INTERESTS, ENCUMBRANCES, SHAREHOLDERS'
AGREEMENTS, VOTING TRUSTS AND ANY OTHER RESTRICTIONS WHATSOEVER.] The
Shares to be issued and sold by the Company, when issued and sold by
the Company pursuant to this Agreement and the Shares to be sold by the
Selling Shareholders, when sold by the Selling Shareholders pursuant to
this Agreement, will be duly and validly issued, fully paid and
nonassessable and none of them will be issued in violation of any
preemptive or other similar right. Except as disclosed in the
Registration Statement and the Prospectus, there is no outstanding
option, warrant or other right calling for the issuance of, and there
is no commitment, plan or arrangement to issue, any share of stock of
the Company [OR ITS SUBSIDIARY], or any security convertible into, or
exercisable or
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exchangeable for, such stock. The Common Stock and the Shares conform
in all material respects to all statements in relation thereto
contained in the Registration Statement and the Prospectus.
(o) Except as described in the Registration Statement and the
Prospectus, no holder of any security of the Company has the right to
have any security owned by such holder included in the Registration
Statement or to demand registration of any security owned by such
holder during the period ending 180 days after the date of this
Agreement.
(p) Each shareholder listed on Schedule III hereto, director
and executive officer of the Company has delivered to the
Representatives his or her enforceable written agreement that, except,
in the case of the Selling Shareholders, for the sale of the Shares to
be sold by the Selling Shareholders pursuant to the Registration
Statement, he, she or it will not, for a period of 180 days after the
date of this Agreement, sell (including "short sales"), loan, pledge,
assign, transfer, encumber, distribute, grant or otherwise transfer or
dispose of, directly or indirectly (collectively, "Transfer"), or
offer, contract or otherwise agree to Transfer, any Common Stock or any
other securities convertible into or exchangeable for Common Stock or
any other equity securities of the Company owned by him, her or it,
without the prior written consent of the Representatives, except for
(i) sales to the several Underwriters pursuant to this Agreement or
(ii) pursuant to will or the laws of intestate succession, provided the
transferee thereof agrees in writing to be bound by such restrictions.
(q) All necessary corporate action has been duly and validly
taken by the Company to authorize the execution, delivery and
performance of this Agreement and the issuance and sale of the Shares.
This Agreement has been duly and validly authorized, executed and
delivered by the Company and constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance
with its terms, except (i) as the enforceability thereof may be limited
by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles and
(ii) to the extent that rights to indemnity or contribution under this
Agreement may be limited by Federal and state securities laws or the
public policy underlying such laws.
(r) [NEITHER] The Company [NOR ITS SUBSIDIARY] is not involved
in any labor dispute nor, to the best knowledge of the Company after
due inquiry, is any such dispute threatened, which dispute would have a
material adverse effect on the assets or properties, business, results
of operations, prospects or condition (financial or otherwise) of the
Company [AND ITS SUBSIDIARY, TAKEN AS A WHOLE]; and the Company is not
aware of any existing or imminent labor disturbance by the employees of
any of its principal suppliers, manufacturers or
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contractors which would have a material adverse effect on the assets or
properties, business, results of operations, prospects or condition
(financial or otherwise) of the Company [AND ITS SUBSIDIARY, TAKEN AS A
WHOLE].
(s) No transaction has occurred between or among the Company
[OR ITS SUBSIDIARY] and any of its [OR THEIR] officers, directors or
shareholders, as the case may be, or any affiliate or affiliates of any
such officer, director or shareholder, that is required to be described
in and is not described in the Registration Statement and the
Prospectus.
(t) [NEITHER] The Company [NOR ITS SUBSIDIARY] has not taken,
nor will it take, directly or indirectly, any action designed to or
which might reasonably be expected to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the Common Shares to
facilitate the sale or resale of any of the Shares.
(u) [EACH OF] The Company [AND ITS SUBSIDIARY] has filed all
Federal, state, local and foreign tax returns which are required to be
filed through the date hereof, or has received valid extensions
thereof, and has paid all taxes shown on such returns and all
assessments received by it to the extent that the same have become due.
(v) The Shares have been duly authorized for quotation and
trading on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") National Market.
(w) The Company has complied with all of the requirements and
filed the required forms as specified in Florida Statutes Section
517.075.
(x) The Company is not an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for,
an "investment company," as each such term is defined in the Investment
Company Act of 1940, as amended.
(y) [EACH OF] The Company [AND ITS SUBSIDIARY] is insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are customary in the business in which it
is engaged; and the Company has no reason to believe that it [OR ITS
SUBSIDIARY] will not be able to renew its existing insurance coverage
as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost
that would not materially and adversely affect the assets or
properties, business, results of operations, prospects or condition
(financial or otherwise) of the Company [AND ITS SUBSIDIARY, TAKEN AS A
WHOLE].
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(z) [NEITHER] The Company [NOR ITS SUBSIDIARY] has not, directly or
indirectly, paid or delivered any fee, commission or other sum of money
or item of property, however characterized, to any finder, agent,
government official or other party, in the United States or any other
country, which is in any manner related to the assets, properties,
business or operations of the Company [OR SUCH SUBSIDIARY], which the
Company knows or has reason to believe to have been illegal under any
federal, state or local laws of the United States or any other country
having jurisdiction; and neither the Company nor its Subsidiary has
participated, directly or indirectly, in any boycotts or other similar
practices in contravention of law affecting any of its actual or
potential customers.
(aa) The Company meets, and on the Effective Date of the
Registration Statement and on each Closing Date will meet, the
conditions for use of Form S-1 under the Securities Act and the Rules.
(bb) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the accounting
records for assets are compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
(cc) There are no claims, payments, issuances, agreements,
arrangements or understandings, whether oral or written, for services
in the nature of a finder's fee, brokerage fee, origination fee or
otherwise with respect to the offerings contemplated by this Agreement,
the Registration Statement and the Prospectus or any other
arrangements, agreements, understandings, payments or issuances that
may affect the Underwriters' compensation as determined by the National
Association of Securities Dealers, Inc. other than as disclosed in the
Registration Statement and Prospectus and other than as the
Representatives may themselves have agreed to with third parties.
5. Representations and Warranties of the Selling Shareholders. Each of
the Selling Shareholders, severally and not jointly, represents and warrants to
each Underwriter that:
(a) Such Selling Shareholder is, and on the Firm Shares Closing
Date will be, the sole lawful owner of the Shares to be sold by it
hereunder, and has, and on such date will have, good and marketable
title to the Shares to be sold by such Selling Shareholder hereunder,
free and clear of any lien, charge, claim, encumbrance, security
interest, shareholders' agreement, voting trust, restriction on
transfer or other defect in title.
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(b) Such Selling Shareholder has, and on the Firm Shares
Closing Date will have, full legal right, power and authority, and
every approval, authorization or other consent, required to sell,
assign, transfer and deliver such Shares in the manner provided in this
Agreement; delivery of certificates for the Shares to be sold by such
Selling Shareholder pursuant hereto will, upon payment therefor, pass
good and marketable title thereto to each Underwriter, free and clear
of any lien, charge, claim, encumbrance, security interest,
shareholders' agreement, voting trust, restriction on transfer or other
defect in title; and there are no outstanding options, warrants, rights
or other agreements or arrangements requiring such Selling Shareholder
at any time to transfer any Shares which may be sold to the
Underwriters pursuant to this Agreement.
(c) Such Selling Shareholder has duly executed and delivered a
power of attorney (the "Power of Attorney"), in the form heretofore
delivered to the Representatives, appointing [ ] and
[ ], as such Selling Shareholder's attorneys-in-fact
(the "Attorneys-in- Fact"), each of them, together or individually,
with full power and authority to execute, deliver and perform this
Agreement on behalf of such Selling Shareholder.
(d) Such Selling Shareholder has duly executed and delivered a
custody agreement (the "Custody Agreement"), in the form heretofore
delivered to the Representatives pursuant to which certificates in
negotiable form for the Shares to be sold by such Selling Shareholder
under this Agreement were deposited with [ ], as a
custodian (the "Custodian"). The Custody Agreement and the Custodian's
authority thereunder and the appointment of the Attorneys-in-Fact are
irrevocable and the obligations of such Selling Shareholder hereunder
and under the Custody Agreement are not subject to termination by such
Selling Shareholder, except as provided in this Agreement, the Power of
Attorney or the Custody Agreement, or by operation of law, whether by
the death or incapacity of such Selling Shareholder (if such Selling
Shareholder is an individual), the death or incapacity of any trustee
or executor or the termination of any trust or estate (if such Selling
Shareholder is a trust or estate), the dissolution or liquidation of
any corporation or partnership (if such Selling Shareholder is a
corporation or a partnership), or the occurrence of any other event. If
any event referred to in the preceding sentence should occur before the
delivery of the Shares hereunder, the certificates for the Shares to be
sold by such Selling Shareholder shall be delivered by the Custodian on
behalf of such Selling Shareholder in accordance with the terms and
conditions of this Agreement and the Custody Agreement, and action
taken by the Custodian pursuant to the Custody Agreement shall be as
valid as if such event had not occurred, whether or not the Custodian
or the Attorneys-in- Fact, or any one of them, shall have received
notice of such event.
(e) The execution, delivery and performance of this Agreement,
the Power of Attorney and the Custody Agreement and the consummation of
the transactions to be performed by such Selling Shareholder
contemplated hereby and thereby, including the delivery and sale
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of the Shares to be delivered and sold by such Selling Shareholder
hereunder and thereunder, will not conflict with or result in a breach
or violation of, or constitute a default (or an event which with notice
or lapse of time or both would constitute a default) under, any
agreement, indenture or other instrument to which such Selling
Shareholder is a party or by which it is bound, or to which any of its
assets or properties are subject or affected, nor will the performance
by such Selling Shareholder of its obligations hereunder or thereunder
violate any statute, rule, regulation, including, without limitation,
the Communications Act, or order or decree of any court or any
governmental or regulatory agency, authority or body, including,
without limitation, the FCC, having jurisdiction over such Selling
Shareholder or any of its assets or properties or result in the
creation or imposition of any lien, charge, claim, security interest,
encumbrance or restriction whatsoever upon such Shares.
(f) Except for permits and similar authorizations required
under the Securities Act, the securities or Blue Sky laws of certain
jurisdictions, and such permits and authorizations which have been
obtained, no consent, approval, authorization, license, permit or
certificate or order of any court, governmental or regulatory agency,
authority or body, including the FCC, or financial institution is
required in connection with the consummation of the transactions to be
performed by such Selling Shareholder contemplated by this Agreement,
including the delivery and sale of the Shares to be sold by such
Selling Shareholder.
(g) Each of this Agreement, the Power of Attorney and the
Custody Agreement has been duly and validly authorized, executed and
delivered by such Selling Shareholder and constitutes a legal, valid
and binding obligation of such Selling Shareholder, enforceable against
such Selling Shareholder in accordance with its terms, except (i) as
the enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles and (ii) to the extent that rights to indemnity or
contribution under this Agreement may be limited by Federal and state
securities laws or the public policy underlying such laws.
(h) All information furnished to the Company by such Selling
Shareholder or on such Selling Shareholder's behalf for use in
connection with the preparation of the Registration Statement and
Prospectus (including, without limiting the generality of the
foregoing, all representations and warranties of such Selling
Shareholder in such Selling Shareholder's Power of Attorney and the
information relating to such Selling Shareholder which is set forth in
the Registration Statement under the caption "Principal and Selling
Shareholders") is true and correct and does not omit any material fact
necessary to make such information not misleading.
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(i) The sale by such Selling Shareholder of Shares pursuant
hereto is not prompted by any adverse information concerning the
Company or its Subsidiary.
(j) Such Selling Shareholder has not since the filing of the
Registration Statement (i) sold, bid for, purchased, attempted to
induce any person to purchase, or paid anyone any compensation for
soliciting purchases of, the Common Shares or (ii) paid or agreed to
pay to any person any compensation for soliciting another to purchase
any securities of the Company, except for the sale of the Shares by the
Selling Shareholders under this Agreement.
(k) Such Selling Shareholder has not taken and will not take,
directly or indirectly, any action designed to cause or result in, or
which has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of the
Common Shares to facilitate the sale or resale of the Shares.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters under this Agreement are several and not joint. The respective
obligations of the Underwriters to purchase the Shares are subject to each of
the following terms and conditions:
(a) The Prospectus shall have been timely filed with the
Commission in accordance with Section 7(A)(a) of this Agreement. The
Registration Statement shall have become effective no later than 5:00
p.m., New York City time, on the date of this Agreement or such later
time and date as shall be consented to in writing by the
Representatives.
(b) No order preventing or suspending the use of any
preliminary prospectus or the Prospectus shall have been or shall be in
effect and no order suspending the effectiveness of the Registration
Statement shall be in effect and no proceedings for such purpose shall
be pending before or threatened by the Commission, and any requests for
additional information on the part of the Commission (to be included in
the Registration Statement or the Prospectus or otherwise) shall have
been complied with to the satisfaction of the Representatives.
(c) The representations and warranties of the Company and the
Selling Shareholders contained in this Agreement and in the
certificates delivered pursuant to Section 6(d) and 6(e), respectively,
shall be true and correct when made and on and as of each Closing Date
as if made on such date and the Company and the Selling Shareholders
shall have performed all covenants and agreements and satisfied all the
conditions contained in this Agreement required to be performed or
satisfied by it or them at or before such Closing Date.
(d) The Representatives shall have received on each Closing
Date a certificate, addressed to the Representatives and dated such
Closing Date, of the chief executive or chief operating officer and the
chief financial officer or chief accounting officer of the Company to
the
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effect that the signers of such certificate have carefully examined the
Registration Statement, the Prospectus and this Agreement and that the
representations and warranties of the Company in this Agreement are
true and correct on and as of such Closing Date with the same effect as
if made on such Closing Date and the Company has performed all
covenants and agreements and satisfied all conditions contained in this
Agreement required to be performed or satisfied by it at or prior to
such Closing Date.
(e) The Representatives shall have received on the Firm Shares
Closing Date a certificate, addressed to the Representatives and dated
such Closing Date, of each Selling Shareholder, to the effect that such
Selling Shareholder has carefully examined the Registration Statement,
the Prospectus and this Agreement and that the representations and
warranties of such Selling Shareholder contained in this Agreement are
true and correct as if made on and as of such Closing Date, with the
same effect as if made on such Closing Date, and such Selling
Shareholder has performed all covenants and agreements and satisfied
all conditions contained in this Agreement required to be performed or
satisfied by such Selling Shareholder at or prior to such Closing Date.
(f) The Representatives shall have received on the Effective
Date, at the time this Agreement is executed and on each Closing Date
signed letters from Price Waterhouse LLP addressed to the
Representatives and dated, respectively, the Effective Date, the date
of this Agreement and each such Closing Date, in form and substance
satisfactory to the Representatives, confirming that they are
independent accountants within the meaning of the Securities Act and
the Rules, that the response to Item 10 of the Registration Statement
is correct insofar as it relates to them and stating in effect that:
(i) in their opinion the audited financial statements
and the schedules to the financial statements included in the
Registration Statement and the Prospectus and reported on by
them comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and
the Rules;
(ii) on the basis of a reading of the amounts
included in the Registration Statement and the Prospectus
under the headings "Summary Financial [INFORMATION],"
"Capitalization," "Dilution," "Selected Financial Data" and
"Management's Discussion and Analysis of Financial Condition
and Results of Operations," carrying out certain procedures
(but not an examination in accordance with generally accepted
auditing standards) which would not necessarily reveal matters
of significance with respect to the comments set forth in such
letter, a reading of the minutes of the meetings of the
shareholders and directors of the Company [AND ITS SUBSIDIARY]
(including any committees thereof), and inquiries of certain
officials of the Company [AND ITS
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SUBSIDIARY] who have responsibility for financial and
accounting matters of the Company [AND ITS SUBSIDIARY] as to
transactions and events subsequent to the date of the latest
audited financial statements, except as disclosed in the
Registration Statement and the Prospectus, nothing came to
their attention which caused them to believe that:
(A) the amounts in "Summary Financial
[INFORMATION]," "Capitalization," "Dilution,"
"Selected Financial Data" and "Management's
Discussion and Analysis of Financial Condition and
Results of Operations" included in the Registration
Statement and the Prospectus do not agree with the
corresponding amounts in the audited financial
statements from which such amounts were derived; or
(B) (x) there were, at a specified date not
more than five business days prior to the date of the
letter, any changes in the short-term or long-term
debt of the Company and its Subsidiary or capital
stock of the Company or its Subsidiary or any
decreases in net income or in working capital or the
shareholders' equity in the Company or its
Subsidiary, as compared with the amounts shown on the
Company's unaudited June 30, 1996 balance sheet
included in the Registration Statement or, (y) for
the period from June 30, 1996 to such specified
business date not more than five business days prior
to the date of the letter, there were any decreases,
as compared with the corresponding period in the
preceding year, in net revenues or in the total or
per share amounts of net income in which case the
Company shall deliver to the Representatives a letter
containing an explanation by the Company as to the
significance thereof unless said explanation is not
deemed necessary by the Representatives or is set
forth in or contemplated by the Registration
Statement;
(iii) on the basis of a reading of the pro forma
financial information included in the Registration Statement
and the Prospectus, carrying out certain procedures that would
not necessarily reveal matters of significance with respect to
the comments set forth in this clause (iii), inquiries of
certain officials of the Company [AND ITS SUBSIDIARY] who have
responsibility for financial and accounting matters and
proving the arithmetic accuracy of the application of the pro
forma adjustments to the historical amounts in the pro forma
financial information, nothing came to their attention that
caused them to believe that the pro forma financial
information included in the Prospectus do not comply in form
in all material respects with the applicable accounting
requirements of Rule 11-02 of Regulation S-X, or that the pro
forma adjustments have not been properly applied to the
historical amounts in the compilation of those statements; and
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(iv) they have performed certain other procedures as
a result of which they have determined that certain
information of an accounting, financial or statistical nature
(which is limited to accounting, financial or statistical
information derived from the general accounting records of the
Company) set forth in the Registration Statement and the
Prospectus and reasonably specified by the Representatives
agrees with the accounting records of the Company.
References to the Registration Statement and the Prospectus in
this paragraph (f) are to such documents as amended and
supplemented as of the date of the letter.
(g) The Representatives shall have received:
(i) an opinion from Latham & Watkins, counsel for the
Company, addressed to the Representatives, dated each Closing
Date, stating in effect that:
(A) The Company has been duly organized and
is validly existing as a corporation in good standing
under the laws of the State of California. To the
best of such counsel's knowledge after due inquiry,
[EXCEPT FOR THE SUBSIDIARY,] the Company has no
[OTHER] subsidiary and does not control, directly or
indirectly, any corporation, partnership, joint
venture, association or other business organization.
[THE SUBSIDIARY HAS BEEN DULY ORGANIZED AND IS
VALIDLY EXISTING AS A CORPORATION IN GOOD STANDING
UNDER THE LAWS OF THE JURISDICTION OF ITS
ORGANIZATION.] [EACH OF] The Company [AND ITS
SUBSIDIARY] is duly qualified and in good standing as
a foreign corporation in each jurisdiction in which
the character or location of its assets or properties
(owned, leased or licensed) or the nature of its
businesses makes such qualification necessary or
desirable, except for such jurisdictions where the
failure to so qualify would not have a material
adverse effect on the assets or properties, business,
results of operations, prospects or condition
(financial or otherwise) of the Company [AND ITS
SUBSIDIARY, TAKEN AS A WHOLE].
(B) [EACH OF] The Company [AND ITS
SUBSIDIARY] has all requisite power and authority to
own, lease and license its assets and properties and
conduct its business as now being conducted and as
described in the Registration Statement and the
Prospectus; and the Company has all requisite
corporate power and authority and all necessary
authorizations, approvals, consents, orders,
licenses, certificates and permits, other than those
required under state Blue Sky or securities laws, to
enter into, deliver and perform this Agreement and to
authorize, issue and sell the Shares.
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(C) The Company has authorized and issued
capital stock as set forth in the Registration
Statement and the Prospectus. The certificates
evidencing the Shares are in due and proper legal
form and have been duly authorized for issuance by
the Company. All of the outstanding Common Stock of
the Company have been duly and validly authorized and
have been duly and validly issued and are fully paid
and nonassessable and none of them was issued in
violation of any preemptive or other similar right.
[THE COMPANY OWNS ALL OF THE SHARES OF CAPITAL STOCK
OR OTHER BENEFICIAL INTERESTS OF ITS SUBSIDIARY, FREE
AND CLEAR OF ALL LIENS, CHARGES, CLAIMS, SECURITY
INTERESTS, ENCUMBRANCES, SHAREHOLDERS' AGREEMENTS,
VOTING TRUSTS AND ANY OTHER RESTRICTIONS WHATSOEVER.
] The Shares, when issued and sold pursuant to this
Agreement, will be duly and validly issued,
outstanding, fully paid and nonassessable and none of
them will have been issued in violation of any
preemptive or other similar right. To such counsel's
knowledge after due inquiry, except as disclosed in
the Registration Statement and the Prospectus, there
is no outstanding option, warrant or other right
calling for the issuance of, and no commitment, plan
or arrangement to issue, any share of stock of the
Company or any security convertible into, exercisable
for, or exchangeable for stock of the Company. The
Common Stock and the Shares conform in all material
respects to the descriptions thereof contained in the
Registration Statement and the Prospectus.
(D) The agreement of the Company's
shareholders set forth on Schedule III to this
Agreement and directors and officers stating that
(except in the case of the Selling Shareholders, for
the sale of the Shares to be sold by the Selling
Shareholders pursuant to the Registration Statement)
for a period of 180 days from the date of this
Agreement they will not, without the Representatives'
prior written consent, directly or indirectly,
Transfer, or offer, contract or otherwise agree to
Transfer, any Common Stock or any other securities
convertible into or exchangeable for Common Stock or
any other equity securities owned by them, except for
(i) sales to the several Underwriters pursuant to
this Agreement or (ii) pursuant to will or the laws
of intestate succession, provided the transferee
thereof agrees in writing to be bound by such
restrictions, has been duly and validly executed and
delivered by such persons and constitutes the legal,
valid and binding obligation of each such person
enforceable against each such person in accordance
with its terms, except as the enforceability thereof
may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or
other similar laws
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affecting the enforcement of creditors' rights
generally and by general equitable principles.
(E) All necessary corporate action has been
duly and validly taken by the Company to authorize
the execution, delivery and performance of this
Agreement and the issuance and sale of the Shares.
This Agreement has been duly and validly authorized,
executed and delivered by the Company and constitutes
the legal, valid and binding obligation of the
Company enforceable against the Company in accordance
with its terms, except (i) as such enforceability may
be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or
other similar laws affecting the enforcement of
creditors' rights generally and by general equitable
principles and (ii) to the extent that rights to
indemnity or contribution under this Agreement may be
limited by Federal or state securities laws or the
public policy underlying such laws.
(F) Neither the execution, delivery and
performance of this Agreement by the Company nor the
consummation of any of the transactions contemplated
hereby (including, without limitation, the issuance
and sale by the Company of the Shares to be issued
and sold by the Company) will give rise to a right to
terminate or accelerate the due date of any payment
due under, or conflict with or result in the breach
or violation of any term or provision of, or
constitute a default (or any event which with notice
or lapse of time, or both, would constitute a
default) under, or require consent or waiver under,
or result in the execution or imposition of any lien,
charge or encumbrance upon any properties or assets
of the Company [OR ITS SUBSIDIARY] pursuant to the
terms of, any indenture, mortgage, deed of trust,
note or other agreement or instrument to which the
Company [OR ITS SUBSIDIARY] is a party or by which
the Company [OR ITS SUBSIDIARY] is bound or to which
the Company [OR ITS SUBSIDIARIES] or any of its
respective properties, assets or businesses is
subject or affected, or any franchise, license,
consent, certificate, permit, judgment, decree,
order, notice, plan, code, statute, rule or
regulation or violate any provision of the Articles
of Incorporation, as amended, or By-laws, as amended,
of the Company [OR THE CHARTER OR BY-LAWS OF THE
SUBSIDIARY].
(G) To the best of such counsel's knowledge
after due inquiry, no default exists, and no event
has occurred which with notice or lapse of time, or
both, would constitute a default, in the due
performance and observance of any term, covenant or
condition by the Company [OR ITS SUBSIDIARY] of any
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indenture, mortgage, deed of trust, note or any other
agreement or instrument to which the Company [OR ITS
SUBSIDIARY] is a party or by which the Company [OR
ITS SUBSIDIARY] may be bound or to which the Company
[OR ITS SUBSIDIARY] or of any of its assets,
properties or businesses may be subject or affected,
where the consequences of such default would have a
material adverse effect on the assets, properties,
business, results of operations, prospects or
condition (financial or otherwise) of the Company
[AND ITS SUBSIDIARY, TAKEN AS A WHOLE].
(H) To the best of such counsel's knowledge
after due inquiry, [NEITHER] the Company [NOR ITS
SUBSIDIARY] is not in violation of any term or
provision of its Articles of Incorporation, as
amended, or the By-laws, as amended, or any
franchise, license, consent, certificate, permit,
judgment, decree, order, notice, plan, code, statute,
rule or regulation, where the consequences of such
violation would have a material adverse effect on the
assets or properties, businesses, results of
operations, prospects or condition (financial or
otherwise) of the Company [AND ITS SUBSIDIARY, TAKEN
AS A WHOLE.]
(I) No consent, approval, authorization,
license, certificate, permit or order of any court or
governmental or regulatory agency, authority or body
is required for the execution, delivery or
performance of this Agreement by the Company or the
consummation of the transactions contemplated hereby
or by the Registration Statement or the Prospectus,
except such as have been obtained under the
Securities Act and such as may be required under
state securities or Blue Sky laws in connection with
the purchase and distribution of the Shares by the
several Underwriters.
(J) To the best of such counsel's knowledge
after due inquiry, there is no litigation or
governmental or other proceeding or investigation
before any court or before or by any public body,
agency or authority pending or threatened against, or
involving the assets, properties or businesses of,
the Company [OR ITS SUBSIDIARY] which might have a
material adverse effect upon the assets or
properties, business, results of operations,
prospects or condition (financial or otherwise) of
the Company [AND ITS SUBSIDIARY, TAKEN AS A WHOLE].
(K) The statements in the Prospectus under
the captions "Description of Capital Stock," "Shares
Eligible for Future Sale," "Business," "Management,"
"Capitalization," "Management's Discussion and
Analysis of Financial
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Condition and Results of Operations," "Principal and
Selling Shareholders," "Certain Transactions," and
"Risk Factors" insofar as such statements constitute
a summary of documents referred to therein or matters
of law, are fair summaries in all material respects
and accurately present the information called for
with respect to such documents and matters. All
contracts and other documents required to be filed as
exhibits to, or described in, the Registration
Statement have been so filed with the Commission or
are fairly described in the Registration Statement,
as the case may be.
(L) The Registration Statement, all
preliminary prospectuses, the Prospectus and each
amendment or supplement thereto (except for the
financial statements and schedules and other
financial data included therein, as to which such
counsel expresses no opinion) comply as to form in
all material respects with the requirements of the
Securities Act and the Rules. The descriptions in the
Registration Statement, all preliminary prospectuses,
the Prospectus, and each amendment or supplement
thereto, of statutes, legal and governmental
proceedings, contracts and other documents are
accurate in all material respects; such counsel does
not know of any statutes or legal or governmental
proceedings required to be described in the
Prospectus that are not described as required, or of
any contracts or documents of a character required to
be described in the Registration Statement or
Prospectus or to be filed as exhibits to the
Registration Statement that are not described and
filed as required.
(M) The Registration Statement has become
effective under the Securities Act, and no stop order
suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that
purpose have been instituted or are threatened,
pending or contemplated.
(N) Such counsel does not know that any of
the representations and warranties of the Company
contained in this Agreement are not true or correct
or that any of the covenants and agreements herein
contained to be performed on the part of the Company
or any of the conditions herein contained, or set
forth in the Registration Statement and the
Prospectus, to be fulfilled or complied with by the
Company, have not been or will not be duly and timely
performed, fulfilled or complied with.
To the extent deemed advisable by such counsel, they
may rely as to matters of fact on certificates of responsible
officers of the Company and public officials and on the
opinions of other counsel satisfactory to the Representatives
as to matters which are
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governed by laws other than the laws of the State of
California, the State of New York, the General Corporation Law
of the State of Delaware and the Federal laws of the United
States; provided that such counsel shall state that in their
opinion the Underwriters and they are justified in relying on
such other opinions. Copies of such certificates and other
opinions shall be furnished to the Representatives and counsel
for the Underwriters.
In addition, such counsel shall state that such
counsel has participated in conferences with officers and
other representatives of the Company, representatives of the
Representatives and representatives of the independent
certified public accountants of the Company, at which
conferences the contents of the Registration Statement and the
Prospectus and related matters were discussed and, although
such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of
the statements contained in the Registration Statement and the
Prospectus (except as specified in the foregoing opinions), on
the basis of the foregoing, no facts have come to the
attention of such counsel which lead such counsel to believe
that the Registration Statement at the time it became
effective (except with respect to the financial statements and
notes and schedules thereto and other financial data, as to
which such counsel need express no belief) contained any
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the
Prospectus as amended or supplemented (except with respect to
the financial statements and notes and schedules thereto and
other financial data, as to which such counsel need express no
belief) on the date thereof contained any untrue statement of
a material fact or omitted to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(ii) an opinion from [LATHAM & WATKINS], counsel for
the Selling Shareholders, addressed to the Representatives,
dated the Firm Shares Closing Date, stating in effect that:
(A) Assuming that the Underwriters acquire
their respective interests in the Shares to be sold
by the Selling Shareholders in good faith and without
notice of any adverse claims (within the meaning of
Section 8-302 of the Uniform Commercial Code), upon
delivery to the Underwriters of such Shares
registered in their names, the Underwriters will
acquire good and marketable title to such Shares free
and clear of all liens, charges, claims, security
interests, encumbrances, pledges, shareholders'
agreements, voting trusts and any other restrictions
whatsoever.
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(B) To the best of such counsel's knowledge
after due inquiry, the execution, delivery and
performance of this Agreement, the Power of Attorney
and the Custody Agreement and the consummation of the
transactions to be performed by each such Selling
Shareholder contemplated hereby and thereby
(including, without limitation, the delivery and sale
of the Shares to be delivered and sold by such
Selling Shareholder hereunder and thereunder), will
not give rise to a right to terminate or accelerate
the due date of any payment due under, or conflict
with or result in the breach or violation of any term
or provision of, or constitute a default (or any
event which with notice or lapse of time, or both,
would constitute a default) under, or require consent
or waiver under, or result in the execution or
imposition of any lien, charge or encumbrance upon
any properties or assets of such Selling Shareholder
pursuant to the terms of any indenture, mortgage,
deed of trust, note or other agreement or instrument
to which such Selling Shareholder is a party or bound
or by which it or any of such Selling Shareholder's
assets, properties or businesses are subject or
affected, or any franchise, license, consent,
certificate, permit, judgment, decree, order, notice,
plan, code, statute, rule or regulation of which such
counsel is aware or result in the creation of
imposition of any lien, charge, claim, encumbrance,
security interest or restriction whatsoever upon the
Shares to be sold by such Selling Shareholder.
(C) No consent, approval, authorization,
license, certificate, permit or order of any court,
governmental or regulatory agency, authority or body
or financial institution is required in connection
with the performance of this Agreement by each
Selling Shareholder or the consummation of the
transactions contemplated hereby, by the Power of
Attorney or by the Custody Agreement, including the
delivery and sale of the Shares to be delivered and
sold by such Selling Shareholder, except such as have
been obtained under the Securities Act and such as
may be required under state securities or Blue Sky
laws in connection with the purchase and distribution
of the Shares by the several Underwriters.
(D) Each of this Agreement, the Power of
Attorney and the Custody Agreement has been duly and
validly authorized, executed and delivered by each
Selling Shareholder and constitutes a legal, valid,
and binding obligation of such Selling Shareholder,
enforceable against such Selling Shareholder in
accordance with its terms, except (i) as such
enforceability may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws affecting the
enforcement of creditors' rights generally and (ii)
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to the extent that rights to indemnity or
contribution under this Agreement may be limited by
Federal and state securities laws or the public
policy underlying such laws.
(E) Such counsel does not know that any of
the representations and warranties of the Selling
Shareholders contained in this Agreement are not true
or correct or that any of the covenants and
agreements herein contained to be performed on the
part of the Selling Shareholders or any of the
conditions herein contained, or set forth in the
Registration Statement and the Prospectus, to be
fulfilled as complied with by the Selling
Shareholders, have not been or will not be duly and
timely performed, fulfilled or complied with.
To the extent deemed advisable by such counsel, they
may rely as to matters of fact on certificates of the Selling
Shareholders and on the opinions of other counsel satisfactory
to the Representatives as to matters which are governed by
laws other than the laws of the State of California, the State
of New York, the General Corporation Law of the State of
Delaware and the Federal laws of the United States; provided
that such counsel shall state that in their opinion the
Underwriters and they are justified in relying on such other
opinions. Copies of such certificates and other opinions shall
be furnished to the Representatives and counsel for the
Underwriters.
In addition, such counsel shall state that such
counsel has participated in conferences with officers and
other representatives of the Company, representatives of the
Representatives and representatives of the independent
certified public accountants of the Company, at which
conferences the contents of the Registration Statement and the
Prospectus and related matters were discussed and, although
such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of
the statements contained in the Registration Statement and the
Prospectus (except as specified in the foregoing opinion), on
the basis of the foregoing, no facts have come to the
attention of such counsel which lead such counsel to believe
that the Registration Statement at the time it became
effective (except with respect to the financial statements and
notes and schedules thereto and other financial data, as to
which such counsel need express no belief) contained any
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the
Prospectus as amended or supplemented (except with respect to
the financial statements and notes and schedules thereto and
other financial data, as to which such counsel need express no
belief) on the date thereof contained any untrue statement of
a material fact or omitted to state a material fact necessary
in order to make
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the statements therein, in the light of the circumstances
under which they were made, not misleading.
(h) All proceedings taken in connection with the sale of the
Firm Shares and the Option Shares as herein contemplated shall be
reasonably satisfactory in form and substance to the Representatives
and their counsel and the Underwriters shall have received from Kaye,
Scholer, Fierman, Hays & Handler, LLP a favorable opinion, addressed to
the Representatives and dated each Closing Date, with respect to the
Shares, the Registration Statement and the Prospectus, and such other
related matters, as the Representatives may reasonably request, and the
Company shall have furnished to Kaye, Scholer, Fierman, Hays & Handler,
LLP such documents as they may reasonably request for the purpose of
enabling them to pass upon such matters.
(i) The Representatives shall have received on each Closing
Date a certificate, addressed to the Representatives, and dated such
Closing Date, of an executive officer of the Company to the effect that
the signer of such certificate has reviewed and understands the
provisions of Section 517.075 of the Florida Statutes, and represents
that the Company has complied, and at all times will comply, with all
provisions of Section 517.075 and further, that as of such Closing
Date, neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba.
(j) The Representatives shall have received from each of the
shareholders listed on Schedule III hereto and each director and
executive officer of the Company the enforceable written agreements
described in Section 4(p).
(k) The Company shall have furnished or caused to be furnished
to the Representatives such further certificates and documents as the
Representatives shall have reasonably requested.
(l) At each Closing Date, the Shares shall have been approved
for listing on the Nasdaq National Market.
7. Covenants of the Company. (A) The Company covenants and agrees as
follows:
(a) The Company shall prepare the Prospectus in a form
approved by the Representatives and file such Prospectus pursuant to
Rule 424(b) under the Securities Act not later than the Commission's
close of business on the second business day following the execution
and delivery of this Agreement, or, if applicable, such earlier time as
may be required by Rule 430A(a)(3) under the Securities Act, and shall
promptly advise the Representatives (i) when any amendment to the
Registration Statement shall have become effective, (ii) of any
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request by the Commission for any amendment of the Registration
Statement or the Prospectus or for any additional information, (iii) of
the prevention or suspension of the use of any preliminary prospectus
or the Prospectus or of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose and (iv)
of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose. The Company shall not file any amendment of the
Registration Statement or supplement to the Prospectus unless the
Company has furnished the Representatives with a copy for their review
prior to filing and shall not file any such proposed amendment or
supplement to which the Representatives reasonably object. The Company
shall use its best efforts to prevent the issuance of any such stop
order and, if issued, to obtain as soon as possible the withdrawal
thereof.
(b) If, at any time when a prospectus relating to the Shares
is required to be delivered under the Securities Act and the Rules, any
event occurs as a result of which the Prospectus, as then amended or
supplemented, would include any untrue statement of a material fact or
omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, or if it shall be necessary to amend or supplement the
Prospectus to comply with the Securities Act or the Rules, the Company
promptly shall prepare and file with the Commission, subject to the
second sentence of paragraph (a) of this Section 7(A), an amendment or
supplement which shall correct such statement or omission or an
amendment which shall effect such compliance.
(c) The Company shall make generally available to its security
holders and to the Representatives as soon as practicable, but not
later than 45 days after the end of the 12-month period beginning at
the end of the fiscal quarter of the Company during which the Effective
Date occurs (or 90 days if such 12-month period coincides with the
Company's fiscal year), an earnings statement (which need not be
audited) of the Company, covering such 12-month period, which shall
satisfy the provisions of Section 11(a) of the Securities Act or Rule
158 of the Rules.
(d) The Company shall furnish to the Representatives and
counsel for the Underwriters, without charge, signed copies of the
Registration Statement (including all exhibits thereto and amendments
thereof) and to each other Underwriter a copy of the Registration
Statement (without exhibits thereto) and all amendments thereof and, so
long as delivery of a prospectus by an Underwriter or dealer may be
required by the Securities Act or the Rules, as many copies of any
preliminary prospectus and the Prospectus and any amendments thereof
and supplements thereto as the Representatives may reasonably request.
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(e) The Company shall use its best efforts to assist the
Representatives and their counsel in endeavoring to qualify the Shares
for offer and sale under the laws of such jurisdictions as the
Representatives may designate and shall maintain such qualifications in
effect so long as required for the distribution of the Shares;
provided, however, that the Company shall not be required in connection
therewith, as a condition thereof, to qualify as a foreign corporation
or to execute a general consent to service of process in any
jurisdiction or subject itself to taxation as doing business in any
jurisdiction.
(f) For a period of five years after the date of this
Agreement, the Company shall supply to the Representatives, and to each
other Underwriter who may so request in writing, copies of such
financial statements and other periodic and special reports as the
Company may from time to time distribute generally to the holders of
any class of its capital stock and to furnish to the Representatives a
copy of each annual or other report it shall be required to file with
the Commission (including the Report on Form SR required by Rule 463 of
the Rules).
(g) Without the prior written consent of the Representatives,
for a period of 180 days after the date of this Agreement, the Company
shall not, directly or indirectly, Transfer, or offer, contract or
otherwise agree to Transfer, any Common Stock, or any other securities
convertible into or exchangeable for Common Stock or any other equity
securities of the Company, except for (i) the issuance of Common Stock
pursuant to stock options outstanding on the date hereof or the
issuance of Common Stock pursuant to the Company's [1996 STOCK OPTION
PLAN] (the "Plans"); and (ii) the issuance of Common Stock in
connection with any acquisition of another entity. In the event that
during this period, (i) any Common Stock is issued pursuant to the
Plans; (ii) any Common Stock is issued in connection with any
acquisition of another entity; or (iii) any registration is effected on
Form S-8 or on any successor form, the Company shall obtain the
enforceable written agreement of such grantee or purchaser or holder of
such securities that, for a period of 180 days after the date of this
Agreement, such person will not directly or indirectly, without the
prior written consent of the Representatives, Transfer, or offer,
contract or otherwise agree to Transfer, or exercise any registration
rights with respect to, any Common Stock (or any other securities
convertible into or exchangeable for any Common Stock, or any other
equity securities) owned by such person.
(h) The Company shall cause each director and executive
officer of the Company and each shareholder set forth on Schedule III
to this Agreement to deliver to the Representatives his or her
enforceable written agreement that, except, in the case of a Selling
Shareholder, for the sale of the Shares to be sold by such Selling
Shareholder pursuant to the Registration Statement, he or she will not,
without the prior written consent of the Representatives, directly or
indirectly, Transfer, or offer, contract or otherwise agree to
Transfer, any Common Stock or any other securities convertible into or
exchangeable for Common Stock
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or any other equity securities of the Company until 180 days after the
date of this Agreement, except for (i) sales to the several
Underwriters pursuant to this Agreement or (ii) pursuant to will or the
laws of intestate succession, provided the transferee thereof agrees in
writing to be bound by such restrictions.
(i) On or before completion of this offering, the Company
shall make all filings required under applicable securities laws and by
the Nasdaq (including any required registration under the Exchange
Act).
(j) The Company shall file timely and accurate reports in
accordance with the provisions of Florida Statutes Section 517.075, or
any successor provision, and any regulations promulgated thereunder, if
at any time after the Effective Date, the Company or any of its
affiliates commences engaging in business with the government of Cuba
or any person or affiliate located in Cuba.
(k) The Company will apply the net proceeds from the offering
of the Shares in the manner set forth under "Use of Proceeds" in the
Prospectus.
(B) The Company agrees to pay, or reimburse if paid by the
Representatives, whether or not the transactions contemplated hereby
are consummated or this Agreement is terminated, all costs and expenses
incident to the public offering of the Shares and the performance of
the obligations of the Company and of the Selling Shareholders under
this Agreement including those relating to: (i) the preparation,
printing, filing and distribution of the Registration Statement
including all exhibits thereto, each preliminary prospectus, the
Prospectus, all amendments and supplements to the Registration
Statement, the Prospectus, and the printing, filing and distribution of
this Agreement; (ii) the fees and disbursements of counsel for the
Company and the Selling Shareholders and of the Company's independent
public accountants; (iii) the preparation and delivery of certificates
for the Shares to the Underwriters; (iv) the registration or
qualification of the Shares for offer and sale under the securities or
Blue Sky laws of the various jurisdictions referred to in Section
7(A)(e), including the reasonable fees and disbursements of counsel for
the Underwriters in connection with such registration and qualification
and the preparation, printing, distribution and shipment of preliminary
and supplementary Blue Sky memoranda; (v) the furnishing (including
costs of shipping and mailing) to the Representatives and to the
Underwriters of copies of each preliminary prospectus, the Prospectus
and all amendments or supplements to the Prospectus, and of the several
documents required by this Section to be so furnished, as may be
reasonably requested for use in connection with the offering and sale
of the Shares by the Underwriters or by dealers to whom Shares may be
sold; (vi) the filing fees of the National Association of Securities
Dealers, Inc. in connection with its review of the terms of the public
offering; (vii) the furnishing
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(including costs of shipping and mailing) to the Representatives and to
the Underwriters of copies of all reports and information required by
Section 7(A)(f); (viii) inclusion of the Common Stock for quotation on
the Nasdaq National Market; and (ix) all transfer taxes, if any, with
respect to the sale and delivery of the Shares by the Company and the
Selling Shareholders to the Underwriters. Subject to the provisions of
Section 10, the Underwriters agree to pay, whether or not the
transactions contemplated hereby are consummated or this Agreement is
terminated, all costs and expenses incident to the performance of the
obligations of the Underwriters under this Agreement not payable by the
Company pursuant to the preceding sentence, including, without
limitation, the fees and disbursements of counsel for the Underwriters.
8. Indemnification.
(a) The Company and each Selling Shareholder agree, jointly
and severally, to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act
against any and all losses, claims, damages and liabilities, joint or
several (including any reasonable investigation, legal and other
expenses incurred in connection with, and any amount paid in settlement
of, any action, suit or proceeding or any claim asserted), to which
they, or any of them, may become subject under the Securities Act, the
Exchange Act, the Rules or other Federal or state law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or
liabilities arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in any
preliminary prospectus, the Registration Statement or the Prospectus or
any amendment thereof or supplement thereto, or arise out of or are
based upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that such indemnity shall
not inure to the benefit of any Underwriter (or any person controlling
such Underwriter) on account of any losses, claims, damages or
liabilities arising from the sale of the Shares to any person by such
Underwriter if such untrue statement or omission or alleged untrue
statement or omission was made in such preliminary prospectus, the
Registration Statement or the Prospectus, or such amendment or
supplement, and was contained in the last paragraph of the cover page
of the Prospectus, in the paragraph relating to stabilization on the
inside front cover page of the Prospectus or under the caption
"Underwriting" in the Prospectus (to the extent such statements relate
to the Underwriters). Notwithstanding the foregoing, the liability of
each Selling Shareholder pursuant to the provisions of this Section
8(a) shall be limited to an amount equal to the aggregate net proceeds
received by such Selling Shareholder from the sale of the Shares sold
by such Selling Shareholder hereunder. This indemnity agreement will be
in addition to any liability which the Company and each Selling
Shareholder may otherwise have.
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(b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Selling Shareholders, each
person, if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act,
each director of the Company, and each officer of the Company who signs
the Registration Statement, to the same extent as the foregoing
indemnities from the Company or such Selling Shareholder to each
Underwriter, but only insofar as such losses, claims, damages or
liabilities arise out of or are based upon any untrue statement or
omission or alleged untrue statement or omission which was made in any
preliminary prospectus, the Registration Statement or the Prospectus,
or any amendment thereof or supplement thereto, and was contained in
the last paragraph of the cover page of the Prospectus, in the
paragraph relating to stabilization on the inside front cover page of
the Prospectus or under the caption "Underwriting" in the Prospectus
(to the extent such statements relate to the Underwriters); provided,
however, that the obligation of each Underwriter to indemnify the
Company or any Selling Shareholder (including any controlling person,
director or officer thereof), as the case may be, shall be limited to
the net proceeds received by the Company or the Selling Shareholder, as
the case may be, from such Underwriter.
(c) Any party that proposes to assert the right to be
indemnified under this Section will, promptly after receipt of notice
of commencement of any action, suit or proceeding against such party in
respect of which a claim is to be made against an indemnifying party or
parties under this Section , notify each such indemnifying party of the
commencement of such action, suit or proceeding, enclosing a copy of
all papers served. The indemnification provided for in Section 8(a) or
8(b) shall be limited for any party who shall fail to give notice as
provided in this Section 8(c) to the extent the indemnifying party was
materially prejudiced by the failure to give such notice, if the party
to whom notice was not given was unaware of the proceeding to which
such notice would have related but the omission to so notify such
indemnifying party of any such action, suit or proceeding shall not
relieve it from any liability that it may have to any indemnified party
for contribution or otherwise than under this Section . In case any
such action, suit or proceeding shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate in, and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof and the approval
by the indemnified party of such counsel, the indemnifying party shall
not be liable to such indemnified party for any legal or other
expenses, except as provided below and except for the reasonable costs
of investigation subsequently incurred by such indemnified party in
connection with the defense thereof. The indemnified party shall have
the right to employ its counsel in any such action, but the fees and
expenses of such counsel shall be at the expense of such indemnified
party unless (i) the
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employment of counsel by such indemnified party has been authorized in
writing by the indemnifying parties, (ii) the indemnified party shall
have reasonably concluded that there may be a conflict of interest
between the indemnifying parties and the indemnified party in the
conduct of the defense of such action (in which case the indemnifying
parties shall not have the right to direct the defense of such action
on behalf of the indemnified party) or (iii) the indemnifying parties
shall not have employed counsel, as provided above, to assume the
defense of such action within a reasonable time after notice of the
commencement thereof, in each of which cases the fees and expenses of
counsel shall be at the expense of the indemnifying parties. An
indemnifying party shall not be liable for any settlement of any
action, suit, proceeding or claim effected without its written consent.
9. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Section 8(a) or 8(b) for any reason is unavailable to or insufficient to hold
harmless an indemnified party under Section 8(a) or 8(b), then each indemnifying
party shall contribute to the aggregate losses, claims, damages and liabilities
(including any investigation, legal and other expenses reasonably incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claims asserted) to which the indemnified party may be subject
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Selling Shareholders on the one hand and the Underwriters
on the other from the offering of the Shares or, if such allocation is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to above but also the relative fault of the
Company and the Selling Shareholders on the one hand and the Underwriters on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company, the
Selling Shareholders and the Underwriters shall be deemed to be in the same
proportion as (x) the total proceeds from the offering (net of underwriting
discounts but before deducting expenses) received by the Company or the Selling
Shareholders, as set forth in the table on the cover page of the Prospectus,
bear to (y) the underwriting discounts received by the Underwriters, as set
forth in the table on the cover page of the Prospectus. The relative fault of
the Company, the Selling Shareholders or the Underwriters shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact related to information supplied by the Company, the Selling
Shareholders or the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company, the Selling Shareholders and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 9
were determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above. Notwithstanding
the provisions of this Section 9, (i) in no case shall any Underwriter (except
as may be provided in the Agreement Among Underwriters) be liable or responsible
for any amount in excess of the underwriting discount applicable to the Shares
purchased by such Underwriter hereunder less the
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amount of any damages which such Underwriter has otherwise been required to pay
by reason of any untrue or alleged untrue statement or omission or alleged
omission which was made in any preliminary prospectus, the Registration
Statement or the Prospectus, or any amendment thereof or supplement thereto; and
(ii) the Company shall be liable and responsible for any amount in excess of the
amount set forth in clause (i) of this sentence; and (iii) in no case shall any
Selling Shareholder be liable and responsible for any amount in excess of the
aggregate net proceeds of the sale of the Shares received by such Selling
Shareholder hereunder; provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 9, each person, if
any, who controls an Underwriter within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act shall have the same rights
to contribution as such Underwriter and each person, if any, who controls the
Company within the meaning of the Section 15 of the Securities Act or Section
20(a) of the Exchange Act, each officer of the Company who shall have signed the
Registration Statement and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to clauses (i), (ii)
and (iii) in the immediately preceding sentence of this Section 9. Any party
entitled to contribution will, promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which a claim
for contribution may be made against another party or parties under this
Section , notify such party or parties from whom contribution may be sought, but
the omission so to notify such party or parties from whom contribution may be
sought shall not relieve the party or parties from whom contribution may be
sought from any other obligation it or they may have hereunder or otherwise than
under this Section . No party shall be liable for contribution with respect to
any action, suit, proceeding or claim settled without its written consent. The
Underwriters' obligations to contribute pursuant to this Section 9 are several
in proportion to their respective underwriting commitments and not joint.
10. Termination. This Agreement may be terminated with respect to the
Shares to be purchased on a Closing Date by the Representatives notifying the
Company and the Selling Shareholders at any time:
(a) in the absolute discretion of the Representatives at or
before any Closing Date: (i) if on or prior to such date, any domestic
or international event or act or occurrence has materially disrupted,
or in the opinion of the Representatives will in the future materially
disrupt, the securities markets; (ii) if the Company [OR ITS
SUBSIDIARY] shall have sustained a loss or interference with its
business by fire, flood, accident, hurricane, earthquake, theft,
sabotage or other calamity or malicious act which is material to the
Company [AND THE SUBSIDIARY, TAKEN AS A WHOLE,] whether or not said
loss shall have been insured, or by court or governmental action, order
or decree which will, in the opinion of the Representatives, make it
inadvisable or impractical to proceed with the offering; (iii) if there
has been, since the respective dates as of which information is given
in the Prospectus, any material adverse change in the assets or
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properties, business, results of operations, prospects or condition
(financial or otherwise) of the Company [AND ITS SUBSIDIARY, TAKEN AS A
WHOLE,] whether or not arising in the ordinary course of business; (iv)
if there has occurred any new outbreak or material escalation of
hostilities or other calamity or crisis the effect of which on the
financial markets of the United States is such as to make it, in the
judgment of the Representatives, inadvisable or impractical to proceed
with the offering; (v) if there shall be such a material adverse change
in general financial, political or economic conditions in the United
States or elsewhere or the effect of international conditions on the
financial markets in the United States is such as to make it, in the
judgment of the Representatives, inadvisable or impractical to proceed
with the offering; (vi) if trading in the Shares has been suspended by
the Commission or trading generally on the New York Stock Exchange,
Inc., on the American Stock Exchange, Inc. or Nasdaq has been suspended
or limited, or minimum or maximum ranges for prices for securities
shall have been fixed, or maximum ranges for prices for securities have
been required, by said exchanges or automated quotation system or by
order of the Commission, the National Association of Securities
Dealers, Inc., or any other governmental or regulatory agency,
authority or body; or (vii) if a banking moratorium has been declared
by any state or Federal agency, authority, or body, or
(b) at or before any Closing Date, that any of the conditions
specified in Section 6 shall not have been fulfilled when and as
required by this Agreement.
If this Agreement is terminated pursuant to any of its
provisions, neither the Company nor any of the Selling Shareholders
shall be under any liability to any Underwriter (except as otherwise
provided in Section 7(B) and Sections 8 and 9, and no Underwriter shall
be under any liability to the Company or the Selling Shareholders
except that (y) if this Agreement is terminated by the Representatives
because of any failure, refusal or inability on the part of the Company
or the Selling Shareholders to comply with the terms or to fulfill any
of the conditions of this Agreement, the Company will reimburse the
Underwriters for all out-of-pocket expenses (including the reasonable
fees and disbursements of their counsel) incurred by them in connection
with the proposed purchase and sale of the Shares or in contemplation
of performing their obligations hereunder and (z) no Underwriter who
shall have failed or refused to purchase the Shares agreed to be
purchased by it under this Agreement, without some reason sufficient
hereunder to justify cancellation or termination of its obligations
under this Agreement, shall be relieved of liability to the Company,
the Selling Shareholders or to the other Underwriters for damages
occasioned by its failure or refusal.
11. Substitution of Underwriters. If one or more of the Underwriters
shall fail (other than for a reason sufficient to justify the cancellation or
termination of this Agreement under Section 10) to purchase on any Closing Date
the Shares agreed to be purchased on such Closing Date by such Underwriter or
Underwriters, the Representatives may find one or more substitute underwriters
to
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purchase such Shares or make such other arrangements as the Representatives may
deem advisable or one or more of the remaining Underwriters may agree to
purchase such Shares in such proportions as may be approved by the
Representatives, in each case upon the terms set forth in this Agreement. If no
such arrangements have been made by the close of business on the business day
following such Closing Date,
(a) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date shall not exceed 10% of the Shares
that all the Underwriters are obligated to purchase on such Closing
Date, then each of the nondefaulting Underwriters shall be obligated to
purchase such Shares on the terms herein set forth in proportion to
their respective obligations hereunder; provided, that in no event
shall the maximum number of Shares that any Underwriter has agreed to
purchase pursuant to Section 1 be increased pursuant to this Section 11
by more than one-ninth of such number of Shares without the written
consent of such Underwriter, or
(b) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date shall exceed 10% of the Shares that
all the Underwriters are obligated to purchase on such Closing Date,
then the Company shall be entitled to an additional business day within
which it may, but is not obligated to, find one or more substitute
underwriters reasonably satisfactory to the Representatives to purchase
such Shares upon the terms set forth in this Agreement.
In any such case, either the Representatives or the Company
shall have the right to postpone the applicable Closing Date for a
period of not more than five business days in order that necessary
changes and arrangements (including any necessary amendments or
supplements to the Registration Statement or Prospectus) may be
effected by the Representatives and the Company. If the number of
Shares to be purchased on such Closing Date by such defaulting
Underwriter or Underwriters shall exceed 10% of the Shares that all the
Underwriters are obligated to purchase on such Closing Date, and none
of the nondefaulting Underwriters or the Company shall make
arrangements pursuant to this Section within the period stated for the
purchase of the Shares that the defaulting Underwriters agreed to
purchase, this Agreement shall terminate with respect to the Shares to
be purchased on such Closing Date without liability on the part of any
nondefaulting Underwriter to the Company or the Selling Shareholders,
and without liability on the part of the Company or the Selling
Shareholders, except in both cases as provided in Sections 7(B), 8, 9
and 10. The provisions of this Section shall not in any way affect the
liability of any defaulting Underwriter to the Company, the Selling
Shareholders or to the nondefaulting Underwriters arising out of such
default. A substitute underwriter hereunder shall become an Underwriter
for all purposes of this Agreement.
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12. Submission to Jurisdiction. The Company hereby irrevocably (i)
agrees that any legal suit, action or proceeding against the Company brought by
any Underwriter or by any person who controls any Underwriter arising out of or
based upon this Agreement or the transactions contemplated hereby, including any
legal suit, action or proceeding to enforce the provisions of Sections 8 and 9
hereof, may be instituted in any United States or State court in the County of
New York, (ii) waives, to the fullest extent it may effectively do so, any
objection which it may have now or hereafter based on forum non convenient or to
the laying of venue of any such suit, action or proceeding, and (iii) expressly
consents and submits to the exclusive jurisdiction of any such court in any such
suit, action or proceeding. The Company has designated and appointed
__________________ (or any successor corporation) (the "Authorized Agent"), as
such person's authorized agent upon whom process may be served in any such suit,
action or proceeding at the office of such agent at ______________________ (or
such other address in the Borough of Manhattan, the City of New York, as such
person may designate by written notice received by you). The Company represents
and warrants that the Authorized Agent has agreed to act as such agent for
service of process and agrees to take any and all action, including the filing
of any and all documents and instruments, that may be necessary to continue such
appointments in full force and effect as aforesaid. Service of process upon the
Authorized Agent and written notice of said service to the Company mailed by
first class mail shall be deemed in every respect effective and valid personal
service of process upon the Company. Nothing herein shall affect the right of
any Underwriter or any person controlling any Underwriter to serve process in
any other manner permitted by law.
13. Miscellaneous. The respective agreements, representations,
warranties, indemnities and other statements of the Company or its directors or
officers, of the Selling Shareholders and of the Underwriters set forth in or
made pursuant to this Agreement shall remain in full force and effect,
regardless of any investigation made by or on behalf of any Underwriter or the
Company or the Selling Shareholders or any of the officers, directors or
controlling persons referred to in Sections 8 and 9 hereof, and shall survive
delivery of and payment for the Shares. The provisions of Sections 7(B), 8, 9
and 10 shall survive the termination or cancellation of this Agreement.
This Agreement has been and is made for the benefit of the
Underwriters, the Company and the Selling Shareholders and their respective
successors and assigns, and, to the extent expressed herein, for the benefit of
persons controlling any of the Underwriters and the Company, and directors and
officers of the Company, and their respective successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include any purchaser of
Shares from any Underwriter merely because of such purchase.
All notices and communications hereunder shall be in writing and mailed
or delivered or by telephone, telex or facsimile transmission if subsequently
confirmed in writing, (a) if to the Representatives, c/o Oppenheimer & Co.,
Inc., Oppenheimer Tower, World Financial Center, New
36
37
York, New York 10281 Attention: ________________ (b) if to the Company, to its
agent for service as such agent's address appears on the cover page of the
Registration Statement; and (c) if to a Selling Shareholder, to the
Attorneys-in-Fact, c/o ___________________________________________.
37
38
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to principles of conflict of
laws.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
Please confirm that the foregoing correctly sets forth the agreement
among us.
Very truly yours,
VIASAT, INC.
By:
-------------------------------
Name:
Title:
SELLING SHAREHOLDERS NAMED ON
SCHEDULE II ANNEXED HERETO
By:
-------------------------------
Attorney-in-Fact for the Selling
Shareholders listed on Schedule II
annexed hereto
Confirmed:
OPPENHEIMER & CO., INC.
NEEDHAM & COMPANY, INC.
VOLPE, WELTY & COMPANY
Acting severally on behalf of themselves and
as representatives of the several Underwriters
named in Schedule I annexed hereto.
By: OPPENHEIMER & CO., INC.
By:
------------------------------
Name:
Title:
38
39
SCHEDULE I
Number of Firm
Name Shares to Be Purchased
---- ----------------------
Oppenheimer & Co., Inc.
Needham & Company, Inc.
Volpe, Welty & Company
---------
Total Shares:
=========
1
40
SCHEDULE II
SELLING SHAREHOLDERS
Selling Shareholder Number of Firm Shares to be Sold
- ------------------- --------------------------------
---------
Total Shares:
=========
1
41
SCHEDULE III
SHAREHOLDERS EXECUTING CERTAIN
AGREEMENTS PURSUANT TO SECTION 7(A)(h)
1
1
EXHIBIT 10.1
VIASAT, INC.
----------------------------------
PREFERRED STOCK PURCHASE AGREEMENT
----------------------------------
3,000,000 SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK
Dated as of June 11, 1986
2
TABLE OF CONTENTS
(NOT PART OF Agreement)
Page
----
1. Authorization, Purchase and Sale of the Shares................ 1
1.1 Authorization of the Shares............................. 1
1.2 Sale and Purchase of the Shares......................... 1
2. Closing, Payment and Delivery................................. 1
2.1 Closing Date and Place of Closing....................... 1
2.2 Payment and Delivery.................................... 1
2.3 Covenant of Best Efforts and Good Faith................. 2
3. Representations and Warranties of the Company................. 2
3.1 organization and Standing; Articles and
Bylaws.................................................. 2
3.2 Subsidiaries............................................ 2
3.3 Capitalization.......................................... 2
3.4 Authorization........................................... 3
3.5 Financial Information................................... 4
3.6 Absence of Undisclosed Liabilities...................... 4
3.7 Contracts............................................... 4
3.8 Interested Party Transactions........................... 5
3.9 Litigation.............................................. 5
3.10 Title to Properties; Liens and
Encumbrances ........................................... 6
3.11 Condition of Properties................................. 6
3.12 Intangible Assets....................................... 6
3.13 Employees............................................... 7
3.14 Compliance with Laws and Other Instruments.............. 7
3.15 Insurance............................................... 7
3.16 No Brokers or Finders................................... 8
3.17 Business Plan........................................... 8
3.18 Disclosure.............................................. 8
4. Representations and Warranties of the Purchaser.............. 8
4.1 Authorization........................................... 8
4.2 Investigation and Experience............................ 9
4.3 Investment Intent....................................... 9
4.4 Accredited Investor..................................... 9
4.5 No Brokers or Finders................................... 9
5. Conditions of Purchasers' Obligations......................... 10
5.1 Representations and Warranties.......................... 10
5.2 Performance............................................. 10
5.3 Opinion of Company's Counsel............................ 10
5.4 Legal Investment........................................ 10
5.5 Compliance Certificate.................................. 10
5.6 Proceedings and Documents............................... 10
i.
3
Page
----
5.7 Qualification........................................... 10
5.8 Certificate............................................. 11
5.9 Election of Directors................................... 11
5.10 Shareholders' Agreement................................. 11
5.11 Supporting Documents.................................... 11
5.12 Founders' Stock Purchase................................ 11
6. Conditions to Closing of the Company.......................... 12
6.1 Representations......................................... 12
6.2 Legal Investment........................................ 12
7. Affirmative Covenants of the Company.......................... 12
7.1 Accounts and Records.................................... 12
7.2 Financial Information................................... 12
7.3 Additional Information.................................. 13
7.4 Preparation of Operating Plan........................... 14
7.5 Prompt Payment of Taxes and Other
Liabilities............................................. 15
7.6 Maintenance of Properties and Leases.................... 15
7.7 Insurance............................................... 15
7.8 Compliance with Laws.................................... 15
7.9 Maintenance of Corporate Existence, etc................. 15
7.10 Availability of Common Stock for Conversion............. 16
7.11 Expenses of Purchasers.................................. 16
7.12 Board of Directors Meetings............................. 16
7.13 Right of First Refusal.................................. 16
7.14 Replacement of Certificates............................. 18
7.15 Notice of Litigation.................................... 18
7.16 Securities Law Filings.................................. 18
7.17 Termination of Certain Obligations...................... 18
8. Transfer of Securities........................................ 18
8.1 Restrictions on Transfer............................... 18
8.2 Restrictive Legend..................................... 19
8.3 Transfers.............................................. 19
8.4 Requested Registration................................. 19
8.5 Company Registration................................... 21
8.6 Expenses of Registration............................... 22
8.7 Registration Procedures................................ 22
8.8 Indemnification........................................ 23
8.9 Information by Holder.................................. 25
8.l0 Limitations on Registration of issues
of Securities.......................................... 25
8.11 Rule 144 Reporting..................................... 26
8.12 Transfer of Registration Rights........................ 26
8.13 "Market Stand-Off" Agreement........................... 27
8.14 No Action Letter or Opinion of Counsel
in Lieu of Registration; Conversion of
Restricted Stock....................................... 27
ii.
4
Page
----
9. Enforcement................................................... 27
9.1 Remedies at Law or in Equity........................... 27
9.2 Cumulative Remedies.................................... 28
10. Definitions................................................... 28
11. Miscellaneous ............................................... 30
11.1 Governing Law.......................................... 30
11.2 Survival............................................... 30
11.3 Successors and Assigns................................. 31
11.4 Entire Agreement....................................... 31
11.5 Notices................................................ 31
11.6 Severability; Counterparts............................. 31
11.7 Titles and Subtitles................................... 32
11.8 Waivers and Amendments................................. 32
Exhibit A Amended and Restated
Articles of Incorporation
Exhibit B Schedule of Purchasers
Exhibit C Schedule of Exceptions
Exhibit D Schedule of Shareholders
Exhibit E Balance Sheet
Exhibit F Schedule of Contracts and
Leases
iii.
5
PREFERRED STOCK PURCHASE AGREEMENT
THIS PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is made as
of the 11th day of June, 1986, by and among ViaSat, Inc., a California
corporation (the "Company"), and Southern California Ventures, a California
limited partnership, Robert W. Johnson and Thomas A. Tisch (collectively, the
"Purchasers").
SECTION 1
Authorization, Purchase and Sale of the Shares
1.1 Authorization of the Shares. The Company has authorized the
issuance and sale of up to 3,000,000 shares of its Series A Convertible
Preferred Stock (the "Shares") having the rights, restrictions, privileges and
preferences as set forth in the Amended and Restated Articles of Incorporation
(the "Certificate") attached to this Agreement as Exhibit A.
1.2 Sale and Purchase of the Shares. At the Closing (as defined in
Section 2.1 hereof), subject to the terms and conditions hereof and in reliance
upon the representations, warranties and agreements contained herein, the
Company agrees to issue and sell to the Purchasers and the Purchasers agree to
purchase from the Company a total of 3,000,000 Shares at a purchase price of
$.10 per share and an aggregate purchase price of $300,000 (the "Purchase
Price"), in the individual amounts set forth on Exhibit B hereto.
SECTION 2
Closing, Payment and Delivery
2.1 Closing Date and Place of Closing. The closing of the purchase and
sale of the Shares hereunder (the "Closing") shall occur at 3 o'clock P.M.,
Pacific Standard Time, on the date hereof or on such later date (within 30 days
thereafter) as the Company and the Purchasers shall agree (the date of such
Closing being referred to as the "Closing Date"). The place of the Closing
(including the place of delivery to the Purchasers by the Company of the
certificates evidencing all Shares being purchased and the place of payment to
the Company by the Purchasers of the Purchase Price therefor) shall be at such
place as the Purchasers and the Company shall agree.
6
2.2 Payment and Delivery. At the Closing, each Purchaser shall pay
the portion of the aggregate Purchase Price set forth opposite the Purchaser's
name on Exhibit B hereto to the Company by check or wire transfer and the
Company shall deliver to each Purchaser a certificate or certificates
representing the number of Shares purchased, as set forth on Exhibit B
registered in the Purchaser's name.
2.3 Covenant of Best Efforts and Good Faith. The Company and the
Purchasers agree to use their respective best efforts and to act in good faith
to cause to occur all conditions to Closing, as set forth in Sections 5 and 6
hereof, which are in the control of such party.
SECTION 3
Representations and Warranties of the Company
The Company hereby covenants with and represents and warrants to the
Purchasers that, except as set forth in the Schedule of Exceptions, attached to
this Agreement as Exhibit C:
3.1 Organization and Standing; Articles and Bylaws.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of California. The
Company has all requisite corporate power and authority to own its properties,
to conduct its business, to enter into this Agreement, to file the Certificate,
to issue and sell the Shares, to issue the Common Stock issuable upon conversion
of the Shares, and to carry out and perform its obligations under this Agreement
and the Certificate.
(b) The Company has furnished the Purchasers or Special Counsel
with true, correct and complete copies of its Articles of Incorporation, Bylaws
and all amendments thereto to date.
3.2 Subsidiaries. The Company has no Subsidiaries or direct or
indirect equity interest, by way of stock ownership or otherwise, in any other
firm, corporation, association or business enterprise.
3.3 Capitalization. The Company's authorized capital stock consists
of (a) 10,000,000 shares of common stock, par value $.01 per share (the "Common
Stock"), of which 3,000,000 shares are issued and outstanding, and (b) 3,000,000
shares of preferred stock (the "Preferred Stock"), 3,000,000 of which have been
designated "Series A Convertible Preferred Stock," no par value, and the Company
has no authority to issue any other capital stock.
2.
7
No shares of Preferred Stock have been issued prior to the Closing. ALL of the
issued and outstanding shares of Common Stock have been duly authorized and
validly issued, are fully paid and nonassessable, and have been offered, issued,
sold and delivered by the Company in compliance with all applicable Federal and
state securities laws. Exhibit D hereto contains a true and complete list of the
names and addresses of the beneficial holders of all of the outstanding Common
Stock and of the holders of all outstanding options or other rights to purchase
Common Stock. Except as expressly provided in this Agreement or disclosed in
Exhibit D, there are no outstanding preemptive, conversion or other rights,
options, warrants or agreements granted or issued by or binding upon the Company
for the purchase or acquisition of any shares of its capital stock. To the best
of the Company's knowledge and belief, no holder of Common Stock has granted
options or other rights to purchase any shares of Common Stock from such
shareholder, and there is no voting trust agreement or arrangement among any of
the beneficial holders of Common Stock affecting the exercise of the voting
rights of such Common Stock. The Company has reserved 1,500,000 shares of Common
Stock for issuance to future employees either upon the exercise of stock options
or upon the issuance of stock, in all cases subject to approval of such options
or stock by the Board.
3.4 Authorization. ALL corporate actions and proceedings on the part
of the Company, its directors and shareholders necessary for the authorization,
execution, delivery and performance by the Company of this Agreement and the
Certificate, and otherwise for the authorization, issuance and delivery of the
Shares and the Common Stock issuable upon conversion thereof have been lawfully
and validly conducted. This Agreement and the Certificate are valid and binding
obligations of the Company, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws and equitable
princples relating to or affecting the enforcement of creditors' rights in
general and by general principles of equity, and except that enforcement of the
indemnity provisions of Section 8.8 of this Agreement may be limited by Federal
or state securities laws or public policy underlying such laws. The execution,
delivery and performance by the Company of this Agreement, and the compliance by
the Company with the Certificate, will not result in any violation of, conflict
with, or result in a breach of any of the terms of, or constitute a default
under, any provision of Federal or state law to which the Company is subject,
the Company's Articles of Incorporation or Bylaws, or any mortgage, indenture,
agreement, instrument, judgment, decree, order, rule, regulation or other
restriction to which the Company is a party or by which it or any of its assets
are bound, or result in the creation of any Lien upon any of the assets of the
Company, which violation, conflict, breach, default or Lien could have a
material adverse effect on the condition, financial or otherwise, or operation
of
3.
8
the Company. The Shares have been duly authorized, and when issued in compliance
with the provisions of this Agreement, will be validly issued, fully paid and
nonassessable, and will be free of any Liens and restrictions (except
restrictions arising under the Securities Act or the California Corporate
Securities Law of 1968) and will have the rights, preferences, privileges and
restrictions as provided in the Certificate. The shares of Common Stock issuable
upon conversion of the Shares have been duly and validly reserved and, upon
issuance in accordance with the terms of the Certificate, will be duly
authorized, validly issued, fully paid and nonassessable and free and clear of
all Liens and restrictions, except those arising from any acts of the Purchaser
(except restrictions arising under the Securities Act or the California
Corporate Securities Law of 1968).
3.5 Financial Information. The Company's unaudited balance sheet at
May 23, 1986, a copy of which is attached hereto as Exhibit E, (i) is in
accordance with the books and records of the Company, (ii) presents fairly the
financial condition of the Company at such date and (iii) was prepared in
accordance with generally accepted accounting principles.
3.6 Absence of Undisclosed Liabilities. Except as disclosed on
Exhibit E hereto, the Company has no obligations or liabilities (whether
accrued, absolute, contingent, liquidated or otherwise, including without
limitation, any tax liabilities due or to become due), except current
liabilities incurred and obligations under agreements entered into in the usual
and ordinary course of business since the inception of the Company, none of
which (individually or in the aggregate) is material.
3.7 Contracts. Except as to those contracts, leases and other
documents set forth in the Schedule of Contracts and Leases, attached hereto as
Exhibit F (correct and complete copies of which have been previously delivered
to Special Counsel or described in all material respects in Exhibit F), the
Company is not a party to any material written or oral agreement not made in the
ordinary course of business and the Company is not a party to any written or
oral:
(a) Employment, bonus or consulting agreement, pension, profit
sharing, deferred compensation, stock bonus, retirement, stock option, stock
purchase, phantom stock or similar plan, including any agreement evidencing
rights to purchase securities of the Company or agreement among shareholders and
the Company;
(b) Loan or other agreement, note, indenture, or instrument
relating to or evidencing Indebtedness for Borrowed Money, or mortgaging,
pledging, granting or creating a Lien or security interest or other encumbrance
on, any of the Company's
4.
9
properties or assets, or any agreement or instrument evidencing any guaranty by
the Company of payment or performance by any other Person;
(c) Joint venture contract or arrangement or other agreement
involving a sharing of profits or expenses to which the Company is a party;
(d) Agreement limiting the freedom of the Company to compete in
any line of business or in any geographic area or with any person;
(e) Agreement or letter of intent with respect to the
acquisition of the business assets or shares of any other business;
(f) Agreement obligating the Company to pay any royalty or
similar charge for the use or exploitation of any tangible or intangible
property;
(g) Lease of real property or any material lease of personal
property or equipment; or
(h) Agreement to register securities of the Company under the
Securities Act.
3.8 Interested Party Transactions. No officer, director, or
shareholder of the Company or any "affiliate" or "associate" (as such terms are
defined in Rule 405 under the Securities Act) of any such Person or the Company
has or has had either directly or indirectly, (a) a beneficial interest in any
Person which (i) furnishes or sells services or products which are furnished or
sold or proposed to be furnished or sold by the Company or (ii) purchases from
or sells or furnishes to the Company any goods or services, or (b) a beneficial
interest in any contract or agreement to which the Company is a party or by
which it may be bound or affected, except to the extent arising solely from the
ownership of shares of the Company's capital stock.
3.9 Litigation. There is neither pending nor, to the Company's best
knowledge, threatened any action, suit, arbitration, proceeding (whether
Federal, state, local or foreign) or claim, or any basis therefor, whether or
not purportedly on behalf of the Company, to which the Company is or may be
named as a party or its property, assets or business is or may be subject and in
which an unfavorable outcome, ruling or finding could have a material adverse
effect on the condition, financial or otherwise, or operations of the Company.
The Company has no knowledge of any unasserted claim, the assertion of which is
likely and which, if asserted, will be for legal or equitable relief which
5.
10
if granted would have a material adverse effect on the condition, financial or
otherwise, or operations of the Company.
3.10 Title to Properties; Liens and Encumbrances. The Company has
good and marketable title to all of its properties and assets, excluding any and
all property and assets described in Section 3.15 hereof, and has good title to
all of its leasehold interests in each case subject to no Lien except as
disclosed in Exhibit F and except for any Lien on personal property in the
nature of a purchase money security interest granted in the usual and ordinary
course of business.
3.11 Condition of Properties. All facilities, machinery, equipment
fixtures, vehicles and other tangible property owned, leased or used by the
Company are in good operating condition and repair.
3.12 Intangible Assets.
(a) The Company has all franchises, permits, certificates,
authorizations, licenses and other similar authority required by law or
governmental regulations from all applicable Federal, state or local authorities
and any other regulatory authorities, which are necessary for the conduct of its
business as now being conducted by it and as planned to be conducted, the lack
of which could have a material and adverse effect on the operations or
condition, financial or otherwise, of the Company, and it is not in default or
noncompliance in any material respect under any of such franchises, permits,
certificates, authorizations, licenses or other similar authority.
(b) The Company owns or has the right to use all patents,
trademarks, trade names, copyrights and rights with respect to any of the
foregoing necessary to conduct its business as now being conducted and as
planned to be conducted, without conflict with or infringement upon any right or
claimed right of any Person and without any obligation or liability for
royalties, fees, or other compensation to any owner, licensor, or other claimant
to any of the foregoing.
(c) The Company owns and has the unrestricted right to use all
trade secrets, including know-how, inventions, designs, processes, computer
programs and technical data and information (collectively herein "Intellectual
Property") required for or incident to the development, manufacture, operation
and sale of all products and services sold or proposed to be sold by the
Company, free and clear of any right, Lien, or claim of any Person, including
without limitation former employers of its employees; provided, however, the
possibility exists that other Persons, completely independent of the Company or
its employees
6.
11
or agents, could have developed trade secrets or items of technical information
similar or identical to those of the Company.
(d) The Company has taken reasonable security measures to
protect the secrecy, confidentiality and value of all of its Intellectual
Property. Each employee of the Company and all other Persons who, either alone
or in concert with others, have developed, discovered or conceived the
Intellectual Property, or who have or have had access to the Intellectual
Property, will have entered into proprietary information agreements in
substantially the form approved by Special Counsel on or prior to September 9,
1986.
3.13 Employees. To the best of the Company's knowledge, no officer or
key employee of the Company has any plans to terminate his or her employment
with the Company and no employee of the Company is in violation of any term of
any employment contract, invention assignment or nondisclosure agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant 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 relating to the use of trade secrets or proprietary information
of others, and the employment of the Company's employees does not subject the
Company or the Purchaser to any liability arising by reason of any such
contract, agreement or restrictive covenant or by reason of trade secret or
unfair competition laws. The Company does not have any collective bargaining
agreement covering any of its employees and has encountered no material labor
difficulties.
3.14 Compliance with Laws and Other Instruments. The business and
operations of the Company have been and are being conducted in accordance with
all applicable Federal, state and local laws, rules and regulations. The Company
is not in violation of any term of its Articles of Incorporation or Bylaws or
any term of any mortgage, indenture, contract, agreement, instrument, judgment,
decree, order, statute, rule or regulation to which the Company is subject. The
offer, issuance and sale of the Shares as contemplated by this Agreement, and
the issuance of Common Stock upon conversion of the Shares in accordance with
the terms of the Certificate are and will be, exempt from the registration and
prospectus delivery requirements of the Securities Act and have been registered
or qualified (or are exempt from registration and qualification) under all
applicable state securities laws.
3.15 Insurance. There are in full force and effect one or more
policies of insurance issued by insurers of recognized
7.
12
responsibility, insuring the Company and its properties and business against
such losses and risks, and in such amounts, as are customary for the
contemplated business of the Company. On or before September 9, 1986, the
Company will have acquired a policy of guaranteed renewable term life insurance
naming the Company as beneficiary and providing $330,000 of coverage on the life
of Mark D. Dankberg.
3.16 No Brokers or Finders. The Company has retained no finder or
broker with the transactions contemplated by this Agreement, and hereby agrees
to indemnify and hold harmless the Purchasers from any liability for any
commission or compensation in the nature of an agent's fee to any broker or
other Person (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.
3.17 Business Plan. The Company has heretofore furnished to each of
the Purchasers and Special Counsel a business plan of the Company dated May 24,
1986 ("Business Plan"). The Business Plan represents a good faith effort by the
Company to describe its proposed business and projected growth and the Company
does not believe that these projections, or any other information contained in
the Business Plan are materially and adversely misleading or that there are any
materially and adversely misleading omissions in the Business Plan.
3.18 Disclosure. To the best of the Company's knowledge, this
Agreement: and all other documents or writings delivered to the Purchasers or
Special Counsel pursuant to this Agreement or otherwise in connection with the
offering of the Shares do not contain any untrue statement of a material fact,
or omit to state any fact necessary to make the statements made therein not
misleading.
SECTION 4
Representations and Warranties of the Purchasers
Each of the Purchasers represents and warrants to the Company as
follows:
4.1 Authorization. The execution, delivery and performance of
this Agreement have been duly authorized by each Purchaser as necessary and this
Agreement is a valid and binding obligation of each Purchaser, enforceable in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws and equitable
principles relating to or affecting the enforcement of creditors' rights in
general and by general principles of equity
8.
13
and except that enforcement of the indemnity provisions of Section 8.8 of this
Agreement may be limited by Federal or state securities laws or public policy
underlying such laws.
4.2 Investigation and Experience. Each Purchaser has carefully
reviewed the representations concerning the Company contained in this Agreement.
Each Purchaser understands that this investment involves substantial risks and
has had an opportunity to discuss the Company's business, management and
financial affairs with the Company's management and has had the opportunity to
inspect the Company's facilities. The officers of the Company have made
available to the Purchasers any and all written information that has been
requested and have answered to the satisfaction of the Purchasers all inquiries
made by them. Each Purchaser is experienced in evaluating and investing in newly
organized companies in the electronics and communications industries such as the
Company and has such knowledge and experience in financial and business matters
that he or it is capable of evaluating the merits and risks of an investment in
the Company and has the capacity to protect his or its own interests in
connection with this Agreement and the transactions contemplated hereby and at
the present time could afford a complete loss of such investment, within the
meaning of Section 25102(f) of the California Corporations Code. Each Purchaser
has been further advised that no public market now exists for any of the
securities issued by the Company and that a public market may never exist for
the Shares.
4.3 Investment Intent. Each Purchaser is acquiring the Shares, and the
shares of Common Stock issuable upon conversion of the Shares, for investment
for the Purchaser's own account and not with the view to, or for resale in
connection with, any distribution thereof. Each Purchaser understands that the
Shares and the shares of Common Stock issuable upon conversion of the Shares
have not been registered under the Securities Act by reason of specified
exemptions therefrom which depend upon, among other things, the bona fide nature
of its investment intent as expressed herein.
4.4 Accredited Investor. Each Purchaser is an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the Securities
Act.
4.5 No Brokers or Finders. Each Purchaser has retained no finder or
broker in connection with the transactions contemplated by this Agreement and
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 (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.
9.
14
SECTION 5
Conditions of Purchasers' Obligations
The obligation of the Purchasers to purchase the Shares at the Closing
is subject to the fulfillment on or prior to the Closing Date of each of the
following conditions, any of which may be waived in whole or in part by the
Purchasers:
5.1 Representations and Warranties. The representations and warranties
made by the Company in Section 3 hereof shall be true and correct in all
respects when made and shall be true and correct in all respects on the Closing
Date with the same force and effect as if they had been made on and as of the
Closing Date.
5.2 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.
5.3 Opinion of Company's Counsel. The Purchasers shall have received
from Wiles, Circuit and Tremblay, counsel to the Company, an opinion addressed
to them, dated the Closing Date, in form and substance acceptable to the
Purchasers and Special Counsel.
5.4 Legal Investment. At the time of the Closing, the purchase of the
Shares hereunder shall be legally permitted by all laws and regulations to which
the Purchasers and the Company are subject.
5.5 Compliance Certificate. The Company, if requested by Special
Counsel, shall have delivered to the Purchasers a certificate of the President
of the Company, dated the Closing Date, certifying the fulfillment of the
conditions specified in Sections 5.1 and 5.2.
5.6 Proceedings and Documents. All corporate and other proceedings and
actions taken in connection with the transactions contemplated hereby and all
certificates, opinions, agreements, instruments and documents mentioned herein
or incident to such transactions shall be satisfactory in substance and form to
the Purchasers and Special Counsel.
5.7 Qualification. All authorizations, registrations, qualifications,
approvals or permits, if any, of any governmental authority or regulatory body
that are required in connection with the lawful issuance and sale of the Shares
pursuant to this Agreement, the conversion of the Shares into Common Stock and
the issuance of such Common Stock upon such conversion, shall have
10.
15
been duly obtained and shall be effective on and as of the Closing.
5.8 Certificate. The Certificate shall have been properly executed
and filed with the Secretary of State of California and a copy of the
Certificate certified by the Secretary of State shall have been delivered to
Special Counsel.
5.9 Election of Directors. The Company's Bylaws shall provide for
three authorized directors. Robert W. Johnson shall have been elected to the
Board as a representative of the Purchasers effective as of the Closing.
5.10 Shareholders' Agreement. Mark D. Dankberg, Steven R. Hart, Mark
J. Miller, the Company and the Purchasers shall have entered into a
Shareholders' Agreement in form and substance acceptable to the Purchasers,
relating to the election to the Board of Directors of certain persons chosen or
nominated by the Purchasers and other shareholders.
5.11 Supporting Documents. The Purchasers or Special Counsel
shall have received the following:
(a) Copies of resolutions of the Board certified by the
Secretary of the Company, authorizing and approving the Certificate and the
execution, delivery and performance of this Agreement and and all other
documents and instruments to be delivered pursuant hereto;
(b) A certificate of incumbency executed by the Secretary of
the Company certifying the names, titles and signatures of the officers
authorized to execute the documents referred to in paragraph (a) above and
certifying that the Articles of Incorporation and Bylaws delivered to the
Purchasers pursuant to Section 3.1 are in full force and effect without
modification or amendment.
(c) Such additional supporting documentation with respect to
the transactions contemplated hereby as the Purchasers or Special Counsel may
reasonably request.
5.12 Founders' Stock Purchase. Each of Mark D. Dankberg, Steven R.
Hart and Mark J. Miller shall have entered into stock restriction agreements
with the Company in form and substance satisfactory to the Purchasers.
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SECTION 6
Conditions to Obligations of the Company
The Company's obligation to sell the Shares at the Closing is subject
to the fulfillment on or prior to the Closing Date of each of the following
conditions:
6.1 Representations. The representations and warranties made by the
Purchasers in Section 4 hereof shall be true and correct in all respects when
made and shall be true and correct in all respects on the Closing Date with the
same force and effect as if they had been made on and as of the Closing Date.
6.2 Legal Investment. At the time of the Closing, the conditions set
forth in Sections 5.4, 5.6, 5.7, 5.8 and 5.10 shall have been satisfied.
SECTION 7
Affirmative Covenants of the Company
The Company hereby covenants and agrees that, so long as the
Purchasers or their assigns are the Holders in the aggregate of more than 50% of
the Restricted Stock purchased hereunder:
7.1 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.
7.2 Financial Information. The Company will furnish the following
reports to the Purchasers (or their representative):
(a) As soon as available and in any event within 60 days after
the end of each fiscal year of the Company, a consolidated balance sheet of
the Company and its Subsidiaries, if any, as of the end of such fiscal year, and
consolidated statements of income, shareholders' equity and changes in financial
condition 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, if unaudited, certified by the
principal financial or accounting officer of the Company. Upon written request
delivered prior to the end of any fiscal year of the Company from Purchasers
holding a majority of the Restricted Stock, such financial statements for that
fiscal year shall be audited and certified by independent accountants of
recognized national
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reputation selected by the Company. If audited financial information is so
requested, the Company shall provide such audited information within 90 days of
the end of the fiscal year for which the audited financial information was
requested.
(b) As soon as available and in any event within 30 days after
the end of each fiscal quarter of the Company, a consolidated balance sheet of
the Company and its Subsidiaries, if any, as of the end of each such fiscal
quarter and consolidated statements of income, shareholders' equity and changes
in financial position of the Company and its Subsidiaries, if any, for such
fiscal quarter 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 for the corresponding periods of the
previous fiscal year, subject only to changes resulting from normal year-end
audit adjustments, if any, all in reasonable detail and certified by the
principal financial or accounting officer of the Company.
(c) During such time as the Company is subject to the reporting
requirements of Section 13(a) or 15(d) of the Exchange Act, and in lieu of the
financial information required pursuant to Sections 7.2(a) and (b), copies of
its Annual and Quarterly Reports on Forms 10-K and 10-Q, respectively, or any
similar successor forms, and all registration statements proxy statements and
other reports, filed with the Commission, such reports to be furnished to the
Purchasers no later than the deadline for filing them with the Commission.
7.3 Additional Information.
(a) Except as prohibited by federal law, the Company will
permit representatives of the Purchasers to visit and inspect any of the
properties of the Company (with the understanding that, when security demands,
the Purchasers shall be accompanied by an authorized individual), including its
books of account, and to discuss its affairs, finances and accounts with the
Company's officers and its independent public accountants, during normal
business hours and as often as the Purchasers may reasonably request. Partners
and full-time employees of the Purchasers shall be granted access to proprietary
data on the same basis as employees and directors of the Company provided that,
if requested, they agree in writing to undertake the same fiduciary duty and
responsibility to protect the proprietary data as would be required of an
employee or a director having access to such proprietary data. As used herein,
"proprietary data" shall mean data which has been classified and is being
controlled (as of the date of the requested access) as confidential and
proprietary by the Company.
(b) As long as a Purchaser holds at least 150,000 of the Shares
or 150,000 shares of Restricted Stock, adjusted as
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appropriate for stock splits and combinations and stock dividends and other
distributions, the Company will deliver to such Purchaser:
(i) As soon as available and in any event within 30 days
after the end of each month, a consolidated balance sheet of the Company and its
Subsidiaries, if any, as of the end of such month, and consolidated statements
of income and sources and applications of funds of the Company and its
Subsidiaries, for each month and for the current fiscal year of the Company to
date, prepared in accordance with generally accepted accounting principles
consistently applied, together with a comparison of such statements to the
Company's operating plan then in effect and approved by its Board, and
certified, subject only to changes resulting from normal year-end audit
adjustments, by the principal financial or accounting officer of the Company,
together with a report of operations by the Company's President including a
statement of orders received, shipments made and a backlog analysis reflecting
orders to be delivered within six months of the reporting date, and orders to be
delivered after six months from the reporting date.
(ii) As soon as available and in any event within 60 days
after the Closing Date for the Company's partial fiscal year ending after the
Closing Date and within 30 days before the commencement of each subsequent
fiscal year, a copy of the operating plan for such partial or full fiscal year
prepared and approved by the Board in accordance with section 7.4. Any
modifications in such operating plan shall be submitted as promptly as
practicable after such changes have been approved by the Board.
(iii) With reasonable promptness, such other information
and data with respect to the Company and its Subsidiaries, if any, as any
Purchaser may from time to time reasonably request.
7.4 Preparation of Operating Plan. The Company shall, within 60 days
after the Closing Date for the Company's partial fiscal year ending after the
Closing Date and at least 30 days prior to the beginning of each subsequent
fiscal year, prepare and submit to the Board, for its approval, an annual plan
for such partial or full fiscal year which shall include monthly capital and
operating expense budgets, cash flow statements and profit and loss and
quarterly balance sheet projections. Each annual plan shall be modified as often
as necessary, but in any event every six months to reflect material changes
required as a result of operating results and other events that occur, or may be
reasonably expected to occur, during the year covered by the annual plan, and
copies of these modifications shall be submitted to and approved by the Board.
The Company may dispense with any
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six month modification if the Board reasonably determines that no material
change is required in the budget for that six-month fiscal period.
7.5 Prompt Payment of Taxes and Other Liabilities. The Company will
promptly pay and discharge, or cause to be paid and discharged, before the same
shall become delinquent and before penalties accrue thereon, all lawful taxes,
assessments and governmental charges or levies imposed upon the income, profits,
property or business of the Company; provided, however, that any such tax,
assessment, charge or levy need not be paid if the validity thereof shall
concurrently be contested in good faith and by appropriate proceedings in such a
manner as not to have any materially adverse effect on the Company's financial
condition or operation and if the Company shall have set aside on its books
adequate reserves with respect thereto; provided, further, that the Company will
promptly pay all such taxes, assessments, charges or levies 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, all other Indebtedness incident to
operations of the Company.
7.6 Maintenance of Properties and Leases. The Company will keep its
tangible properties and those of any Subsidiary necessary to the business of the
Company or such Subsidiary in good repair and in working order and condition,
reasonable wear and tear excepted, and will from time to time make all necessary
and proper repairs, renewals, replacements, additions and improvements thereto.
The Company and all of its Subsidiaries will at all times comply with each
provision of all leases to which any of them is a party or under which any of
them occupies property if the breach of such provision might have a material
adverse effect on the condition, financial or otherwise, or operations of the
Company or such Subsidiary.
7.7 Insurance. The Company will keep its assets and those of any
Subsidiary which are of an insurable character insured by financially sound and
reputable insurers against loss or damage by fire, extended coverage, explosion
and such other hazards, risks and liability to persons and property, and in such
amounts, as are customary and prudent for companies in similar businesses
similarly situated.
7.8 Compliance with Laws. The Company and all of its Subsidiaries
shall duly observe and conform to all applicable laws and requirements of
governmental authorities relating to the conduct of their businesses or to their
property or assets.
7.9 Maintenance of Corporate Existence. The Company shall maintain in
full force and effect its corporate existence,
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rights and franchises and all licenses and other rights to use patents,
processes, licenses, trademarks, trade names or copyrights owned or licensed by
it or any Subsidiary, and deemed by the Company to be necessary for the conduct
of its business, and conduct its business in an orderly manner without voluntary
interruption.
7.10 Availability of Common Stock for Conversion. The Company will,
from time to time, in accordance with the laws of California, increase the
authorized amount of Common Stock prior to such time as the failure to do so
would cause the number of shares of Common Stock remaining authorized and
unissued to be insufficient to permit conversion of all the then outstanding
Shares.
7.11 Expenses of Purchasers. The Company shall pay, and hold the
Purchasers harmless from liability for the payment of, (i) all reasonable fees
and expenses of Special Counsel arising in connection with the negotiation of
execution of this Agreement and consummation of the transactions contemplated
hereby, which fees (not including expenses) shall not exceed $12,000.
7.12 Board of Directors Meetings. The Company shall hold meetings of
the Board at least once every month unless the failure to hold any meeting is
consented to by Purchasers holding a majority of the Restricted Stock, and shall
furnish to the Purchasers upon request, a complete and accurate copy of the
minutes and other records of all meetings and other proceedings of the Board and
its committees as well as of the written consents of the members of the Board by
which action is taken by the Board or any committee without a meeting.
7.13 Right of First Refusal. The Company hereby grants to each
Purchaser the right of first refusal to purchase a pro rata part of any New
Securities (as defined in this section 7.13) which the Company may, from time to
time, propose to sell and issue. Each Purchaser's pro rata share, for purposes
of this right of first refusal, is the ratio of (i) the number of shares of
Restricted Stock held by the Purchaser as of the date of the proposed sale (ii)
the aggregate number of shares of Common Stock outstanding and the aggregate
number of shares of such stock issuable upon the conversion of all securities
convertible into Common Stock. This right of first refusal shall be subject to
the following provisions:
(a) "New Securities" shall mean any capital stock (including
Common Stock or preferred shares) of the Company and all rights, options or
warrants to purchase capital stock, and securities of any type whatsoever that
are, or may become, convertible into capital stock; provided, however, that the
term
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"New Securities" does not include (i) securities purchased under this Agreement
and securities outstanding on the Closing date; (ii) securities offered to the
public pursuant to a registration statement filed pursuant to the Securities
Act; (iii) securities issued pursuant to the acquisition of another corporation
by the Company by merger, purchase of all or substantially all the assets or
other reorganization whereby the Company shall become the owner of more than 50%
of the voting power of such corporation; (iv) shares of Common Stock issued in
connection with any stock split, stock dividend or recapitalization of the
Company; (v) any borrowings, direct or indirect, from financial institutions or
other Persons by the Company, whether or not presently authorized, including any
type of loan or payment evidenced by any type of debt instrument, provided such
borrowings do not have equity features, including warrants, options or other
rights to purchase capital stock, and are not convertible into capital stock of
the Company; or (vi) shares of Common Stock of the Company issued to employees,
consultants or directors of the Company upon the exercise of stock options or
pursuant to stock purchase agreements or other incentive arrangements or
otherwise, all of which options, agreements, arrangements and other issuances
are approved by the Board.
(b) In the event the Company proposes to undertake an issuance
of New Securities, it shall give each Purchaser written notice of its intention,
describing the type or New Securities, the price and the general terms upon
which the Company proposes to issue the same. Each Purchaser shall have 30 days
from the date such notice is given to agree to purchase all or any portion of
the Purchaser's pro rata share of such New Securities for the price and upon the
general terms specified in the notice by giving written notice to the Company
and stating therein the quantity of New Securities to be purchased.
(c) In the event the Purchasers fail to exercise the right of
first refusal as to all of the New Securities proposed to be issued within
said 30-day period, the Company shall give written notice of such fact,
specifying the amount of securities not elected to be purchased, to each
Purchaser who has elected to purchase any of such New Securities, and each such
Purchaser shall have five days, after the giving of such further notice, to
purchase all or any part of its pro rata share of such unpurchased portion by
giving written notice thereof to the Company. After the expiration of the period
for the exercise of the over-allotment provisions of this section 7.13, the
Company shall have 180 days thereafter to sell or enter into an agreement
(pursuant to which the sale of New Securities covered thereby shall be closed,
if at all, within 180 days from the date of said agreement) to sell that portion
of the New Securities for which the Purchasers' option was not exercised, at a
price and upon general terms no more favorable to the purchasers thereof than
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specified in the Company's notice. In the event the Company has not sold the New
Securities within said 180-day period (or sold and issued New Securities in
accordance with the foregoing within 180 days from the date of said agreement),
the Company shall not thereafter issue or sell any New Securities, without first
offering such securities to the Purchasers in the manner provided above.
7.14 Replacement of Certificates. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
any certificate representing any of the Shares, and upon receipt of an
appropriate indemnity bond in the case of any reasonable request therefor by the
Company, the Company shall issue a new certificate representing such Shares in
lieu of such lost, stolen, destroyed or mutilated certificate.
7.15 Notice of Litigation. The Company shall promptly provide notice
to the Purchasers of any material suit or litigation instituted against the
Company.
7.16 Securities Law Filings. The Company shall make any filing
necessary to perfect in a timely fashion an exemption from the registration and
prospectus delivery requirements of the Securities Act, and to register or
qualify or secure an exemption from such registration or qualification under any
applicable Blue Sky or securities laws of any state or other jurisdiction for
the issuance of the Shares to the Purchasers.
7.17 Termination of Certain Obligations. The obligations of the
Company under Sections 7.1, 7.3, 7.4, 7.5, 7.6, 7.7, 7.8, 7.9, 7.12, 7.13, and
7.15 hereof shall terminate upon the occurrence of any event specified in the
Certificate as a condition precedent for the automatic conversion of the Shares
or upon the voluntary conversion pursuant to the Certificate of more than 50% of
the Shares.
SECTION 8
Transfer of Securities
8.1 Restrictions on Transfer. The Shares shall not be transferable,
except upon the conditions specified in this Section 8, which are intended to
insure compliance with the provisions of the Securities Act and the California
Corporate Securities Act of 1968 or, in the case of Section 8.13 hereof, to
assist in an orderly distribution. Each Purchaser agrees to cause any proposed
transferee of Shares held by the Purchaser to agree to take and hold those
securities subject to the provisions of this Section 8.
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8.2 Restrictive Legend. Each certificate representing the Shares or
any Restricted Stock shall be imprinted with a legend substantially in the
following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A)
COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, (B) IN
COMPLIANCE WITH RULE 144 UNDER SUCH ACT, OR (C) THE
COMPANY HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT NO
REGISTRATION IS LEGALLY REQUIRED BY SUCH TRANSFER.
8.3 Transfers. Prior to any proposed transfer of any Shares or any
Restricted Stock (other than under circumstances described in Section 8.4 and
8.5 hereof), and so long as such securities bear the restrictive legend required
under Section 8.2, the Holder thereof shall deliver to the Company (except in
transactions demonstrated to the Company's reasonable satisfaction to be in
compliance with Rule 144 of the Commission, or any substantially similar
successor rule of the Commission) either (i) a written opinion of legal counsel
reasonably satisfactory to the Company to the effect that the proposed transfer
of such securities may be effected without registration under the Securities Act
and any applicable state securities laws, or (ii) a "no action" letter from the
Commission (and any necessary state securities administrators) to the effect
that the distribution of such securities without registration will not result in
a recommendation by the staff of the Commission (or such administrators) that
action be taken with respect thereto, whereupon the Holder of such securities
shall be entitled to transfer such securities in accordance with the terms of
such opinion or "no action" letter. Upon the request of a Holder complying with
either of these conditions, the Company will issue a new certificate for such
securities free of any legend.
8.4 Requested Registration.
(a) If the Company shall receive from any Purchaser or
Purchasers a written request that the Company effect a registration for the sale
of Restricted Stock, the Company will, as soon as practicable, effect such
registration as may be so requested and as would permit or facilitate the sale
and distribution of the Restricted Stock specified in such request, provided
that the Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section 8.4:
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(i) Prior to the earlier of the fifth anniversary of the date
hereof or the completion of the initial, firm-commitment underwritten
public offering of the Common Stock pursuant to an effective
registration statement under the Securities Act;
(ii) If the request from the Purchaser(s) is for a registration
on Form S-1, S-2 or S-18 (or their equivalents) and the Company has
previously effected two such registrations pursuant to this Section
8.4(a);
(iii) If the Company has effected any registration pursuant to
this Section 8.4(a) within twelve months of such request;
(iv) If the aggregate proposed selling price of the Restricted
Stock to be included by the Purchaser(s) is less than $1,000,000 in
the case of a registration on Form S-1, S-2 or S-18 or $500,000 in
the case of a registration on Form S-3; or
(v) If the request from the Purchaser(s) is for registration of
a class of securities other than Common Stock, and the Company has
not previously effected a registered public offering of such class of
securities.
(b) If a Purchaser, in making a valid request for registration
pursuant to Section 8.4(a), intends to distribute the Restricted Stock covered
by its request by means of an underwriting, it shall so advise the Company as a
part of its request and the Company shall include such information in the
written notice referred to in Section 8.4(a) above. The right of the Purchaser
to registration pursuant to this Section 8.4 shall be conditioned upon the
inclusion of the Purchaser's Restricted Stock in the underwriting. If holders of
securities of the Company (other than holders of Restricted Stock) who are
entitled by contract with the Company to have securities included in any
registration initiated pursuant to this Section 8.4 (the "Other Shareholders")
request such inclusion, the Purchaser(s) shall offer to include the securities
of such Other Shareholders in the underwriting and may condition such offer on
their acceptance of the further applicable provisions of this Section 8. If the
managing underwriter or underwriters of the offering advise the Purchaser(s) in
writing that marketing factors require a limitation on the number of shares to
be underwritten, the securities of the Company held by the Other Shareholders
shall, to the extent necessary, be first excluded from such registration before
any shares of Restricted Stock held by the Purchaser(s) are excluded. No
securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in
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such registration. If any Purchaser disapproves of the terms of any
underwriting, it may elect to withdraw therefrom by written notice to the
Company and the underwriter. In such event, the registration shall not be
counted as a registration for the purposes of Section 8.4(a). If the managing
underwriter or underwriters have not limited the amount of Restricted Stock to
be underwritten, the Company may include its securities for its own account in
such registration unless such inclusion will limit the sale of any Restricted
Stock in the underwriting. The managing underwriter or underwriters of any
underwritten public offering requested pursuant to this Section 8.4 shall be
selected by mutual agreement of the Company and the Purchaser(s).
8.5 Company Registration.
(a) If the Company shall determine to register any of its
securities either for its own account or the account of any security holder or
holders, other than a registration relating solely to employee benefit plans, or
a registration relating solely to a transaction pursuant to Rule 145 of the
Commission (or substantially similar successor rule) or a registration on any
registration form which does not permit secondary sales or does not include
substantially the same information regarding the Company as would be required to
be included in a registration statement covering the sale of Restricted Stock,
the Company will:
(i) promptly give to each Holder of Restricted Stock written
notice thereof (which shall include a list of the jurisdictions in
which the Company intends to attempt to qualify such securities under
the applicable Blue Sky or other state securities laws, and the name
of the managing underwriter or underwriters, if any, of the
offering); and
(ii) include in such registration all the Restricted Stock of
the same class or classes of securities to be registered by the
Company, as specified in a written request or requests given by any
Holder within 15 days after such written notice from the Company
described in clause (i) above is given, except as set forth in
Section 8.5(b) below.
(b) The right of any Holder to include Restricted Stock in a
registration pursuant to Section 8.5 involving an underwritten public offering
shall be conditioned upon the inclusion of such Holder's Restricted Stock in the
underwriting to the extent provided herein. Notwithstanding any other provision
of this Section 8.5, if the managing underwriter or underwriters determine that
marketing factors require a limitation on the number of shares to be
underwritten, and if such registration is
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the first registered public offering of the Company's securities, the
underwriter may (subject to the allocation priority set forth below) exclude
from such registration and underwriting some or all of the Restricted Stock
requested to be included. The Company shall so advise all holders of securities
requesting registration, and the securities of the Company held by Other
Shareholders shall, to the extent necessary, be first excluded from such
registration before any shares of Restricted Stock held by the Purchaser are
excluded. If the Purchaser disapproves of the terms of any such underwriting, it
may elect to withdraw therefrom by written notice to the Company and the
underwriter. Any Restricted Stock excluded or withdrawn from such underwriting
shall be withdrawn from such registration.
8.6 Expenses of Registration. The Company shall bear all
Registration Expenses incurred in connection with (i) the first two
registrations on Form S-1, S-2, S-3 or S-18 (or their equivalents) effected
pursuant to Section 8.4, and (ii) all registrations pursuant to Section 8.5;
provided, however, that if any holder of Registrable Securities shall withdraw
from any registration commenced pursuant to this Section 8, such holder shall
pay his or its portion of any expenses incurred in connection with such
registration prior to such withdrawal pro rata, on the basis of the number of
shares such holder had requested to include in the registration. All Selling
Expenses shall be borne by the holders of the securities so registered and sold,
pro rata on the basis of the number of their shares so registered and sold.
8.7 Registration Procedures. In the case of each registration
effected by the Company pursuant to this Section 8, the Company will advise the
Purchasers in writing as to the initiation of such registration and as to the
completion thereof, and the Company will as expeditiously as possible:
(a) Keep such registration effective for a period of 90 days
or until the Holder or Holders of Restricted Stock included in such registration
have completed the distribution described in the registration statement relating
thereto, whichever first occurs;
(b) Furnish such number of prospectuses and other documents
incident thereto as a Holder of Restricted Stock included in such registration
may from time to time reasonably request;
(c) If the offering is to be underwritten, in whole or in
part, enter into a written underwriting agreement in form and substance
reasonably satisfactory to the Company, the underwriter of the public offering
and the Holders of the Restricted Stock included in such offering;
22.
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(d) Register or qualify the securities covered by such
registration statement under state securities or Blue Sky laws of such
jurisdictions as such participating Holders of Restricted Stock and underwriters
may reasonably request, except in any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance, unless the Company is
already subject to service in such jurisdiction;
(e) Notify the Holders participating in such registration,
promptly after it shall receive notice thereof, of the date and time when such
registration statement and each post-effective amendment thereto has become
effective or a supplement to any prospectus forming a part of such registration
statement has been filed;
(f) Notify counsel for such Holders promptly of any request by
the Commission for the amending or supplementing of such registration statement
or prospectus or for additional information;
(g) Advise such Holders promptly after it shall receive notice
or obtain knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of such registration statement or the initiation or
threatening of any proceeding for that purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued; and
(h) Refrain from making any sale or distribution of Common
Stock or other equity security, except pursuant to any employee benefit plan
approved by the Board and any pre-existing agreement for the sale or
distribution of such securities, for at least 90 days after the closing of the
public offering pursuant to such registration statement.
8.8 Indemnification.
(a) The Company will indemnify and hold harmless each Holder
of Restricted Stock included in a registration pursuant to this Section 8, each
of such Holder's officers, directors and partners, and each person controlling
such Holder within the meaning of the Securities Act and the rules and
regulations thereunder, and each underwriter, if any, and each person who
controls any underwriter, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated
23.
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therein or necessary to make the statements therein not misleading, or any
violation by the Company of the Securities Act or any rule or regulation
thereunder applicable to the Company and relating to action or inaction required
of the Company in connection with any such registration, qualification or
compliance, and will reimburse each such Holder, each of such Holder's officers,
directors and partners, and each Person controlling such Holder, each such
underwriter and each Person who controls any such underwriter, for any legal and
any other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action; provided, that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission (or alleged untrue statement or omission) based upon
written information furnished to the Company by such Holder or underwriter and
stated to be specifically for use therein; provided, however, that in the case
of a registration pursuant to Section 8.5 hereof, the obligation of the Company
hereunder shall be limited to an amount equal to the aggregate proceeds to the
Company of securities sold in such registration.
(b) Each Holder of Restricted Stock included in a registration
pursuant to this Section 8 will indemnify the Company, each of the Company's
directors and officers and each underwriter, if any, of the Company's securities
covered by such registration, each Person who controls the Company or such
underwriter within the meaning of the Securities Act and the rules and
regulations thereunder, each other such Holder of Restricted Stock included in
such registration and such other Holder's officers, directors and partners, and
each Person controlling such other Holder against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company, such underwriters and such other
Holders, directors, officers, partners, and control Persons for any legal or any
other expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder and
stated to be specifically for use therein; provided, however, that the
obligations of the Purchaser hereunder shall be limited to an amount equal to
the proceeds to the Purchaser of securities sold as contemplated herein.
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(c) Each party entitled to indemnification under this Section
8.8 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 8. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
8.9 Information by Holder. Each Holder of Restricted Stock included
in a registration pursuant to this Section 8 shall furnish to the Company such
information regarding such Holder and the distribution proposed by such Holder
as the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Section 8.
8.10 Limitations on Registration of Issues of Securities. From and
after the date of this Agreement, so long as the Purchasers or their assigns are
together the Holders of more than 50% of the Restricted Stock purchased
hereunder, the Company shall not enter into any agreement with any holder or
prospective holder of any securities of the Company giving such holder or
prospective holder the right to require the Company to initiate any registration
of any securities of the Company or to participate in any registration effected
pursuant to Section 8.4 hereof. This Section 8.10 shall not limit the right of
the Company to enter into any agreements with any holder or prospective holder
of any securities of the Company giving such holder or prospective holder the
right to require the Company, upon any registration of any of its securities
other than pursuant to Section 8.4 hereof, to include, among the securities
which the Company is then registering, securities owned by such holder subject
to the terms and conditions of this Section 8 applicable to Other Shareholders.
Any right given by the Company to any holder or prospective holder of the
Company's securities in connection with the registration of securities shall be
conditioned such that it shall be consistent with the rights of the Holders of
Restricted Stock provided in this Agreement.
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8.11 Rule 144 Reporting. With a view to making available the benefits
of the rules and regulations of the Commission which may permit the sale of the
Restricted Stock to the public without registration and the benefits of using
Form S-3, the Company agrees to:
(a) Make and keep public information available as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
from and after 90 days following the effective date of the first registration of
the Company under the Securities Act of an offering of its securities to the
general public;
(b) File with the Commission in a timely manner all reports
and other documents as the Commission may prescribe under Section 13(a) or
15(d) of the Exchange Act, whether or not the Company is required to do so, at
any time after it has become subject to such reporting requirements of the
Exchange Act; and
(c) So long as any Purchaser holds any Restricted Stock,
furnish to the Purchaser forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144 (at any
time from and after 90 days following the effective date of the first
registration of the Company for an offering of its securities to the general
public), and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
so filed as the Purchaser may reasonably request to avail itself of any rule or
regulation of the Commission allowing the Purchaser to sell any such securities
without registration.
(d) Use reasonable efforts to qualify for the use
of Form S-3 (or its equivalent).
8.12 Transfer of Registration Rights. The rights to cause the Company
to register securities granted by the Company under Sections 8.4 and 8.5 may be
assigned by any Purchaser to any of its limited partners or to the spouse of any
Purchaser, without regard to the amount of securities transferred, and to any
other transferees or assignees of such stock acquiring at least 50% of the
shares held by the Purchaser, provided that the Company is given written notice
at the time of or within a reasonable time after any said transfer, stating the
name and address of said transferees or assignees and identifying the securities
with respect to which such registration rights are being assigned, and provided
further that the transferees or assignees of such rights assume the obligations
of the Purchaser(s) under this section 8.
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8.13 "Market Stand-Off" Agreement. The Purchasers, if requested by the
Company and the underwriter of any public offering of the Company, shall agree
not to sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by it during the 90 day period following the
effective date of the registration statement covering the public offering,
provided that all officers and directors of the Company shall also enter into
similar agreements. Such agreement shall be in writing in a form satisfactory to
the Company and such underwriter. The Company may impose stop-transfer
instructions with respect to the securities subject to the foregoing
restrictions until the end of said 90 day period.
8.14 No Action Letter or Opinion of Counsel in Lieu of Registration;
Conversion of Restricted Stock. Notwithstanding anything else in this Section 8,
if Company shall have obtained from the Commission a "no action" letter in which
the Commission has indicated that it will take no action, if without
registration under the Securities Act, any holder disposes of securities covered
by any request for a registration made under this section in the specific manner
in which such holder proposes to dispose of the Restricted Stock, included in
such request, or if in the opinion of counsel for the Company concurred in by
counsel for such holder, which concurrence shall not be unreasonably withheld,
no registration under the Securities Act is required in connection with such
disposition, the shares included in such request shall not be eligible for
registration under this Section 8.
SECTION 9
Enforcement
9.1 Remedies at Law or in Equity. If any Default should occur or if
any representation or warranty made by or on behalf of either party to this
Agreement or in any certificate, report or other instrument delivered under or
pursuant to any term hereof shall be untrue or misleading in any material
respect as of the date of this Agreement or as of the Closing Date or as of the
date it was made, furnished or delivered, the other party may proceed to protect
and enforce its rights by suit in equity or action at law, whether for the
specific performance of any term contained in this Agreement or the Certificate
or for the injunction against the breach of any such term or in aid of the
exercise of any power granted in this Agreement or the Certificate or to enforce
any other legal or equitable right of such party, or to take any one or more of
such actions. In the event of such an action, the prevailing party in any such
dispute shall
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be entitled to recover from the losing party all fees, costs, and expenses of
enforcing any right of such prevailing party under or with respect to this
Agreement or the Certificate, including without limitation such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs, and expenses of appeals.
9.2 Cumulative Remedies. None of the rights, powers or remedies
conferred under this Agreement shall be mutually exclusive, and each such right,
power or remedy shall be cumulative and in addition to any other right, power or
remedy whether conferred by this Agreement or by the Certificate or now or
hereafter available at law, in equity, by statute or otherwise.
SECTION 10
Definitions
Unless the context otherwise requires, the terms defined in this
section 10 shall have the meaning herein specified for all purposes of this
Agreement, applicable to both the singular and plural forms of any of the terms
herein defined. All accounting terms used in this Agreement not defined in this
section 10 shall, except as otherwise provided for herein, be construed in
accordance with those generally accepted accounting principles that the Company
is required to employ by the terms of this Agreement. If and so long as the
Company has any Subsidiary, the accounting terms appearing in this Agreement
shall refer to accounting on a consolidated basis for the Company and each of
its Subsidiaries.
"Agreement" shall mean this Agreement.
"Certificate" shall have the meaning assigned to it in section 1.1
hereof.
"Board" shall mean the Board of Directors of the Company.
"Business Plan" shall have the meaning assigned to it in section 3.20
hereof.
"Closing" and "Closing Date" shall have the meanings assigned to them
in section 2.1 hereof.
"Common Stock" shall have the meaning assigned to it in section 3.3
hereof.
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"Commission" shall mean the Securities and Exchange Commission.
"Company" shall mean Intellicom, Inc.
"Default" shall mean a default or failure in the due observance or
performance of any covenant, condition or agreement to be observed or performed
under the terms of this Agreement or the Certificate, if such default or failure
in performance shall remain unremedied for thirty days.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Holder" shall mean, with respect to any outstanding security, the
record owner of such security and, with respect to the Common Stock or other
securities issuable upon conversion of any Shares, the record owner of such
Shares.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind, including, without limitation, any
conditional sales or other title retention agreement, any lease in the nature
thereof, and the filing of or agreement to give any financing statement under
the Uniform Commercial code of any jurisdiction and including any lien or charge
arising by statute or other law.
"Other Shareholder" shall have the meaning assigned to it in section
8.4(b) hereof.
"Person" shall include all natural persons, corporations, business
trusts, associations, companies, partnerships, joint ventures and other entities
and governments and agencies and political subdivisions.
"Preferred Stock" shall have the meaning assigned to it in section
3.3 hereof.
"Purchasers" shall mean Southern California Ventures, Robert W.
Johnson and Thomas A. Tisch.
The terms "register", "registered" and "registration" shall refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses incurred by the
Company in order to comply with sections 8.4, 8.5 and 8.7 hereof, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of accountants
29.
34
and legal counsel for the Company, fees and disbursements NASD fees, blue sky
fees and expenses, and the expenses associated with the Company's obligations
under section 8.7, but excluding Selling Expenses.
"Restricted Stock" shall mean (i) all Common Stock issued or issuable
upon conversion of the Shares and (ii) any securities issued or issuable with
respect to such Common Stock or the Shares upon any stock dividend, stock split,
recapitalization, merger, consolidation or similar event; provided, however,
that any shares of such Common Stock or other, securities shall cease to be
Restricted Stock after they have been lawfully sold to the public or
certificates representing such shares shall be issued in accordance with Section
8.3 without the legend required under Section 8.2.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions relating solely to the sale of Restricted Stock.
"Shares" shall have the meaning assigned to it in section 1.1 hereof.
"Special Counsel" shall mean Riordan & McKinzie, legal counsel for
the Purchasers in connection with the purchase and sale of the Shares.
"Subsidiary" shall mean any corporation, association or other
business entity at least 50% of the outstanding voting stock of which is at the
time owned or controlled directly or indirectly by the Company or by one or more
of such subsidiary entities or both.
SECTION 11
Miscellaneous
11.1 Governing Law. This Agreement shall be governed in all respects
by the laws of the State of California.
11.2 Survival. All representations, warranties, covenants and
agreements made in Section 3 of this Agreement, the Exhibits hereto or in the
Business Plan shall survive until 30 days following the delivery to the
Purchasers of the financial statements for the year ended April 30, 1988
pursuant to Section 7.2(a) hereof. All statements contained in any certificate,
instrument or other writing delivered by or on behalf of the Company pursuant
30.
35
hereto or in connection with or in contemplation of the transactions herein
contemplated shall constitute representations and warranties by the Company
hereunder.
11.3 Successors and Assigns. Except as otherwise expressly provided
herein, the terms and provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto; provided, however, that the Company may not assign its
rights hereunder and the Purchasers may not assign their rights hereunder except
to any Purchaser's limited partners or to the spouse of any Purchaser, without
regard to the amount of shares transferred to such Person or to any other
person to whom a Purchaser transfers at least 50% of the Restricted Stock
purchased by such Purchaser.
11.4 Entire Agreement. This Agreement (including the Exhibits hereto)
constitutes the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof.
11.5 Notices. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given upon delivery, if delivered personally,
or upon the expiration of 72 hours after mailing, if mailed, first class mail,
postage prepaid, addressed as follows:
(a) If to the Purchasers, at the addresses set forth below or
at such other address or addresses as the Purchaser may specify by written
notice to the Company:
Mr. Robert W. Johnson James W. Geisz, Esq.
Southern California Ventures Riordan & McKinzie
2102 Business Center Drive 300 South Grand Avenue
Suite 218 Suite 2900
Irvine, CA 92715 Los Angeles, CA 90071
(b) If to the Company, at the addresses set forth below or at
such other address or addresses as the Company may specify by written notice to
the Purchaser:
Mr. Mark D. Dankberg Richard K. Circuit, Esq.
ViaSat, Inc. Wiles, Circuit and Tremblay
1239 Crest Drive 1205 Prospect Street, Suite 400
Encinitas, California 92024 La Jolla, California 92037
11.6 Severability; Counterparts.
(a) In case any provision of this Agreement shall be invalid,
illegal or unenforceable, the validity, legality and
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36
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
(b) 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.
11.7 Titles and Subtitles. The titles of the sections of this
Agreement are for convenience and reference only and are not to be considered in
construing this Agreement.
11.8 Waivers and Amendments. With the written consent of Purchasers
holding a majority of the Restricted Stock 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 its 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
of any supplemental agreement or modifying in any manner the rights and
obligations hereunder of the Purchasers and the Company; provided, however, that
no such waiver or supplemental agreement shall affect any of the rights of the
Purchasers created by the Certificate or by the California Corporations Code
unless such waiver or supplemental agreement shall comply with the requirements
of the Certificate or the California Corporations Code. Neither this Agreement
nor any provision hereof may be changed, waived, discharged or terminated orally
or by course of dealing, but only by a statement in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, except to the extent provided in this section 11.8.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed And delivered by their proper and duly authorized officers or
representatives as of the day and year first written above.
VIASAT, INC. SOUTHERN CALIFORNIA VENTURES
By /s/ Mark D. Dankberg By
_______________________________________ ______________________________________
_______________________________________ ______________________________________
Robert W. Johnson Thomas A. Tisch
32.
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enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
(b) 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.
11.7 Titles and Subtitles. The titles of the sections of this
Agreement are for convenience and reference only and are not to be considered in
construing this Agreement.
11.8 Waivers and Amendments. With the written consent of Purchasers
holding a majority of the Restricted Stock 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 its 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
of any supplemental agreement or modifying in any manner the rights and
obligations hereunder of the Purchasers and the Company; provided, however, that
no such waiver or supplemental agreement shall affect any of the rights of the
Purchasers created by the Certificate or by the California Corporations Code
unless such waiver or supplemental agreement shall comply with the requirements
of the Certificate or the California Corporations Code. Neither this Agreement
nor any provision hereof may be changed, waived, discharged or terminated orally
or by course of dealing, but only by a statement in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, except to the extent provided in this section 11.8.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers or
representatives as of the day and year first written above.
VIASAT, INC. SOUTHERN CALIFORNIA VENTURES
By____________________________________ By_____________________________________
/s/ Thomas A. Tisch
______________________________________ ______________________________________
Robert W. Johnson Thomas A. Tisch
32.
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enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
(b) 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.
11.7 Titles and Subtitles. The titles of the sections of this
Agreement are for convenience and reference only and are not to be considered in
construing this Agreement.
11.8 Waivers and Amendments. With the written consent of Purchasers
holding a majority of the Restricted Stock 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 its 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
of any supplemental agreement or modifying in any manner the rights and
obligations hereunder of the Purchasers and the Company; provided, however, that
no such waiver or supplemental agreement shall affect any of the rights of the
Purchasers created by the Certificate or by the California Corporations Code
unless such waiver or supplemental agreement shall comply with the requirements
of the Certificate or the California Corporations Code. Neither this Agreement
nor any provision hereof may be changed, waived, discharged or terminated orally
or by course of dealing, but only by a statement in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, except to the extent provided in this section 11.8.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers or
representatives as of the day and year first written above.
VIASAT, INC. SOUTHERN CALIFORNIA VENTURES
By____________________________________ By_____________________________________
/s/ Robert W. Johnson
______________________________________ _______________________________________
Robert W. Johnson Thomas A. Tisch
32.
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enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
(b) 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.
11.7 Titles and Subtitles. The titles of the sections of this
Agreement are for convenience and reference only and are not to be considered in
construing this Agreement.
11.8 Waivers and Amendments. With the written consent of Purchasers
holding a majority of the Restricted Stock 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 its 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
of any supplemental agreement or modifying in any manner the rights and
obligations hereunder of the Purchasers and the Company; provided, however, that
no such waiver or supplemental agreement shall affect any of the rights of the
Purchasers created by the Certificate or by the California Corporations Code
unless such waiver or supplemental agreement shall comply with the requirements
of the Certificate or the California Corporations Code. Neither this Agreement
nor any provision hereof may be changed, waived, discharged or terminated orally
or by course of dealing, but only by a statement in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, except to the extent provided in this section 11.8.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers or
representatives as of the day and year first written above.
VIASAT, INC. SOUTHERN CALIFORNIA VENTURES
By By /s/ ,General Partner
______________________________________ _______________________________________
______________________________________ _______________________________________
Robert W. Johnson Thomas A. Tisch
32.
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enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
(b) 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.
11.7 Titles and Subtitles. The titles of the sections of this
Agreement are for convenience and reference only and are not to be considered in
construing this Agreement.
11.8 Waivers and Amendments. With the written consent of Purchasers
holding a majority of the Restricted Stock 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 its 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
of any supplemental agreement or modifying in any manner the rights and
obligations hereunder of the Purchasers and the Company; provided, however, that
no such waiver or supplemental agreement shall affect any of the rights of the
Purchasers created by the Certificate or by the California Corporations Code
unless such waiver or supplemental agreement shall comply with the requirements
of the Certificate or the California Corporations Code. Neither this Agreement
nor any provision hereof may be changed, waived, discharged or terminated orally
or by course of dealing, but only by a statement in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, except to the extent provided in this section 11.8.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers or
representatives as of the day and year first written above.
VIASAT, INC. SOUTHERN CALIFORNIA VENT
By By /s/ ,General Partner
______________________________________ _______________________________________
______________________________________ _______________________________________
Robert W. Johnson Thomas A. Tisch
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EXHIBIT A
AMENDED AND RESTATED ARTICLES OF
INCORPORATION OF
VIASAT, INC.
a California Corporation
MARK D. DANKBERG and RICHARD K. CIRCUIT hereby certify that:
1. They are the President and Assistant Secretary, respectively, of
ViaSat, Inc., a California corporation.
2. The Articles of Incorporation of this corporation are amended and
restated to read as follows:
ONE: The name of this corporation is ViaSat, Inc.
TWO: The purpose of this corporation is to engage in any lawful
act or activity for which a corporation may be organized under the
General Corporation Law of California other than the banking
business, the trust company business or the practice of a profession
permitted to be incorporated by the California Corporations Code.
THREE: A. This corporation is authorized to issue thirteen
million (13,000,000) shares of its capital stock, which shall be
divided into two classes known as common stock and preferred stock,
respectively, and the par value of each share of common and
preferred stock shall be One Cent ($.01).
B. The total number of shares of common stock which
this corporation is authorized to issue is ten million (10,000,000).
The total number of shares of preferred stock which this corporation
is authorized to issue is three million (3,000,000). This corporation
is authorized to issue one series of its preferred stock, which shall
be known as its Series A convertible preferred stock ("Series A
Preferred Stock") and shall consist of three million (3,000,000)
shares.
C. This corporation shall from time to time, in
accordance with the laws of the State of
42
California, increase the authorized amount of its common stock, if
at any time the number of shares of common stock remaining unissued
and available for issuance shall not be sufficient to permit
conversion of the preferred stock in accordance with the applicable
conversion provisions.
FOUR: The rights, preferences, privileges and restrictions
granted to or imposed upon the shares of Series A Preferred Stock
or the holders thereof are as follows:
(a) Dividends.
(1) Right to Dividends. The holders of the outstanding shares
of Series A Preferred Stock shall be entitled to receive, when and as declared
by the Corporation's Board of Directors, and out of any funds legally available
therefor, cumulative dividends at the annual rate of $.009 per share, payable,
if earned and declared, in cash on the 1st day of May of each year with respect
to the prior fiscal year. Subject to the remainder of this subsection (a), such
dividends shall accrue on each such share from the date of its original issue
and shall accrue from month to month. Such dividends shall accumulate and accrue
during each fiscal year only to the extent of the net income of the Company for
such fiscal year. For the purposes of this section, "net income" of the Company
for a period shall mean the consolidated net income of the Company, and its
subsidiaries, for that period determined in accordance with generally accepted
accounting principles.
(2) Priority. No dividend shall be paid or declared and no
distribution shall be made on any Common Stock, no shares of Common Stock shall
be purchased, redeemed or otherwise acquired by the Corporation and no monies
shall be paid into or set aside or otherwise made available for a sinking fund
for the purchase, redemption or acquisition of any shares of Common Stock if
dividends on the Series A Stock for the then current annual dividend period and
accrued dividends for all previous dividend periods, at the annual rate
specified above, have not been paid or declared and a sum sufficient for the
payment thereof set apart; provided, however, that subject to subparagraph
(g)(1)(i), the restrictions shall not apply to the repurchase of shares of
Common Stock from directors or employees of, or consultants to the Corporation
pursuant to stock purchase or stock option agreements under which the
Corporation has the option or obligation to repurchase such shares upon the
occurrence of certain events including the termination of employment. Any
accumulation of dividends on Series A Stock shall not bear interest.
(3) Partial Payment. If the Board shall declare a payment of
dividend and the amount declared for dividend payment
2.
43
is insufficient to permit the payment of the full preferential amounts required
to be paid to the holders of the outstanding Series A Stock and to holders of
any other Preferred Stock on a parity therewith as to dividend preferences,
then the entire amount declared for dividend payment shall be distributed
ratably among the holders of Series A Stock and such other holders according to
the respective preferential amounts to which such holders would otherwise be
entitled.
(b) Preference on Liquidation.
(1) In the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the holders of shares of
Series A Stock then outstanding shall be entitled to be paid out of the assets
of the Corporation available for distribution to it stockholders, whether from
capital, surplus or earnings before any payment shall be made in respect of the
Common Stock of the Corporation, an amount equal to $.10 plus all accrued, but
unpaid dividends, if any, per share (the "Preference Price"). In the case of any
liquidation, dissolution, or winding up of the corporation occurring on or prior
to June 11, 1989, after the holders of shares of Series A Stock have received an
amount equal to the Preference Price, and the further payment of the full
preferential amounts to which the holders of any other Preferred Stock are
specifically entitled, the assets remaining shall be distributed ratably among
the holders of Common Stock until each holder of Common Stock has received an
amount per share equal to the price paid per share to the Corporation by the
original holder of each share of Common Stock plus all accrued but unpaid
dividends, if any, on such Common Stock. Thereafter, any assets remaining
shall be distributed ratably among the holders of all of the stock of the
Corporation (Preferred and Common). In case of any liquidation, dissolution or
winding up of the Corporation occurring subsequent to June 11, 1989, after the
holders of shares of Series A Stock have received an amount equal to the
Preference Price, and the further payment of the full preferential amounts to
which the holders of any other Preferred Stock are specifically entitled, the
assets remaining shall be distributed ratably among the holders of Common Stock
until each holder of Common Stock has received an amount equal to the Preference
Price. (The amount required to pay the full Preference Price to each holder of
Series A Stock and other preferred stock and the amount required to be paid to
each holder of Common Stock hereunder is hereinafter collectively referred to as
the "Payout.") Thereafter, any assets remaining shall be distributed ratably
among the holders of all of the stock of the Corporation (Preferred and Common).
(2) The sale, transfer or lease of all or substantially all of
the assets of the Corporation, the gross proceeds of which do not exceed the
Payout, shall be deemed to be a liquidation, dissolution or winding up of the
Corporation as those terms are used in this paragraph (b).
- 3 -
44
(3) If upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the assets of the Corporation
available for distribution to its shareholders shall be insufficient to pay the
full preferential amounts required to be paid to the holders of series A Stock
and the holders of any other Preferred Stock on a parity therewith as to
liquidation preferences, then the entire assets of the Corporation legally
available to be distributed shall be distributed ratably among the holders of
Series A Stock and such other holders according to the respective preferential
amounts to which such holders would otherwise be entitled.
(c) voting.
(1) Preferred Stock. Each holder of shares of Series A Stock
shall be entitled to vote on all matters and, except as otherwise expressly
provided herein, shall be entitled to the number of votes equal to the largest
number of full shares of Common Stock into which such shares of Series A Stock
could be converted, pursuant to the provisions of paragraph (d) of this Article
Four, at the record date for the determination of the shareholders entitled to
vote on such matters or, if no such record date is established, at the date such
vote is taken.
(2) Common Stock. Each holder of shares of Common stock shall
be entitled to one vote for each share thereof held. Except as otherwise
expressly provided herein or as required by law, the holders of Series A Stock
and the holders of Common Stock shall vote together and not as separate classes.
(d) Conversion Rights.
The holders of Series A Stock shall have the following conversion
rights (the "Conversion Rights"):
(1) Right to Convert. The Series A Stock shall be convertible,
at any time or from time to time, at the option of any holder thereof, into
fully paid and nonassessable shares of Common Stock.
(2) Conversion Price. Each share of Series A Stock shall be
convertible into the number of shares of Common Stock which results from
dividing the Conversion Price in effect at the time of conversion into $.10 for
each share of Series A Stock being converted. The initial Conversion Price shall
be $.10 subject to adjustment from time to time as provided below.
(3) Mechanics of Conversion. Each holder of Series A Stock who
desires to convert the same into shares of Common Stock shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Corporation or of
4.
45
any transfer agent for the Series A Stock or Common Stock, and shall give
written notice to the Corporation at such office that such holder elects to
convert the same and shall state therein the number of shares of Series A Stock
being converted. Thereupon, the Corporation shall promptly issue and deliver at
such office to such holder a certificate or certificates for the number of
shares of Common Stock to which such holder is entitled. Such conversion shall
be deemed to have been made immediately prior to the close of business on the
date of such surrender of the shares of Series A Stock to be converted and the
person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such shares
of Common Stock on such date.
(4) Adjustment for Stock Splits and Combinations. If the
Corporation at any time or from time to time after the date of original issue of
the Series A Stock (the "Commitment Date") effects a subdivision of the
outstanding Common Stock, the Conversion Price then in effect immediately before
the subdivision shall be proportionately decreased, and conversely, if the
Corporation at any time or from time to time after the Commitment Date combines
the outstanding shares of Common Stock, the Conversion Price then in effect
immediately before the combination shall be proportionately increased. Any
adjustment under this subparagraph (4) shall become effective as of the date and
time the subdivision or combination becomes effective.
(5) Adjustment for Certain Dividends and Distributions. In the
event the Corporation at any time or from time to time after the Commitment Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock, then and in each such event the Conversion Price then in
effect shall be decreased as of the time of such issuance or, in the event such
a record date is fixed, as of the close of business on such record date, by
multiplying the Conversion Price then in effect by a fraction (i) the numerator
of which is the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date, and (ii) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date plus the number of
shares of Common Stock issuable in payment of such dividend or distribution;
provided, however, that if such record date is fixed and such dividend or
distribution is not fully paid on the date fixed therefor, the Conversion Price
shall be recomputed accordingly as of the close of business on such record date
and thereafter the Conversion Price shall be adjusted pursuant to this
subparagraph (5) as of the time of and on the basis of the actual dividend or
distribution paid.
5.
46
(6) Adjustments for Other Dividends and Distributions. In the
event the Corporation at any time or from time to time after the Commitment Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities of
the Corporation other than shares of Common Stock, then and in each such event
provision shall be made so that the holders of Series A Stock shall receive upon
conversion thereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of securities of the Corporation which they
would have received had their Series A Stock been converted into Common Stock on
the date of such event and had they thereafter, during the period from the date
of such event to and including the date of conversion, retained such securities
receivable by them as aforesaid during such period, subject to all other
adjustments called for during such period under this paragraph (d) with respect
to the rights of the holders of Series A Stock.
(7) Adjustment for Recapitalizations, Reclassifications and
Exchanges. If the Common Stock issuable upon the conversion of the Series A
Stock is changed into the same or a different number of shares of any class or
classes of stock, whether by recapitalization, reclassification or exchange
(other than by subdivision, combination, stock dividend, reorganization,
merger, consolidation or sale of assets, as provided for elsewhere in this
paragraph (d)), then the holders of Series A Stock shall have the right
thereafter to convert their Series A Stock into the kind and amount of stock and
other securities and property receivable upon such recapitalization,
reclassification or exchange by holders of the maximum number of shares of
Common Stock into which such shares of Series A Stock might have been converted
immediately prior to such recapitalization, reclassification or exchange, all
subject to further adjustment as provided herein.
(8) Reorganizations, Mergers, Consolidations or
Sales of Assets. If at any time or from time to time there is a capital
reorganization of the Common Stock (other than a recapitalization,
reclassification, exchange, subdivision, combination, or stock dividend provided
for elsewhere in this paragraph (d)), merger or consolidation of the Corporation
with or into another corporation, or sale of all or substantially all of the
Corporation's properties and assets to any other person, then, as a part of such
reorganization, merger, consolidation or sale, provision shall be made so that
the holders of Series A Stock shall thereafter be entitled to receive, upon
conversion of the Series A Stock, the number of shares of stock or other
securities or property of the Corporation, or of the successor corporation
resulting from such reorganization, merger, consolidation or sale, to which a
holder of Common Stock deliverable upon conversion would otherwise have been
entitled on such reorganization, merger, consolidation, or sale. In any such
case, appropriate adjustment
6.
47
shall be made in the application of the provisions of this paragraph (d) with
respect to the rights of the holders of the Series A Stock after the
reorganization, merger, consolidation or sale to the end that the provisions of
this paragraph (d) (including adjustment of the Conversion Price then in effect
and number of shares purchasable upon conversion of the Series A Stock) shall be
applicable after that event and be as nearly equivalent to the provisions hereof
as may be practicable.
(9) Accountants' Certificate of Adjustment. In any case of an
adjustment or readjustment of the Conversion Price or the number of shares of
Common Stock, or other securities issuable upon conversion of Series A Stock,
the Corporation at its expense, shall cause independent public accountants of
recognized standing selected by the Corporation (who may be the independent
public accountants then auditing the books of the Corporation) to compute such
adjustment or readjustment in accordance with the provisions hereof and prepare
a certificate showing such adjustment or readjustment, and shall mail such
certificate, by first class mail, postage prepaid, to each registered holder of
Series A Stock at the holder's address as shown in the Corporation's books. The
certificate shall set forth such adjustment or readjustment showing in detail
the facts upon which such adjustment or readjustment is based.
(10) Notices of Record Date. In the event of (i) any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, or (ii) any capital reorganization of the
Corporation, any reclassification or recapitalization of the capital stock of
the Corporation, any transfer of all or substantially all of the assets of the
Corporation to any other person, any consolidation, any merger, or any voluntary
or involuntary dissolution, liquidation or winding up of the Corporation, the
Corporation shall mail to each holder of Series A Stock no less than 10 days and
no more than 50 days prior to the record date specified therein or the effective
date thereof, a notice specifying (A) the material terms and conditions of the
proposed action, (B) the date on which any such record is to be taken for the
purpose of such dividend or distribution and a description of such dividend or
distribution, (C) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding up is expected to become effective, and (D) the time, if any, that is to
be fixed, as to when the holders of record of Common Stock (or other securities)
shall be entitled to exchange their shares of Common Stock (or other securities)
for securities or other property deliverable upon such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding up.
7.
48
(11) Automatic Conversion.
(i) Each share of Series A Stock shall automatically be
converted into shares Of Common Stock based on the then effective Conversion
Price immediately upon the closing of any public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
in which the aggregate gross proceeds received by the Corporation at the public
offering price equals or exceeds $3,000,000, and the public offering price per
share of which equals or exceeds $.50 per share of Common Stock (appropriately
adjusted for stock dividends, recapitalizations, subdivisions and combinations
of shares of Common Stock).
(ii) Each share of Series A Stock shall automatically be
converted into shares of Common Stock based on the then effective Conversion
Price immediately prior to the closing of a merger, consolidation or combination
of the Corporation with or into another Corporation or entity, or a sale of
substantially all of the Corporation's assets, in which the Corporation receives
cash in the aggregate amount of, or freely tradeable securities with an
aggregate value of, at least $3,000,000 and at a price per share of Common Stock
equal to or exceeding $.50 per share.
(iii) Upon the occurrence of the event specified in
subparagraph (i) or (ii) above, the outstanding shares of Series A Stock shall
be converted automatically without any further action by the holders of such
shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent; provided, however, that
the Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless the certificates
evidencing such shares of Series A Stock are either delivered to the Corporation
or its transfer agent as provided below, or the holder notifies the Corporation
or its transfer agent that such certificates have been lost, stolen or
destroyed and executes an agreement satisfactory to the Corporation to indemnify
the Corporation from any loss incurred by it in connection therewith. Upon the
occurrence of such automatic conversion of the Series A Stock, each holder of
Series A Stock shall surrender the certificates representing such shares at the
office of the Corporation or any transfer agent for the Series A Stock or Common
Stock. Thereupon, there shall be issued and delivered to such holder promptly at
such office and in his name as shown on such surrendered certificate or
certificates, a certificate or certificates for the number of shares of Common
Stock into which the shares of Series A Stock surrendered were convertible on
the date on which such automatic conversion occurred.
8.
49
(12) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of the shares of Series A Stock of any holder.
In lieu of any fractional shares to which the holder would otherwise be
entitled, the Corporation shall, to the extent legally permissible, pay cash
equal to the product of such fraction multiplied by the Common Stock's fair
market value as of the date of conversion as determined in good faith by the
Board.
(13) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of Series A Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Series A Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Series A Stock, the Corporation
will take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose.
(14) Notices. Any notice required by the provisions of this
paragraph (d) to be given to the holder of shares of the Series A Stock shall be
deemed given upon the earlier of actual receipt or 72 hours after the same has
been deposited in the United States mail, by certified or registered mail,
return receipt requested, postage prepaid, and addressed to each holder of
record at his address appearing on the books of the Corporation.
(15) Payment of Taxes. The Corporation will pay all taxes
(other than taxes based upon income) and other governmental charges that may be
imposed with respect to the issue or delivery of shares of Common Stock upon
conversion of shares of Series A Stock, including without limitation, any tax or
other charge imposed in connection with any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that in which the shares
of Series A Stock so converted were registered.
(e) Redemption.
The Company may only redeem or otherwise acquire for value any
outstanding Series A Stock as follows:
(1) Mandatory Redemption. So long as any Series A Stock
remains outstanding, the Company will, if it may lawfully do so, redeem one
third of the number of shares of Series A Stock held on January 1, 1991 by each
holder thereof, on each of April
9.
50
1, 1991, April 1, 1992, and April 1, 1993 ("Redemption Date(s)"), at the
redemption price hereinafter specified; provided, however, that the Company
shall not redeem any shares of Series A Stock required to be redeemed on a
Redemption Date which a holder elects not to have redeemed by delivery of a
written notice to the Company within 45 days after the receipt of the Redemption
Notice (as defined below) for such Redemption Date. If the funds of the Company
legally available for redemption of Series A Stock on any Redemption Date are
insufficient to redeem the total number of shares required under this subsection
to be redeemed on such date, the funds which are legally available will be used
to redeem the maximum possible number of shares. At any time thereafter when
additional funds of the Company are legally available for the redemption of the
Series A Stock, such funds will immediately be used to redeem Series A Stock
which the Company has become obligated to redeem on any Redemption Date but has
not yet redeemed. In the event of the redemption of less' than one third of the
Series A Stock held by each holder thereof on any Redemption Date, the Company
shall effect such redemption pro rata from the holders of Series A Stock
according to the number of shares held by each.
(2) Redemption Price. The redemption price shall be an amount per
share in cash equal to $.10 plus all accrued and unpaid dividends thereon (the
"Redemption Price").
(3) Redemption Notice. The Company shall, not less than 60 nor more
than 90 days prior to each date for the redemption of the Series A Stock, mail
written notice ("Redemption Notice"), postage prepaid, to each holder of record
of Series A Stock to be redeemed at such post office address last shown on the
records of the Company. The Redemption Notice shall state:
(i) The total number of the outstanding shares of Series A
Stock to be redeemed;
(ii) The number of shares of Series A Stock held by the holder
which the Company intends to redeem;
(iii) The Redemption Date and Redemption Price;
(iv) The date on or before which the holder of Series A Stock
may elect not to have redeemed any or all of such holder's Series A Stock
scheduled for redemption.
(v) The time and manner in, and place at, which the holder is
to surrender to the Company the certificate or certificates representing the
shares of Series A Stock to be redeemed.
10.
51
(4) Surrender of Stock. On or before the Redemption Date, each
holder of Series A Stock to be redeemed, unless the holder has converted the
shares to be redeemed as provided in paragraph (d), shall surrender the
certificate or certificates representing such shares to the Company, in the
manner and at the place designated in the Redemption Notice, and thereupon the
Redemption Price for such shares shall be payable to the order of the person
whose name appears on such certificate or certificates as the owner thereof, and
each surrendered certificate shall be cancelled and retired. In the event less
than all of the shares of Series A Stock represented by such certificate are
redeemed, a new certificate representing the unredeemed shares shall be issued
to the holder of such shares.
(5) Termination of Rights. If the Redemption Notice is duly
given, and if on or prior to the Redemption Date the Redemption Price is either
paid or made available for payment through the arrangement specified in
subparagraph (6) below, then notwithstanding that the certificates evidencing
any of the shares of Series A Stock so called for redemption have not been
surrendered, such shares will thereupon be deemed to be redeemed and no longer
outstanding, and the dividends with respect to such shares shall cease to accrue
and all rights with respect to such shares shall forthwith cease and terminate,
except the right of the holders to receive the Redemption Price without interest
upon surrender of their certificates therefor.
(6) Deposit of Funds. On or prior to the Redemption Date, the
Company shall deposit with any bank or trust company in San Diego, California,
having a capital and surplus of at least $100,000,000, as a trust fund, a sum
equal to the aggregate Redemption Price of all outstanding shares of Series A
Stock and any other Preferred Stock on a parity therewith as to redemption,
called for redemption and not yet redeemed, with irrevocable instructions and
authority to the bank or trust company to pay, on or after the Redemption Date
or prior thereto, the Redemption Price to the respective holders upon the
surrender of their share certificates. Any monies so deposited and unclaimed at
the end of one year from the Redemption Date shall be released or repaid to the
Company, after which the holders of shares called for redemption shall be
entitled only to receive payment of the Redemption Price from the Company.
(f) Restrictions and Limitations.
(1) So long as at least 300,000 shares of Series A Stock remain
outstanding, the Corporation shall not, and shall not permit any Subsidiary (as
hereinafter defined) to, without the vote or written consent by the holders of
more than 50% of the then outstanding Series A Stock voting as a single class:
11.
52
(i) Purchase, redeem or otherwise acquire (or pay into or set
aside for a sinking fund for such purpose) any of the Common Stock; provided,
however, that this restriction shall not apply to the repurchase of shares of
Common Stock from Corporation or any Subsidiary pursuant to an agreement under
which the Corporation has the option or the obligation to repurchase such shares
upon the occurrence of certain events, including the termination of employment,
provided that the total amount applied to such repurchase does not exceed
$50,000 during any twelve-month period;
(ii) Prior to April 1, 1993, effect any sale, lease,
assignment, transfer or other conveyance of all or substantially all of the
assets of the Corporation or any corporation more than 50% of whose outstanding
voting stock is owned by the Corporation ("Subsidiary"), or any consolidation or
merger involving the Corporation or any Subsidiary, or any recapitalization,
dissolution, liquidation or winding up, of the Corporation in which the
consideration received by or allocable to the holders of the Series A Stock is
cash in an amount, or freely tradeable Securities with a value, which is less
than $.50 per share, appropriately adjusted for stock splits, combinations and
dividends, or make any agreement or become obligated to do so unless the
obligations of the Corporation under the agreement are expressly conditioned
upon the requisite approval of the holders of the Series A Stock.
(iii) Permit any Subsidiary to issue or sell, except to the
Corporation or any wholly-owned Subsidiary, any stock of such Subsidiary;
(iv) Until the earlier of April 1, 1993 or the end of the
second consecutive fiscal year in which the Corporation has pre-tax earned
income (determined in accordance with generally accepted accounting principles
consistently applied) of at least $500,000, amend the Bylaws of the Corporation
to change the authorized number of directors.
(2) The Corporation shall not amend its Articles of Incorporation
without the approval, by vote or written consent, of the holders of more than
50% of the Series A Stock voting as a single class if such amendment would
change any of the rights, preferences, privileges of or limitations provided for
herein for the benefit of the Series A Stock.
(g) Replacement of Certificates. Upon receipt of evidence reasonably
satisfactory to the Corporation of the loss, theft, destruction, or mutilation
of any certificate representing any of the Series A Stock, and, in the case of
loss, theft, or destruction, the execution of an agreement satisfactory to the
Corporation to indemnify the Corporation from any loss incurred
12.
53
by it in connection therewith, the Corporation will issue, or cause to be
issued, a new certificate representing such Series A Stock in lieu of such lost,
stolen, destroyed, or mutilated certificate.
3. The foregoing amendment and restatement of the Articles of
Incorporation has been duly approved by the Board of Directors.
4. The foregoing amendment and restatement of the Articles of
Incorporation has been duly approved by the required vote of shareholders in
accordance with Sections 902 and 903 of the California Corporations Code. The
total number of outstanding shares of common stock of the corporation is three
million (3,000,000). The number of shares voting in favor of the amendment and
restatement equaled or exceeded the vote required. The percentage vote required
was more than fifty percent (50%).
We declare, under the penalty of perjury, under the laws of the
State of California, that the matters set forth in this certificate are true on
our own knowledge.
Executed this 9th day of June, 1986, at La Jolla, California.
/s/ Mark D. Dankberg
___________________________________
MARK D. DANKBERG
President
/s/ Richard K. Circuit
___________________________________
RICHARD K. CIRCUIT
Assistant Secretary
13.
54
EXHIBIT B
SCHEDULE OF PURCHASERS
Number of
Purchaser Shares Consideration
- --------- ---------- -------------
Southern California
Ventures 2,720,000 $272,000
Robert W. Johnson 250,000 25,000
Thomas A. Tisch 30,000 3,000
---------- --------
3,000,000 $300,000
---------- --------
55
ViaSat, Inc.
Schedule of Exceptions to
Preferred Stock Purchase Agreement
Dated June 11 , 1986
1. Mark Dankberg, the Company's President, owns 263 shares of the common
stock of M/A - COM, Inc., his former employer and a potential competitor of the
Company.
EXHIBIT C
56
ViaSat, Inc.
Schedule of Shareholders of Record
June 11, 1986
Mark Dankberg 1,200,000 shares
1239 Crest Drive
Encinitas, California 92024
Steven R. Hart 900,000 shares
1858 Avenida Flores
Encinitas, California 92024
Mark J. Miller 900,000 shares
11384 Avenger Road
San Diego, California 92126
EXHIBIT "D"
57
ViaSat, Inc.
Opening Statement of Assets and Liabilities
May 23, 1986
ASSETS
Cash in bank accounts $ 5,000.00
Notes receivable 25,000.00
----------
Total Assets: $30,000.00
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities None
Shareholders' equity:
Common stock, par value $.01, 30,000.00
10,000,000 shares authorized,
3,000,000 issued and out-
standing ----------
Total Liabilities and
Shareholders' Equity $30,000.00
EXHIBIT "E"
58
ViaSat, Inc.
Schedule of Contracts and Leases
1. Cincinnati Electric Technical Support Contract dated May 22, 1986.
2. TRW Personal Consulting Contracts with Messr. Dankberg, Miller and
Hart, beneficially assigned to Company, dated May 20, 1986.
EXHIBIT F
1
EXHIBIT 10.2
VIASAT, INC.
SHAREHOLDERS' AGREEMENT
This Shareholders' Agreement (the "Agreement") is made and entered
into this 11th day of June, 1986, by and among Southern California Ventures, a
California limited partnership ("SCV"), Robert W. Johnson and Thomas A. Tisch
(SCV and Messrs. Johnson and Tisch are collectively referred to herein as the
"Investors" and singly as an "Investor"), ViaSat, Inc., a California corporation
(the "Corporation"), and Mark D. Dankberg, Steven R. Hart and Mark J. Miller
(Messrs. Dankberg, Hart and Miller are collectively referred to herein as the
"Common Shareholders").
R E C I T A L S
A. The Investors desire to purchase from the Corporation shares of
its Series A Convertible Preferred Stock (the "Preferred Stock") on the terms
and conditions set forth in a Preferred Stock Purchase Agreement among each of
the Investors and the Corporation dated as of June 11, 1986 (the "Purchase
Agreement").
B. The Amended and Restated Articles of Incorporation of the
Corporation provide that each holder of Preferred Stock is entitled to the
number of votes equal to the largest number of full shares of the Corporation's
Common Stock into which such shares of Preferred Stock could be converted on all
matters submitted to a vote of shareholders.
C. The Common Shareholders own all or substantially all of the
outstanding Common Stock of the Corporation and have entered into certain
agreements ("Stock Restriction Agreements") with the Corporation providing for
the right of the Corporation to repurchase such stock under certain
circumstances.
D. The Stock Restriction Agreements between the Company and the
Common Stockholders grant the Investors the option to purchase the shares of
Common Stock of the Common Shareholders in certain circumstances; accordingly,
the Investors are third party beneficiaries under such Stock Restriction
Agreements.
E. The Investors are willing to purchase the Preferred Stock on the
terms and conditions contained in the Purchase Agreement if the Investors can
obtain assurances from the Corporation and the Common Shareholders regarding,
among other things, election of the Corporation's Board of Directors. To induce
the Investors to purchase the Preferred Stock, the Corporation and the Common
Shareholders are willing to enter into certain agreements as set forth herein.
2
A G R E E M E N T
NOW, THEREFORE, IT IS AGREED among the parties as follows:
1. Definitions. Except as otherwise specifically provided in this
Agreement, or unless the context otherwise requires, the following terms shall
have the following respective meanings:
1.1 "Board" shall mean the Board of Directors of the
Corporation.
1.2 "Capital Stock" shall mean all shares or other units into
which the proprietary interest of the Corporation is divided pursuant to its
Articles of Incorporation, as amended and restated from time to time, and shall
include Common Stock and Preferred Stock.
1.3 "Common Shareholders" shall mean Mark Dankberg, Steve Hart
and Mark Miller.
1.4 "Common Stock" shall mean all shares of Capital Stock other
than Preferred Stock.
1.5 "Corporation" shall mean Intellicom, Inc., a California
corporation.
1.6 "Investor" shall mean SCV or Robert W. Johnson or Thomas A.
Tisch, and "Investors" shall mean all three of such individuals and entities and
any successor or successors to them as holders of any portion of the Preferred
Stock or the Common Stock into which the Preferred Stock is convertible.
1.7 "Investors' Common Stock" shall mean the shares of Common
Stock issued upon conversion of the Preferred Stock.
1.8 "Preferred Stock" shall mean the shares of Series A
Convertible Preferred Stock sold to the Investors by the Corporation pursuant
to the Purchase Agreement.
1.9 "Purchase Agreement" shall mean that certain Preferred
Stock Purchase Agreement by and among the corporation and the Investors.
1.10 "SCV" shall mean Southern California Ventures, a
California limited partnership.
2.
3
1.11 "Stock Restriction Agreement" shall mean any of the
agreements between the Corporation and a Common Shareholder providing for the
right of the Corporation to repurchase the Common Stock of such Common
Shareholder under certain circumstances.
2. Representations and warranties.
2.1 Common Shareholders. Each of the Common Shareholders
represents and warrants to each Investor that (a) Exhibit 1 attached hereto sets
forth his true name and address and contains a true and complete description of
the number of shares of Common Stock owned by him, and (b) no other individual
(besides his spouse, if any), estate, corporation, trust, partnership, joint
venture, association or other entity has any present or contingent interest in
any of the shares of Common Stock listed on Exhibit 1 hereof.
2.2 Investors. Each Investor represents and warrants to each
Common Share holder that (a) Exhibit B to the Purchase Agreement contains a true
and complete description of the number of shares of Preferred Stock owned by him
or it after giving effect to the transactions contemplated by the Purchase
Agreement, and (b) no other individual (besides his spouse, if any), estate,
corporation, trust, partnership, joint venture, association or other entity has
any present or contingent interest in any of the shares of Preferred Stock
listed on such Exhibit B (other than as a general or limited partner of SCV).
3. Irrevocable Proxies.
3.1 Intent. The purpose of this Agreement is to provide for a
Board composed as follows:
(a) One person less than a majority of the Board selected
by the vote of the holders of outstanding Preferred Stock and Investors' Common
Stock voting as a class (the "Preferred Directors");
(b) One person less than a majority of the Board selected
by the vote of the holders of Common Stock, excluding the holders of the
Investors' Common Stock (the "Common Directors");
(c) One person (who shall not be an officer or full-time
employee of the Corporation, except as is specifically otherwise approved by the
Investors) selected by the Common Shareholders and not objected to by holders of
a majority of the Preferred Stock and Investors' Common Stock as a class (the
"Independent Director").
3.
4
3.2 Grant of irrevocable Proxy. The Common Shareholders and
each of them hereby appoint the Preferred Directors (or if less than two
directors are acting, the one so acting) as their attorney and proxy to attend
meetings, vote, give consents and in all other ways to act in their place with
respect to the shares of Common Stock held respectively by them, in order to
effect the following actions:
(a) To maintain a Board consisting of an odd number of
Directors;
(b) To provide for prompt elections to assure that
vacancies on the Board are replaced in a manner so that Common Directors
continue to be elected by holders of the Common Stock (excluding the Investors'
Common Stock), Preferred Directors continue to be elected by holders of the
Preferred Stock and the Investors' Common Stock, and the Independent Director
continues to be selected and elected as hereinafter provided.
(c) To vote or withhold the vote of the shares of Common
Stock for which the irrevocable proxy has been granted for the person nominated
by the holders of the Common Stock to be the Independent Director, it being
understood that if such vote is withheld no votes may be cast for such nominee
by any holder of the Preferred Stock or by any bolder of the Investors' Common
Stock. It is understood that it is the intent of this provision to provide to a
majority of the persons acting as Preferred Directors the right to disapprove a
nominee selected by the holders of the Common Stock to act as the Independent
Director. The proxy granted hereunder shall not permit the Preferred Directors
to nominate or select any person to act as Independent Director, if such person
has not been nominated on the same occasion by the holders of the Common Stock.
if no action in favor or against a nominee is taken by the holders of the proxy,
the holders of the Common Stock may vote in favor of the nominee.
3.3 Directors to Act as Nominees. The Investors, as holders of
the option to purchase common Stock of the Common Shareholders 'pursuant to the
Stock Restriction Agreements, each hereby appoint the Preferred Director or
Directors, as their nominees, to accept the irrevocable proxy granted under
Section 3.2 of this Agreement. It is the express intention of the Investors, as
holders of such option, and the Common Shareholders that such persons be
appointed as proxy holders so that the irrevocable proxy granted under Section
3.2 meets the requirements of Section 705(e)(2) of the California General
Corporation Law.
3.4 Term. The proxy granted under Section 3.2 shall remain in
effect and shall be irrevocable for the period of
4.
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time commencing on the date of this Agreement and ending upon termination of
this Agreement pursuant to Section 6.6 of this Agreement.
3.5 Agreement Not to Amend Stock Restriction Agreements. The
Corporation and the Common Shareholders shall not amend any of the Stock
Restriction Agreements without the consent of Investors who are holders of a
majority of the number of shares of Common Stock issued or issuable upon
conversion of the Preferred Stock.
4. Legend. All shares and certificates representing the Common Stock
held by the Common Shareholders shall have the following legend printed thereon:
"These shares are subject to a Shareholders' Agreement which grants
under certain limited circumstances an irrevocable proxy to vote
these shares. Such Agreement is binding upon succeeding holders of
these shares. A copy of such Agreement is on file and may be
inspected at the principal office of the Corporation."
Such legend shall be promptly removed upon the earlier of termination of the
irrevocable proxy or the written consent of a majority of the then living
Selling Shareholders.
5. Assistance of the Corporation. The Corporation shall use its
reasonable best efforts to cause the nomination and election to the Board of
Directors of the persons chosen in accordance with Section 3.1 above.
6. Miscellaneous.
6.1 Amendment and Waiver. No modification or amendment of any
provision of this Agreement shall be valid unless it is in writing and signed by
all of the parties hereto, and no waiver of any provision hereof shall be
binding upon any party unless in writing and signed by the party so waiving.
6.2 Notices. All notices and other communications given or made
pursuant to or in connection with this Agreement shall be in writing, shall be
addressed to the Corporation at its principal place of business or to the Common
Shareholders and Investors as specified on Exhibit 1 or 2 hereto, or at such
other address or to such other person as each party shall furnish by notice to
all the others with respect to himself, and shall be delivered personally or
sent by certified mail, postage prepaid, return receipt requested. Unless
otherwise specifically provided
5.
6
herein, all such notices and other communications shall be deemed given or made
only (a) upon personal delivery to the appropriate address or (b) on the second
business day following deposit in the mail, if sent by certified mail, return
receipt requested.
6.3 Governing Law and Interpretation. This Agreement shall
be governed and construed in accordance with the laws of the State of
California. The headings of the various Sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
6.4 Counterparts. This Agreement may be executed in any number
of counterparts, all of which together shall constitute one and the same
instrument.
6.5 Binding Effect. This Agreement shall be binding upon and
shall inure to the benefit of each of the parties hereto and their respective
administrators, executors, legal representatives, heirs, devisees, legatees,
successors, assigns, and transferees. The invalidity or unenforceability of any
provisions hereof shall in no way affect the validity or enforceability of any
other provisions.
6.6 Termination. The provisions of this Agreement shall
terminate upon the earlier of (i) the closing of a firm commitment underwritten
public offering of the Corporation's Common Stock pursuant to a registration
statement declared effective under the Securities Act of 1933, as amended, in
which the aggregate gross proceeds are at least $3,000,000 at a price per share
(subject to adjustment for events occurring after the date hereof) of at least
$0.50, (ii) the end of the second consecutive fiscal year of the Corporation in
which the Corporation has earned income before taxes (determined in accordance
with generally accepted accounting principles consistently applied) of
6.
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at least $500,000, or (iii) the conversion of more than 50% of the shares of
Preferred Stock issued to the Investors pursuant to the Purchase Agreement.
IN WITNESS WHEREOF, the parties have executed this Shareholders'
Agreement as of the day and year first above written.
VIASAT, INC. SOUTHERN CALIFORNIA VENTURES
By /s/ Mark D. Dankberg By
--------------------------------- -------------------------------------
/s/ Mark D. Dankberg
- ----------------------------------- ---------------------------------------
Robert W. Johnson Mark D. Dankberg
/s/ Steven R. Hart
- ----------------------------------- ---------------------------------------
Thomas A. Tisch Steven R. Hart
/s/ Mark J. Miller
---------------------------------------
Mark J. Miller
7.
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at least $500,000, or (iii) the conversion of more than 50% of the shares of
Preferred Stock issued to the Investors pursuant to the Purchase Agreement.
IN WITNESS WHEREOF, the parties have executed this Shareholders'
Agreement as of the day and year first above written.
VIASAT, INC. SOUTHERN CALIFORNIA VENTURES
By By /s/
___________________________________ _______________________________________
___________________________________ _______________________________________
Robert W. Johnson Mark D. Dankberg
___________________________________ _______________________________________
Thomas A. Tisch Steven R. Hart
_______________________________________
Mark J. Miller
7.
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EXHIBIT 10.3
STOCK RESTRICTION AGREEMENT
THIS STOCK RESTRICTION AGREEMENT is entered into between ViaSat, Inc.,
a California corporation ("Company"), and _______________________
("Shareholder") and is made effective for
all purposes on _________________, 19___.
ARTICLE I
PURPOSE AND DEFINITIONS
1.1 PURPOSE. This Stock Restriction Agreement ("Agreement") is
entered into with Shareholder for the purpose of limiting the sale, succession,
or other transfer of ownership of common stock of the Company ("shares") during
the lifetime or at the death of Shareholder in accordance with the provisions
herein. The Agreement also requires the acceptance of an offer to purchase all
of the shares if Shareholders owning sixty-six and two-thirds percent (66-2/3%)
of the outstanding shares of the Company agree to accept such an offer. This
Agreement covers all shares of the Company capital stock now or subsequently
owned by Shareholder ("shares") and a reference to this agreement shall be
endorsed on all of the certificates of shares owned by Shareholder or which may
be subsequently issued to him.
1.2 EFFECT ON SPOUSE'S INTEREST. All references in this
Agreement to "shares" or to a "Shareholder's shares" shall include the community
or separate property interest, if any, of Share- holder's spouse in any shares
of the Company's stock regardless of
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whether registered in said spouse's name only or registered in any manner in the
names of both spouses. All of the conditions and restrictions contained in this
Agreement to Shareholder's shares shall be equally binding on Shareholder's
spouse with respect to his or her interest in shares. For purposes of this
Agreement if the shares are owned jointly or by either spouse, Shareholder shall
refer only to the spouse associated with Company by employment, agency, or other
relationship where financial consideration is paid to such person for services
performed for Company.
1.3 DATE OF EMPLOYMENT. Any reference in this Agreement to
"Date of Employment" shall mean the day and year when "Shareholder" commenced
his first day of employment with the Company.
1.4 FIRST YEAR OF EMPLOYMENT. Any reference to "First Year of
Employment" shall mean any day beginning after the Date of Employment and ending
one (1) year thereafter.
1.5 EMPLOYMENT ANNIVERSARY. Any reference to "Employment
Anniversary" shall include the date(s) in any subsequent year(s) which coincide
with the Date of Employment of Shareholder.
1.6 DATE OF GRANT. The "Date of Grant" shall mean (i) any
Employment Anniversary of Shareholder that is prior to or is on the same date as
the fiscal year-end of the Company that is utilized as a basis by the Company
for determining the amount of shares that may be purchased by Shareholder, or
(ii) if shares are being purchased as a result of exercising a right to purchase
shares under the Company's 1993 Stock Option Plan or any subsequently created
Company Stock Option Plan, the Date of Grant shall mean the Employment
Anniversary of Shareholder that is prior
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to or is the same date as the fiscal year-end of the Company that is utilized as
a basis by the Company for determining the amount of shares subject to the
option that are granted to the Shareholder pursuant to the Company's Stock
Option Plan or any subsequently created Company Stock Option Plan.
ARTICLE II
TRANSFERS OF STOCK
RESTRICTIONS AND MANDATORY OFFERS
2.1 LIFETIME GRATUITOUS TRANSFERS TO SPOUSE OR ISSUE
(MANDATORY OFFER BY DONEE UPON DEATH OF SHAREHOLDER). Shareholder may make a
gift of shares to his spouse or issue outright or to the Trustee of a trust for
his or her benefit, or to his spouse or issue as joint tenants with right of
survivorship ("Donee"). The Donee of these shares shall hold them subject to all
of the provisions of this Agreement, and shall not make any transfers other than
as provided in this Agreement, except for gifts to revocable trusts or members
of a Shareholder's family as described above.
Within thirty (30) days after the date of Share-
holder's death, such Donee shall be required to offer these shares for sale as
provided at Article III of this Agreement ("Mandatory Offer"). All references to
shares in this Agreement shall include shares owned by any Donee or held in
trust on behalf of the Donee. Payment for a Donee's shares on the death of
Shareholder shall be made to the Donee or, where held in trust, pursuant to the
provisions of the trust.
2.2 OTHER LIFETIME GRATUITOUS TRANSFERS. Except as
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permitted at Section 2.1, Shareholder shall not transfer any shares gratuitously
during his lifetime unless he shall have first offered the shares for sale as
provided at Article III of this Agreement ("Mandatory Offer").
2.3 OFFER UPON DEATH OF SHAREHOLDER. Within ten (10) days
after the receipt of notice of the death of Shareholder, or within ten (10) days
after the qualification of his personal representative (if Shareholder's shares
will be part of his probate estate), whichever is later, the Shareholder's
shares shall be offered for sale as provided at Article III of this Agreement by
the person or persons entitled to do so ("Mandatory Offer").
2.4 LIFETIME SALES OF SHARES. Shareholder shall not sell or
transfer shares during his lifetime for a valuable consideration without first
offering such shares for sale as provided at Article III of this Agreement
("Sale of Shares").
2.4.1 A shareholder desiring to complete the Sale of Shares
shall give written notice of his intention to transfer to the President or
Secretary, but not to himself, of the Company ("Notice"). The Notice shall name
the proposed purchaser, his or its business or residence address, and shall
specify the number of shares to be transferred, the price per share, and the
terms of transfer.
2.5 PURCHASE OR MANDATORY OFFER ON TERMINATION OF MARITAL
STATUS. In the event that the marital status of Shareholder is terminated, that
termination of marital status shall be an event giving rise to options to
purchase all, but not less than all, of whatever interest is held by the spouse
of such Shareholder
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in the shares.
2.5.1 OPTION OF SHAREHOLDER. The Shareholder whose marital
status is terminated shall have the first option to purchase whatever interest
is held by his spouse in the stock held in their name, or owned by them. This
option shall be exercised by the Shareholder giving written notice to his spouse
and to the Company within 30 days following the date of termination of marital
status of the Shareholder and his spouse. The purchase price shall be determined
by the Shareholder and his spouse using the same procedure described at Article
IV of this Agreement. The price shall be paid to the selling spouse in the
manner selected by the Shareholder from the alternatives described at Article V
of this Agreement.
2.5.2 SECONDARY OPTION TO PURCHASE. If the Shareholder whose
marital status is terminated does not exercise the option to purchase all of
whatever interest is held by his spouse in the shares held in their name or
owned by them, the Shareholder and his spouse shall each notify the Company in
writing that the Shareholder has not exercised his option pursuant to Paragraph
2.5.1 of this Agreement. If both the Shareholder and his spouse fail to notify
the Company in writing of the termination of their marital status, the Company
shall not be deemed to have received notice until the Company has actual notice
of the termination of marital status of Shareholder and his spouse. For a period
of thirty (30) days commencing upon the date that Company has received the
notice specified in this paragraph, the Shareholder's spouse shall be required
to offer those shares to the
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Company for sale as provided at Article III of this Agreement ("Mandatory
Offer").
2.5.3 BIFURCATION OF MARITAL STATUS AND PROPERTY RIGHTS.
Notwithstanding Subparagraphs 2.5.1 and 2.5.2 to the contrary, in the event that
the marital status of Shareholder is terminated prior to the determination by a
court of the right to ownership of the shares, then in such circumstance, the
event giving rise to the option specified or notice required in Sub-paragraphs
2.5.1 and 2.5.2 shall be the date of entry of judgment by the court determining
ownership of the shares.
2.6 TERMINATION OF EMPLOYMENT.
2.6.1 If Shareholder's employment with Company
terminates within three (3) years from the Date of Employment by the Company,
for any reason whatsoever, Shareholder, or his Donee at Section 2.1, or his
former spouse under Section 2.5.2, shall offer his shares to the Company in
accordance with Article III of this Agreement ("Mandatory "Offer").
2.6.2 The price of the shares purchased during the
first year commencing on the Date of Employment shall be based on Shareholder's
completed months of service determined from his Date of Employment, as follows:
Unvested Vested
Shares Required Shares Required
Completed Months to be Sold at Price to be Sold at Price
of Service From Originally Paid by Determined in
Date of Employment Shareholder Section 4.1
- ------------------ ----------- ------------
("Cost") ("Higher of Cost or
Fair Market Value")
Less than 6 100% 0
6 but less than 7 75% 25%
7 and continuing thereafter through 36 months, Shareholder shall
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vest to his shares at a rate of 1/30 (3.333 % per month).
2.6.3 The price of any shares purchased by Shareholder after
the First Year of Employment shall be based on Shareholder's completed months of
service as determined for each subsequent purchase by Shareholder beginning from
the Date of Grant, as follows:
Unvested Vested
Completed Months Shares Required Shares Required
of Service From to be Sold at Price to be Sold at Price
Date of Originally Paid by Determined in
Grant Shareholder Section 4.1
----- ----------- -----------
("Cost") ("Higher of Cost or
Fair Market Value")
Less than 6 100% 0
6 but less than 7 75% 25%
7 and continuing thereafter through 36 months, Shareholder shall vest to his
shares at a rate of 1/30 (3.333 % per month).
2.6.4 If Shareholder's employment with the Company terminates
after three (3) years from the date of his employment with the Company, for any
reason whatsoever, Shareholder or his Donee at Section 2.1 or his former spouse
under Section 2.5.2, shall offer his shares to Company in accordance with
Article III of the Agreement ("Mandatory Offer") and at the price determined by
Section 4.1.
2.6.5 The term "employment" or "employed" for purposes of this
Agreement shall include but not be limited to any relationship in which
Shareholder is paid for his service to the Company whether by way of salary,
hourly compensation, commission, director's fees, fringe benefits, reimbursement
and the like.
2.6.6 In the event of any conflict between Section 2.6 and
Section 2.4, the provisions of Section 2.6 shall prevail.
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2.6.7 Notwithstanding anything in this Agreement to the
contrary, so long as Shareholder's share or portion thereof are subject to the
restrictions in this Section 2.6, Shareholder shall not transfer such shares, or
portion thereof, gratuitously or for consideration, except as permitted at
Sections 2.1, 2.3, or 2.5.
2.7 TRANSFEREES SUBJECT TO RESTRICTIONS. Any Transferee upon
receiving shares (or any interest in shares) shall be subject to all of the
provisions and restrictions contained in this Agreement, and shall, prior to
receiving delivery of the shares, become a signatory to the then current Stock
Restriction Agreement of the Company.
2.8 OFFER TO ALL SHAREHOLDERS. If an offer is made to all
Shareholders to purchase all of the outstanding shares of the Company, and if
that offer is accepted by Shareholders owning sixty-six and two-thirds (66-2/3)
percent of the shares, Shareholder agrees he will be bound by such acceptance.
Shareholder further agrees he will sell all of the shares owned by him to the
offeror on the terms and conditions contained in the offer to all Shareholders.
Should such an offer be made, the provisions of this Agreement requiring that
shares be offered to Company or its designated purchaser shall not apply and the
purchaser shall acquire the shares free and clear of this Agreement and of any
of its terms and conditions.
ARTICLE III
OPTION TO PURCHASE TO COMPANY OR SHAREHOLDERS
3.1 SUBMISSION TO COMPANY. A Mandatory Offer required by
Sections 2.1, 2.2, 2.3 2.5 or 2.6 or a Notice required
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by Section 2.4.1, shall be submitted to the Company by the person
required to do so (Offeror).
3.2 OPTION TO COMPANY. The Company shall have the right to
elect to purchase any or all of the shares which are the subject of a Mandatory
Offer or Notice (the "shares offered") for the price and on the terms set forth
in this Agreement. This option shall expire sixty (60) days after receiving a
Mandatory Offer or Notice or sixty (60) days after termination of Share-
holder's employment, whichever is applicable.
3.3 NON-EXERCISE OF OPTION. If for any reason the Company
does not exercise its option in a timely manner to purchase any or all of the
offered shares, the Offeror shall be entitled to do whichever of the following
is applicable:
3.3.1 Continue to hold such shares under
Section 2.1 of this Agreement either outright or as a trustee subject to the
terms of the trust. In either event, the holder of such shares shall be treated
in all respects as a Shareholder subject to the terms of this Agreement;
3.3.2 Complete the gratuitous transfer under
Section 2.2 in which case the Transferee will be a Shareholder subject to the
terms of this Agreement;
3.3.3 Continue to hold such shares under
Section 2.3 of this Agreement as a Shareholder subject to the terms of this
Agreement or to distribute them according to law to the deceased Shareholder's
beneficiaries who will then be treated as Shareholders subject to the terms of
this Agreement;
3.3.4 Complete the transfer of shares for
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consideration under Section 2.4 of this Agreement in which case the Transferee
shall be a Shareholder subject to the terms of this Agreement; provided,
however, that the transfer must be completed within six (6) months of
termination of the Company's and Share- holders' option period, and at the price
and upon terms no more favorable than those specified in the Notice;
3.3.5 Continue to hold shares under Section
2.5 of this Agreement as a Shareholder subject to the terms of this Agreement;
provided, however, that a Shareholder who has acquired shares as a result of
dissolution of marriage with a Shareholder who is then employed by the Company,
shall remain subject to the provisions of Section 2.6 of this Agreement as
though the Shareholder is employed by the Company.
3.3.6 Continue to hold shares under Section
2.6 of this Agreement as a Shareholder subject to the terms of this Agreement.
3.4 RESTRICTION. Notwithstanding the foregoing, the Company
shall not have the option to purchase such shares as designated at Section 3.2
if such purchase would violate Sections 500 and 501 of the California
Corporations Code or any statute of similar import restricting the right of a
corporation to purchase its own shares. This Section 3.6 does not restrict the
Company's option to designate, appoint or approve as a purchaser for such
shares, any person or persons including other Shareholders of the Company.
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ARTICLE IV
PURCHASE PRICE
4.1 DETERMINATION. Except when a purchase price per share is
stated in a Notice required by Section 2.4, the option price per share shall be
based on the original cost of the stock to the Offeror, in the case of unvested
shares, and on the higher of original cost of the stock to Offeror or fair
market value ("Fair Market Value") as agreed upon by the Offeror and the Company
in the case of vested shares. If the Offeror and the Company cannot agree upon
the Fair Market Value for the Offeror's shares within fifteen (15) days
("Agreement Period") after the Company has received a Mandatory Offer of Notice,
or termination of Shareholder's employment, whichever is applicable, the Fair
Market Value shall be determined by an appraiser chosen by Offeror and an
appraiser chosen by the Company. Within fifteen (15) days after the expiration
of the Agreement Period, Offeror and Company shall each choose an appraiser
("Appointment Period") and notify the other in writing of the name, address and
phone number of such appraiser. The two appraisers shall thereafter have fifteen
(15) days to determine the Fair Market Value of the shares ("First Appraisal
Period"). In the event the two appraisers cannot agree within fifteen (15) days
after expiration of the First Appraisal Period, they shall thereupon immediately
choose a third appraiser and the decision in writing of any two of the three
appraisers ("Second Appraisal Period") so appointed shall be deemed binding and
conclusive on the Offeror and the Company with respect to the price per share of
shares being offered for sale.
In the event that either Company or Offeror
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fails to appoint an appraiser during the Appointment Period, the appraiser
appointed by the non-failing party shall determine the Fair Market Value of the
shares. Each party shall bear the cost and expense of the appraiser appointed by
such party. All costs and expenses of the tie-breaking appraiser appointed for
the Second Appraisal Period shall be borne equally by the Company and Offeror.
4.2 CANCELLATION OF SHARES. If the Offeror refuses to tender
shares after Fair Market Value (or other purchase price specified in this
Agreement) has been determined, the Company may thereafter cancel Offeror's
shares provided, however, that Company first tenders full payment of the
purchase price of the shares to Offeror.
4.3 TIME FOR DETERMINATION. In the event of the necessity of
appointment of such appraisers, the price per share shall be determined within
thirty (30) days of the appointment or such additional time as may be agreed
upon between Offeror and the Company.
4.4 PAYMENT WHERE DEATH BENEFIT EXISTS. Upon the valuation of
shares of a deceased Shareholder, who at the time of his death was also an
employee of the Company (Shareholder- Employee), or Donee of a deceased
Shareholder or employee, the purchase price for all shares shall be reduced by
$5,000 in the event that the Company is obligated to pay a death benefit in this
amount to the beneficiary designated by such Shareholder-Employee.
ARTICLE V
PAYMENT
5. TIME AND MANNER. In the event that the Company shall
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exercise its option to purchase shares, payment for the shares shall be made in
accordance with whichever of the following options the purchaser shall choose:
5.1 In cash or certified check within the time
periods designated for the exercise of options under Sections 2.3, 2.5 or 2.6,
which give rise to the option to purchase such shares; or
5.2 On the terms and conditions set forth in the
Notice from the offering Shareholder under Section 2.4.
ARTICLE VI
INSURANCE
6.1 INSURANCE POLICIES. In order to fund the payment of the
purchase price of the shares to be purchased under this Agreement by Company
upon the death of Shareholder, the Company may apply for (but is under no
obligation to do so), acquire, and maintain in force policies of life insurance
in face amounts sufficient to pay the purchase price of the shares owned by
Shareholder. The policies, if any, shall be described on Exhibit A; and any
additional policies acquired by Company on the life of Shareholder, or changes
in the face amounts of the policies, shall also be listed on Exhibit A. All
policies shall belong solely and absolutely to Company and shall be subject to
the provisions of this Agreement; Company reserves all the powers and rights of
ownership, will name itself as primary beneficiary, and agrees to pay all
premiums on the policies as they fall due. Company shall not exercise any of its
powers of ownership by cancelling the policies, lowering the face amount of the
policies, changing the
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name of the beneficiary, electing optional methods of payment, converting the
policies, borrowing against them, or in any other way changing their nature,
reducing their value or the rights under them without first giving fifteen (15)
days written notice of its intention to do so to Shareholder. Any dividends paid
upon any of the policies shall be paid to Company. Receipts showing payment of
premiums shall be held by the Secretary of Company for inspection by
Shareholder.
ARTICLE VII
TRANSFER OF SHARES
7.1 TRANSFERS. Upon the payment in full of the
purchase price, Offeror shall deliver to the purchaser a receipt for the payment
of the purchase price, together with a stock assignment separate from
certificate transferring the shares to the purchaser; and, if applicable, the
personal representative shall deliver his receipt for the payment of the
purchase price to the Company, together with a court order confirming sale, and
any documents necessary for clearance of inheritance tax liens, as well as an
appropriate stock or assignment separate from certificate duly transferring the
shares to the Company. The stock or assignment shall have the signature or
signatures guaranteed by a commercial bank or trust company or savings and loan
association or a member firm of the National Association of Security Dealers.
Upon the presentation of the foregoing documents, the Company shall cause the
shares purchased to be transferred to the purchaser.
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ARTICLE VIII
LEGEND ON SHARE CERTIFICATE
8.1 LEGEND. Each share certificate of the Company
shall have on its face the following words:
"ANY TRANSFER OR PLEDGE OF THE SHARES REPRESENTED BY THIS
CERTIFICATE, OR THE TRANSFER OF ANY INTEREST IN THOSE SHARES IS
RESTRICTED BY THE PROVISIONS OF THE COMPANY'S STOCK RESTRICTION
AGREEMENT, PRESENTLY EFFECTIVE, A COPY OF WHICH MAY BE INSPECTED
AT THE PRINCIPAL OFFICE OF THE COMPANY, AND ALL OF THE
PROVISIONS OF WHICH ARE INCORPORATED HEREIN."
An executed copy of this Agreement shall be delivered
to the Secretary of the Company and shall be shown by him to any person duly
authorized in writing by Shareholder who then holds shares subject to this
Agreement.
ARTICLE IX
RESTRICTIONS ON PLEDGE
9.1 RESTRICTION. Shareholder shall not pledge or
otherwise encumber any shares or any interest in any shares, unless he shall
have first complied with the following requirements.
9.1.1 Shareholder, desiring to pledge any
shares as security, or any interest in any shares, shall give notice to the
Company, settling forth the proposed pledge, his or its business and residence
address, and specifying the number of shares to be pledged, the total obligation
secured and the terms of that obligation. A meeting of the Board of Directors of
the Company shall be held within fifteen (15) days from the receipt of the
notice, for the purpose of reviewing the proposed pledge.
9.1.2 It shall be a condition precedent to
the approval of any proposed pledge that Shareholder and the proposed
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pledgee enter into a written Consent Agreement with the Company pursuant to
which the Company will be given notice of any default by the pledgor, allowed
sufficient time to cure the default prior to any execution upon the pledged
shares, and granted a security interest in the pledged shares upon curing the
default. Upon delivery of such a Consent Agreement satisfactory to the Company,
together with other documentation which may, in the sole discretion of the Board
of Directors of the Company, be necessary or desirable to effectuate the purpose
of this Agreement, the Board of Directors shall act to authorize the pledge of
the shares and shall give written notice to Shareholder of this approval.
ARTICLE X
TERMINATION OF AGREEMENT
10.1 TERMINATION. This Agreement shall terminate
upon the occurrence of any of the following:
10.1.1 The written agreement of all of the
parties to this Agreement;
10.1.2 The dissolution of the Company;
10.1.3 The appointment of a receiver to take
possession of all or substantially all of the assets of the Company, a general
assignment by the Company for the benefit of creditors, or any action
voluntarily taken by the Company under any insolvency or bankruptcy act;
10.1.4 Any action involuntarily suffered by
the Company under any insolvency or bankruptcy act, which continues
for a period of thirty (30) days; or
10.1.5 When only one Shareholder remains,
the
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shares of all others having been transferred or repurchased.
10.1.6 When the Company makes a public
offering to sell its shares by filing a registration with the Securities and
Exchange Commission to register shares for sale to the general public, such
registration is made effective by the Securities and Exchange Commission and
such registration is properly qualified in those states of the United States
where the shares will be sold. The foregoing sentence is applicable whether or
not shares subject to this Agreement are made part of the registration with the
Securities and Exchange Commission.
ARTICLE XI
LIFE INSURANCE UPON TERMINATION
11.1 DISPOSITION OF LIFE INSURANCE POLICIES UPON
TERMINATION. If this Agreement is terminate as provided in Article X, or if a
Shareholder dispose of all of the Shares owned, Shareholder shall have an
option, exercisable within sixty (60) days after the termination of this
Agreement or the sale of shares, to purchase any or all life insurance policies
on himself owned by Company listed on Exhibit A by payment of the following
amount:
11.1.1 The interpolated terminal reserve of
the policy and any paid-up additions as of the date of transfer, plus
11.1.2 Any dividends or dividend
accumulations credited to the policy, plus
11.1.3 The unearned portion of the premium
paid beyond the date of transfer, less
11.1.4 Any indebtedness against the policy
plus any interest accrued as of the date of transfer.
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ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 PRIOR AGREEMENTS. This Agreement supersedes all other
agreements in force at the date of this Agreement, and all rights and
obligations of the parties under them which are inconsistent with the terms of
this Agreement, are terminated.
12.2 NOTICE. Any notice given under the terms of
this Agreement shall be given in writing and shall be given by registered or
certified mail, postage prepared and return receipt requested, to the Company at
its principal office of business, and to Shareholder at the address last
provided by Shareholder to the Company. Any address may be changed by giving
notice in writing to the Company. The date of receipt by any notice shall be the
third business day following the postmark on the registered or certified mail.
12.3 BINDING ON HEIRS. This Agreement shall be
binding upon and inure to the benefit of the successors, heirs, personal
representatives, and assignees of the parties.
12.4 COORDINATION WITH WILL. Each Shareholder agrees to
insert in his will a direction and authorization to his personal representative
to comply with the provisions of this Agreement.
12.5 AMENDMENT. This Agreement may be amended at any
time by the written agreement of the Company and all of its then Shareholders.
12.6 VALIDITY. In the event that any of the provisions
of this Agreement are held invalid under any law, this invalidity shall not
affect the remainder of the Agreement.
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12.7 ATTORNEY'S FEES. In a suit or proceeding
brought or instituted by any of the parties to enforce or interpret any of the
provisions of this Agreement or on account of any damages sustained by any party
by reason of the violation of another party of any of the terms or provisions of
this Agreement, the prevailing party shall be entitled to recover reasonable
attorney's fees in such amount as shall be fixed by the court.
12.8 CALIFORNIA LAW. This Agreement shall be governed
by the laws of the State of California.
12.9 GENDER AND NUMBER. As used herein, masculine terms
and number shall include the equivalent feminine terms and numbers.
12.10 CAPTION AND PARAGRAPH HEADINGS. Captions and
paragraph headings used herein are for convenience only and are not a part of
this Agreement and shall not be used in construing it.
IN WITNESS WHEREOF, the parties have executed this
Agreement at San Diego, California, effective for all purposes on
- -------------------------.
COMPANY SHAREHOLDER
ViaSat, Inc.
By: _________________________ _______________________
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SPOUSE'S CONSENT TO STOCK RESTRICTION AGREEMENT
I acknowledge that I have read the foregoing Stock
Restriction Agreement and that I know its contents. I am aware that my community
property or other interest, if any, in shares registered in the name of my
spouse or in both of our names is subject to the terms of this Agreement
including, without limitation, of the following: Section 1.2, rendering my
shares subject to the terms of this Agreement; Section 2.3, providing for the
mandatory offer of my interest in shares to the Company upon my spouse's death;
and Section 2.5, requiring a mandatory offer of my shares to my spouse (or the
Company) in the event of the termination of our marital status.
I agree to sell my interest in the Company's shares
upon termination of my marital status on the terms and conditions set forth in
the Stock Restriction Agreement. I agree to provide notice to the Company, as
required by Paragraph 2.5.2, in the event my spouse does not purchase my shares
in the Company upon termination of our marital status. I consent to the sale of
my interest in the Company's shares upon my spouse's death. I approve of the
remaining provisions of the Agreement.
I acknowledge that I have been advised to obtain
independent legal advice prior to signing this Consent and have either done so
or declined to do so of my own free will and choice.
Dated:______________________ Spouse:
________________________________________
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EXHIBIT 10.4
INVENTION AND CONFIDENTIAL DISCLOSURE AGREEMENT
THIS INVENTION AND CONFIDENTIAL DISCLOSURE AGREEMENT ("Agreement") is made
between ViaSat, Inc., a California corporation ("Company"), and
______________________________ ("Employee").
In consideration of the employment or contractual relationship between the
Employee and the Company, the parties hereto agree as follows:
1. Employee is retained by the Company as a research and development
engineer to invent, discover, develop and improve methods, formulas, machines
and devices relating in any manner to the Company's business or related to the
Company's products or to any research, design, experimental or production work
carried on by the Company. On inventing, discovering, developing or improving
any of the aforesaid methods, formulas, machines and devices, Employee shall
immediately make a full disclosure thereof to the Company and shall thereafter
keep the Company fully informed at all times of all progress in connection
therewith. Such disclosure shall be made in confidence, and the Company shall
provide a review process available to Employee, upon request, to determine such
issues as may arise with such disclosure.
2. All such inventions, designs, improvements and discoveries, whether or
not conceived by Employee alone or with others and whether or not conceived
during regular working hours, shall be the exclusive property of the Company,
and Employee agrees to assign and hereby assigns his entire right, title and
interest in the same to the Company.
3. Employee acknowledges notification under California Labor Code Section
2872 that this Agreement does not apply to any invention which qualifies fully
under the provisions of Labor Code Section 2870, which reads in pertinent part
as follows:
Any provision in an employment agreement which provides that an
employee shall assign or offer to assign any of his or her rights in
an invention to his or her employer shall not apply to an invention
for which no equipment, supplies, facility, or trade secret
information of the employer was used and which was developed
entirely on the employee's own time, and (a) which does not relate
(1) to the business of the employer or (2) to the employer's actual
or demonstrably anticipated research or development, or (b) which
does not result from any work performed by the employee for the
employer.
2
4. Employee shall assist the Company to obtain patents on all such
inventions, designs, improvements and discoveries deemed patentable by the
Company and shall execute all documents and do all things necessary to obtain
letters patent, vest the Company with full and exclusive title thereto and
protect the same against infringement, all at the Company's expense, but for no
consideration to Employee in excess of Employee's usual wages or contract
compensation from the Company. In the event that the Company requires Employee's
assistance under this section 4 after termination of Employee's employment or
contractual relationship with the Company, Employee shall be compensated for
Employee's time actually spent in providing such assistance at an hourly rate
equivalent to Employee's salary or wages or contract compensation during the
last year of employment or contractual relationship with the Company.
5. All experiments, developments, formulas, patterns, devices, secret
inventions and compilations of information, records and specifications regarding
the Company's business or related to the Company's products or to any research,
design, experimental or production work carried on by Company are trade secrets,
which Employee shall not disclose, directly or indirectly, or use in any way,
either during the term of Employee's employment by or contractual relationship
with the Company or at any time thereafter, except as required by the Company.
Employee recognizes and agrees that the foregoing obligation applies not only to
technical information, but any business information which the Company treats as
confidential. Any information of the Company which is not readily publicly
available shall be considered to be a trade secret unless the Company advises
Employee otherwise.
6. Employee agrees to return to the Company upon termination of Employee's
employment or contractual relationship with the Company, all papers, records,
documents, drawings, plans, models and equipment in Employee's possession,
relating to the Company's business or related to the Company's products or to
any research, design, experimental or production work carried on by the Company,
and Employee shall not make or retain any copies thereof.
7. In the event of a breach or threatened breach by Employee of any
provision of this Agreement, the Company shall be entitled to an injunction
restricting Employee from committing such a breach. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedy available to
the Company for such breach or threatened breach, including the recovery of
damages from Employee.
8. Should any part of this Agreement be declared invalid for any reason,
then such portion shall be invalid only to the extent of the prohibition without
invalidating or affecting the remaining provisions of this Agreement, or without
invalidating or altering such portion within states or localities where not
prohibited by law or court decree.
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9. In any action to enforce or interpret the terms of this Agreement, the
prevailing party shall be entitled to attorneys' fees and costs.
10. This Agreement shall be construed under the laws of the State of
California and shall be binding upon the heirs, assigns, administrators and
executors of the parties.
DATED:____________________________ DATED:
VIASAT, INC., a California
Corporation
__________________________________ By:_____________________________________
"Employee" "Company"
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EXHIBIT 10.5
VIASAT, INC.
1993 STOCK OPTION PLAN
1. PURPOSE
1.1 VIASAT, INC., a California corporation ("Company") desires to
afford certain of its employees and independent contractors whom the Company's
Board of Directors specifically finds have substantial business contacts with
the Company and who are performing services of special significance to the
Company, and non-employee members of the Company's Board of Directors who are
responsible for the continued growth of the Company, an opportunity to acquire a
proprietary interest in the Company, and thus to create in such persons an
increased interest in and a greater concern for the welfare of the Company and
its affiliates.
1.2 The stock options ["Option(s)"] offered pursuant to this 1993 Stock
Option Plan ("Plan") are a matter of separate inducement and are not in lieu of
any salary or other compensation for the services of any person.
1.3 The Options granted under the Plan are intended to be either
incentive stock options ["Incentive Option(s)"] within the meaning of Section
422A of the Internal Revenue Code of 1986, as it may from time to time be
amended ("Code"), or options that do not meet the requirements for Incentive
Options ["Non-Qualified Option(s)"].
1.4 Employees of the Company may receive Incentive Options and/or
Non-Qualified Options. Persons who are not employees, but who are directors of,
or who are independent contractors found to have substantial business contacts
with and to be performing significant services for, the Company may also receive
Options pursuant to the Plan, provided, however, that such persons may only
receive Non-Qualified Options.
1.5 For the purposes of the Plan, the term "employee" shall have the
same meaning required by Section 422A of the Code.
2. SHARES SUBJECT TO THE PLAN
2.1 The total number of shares of common stock of the Company issuable
under the Plan shall not exceed, in the aggregate, One Million (1,000,000)
shares of the authorized common stock, $.01 par value, as of the Effective Date,
consisting of Incentive Options and Non-Qualified Options in amounts determined
by the Board of
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Directors of the Company ("Shares"). The term "Shares" shall include any
securities, cash or other property into which Shares may be changed through
merger, consolidation, reorganization, recapitalization, stock dividend, stock
split, split-up, split-off, spin-off, combination of shares, exchange of shares,
issuance of rights to subscribe or change in capital structure.
2.2 Shares which may be acquired under the Plan shall be authorized but
unissued Shares. If and to the extent that Options granted under the Plan expire
or terminate without having been exercised, new Options may be granted with
respect to the Shares covered by such expired or terminated Options, provided
that the grant and the terms of such new Options shall in all respects comply
with the applicable provisions of the Plan.
3. ADMINISTRATION
3.1 The Company's Board of Directors ("Board") shall designate a
committee ("Committee") to administer the Plan. In the absence of a Committee,
the Plan shall be administered by the Board. The Committee shall consist of no
fewer than three members of the Board. The Board shall have the power to
redesignate the composition of the Committee at any time. A majority of the
members of the Committee shall constitute a quorum, and the act of a majority of
the members of the Committee shall be the act of the Committee. Any member of
the Committee may be removed at any time either with or without cause by
resolution adopted by the Board, and any vacancy on the Committee may at any
time be filled by resolution adopted by the Board.
3.2 Subject to the express provisions of the Plan, the Committee shall
have authority, in its discretion, to determine the persons to whom Options
shall be granted, the time when such Options shall be granted, the number of
Shares which shall be subject to each Option, the purchase price of each Share
which shall be subject to each Option, the period(s) during which such Options
shall be exercisable (whether in whole or in part), and the other terms and
provisions thereof. In determining the persons to whom Options shall be granted
and the number of Shares subject to each such grant, the Committee shall
consider the length of service, the amount of earnings, the responsibilities and
duties of each person, and/or other factors it deems relevant.
3.3 Subject to the express provisions of the Plan, the Committee shall
have authority to construe the Plan and any Options granted thereunder, to amend
the Plan and any Options granted thereunder, to prescribe, amend and rescind
rules and regulations relating to the Plan, to determine the terms and
provisions of the Options granted under the Plan and to make all other
determinations that the Committee deems necessary or advisable for administering
the Plan. The Committee also shall have the authority to require, in its
discretion, that the Optionee agree, promptly after the grant of an Option to
such person, not to sell or otherwise dispose
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of Shares acquired pursuant to the exercise of the Option for a period of time
to prevent any undesirable federal and/or state securities law consequences or
the volatility of the Company's Shares in connection with a secondary and/or
primary offering thereof. The determination of the Committee on matters referred
to in this Section 3 shall be conclusive.
3.4 Any or all powers and functions of the Committee may at any time
and from time to time be exercised by the Board or an executive committee
thereof.
3.5 The Committee may employ such legal counsel, consultants and agents
as it may deem desirable for the administration of the Plan and may rely upon
any opinion received from any such counsel or consultant or agent. Expenses
incurred by the Board or the Committee in the engagement of such counsel,
consultant or agent shall be paid by the Company. No member or former member of
the Committee or of the Board shall be liable for any action or determination
made in good faith with respect to the Plan.
4. ELIGIBILITY
4.1 The persons eligible to receive Options under the Plan are
identified in Section 1 hereof.
4.2 An Option shall not be granted to any person who, at the time such
Option is granted, owns shares of the Company or any subsidiary or parent
corporation of the Company which share possess more than ten percent (10%) of
the total combined voting power of all classes of shares of the Company or of
any subsidiary or parent corporation of the Company, unless (a) the exercise
price per share is not less than one hundred ten percent (110%) of the fair
market value per share on the date such Option is granted, and (b) in the case
of an Incentive Option, the Option by its terms is not exercisable after the
expiration of five (5) years from the date such Option is granted. In
determining share ownership of a proposed grantee, the rules of Section 425(d)
of the Code shall be applied, and the Committee may rely on representations of
fact made to it by the proposed grantee.
5. OPTION GRANT PROGRAM
5.1 Each Option granted under the Plan shall be evidenced by a Stock
Option Agreement (and all necessary supporting documentation, as determined by
the Committee in its discretion) that complies with (or incorporates) each of
the applicable terms and conditions of this Plan (as well as the applicable
terms and conditions set forth elsewhere in the Plan) and any additional terms
which the Committee deems appropriate. Each Stock Option Agreement shall
identify such Option as either an Incentive Stock Option that is intended to
comply with the requirements of Section 422A of the Internal Revenue Code or as
a Non-Qualified Option
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that is intended not to be an Incentive Stock Option. The Stock Option Agreement
and all supporting documentation shall contain such representations and
warranties as the Committee shall require.
6. OPTION PRICE AND PAYMENT
6.1 The price for each Share purchasable under any option granted
pursuant hereto shall not be less than one hundred percent (100%) of the fair
market value per Share on the date the Option is granted, provided, however,
that in the case of an Incentive Option granted to a person who, at the time
such Option is granted, owns shares of the Company or any subsidiary or parent
corporation which shares possess more than ten percent (10%) of the total
combined voting power of all classes of shares of the Company or of any
subsidiary or parent corporation, the purchase price for each Share shall be
determined in accordance with paragraph 4.2 of the Plan.
6.2 If the Shares are listed on a national securities exchange in the
United States on the date any Option is granted, the fair market value per Share
shall be deemed to be the closing quotation at which the Shares are sold on such
national securities exchange on the date such option is granted. If the Shares
are listed on a national securities exchange in the United States on such date
but the Shares are not traded on such date, or such national securities exchange
is not open for business on such date, the fair market value per Share shall be
determined as of the closest preceding date on which such exchange shall have
been open for business and the Shares were traded. If the Shares are listed on
more than one national securities exchange in the United States on the date any
such Option is granted, the Committee shall determine which national securities
exchange shall be used for the purpose of determining the fair market value per
Share.
6.3 If at the date any Option is granted, a public market exists for
the Shares but the Shares are not listed on a national securities exchange in
the United States, the fair market value per Share shall be deemed to be the
mean between the closing bid and asked quotations on the over-the-counter market
for the Shares in the United States on the date such Option is granted. If there
are no bid and asked quotations for the Shares on such date, the fair market
value per Share shall be deemed to be the mean between the closing bid and asked
quotations on the over-the-counter market in the United States for the Shares on
the closest date, preceding the date such Option is granted, for which such
quotations are available.
6.4 If the Shares are not listed on a National Securities Exchange in
the United States, and fair market value per Share cannot be determined pursuant
to paragraph 6.3 hereof, then the fair market value of the Shares shall be as
determined by the Committee, using the following criteria: (a) the price at
which securities of reasonably comparable corporations (if any) in the same
industry are being traded, subject to appropriate adjustments
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for the dissimilarities between the corporations being compared, or (b) in the
absence of any reliable indicator under subsection (a), the earnings history,
book value and prospects of the Company in light of market conditions generally.
7. TERM OF OPTIONS AND LIMITATIONS ON THE RIGHT OF EXERCISE
7.1 Subject to the provisions of Section 18, the holder of an Option
("Optionee") may exercise such Option in accordance with a vesting schedule set
forth hereafter:
Percentage of Total Options
Date Granted Which May be Exercised
---- ------------------------------
1st anniversary from date of grant 35%
2nd anniversary from date of grant 35%
3rd anniversary from date of grant 30%
The date after which the Option may no longer be exercisable ("Expiration Date")
shall be five (5) years after the Grant Date.
7.2 Except as provided in Paragraph 11.1 hereafter, no Option may be
exercised unless, at the time of such exercise, the Optionee is in the employ of
the Company and shall have been so employed continuously since the date the
Option is granted. For purposes of this paragraph, the term "employment" shall
include any association with the Company as an independent contractor, director
or in any other capacity where such person is granted an Option under the Plan.
7.3 The grant of Options under the Plan shall not effect the right of
the Company to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
7.4 To the extent that an Option is not exercised prior to the
Expiration Date (or prior to its earlier termination as provided herein or in
the Stock Option Agreement), it shall expire as to the then unexercised part. If
any Option shall terminate prior to the Termination Date, as defined in Section
18, the Committee shall have the right to use the Shares as to which such Option
shall not have been exercised to grant one or more additional Options to any
eligible person, but any such grant of an additional Option shall be made prior
to the close of business on the Termination Date.
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6
8. $100,000 LIMITATION
8.1 The aggregate fair market value (determined at the time the Option
is granted) of the Shares with respect to which Incentive Options granted to an
individual are exercisable for the first time by such individual during any one
calendar year (under the Plan or another stock option plan of the Company, a
Parent or Subsidiary Corporation, or predecessor thereof) shall not exceed
$100,000 or such greater amounts as may be permitted under Section 422A of the
Code. To the extent that the aggregate fair market value of the Shares with
respect to which Incentive Options are exercisable for the first time by any
individual during any calendar year (under all plans of the Company and its
Parent and Subsidiary Corporations) exceeds $100,000, such Options shall be
treated as Non-Qualified Options, by taking Options into account in the order in
which they were granted.
9. EXERCISE OF OPTIONS
9.1 Options granted under the Plan shall be exercised by the Optionee
as to all or part of the Shares covered thereby by the giving of written notice
(in the form acceptable to the Committee) of the exercise thereof to the
Corporate Secretary of the Company at the principle business office of the
Company, specifying the number of Shares to be purchased and accompanied by
payment of the full purchase price (in the form (s) permitted by the Option).
10. NON-TRANSFERABILITY OF OPTIONS
10.1 An Option shall not be transferable other than by will or the laws
of descent and distribution, and any Option shall be exercisable, during the
lifetime of the holder, only by such holder.
11. TERMINATION OF EMPLOYMENT AND/OR ASSOCIATION
11.1 Upon termination of the association of an Optionee with the
Company for any reason other than disability or death, any Option previously
granted to the Optionee, to the extent said Option is then exercisable as of
said termination date based upon the vesting schedule set forth in Optionee's
Stock Option Agreement with the Company, but not theretofore exercised, shall
terminate and become null and void thirty (30) days after the termination date
("Association Termination Date"). Upon termination of the association of an
Optionee with the Company by reason of said Optionee's disability (as defined in
Code Section 22(e)(3) or death, any Option previously granted to the Optionee,
to the extent said Option is then exercisable as of said Association Termination
Date based upon the vesting schedule set forth in Optionee's Stock Option
Agreement with the Company, but not therefore executed, shall terminate and
become null and void no sooner than the date
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which is six (6) months from the Optionee's Association Termination Date. For
purposes of determining the rights of the Optionee under the vesting contained
in Paragraph 7.1, the vesting rights shall be calculated to the Association
Termination Date.
11.2 If an Option shall be exercised by the legal representative of a
deceased Optionee or an Optionee whose relationship with the Company has been
terminated, or by a person who acquired an Option by bequest or inheritance or
by reason of the death of any Optionee or an Optionee whose relationship with
the Company (and/or a parent or subsidiary corporation thereof) has been
terminated, written notice of such exercise shall be accompanied by a certified
copy of letters testamentary or equivalent proof of the right of such legal
representative or other person to exercise such Option.
11.3 The Plan shall not impose any obligation on the Company to
continue the employment, and/or other relationship of whatever nature, of any
holder of an Option and/or Shares acquired pursuant to an exercise of an Option,
nor shall it impose any obligation on the part of any holder of an Option or
Shares to remain in the employ of the Company.
12. RESTRICTION ON SHARES
12.1 All shares issued pursuant to the exercise of the Options
shall contain the following restrictive legends:
12.1.1 IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OF ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREOF,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
12.1.2 THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED UNLESS (A) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, (B) IN COMPLIANCE WITH RULE 144 UNDER SUCH
ACT, OR (C) THE COMPANY HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL ACCEPTABLE
TO THE COMPANY TO THE EFFECT THAT NO REGISTRATION IS LEGALLY REQUIRED BY SUCH
TRANSFER.
12.1.3 ANY TRANSFER OR PLEDGE OF THE SHARES REPRESENTED BY
THIS CERTIFICATE, OR THE TRANSFER OF ANY INTEREST IN THOSE SHARES, IS RESTRICTED
BY THE PROVISIONS OF A STOCK RESTRICTION AGREEMENT, A COPY OF WHICH MAY BE
INSPECTED AT THE PRINCIPAL OFFICE OF THE COMPANY, AND ALL PROVISIONS OF WHICH
ARE INCORPORATED HEREIN.
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13. ISSUANCE OF CERTIFICATES; PAYMENT OF EXPENSES
13.1 Upon any exercise of an Option and payment of the purchase price,
a certificate or certificates for the Shares as to which the Option has been
exercised shall be issued by the Company in the name of the person exercising
the Option and shall be delivered to or upon the order of such person or
persons.
13.2 The Company shall pay all issue or transfer taxes with respect to
the issuance or transfer of Shares, as well as all fees and expenses necessarily
incurred by the Company in connection with such issuance or transfer.
13.3 All Shares issued as provided herein shall be fully paid and
non-assessable to the extent permitted by law.
14. WITHHOLDING TAXES
14.1 The Company may require a person exercising a Non- Qualified
Option (or making a "disqualifying disposition," as defined in Code Section 421,
of an Incentive Option), to reimburse the Company for any taxes required by any
government to be withheld or otherwise deducted and paid by the Company. In lieu
thereof, the Company shall have the right to withhold the amount of such taxes
from any other sums due or to become due from the Company to such person upon
such terms and conditions as the Committee shall prescribe or withhold an
appropriate number of Shares whose fair market value is equal to taxes required
to be withheld.
15. AMENDMENT OF THE PLAN
15.1 The Board may, from time to time, amend the Plan, provided that no
amendment shall be made, without the approval of the shareholders of the
Company, that will (a) increase the total number of Shares reserved for Options
under the Plan (other than an increase merely reflecting a change in
capitalization such as a stock dividend or stock split as provided in paragraph
2.1), (b) reduce the exercise price of any Incentive Option granted pursuant
hereto below the price required by Section 6, (c) modify the provisions of the
Plan relating to eligibility, (d) materially increase the benefits accruing to
participants under the Plan, or (e) change the requirements applicable to
Options granted to directors. The rights and obligation under any Option granted
before amendment of the Plan or any unexercised portion of such Option, shall
not be adversely affected by amendment of the Plan or the Option without the
consent of the beneficiary thereof.
16. TERMINATION OR SUSPENSION OF THE PLAN
16.1 The Board may at any time suspend or terminate the Plan.
The Plan shall terminate at the close of business on the Termina-
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tion Date. An Option may not be granted while the Plan is suspended or after it
is terminated. The 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 upon the consent of the person to whom the Option or Right
was granted.
17. GOVERNING LAW
17.1 The Plan and all related matters shall be governed by, and
construed and enforced in accordance with, the laws of the State of California
in effect from time to time.
18. EFFECTIVE DATE AND TERMINATION DATE OF THE PLAN
18.1 The Plan shall become effective when, as and if it shall be
approved by the Commissioner of Corporations for the State of California
("Effective Date"). The Plan shall terminate ten (10) years from July 9, 1993
(the date the Plan was adopted by the Board) or the date the Plan is approved by
the shareholders of the Company, whichever is earlier. ("Termination Date").
19. USE OF PROCEEDS
19.1 The cash proceeds of the sale of Shares pursuant to the exercise
of Options granted pursuant to the Plan shall be added to the general funds of
the Company and used for its general corporate purposes, as the Board shall
determine.
20. INFORMATION TO EMPLOYEES, INDEPENDENT CONTRACTORS AND
DIRECTORS
20.1 All persons who receive Options under the Plan shall receive
annual financial statements of the Company.
21. SHAREHOLDER APPROVAL AND CALIFORNIA COMMISSIONER OF
CORPORATIONS
21.1 This Plan shall be submitted to the shareholders of the Company
for approval within twelve (12) months from July 9, 1993 (the date of adoption
by the Board). Options may be granted hereunder prior to but conditional upon
the obtaining of such approval, and no option may be exercised until such
approval has been obtained.
21.2 The adoption of this Plan is conditioned upon the obtaining of a
Permit from the California Commissioner of Corporations for the Plan and options
to be granted and shares to be issued thereunder.
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22. SHARES SUBJECT TO STOCK RESTRICTION AGREEMENT
22.1 Upon the exercise of any Option granted pursuant to the Plan, the
Optionee shall be required to sign the Company's then- effective Stock
Restriction Agreement. If at the time of exercise of any Option the Optionee has
been terminated as an employee and/or associate of the Company, the provisions
of the Company's then-effective Stock Restriction Agreement shall be superior to
the Plan and shall control Optionee's rights with respect to the disposition of
the Shares purchased pursuant to the Plan.
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EXHIBIT 10.6
VIASAT STOCK OPTION AGREEMENT
(INCENTIVE OPTION)
This ViaSat Stock Option Agreement ("Agreement) is entered into
effective the _____ day of ________________, _____ ("Date of Grant"), between
ViaSat, Inc., a California corporation ("Company"), and __________________
("Employee").
Company desires, by affording the Employee an opportunity to
purchase shares of its common stock ("Common Stock") as hereinafter provided, to
carry out the purpose of the ViaSat, Inc., 1993 Stock Option Plan ("Plan").
NOW, THEREFORE, in consideration of the promises and the mutual
covenants hereinafter set forth and for other good and valuable consideration,
the parties hereto have agreed, and do hereby agree, as follows:
1. Grant. The Company hereby irrevocably grants to the Employee,
as a matter of separate agreement and not in lieu of salary or any other
compensation for services, the right and option ("Option") to purchase all or
any part of an aggregate of ___________________ (__________) shares of Common
Stock on the terms and conditions herein set forth. The Option is intended to be
an "incentive stock option" ("Incentive Stock Option"), as authorized by Section
422A of the Internal Revenue Code of 1986, as such may be amended from time to
time ("Code").
2. Purchase Price. The purchase price of the shares of
Common Stock subject to the Option shall be
($_____) per share.
3. Term and Vesting. The Option shall expire at the close of
business on ___________________, _____ [five years after the Date of Grant], or
such shorter period as prescribed in Paragraph 5 hereof. The Option shall be
exercisable in installments as follows:
Percentage of Total Options
Date Granted Which May Be Exercised
---- ------------------------------
1st anniversary from date of grant 35%
2nd anniversary from date of grant 35%
3rd anniversary from date of grant 30%
Except as provided in Paragraph 5 hereafter, no Option
may be exercised unless, at the time of such exercise, the Optionee is in the
employ of the Company and shall have been so employed continuously since the
date the Option is granted. For purposes of
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this paragraph, the term "employment" shall include any association with the
Company as an independent contractor, director or in any other capacity where
such person is granted an Option under the Plan.
The right to exercise this Option is conditioned upon
the approval of the Plan by the Shareholders of the Company within twelve (12)
months after the adoption of the Plan by the Company's Board of Directors. If
such approval is not secured on a timely basis, this Option shall be null and
void in its entirely.
4. Transferability of Option. The Option shall not be
transferable other than by will or the laws of descent and distribution, and the
Option may be exercised, during the lifetime of the Employee, only by him. More
particularly (but without limiting the generality of the foregoing), the Option
may not be assigned, transferred (except as aforesaid), pledged or hypothecated
in any way (whether by operation of law or otherwise), and shall not be subject
to execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of the Option contrary to the
provisions hereof, and the levy of any execution, attachment or similar process
upon the Option, shall be null and void and without effect.
5. Termination of Employment. Upon termination of employment of
the Employee with the Company, the Option, to the extent the Option is then
exercisable as of said termination date based upon the vesting schedule set
forth in Section 3 hereof, but not theretofore exercised, shall terminate and
become null and void thirty (30) days after the date of such termination
("Employment Termination Date"); except that if the Employee shall die, or
become totally and permanently disabled (as described in Section 22(e)(3) of the
Code), while in the employ of such corporation, in case of death the legal
representative of the Employee (or such person who acquired such Option by
reason of the death of the Employee), or in the case of total and permanent
disability the Employee, may, not later than six (6) months from the date of
death or total and permanent disability, exercise the Option in respect of any
or all of the Common Stock subject to the Option.
In no event, however, shall any person be entitled to
exercise the Option (i) after the expiration of the period of exercisability of
the Option as specified herein, or (ii) with respect to any portion of the
Option which is only exercisable after Optionee's date of termination, based
upon the vesting schedule set forth in Section 3 hereof. For purposes of
determining the rights of the Employee under the vesting schedule set forth in
Section 3 hereof, the vesting rights shall be calculated to the Employment
Termination Date.
6. Obligation to Continue Employment. Neither the Plan nor the
Option shall impose any obligation on the Company to continue the employment of
the Employee, nor shall it impose any
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obligation on the part of the Employee to remain in the employ of
the Company.
7. Recapitalization, Stock Dividends, Etc. If after the date of
this Option the shares of the common stock of the Company shall be changed into
or exchanged for a different number and/or kind of shares of stock or other
securities of the Company or of another Company (whether by reason of merger,
consolidation, recapitalization, reclassification, split-up, combination of
shares or otherwise), there shall be substituted for each share of common stock
of the Company then subject to this Option, the number and kind of shares of
stock and/or other securities into which each share of common stock of the
Company shall be so changed, or for which each such share shall be exchanged. In
the event the Company shall pay any dividend in common shares of the Company
upon the common stock of the Company, during the period of any option, the
number of shares then subject to such option shall be adjusted by adding to each
such share the shares or fractions thereof which would have been distributable
as a stock dividend thereon had such share been outstanding at the record date
for the payment of the stock dividend. If, after the granting of this Option, a
substitution or an adjustment shall be required to be made under the immediately
foregoing provisions in the number and/or kind of shares of stock or other
securities then subject to such option, the price per unit payable by the
Optionee for shares or securities which he may thereafter be entitled to
purchase under such option shall be concurrently adjusted so that the aggregate
purchase price of all shares or securities not theretofore purchased under such
option will be apportioned ratably and equitably to and among the substituted or
adjusted number and/or kind of shares of stock or other securities.
8. Exercise. Subject to the terms and conditions hereof, the
Option may be exercised by written notice to the Company at its principal
executive office, Attention: Corporate Secretary. The written notice shall be in
the form attached hereto as Exhibit "A." Such notice shall be accompanied by
payment of the full purchase price of said shares. The Company shall issue and
deliver a certificate or certificates representing such shares as soon as
practicable after the notice is received. The purchase price of shares may be
paid in cash (by check payable to the Company). In the event the Option shall be
exercised, pursuant to Section 5 hereof, by any person or persons other than the
Employee, such notice shall be accompanied by appropriate proof of the right of
such person or persons to exercise the Option. All shares that shall be
purchased upon the exercise of the Option as provided herein shall be fully paid
and nonassessable.
9. Reservation of Shares. The Company shall, at all times during
the term of the Option, reserve and keep available, as authorized and unissued
shares or as treasury shares, such number of shares of Common Stock as will be
sufficient to satisfy the requirements of this Agreement, shall pay all original
issue and transfer taxes, if any, with respect to the issue and transfer of
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shares pursuant hereto and all other fees and expenses necessarily incurred by
the Company in connection therewith, and will from time to time use its best
efforts to comply with all laws and regulations which in the option of counsel
for the Company shall be applicable thereto.
10. Listing and Registration of Shares. The exercise of this
Option is subject to the obtaining of any consent or approval of any
governmental or other regulatory body which the Board, in its discretion, deems
necessary or desirable.
11. Shareholder Rights. The holder of this Option shall not be
entitled to any rights of a shareholder of the Company with respect to any
Common Stock subject to this Option until such shares have been paid for in full
and issued to him.
12. Restrictions on Shares. All shares issued pursuant to the
exercise of this Option shall contain the following restrictive legends:
(a) 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.
(b) THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED UNLESS (A) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, (B) IN COMPLIANCE WITH RULE 144 UNDER SUCH
ACT, OR (C) THE COMPANY HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL ACCEPTABLE
TO THE COMPANY TO THE EFFECT THAT NO REGISTRATION IS LEGALLY REQUIRED BY SUCH
TRANSFER.
(c) ANY TRANSFER OR PLEDGE OF THE SHARES REPRESENTED BY
THIS CERTIFICATE, OR THE TRANSFER OF ANY INTEREST IN THOSE SHARES, IS RESTRICTED
BY THE PROVISIONS OF A STOCK RESTRICTION AGREEMENT, A COPY OF WHICH MAY BE
INSPECTED AT THE PRINCIPAL OFFICE OF THE COMPANY, AND ALL PROVISIONS OF WHICH
ARE INCORPORATED HEREIN.
13. Representations. Employee hereby represents and warrants to
the Company as follows: (i) Employee acknowledges that this Option has been
issued pursuant to an exemption from registration under the Securities Act of
1933, as amended; (ii) Employee has acquired the Option and will acquire any of
the stock underlying this Option for his own account, with no view to any
distribution thereof; (iii) Employee will not make any distribution thereof
other than pursuant to an exemption from registration under the Securities Act
and an exemption from qualification under the California Corporate Securities
Law of 1968; (iv) Employee has received from the Company such financial,
business and other information regarding the Company as he has deemed necessary
for an independent evaluation of the business prospects of the Company, the
fairness of the
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investment and the merits and risks of holding the Option, and Employee has had
such opportunity as he has deemed necessary to ask and receive answers to
questions from personnel of the Company; and (v) Employee has a pre-existing
personal or business relationship with the Company or one or more of its
officers or directors of a nature and duration such as would enable a reasonably
prudent purchaser to be aware of the character, business acumen and general and
financial circumstances of the person or entity with whom such relationship
exists.
14. Optional Form of Payment for Shares. Payment for any number
of shares of Common Stock of the Company purchased pursuant to the exercise of
this Option may, at the option of the Committee appointed by the Board to
administer the Plan (or the Board itself in the absence of such a Committee), be
made by delivering to the Company a number of shares of the Common Stock of the
Company previously acquired and held for not less than one year by the Employee,
with a fair market value (as determined by the Board), on the date this Option
is exercised, equal to the option exercise price for such shares.
15. Notice of Disqualifying Disposition. Employee agrees that, in
the event that he shall dispose of any shares of Common Stock acquired pursuant
to the Option prior to the later of two (2) years from the date of this
Agreement or one (1) year after the transfer of such shares to him pursuant to
the Option, the Employee will notify the Company in writing of such disposition,
such notice to be sent to the attention of the Corporate Secretary and state the
date of disposition, the nature of the disposition, the number of shares
disposed of and the price, if any, received for the Common Stock. Employee
agrees that, in the event of a disqualifying disposition by the Employee, the
Company may withhold from other compensation then or in the future due to the
Employee if the Company and its counsel determine that such action is necessary
to secure a deduction by the Company in the amount of income reported by
Employee in connection with the disqualifying disposition.
16. Stock Restriction Agreement. Upon the exercise of any Option
granted pursuant to the Plan, the Optionee shall be required to sign the
Company's then-effective Stock Restriction Agreement. If at the time of exercise
of any Option the Optionee has been terminated as an employee and/or associate
of the Company, the provisions of the Company's then-effective Stock Restriction
Agreement shall be superior to the Plan and shall control Optionee's rights with
respect to the disposition of the Shares purchased pursuant to the Plan.
17. The Plan. The Employee's and the Company's respective rights
and obligations under this Agreement are also subject to the applicable terms,
conditions, requirements and other provisions set forth in the Plan. By
executing this Agreement, the Employee acknowledges that he has had the
opportunity to review the Plan at the Company's principal executive offices,
upon Employee's request, and to seek whatever professional consultation
necessary to fully
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understand the content thereof. EXCEPT AS MODIFIED OR AMPLIFIED BY THE SPECIFIC
TERMS OF THIS AGREEMENT, ALL OF THE TERMS AND PROVISIONS OF THE PLAN ARE HEREBY
INCORPORATED BY REFERENCE AS IF SET FORTH AT LENGTH HEREIN.
18. Status of Option. Employee acknowledges and agrees that
neither the Company nor any of its stockholders, directors, officers, employees,
agents or legal counsel are making any representations and/or warranties
regarding the status of the Option as an "incentive stock option" (as that term
is defined in Section 422A(b) of the Code). Employee, for himself and his
successors and assigns, hereby expressly agrees that he has no claim, now or
hereafter, against the Company, its stockholders, directors, officers,
employees, agents and/or legal counsel, that has (or may) arise from loss,
liability or damage that has been (or may be) incurred by or on behalf of
Employee and/or his successors or assigns, if the Internal Revenue Service
and/or any state taxing agency takes the position that the Option does not
constitute an "incentive stock option" (as defined in Code Section 422A(b)).
IN WITNESS WHEREOF, the Company has caused this Agreement to be
duly executed by its officers thereunto duly authorized, and the Employee has
executed it, all as of the day and year first above written.
EMPLOYEE: COMPANY:
______________________________ ViaSat, Inc.
(signature) A California Corporation
______________________________
(name printed)
Address:
By:_______________________
______________________________ Mark D. Dankberg
______________________________ President
Social Security Number:
______________________________
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EXHIBIT 10.7
VIASAT STOCK OPTION AGREEMENT
(NONQUALIFIED OPTION)
This ViaSat Stock Option Agreement ("Agreement) is entered into
effective the _____ day of ________________, 1993 ("Date of Grant"), between
ViaSat, Inc., a California corporation ("Company"), and __________________
("Optionee").
Company desires, by affording the Optionee an opportunity to
purchase shares of its common stock ("Common Stock") as hereinafter provided, to
carry out the purpose of the ViaSat, Inc., 1993 Stock Option Plan ("Plan").
NOW, THEREFORE, in consideration of the promises and the mutual
covenants hereinafter set forth and for other good and valuable consideration,
the parties hereto have agreed, and do hereby agree, as follows:
1. Grant. The Company hereby irrevocably grants to the Optionee,
as a matter of separate agreement and not in lieu of salary or any other
compensation for services, the right and option ("Option") to purchase all or
any part of an aggregate of ___________________ (__________) shares of Common
Stock on the terms and conditions herein set forth. This option is not intended
to constitute an "incentive stock option" subject to Section 422A of the
Internal Revenue Code of 1986, as such may be amended from time to time
("Code").
2. Purchase Price. The purchase price of the shares of Common
Stock subject to the Option shall be ___________ Dollars
($_____) per share.
3. Term and Vesting. The Option shall expire at the close of
business on ___________________, 19___ [five years after the date of grant], or
such shorter period as prescribed in Paragraph 5 hereof. The Option shall be
exercisable in installments as follows:
Percentage of Total Options
Date Granted Which May Be Exercised
---- ------------------------------
1st anniversary from date of grant 35%
2nd anniversary from date of grant 35%
3rd anniversary from date of grant 30%
Except as provided in Paragraph 5 hereafter, no Option may be
exercised unless, at the time of such exercise, the Optionee
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is in the employ of the Company and shall have been so employed continuously
since the date the Option is granted. For purposes of this paragraph, the term
"employment" shall include any association with the Company as an independent
contractor, director or in any other capacity where such person is granted an
Option under the Plan.
The right to exercise this Option is conditioned upon the
approval of the Plan by the Shareholders of the Company within twelve (12)
months after the adoption of the Plan by the Company's Board of Directors. If
such approval is not secured on a timely basis, this Option shall be null and
void in its entirely.
4. Transferability of Option. The Option shall not be
transferable other than by will or the laws of descent and distribution, and the
Option may be exercised, during the lifetime of the Optionee, only by him. More
particularly (but without limiting the generality of the foregoing), the Option
may not be assigned, transferred (except as aforesaid), pledged or hypothecated
in any way (whether by operation of law or otherwise), and shall not be subject
to execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of the Option contrary to the
provisions hereof, and the levy of any execution, attachment or similar process
upon the Option, shall be null and void and without effect.
5. Termination of Association. Upon termination of association of
the Optionee with the Company, the Option, to the extent the Option is then
exercisable as of said termination date based upon the vesting schedule set
forth in Section 3 hereof, but not theretofore exercised, shall terminate and
become null and void thirty (30) days after the date of such termination
("Association Termination Date"); except that if the Optionee shall die, or
become totally and permanently disabled (as described in Section 22(e)(3) of the
Code), while associated with the Company, in case of death the legal
representative of the Optionee (or such person who acquired such Option by
reason of the death of the Optionee), or in the case of total and permanent
disability the Optionee, may, not later than six (6) months from the date of
death or total and permanent disability, exercise the Option in respect of any
or all of the Common Stock subject to the Option.
In no event, however, shall any person be entitled to
exercise the Option (i) after the expiration of the period of exercisability of
the Option as specified herein, or (ii) with respect to any portion of the
Option which is only exercisable after Optionee's date of termination, based
upon the vesting schedule set forth in Section 3 hereof. For purposes of
determining the rights of the Optionee under the vesting schedule set forth in
Section 3 hereof, the vesting rights shall be calculated to the Association
Termination Date.
6. Obligation to Continue Association. Neither the Plan nor the
Option shall impose any obligation on the Company to
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continue the employment of the Optionee and/or continue any other association;
nor shall it impose any obligation on the part of the Optionee to remain in the
employ of and/or other association with the Company.
7. Recapitalization, Stock Dividends, Etc. If after the date of
this Option the shares of the common stock of the Company shall be changed into
or exchanged for a different number and/or kind of shares of stock or other
securities of the Company or of another Company (whether by reason of merger,
consolidation, recapitalization, reclassification, split-up, combination of
shares or otherwise), there shall be substituted for each share of common stock
of the Company then subject to this Option, the number and kind of shares of
stock and/or other securities into which each share of common stock of the
Company shall be so changed, or for which each such share shall be exchanged. In
the event the Company shall pay any dividend in common shares of the Company
upon the common stock of the Company, during the period of any option, the
number of shares then subject to such option shall be adjusted by adding to each
such share the shares or fractions thereof which would have been distributable
as a stock dividend thereon had such share been outstanding at the record date
for the payment of the stock dividend. If, after the granting of this Option, a
substitution or an adjustment shall be required to be made under the immediately
foregoing provisions in the number and/or kind of shares of stock or other
securities then subject to such option, the price per unit payable by the
Optionee for shares or securities which he may thereafter be entitled to
purchase under such option shall be concurrently adjusted so that the aggregate
purchase price of all shares or securities not theretofore purchased under such
option will be apportioned ratably and equitably to and among the substituted or
adjusted number and/or kind of shares of stock or other securities.
8. Exercise. Subject to the terms and conditions hereof, the Option may be
exercised by written notice to the Company at its principal executive office,
Attention: Corporate Secretary. The written notice shall be in the form attached
hereto as Exhibit "A." Such notice shall be accompanied by payment of the full
purchase price of said shares. The Company shall issue and deliver a certificate
or certificates representing such shares as soon as practicable after the notice
is received, subject to the provisions of Paragraph 13 hereof. The purchase
price of shares may be paid in cash (by check payable to the Company). In the
event the Option shall be exercised, pursuant to Section 5 hereof, by any person
or persons other than the Optionee, such notice shall be accompanied by
appropriate proof of the right of such person or persons to exercise the Option.
All shares that shall be purchased upon the exercise of the Option as provided
herein shall be fully paid and nonassessable.
9. Reservation of Shares. The Company shall, at all times during the term
of the Option, reserve and keep available, as authorized and unissued shares or
as treasury shares, such number of shares of Common Stock as will be sufficient
to satisfy the
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requirements of this Agreement, shall pay all original issue and transfer taxes,
if any, with respect to the issue and transfer of shares pursuant hereto and all
other fees and expenses necessarily incurred by the Company in connection
therewith, and will from time to time use its best efforts to comply with all
laws and regulations which in the option of counsel for the Company shall be
applicable thereto.
10. Listing and Registration of Shares. The exercise of this Option is
subject to the obtaining of any consent or approval of any governmental or other
regulatory body which the Board, in its discretion, deems necessary or
desirable.
11. Shareholder Rights. The holder of this Option shall not be entitled to
any rights of a shareholder of the Company with respect to any Common Stock
subject to this Option until such shares have been paid for in full and issued
to him.
12. Restrictions on Shares. All shares issued pursuant to the exercise of
this Option shall contain the following restrictive legends:
(a) 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.
(b) THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED UNLESS (A) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, (B) IN COMPLIANCE WITH RULE 144 UNDER SUCH
ACT, OR (C) THE COMPANY HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL ACCEPTABLE
TO THE COMPANY TO THE EFFECT THAT NO REGISTRATION IS LEGALLY REQUIRED BY SUCH
TRANSFER.
(c) ANY TRANSFER OR PLEDGE OF THE SHARES REPRESENTED BY
THIS CERTIFICATE, OR THE TRANSFER OF ANY INTEREST IN THOSE SHARES, IS RESTRICTED
BY THE PROVISIONS OF A STOCK RESTRICTION AGREEMENT, A COPY OF WHICH MAY BE
INSPECTED AT THE PRINCIPAL OFFICE OF THE COMPANY, AND ALL PROVISIONS OF WHICH
ARE INCORPORATED HEREIN.
13. Representations. Optionee hereby represents and warrants to the Company
as follows: (i) Optionee acknowledges that this Option has been issued pursuant
to an exemption from registration under the Securities Act of 1933, as amended;
(ii) Optionee has acquired the Option and will acquire any of the stock
underlying this Option for his or her own account, with no view to any
distribution thereof; (iii) Optionee will not make any distribution thereof
other than pursuant to an exemption from registration under the Securities Act
and an exemption from qualification under the California Corporate Securities
Law of 1968; (iv) Optionee has received from the Company such financial,
business and other information regarding the Company
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as he has deemed necessary for an independent evaluation of the business
prospects of the Company, the fairness of the investment and the merits and
risks of holding the Option, and Optionee has had such opportunity as he has
deemed necessary to ask and receive answers to questions from personnel of the
Company; and (v) Optionee has a pre-existing personal or business relationship
with the Company or one or more of its officers or directors of a nature and
duration such as would enable a reasonably prudent purchaser to be aware of the
character, business acumen and general and financial circumstances of the person
or entity with whom such relationship exists.
14. Optional Form of Payment for Shares. Payment for any number
of shares of Common Stock of the Company purchased pursuant to the exercise of
this Option may, at the option of the Committee appointed by the Board to
administer the Plan (or the Board itself in the absence of such a Committee), be
made by delivering to the Company a number of shares of the Common Stock of the
Company previously acquired and held for not less than one year by the Optionee,
with a fair market value (as determined by the Board), on the date this Option
is exercised, equal to the option exercise price for such shares.
15. Withholding. Optionee agrees that the Company may withhold such number
of shares of Common Stock upon each exercise of the Option (or otherwise charge
the Optionee) as may be required by the Code with respect to federal income tax
and/or social security tax withholding and, additionally, any applicable state
income and/or employment tax laws.
16. Stock Restriction Agreement. Upon the exercise of any Option granted
pursuant to the Plan, the Optionee shall be required to sign the Company's
then-effective Stock Restriction Agreement. If at the time of exercise of any
Option the Optionee has been terminated as an employee and/or associate of the
Company, the provisions of the Company's then-effective Stock Restriction
Agreement shall be superior to the Plan and shall control Optionee's rights with
respect to the disposition of the Shares purchased pursuant to the Plan.
17. The Plan. The Optionee's and the Company's respective rights and
obligations under this Agreement are also subject to the applicable terms,
conditions, requirements and other provisions set forth in the Plan. By
executing this Agreement, the Optionee acknowledges that he has had the
opportunity to review the Plan at the Company's principal executive offices,
upon Optionee's request, and to seek whatever professional consultation
necessary to fully understand the content thereof. EXCEPT AS MODIFIED OR
AMPLIFIED BY THE SPECIFIC TERMS OF THIS AGREEMENT, ALL OF THE TERMS AND
PROVISIONS OF THE PLAN ARE HEREBY INCORPORATED BY REFERENCE AS IF SET FORTH AT
LENGTH HEREIN.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
duly executed by its officers thereunto duly authorized, and the
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Optionee has executed it, all as of the day and year first above written.
OPTIONEE: COMPANY:
______________________________ ViaSat, Inc.
(signature) A California Corporation
______________________________
(name printed)
Address:
______________________________ By:_______________________
______________________________ Mark D. Dankberg
President
Social Security Number:
______________________________
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EXHIBIT 10.12
VIASAT, INC.
401(K) PROFIT SHARING PLAN
SUMMARY PLAN DESCRIPTION
2
TABLE OF CONTENTS
I
INTRODUCTION TO YOUR PLAN
II
GENERAL INFORMATION ABOUT YOUR PLAN
1. General Plan Information ........................................... 2
2. Employer Information................................................ 2
3. Plan Administrator Information...................................... 2
4. Plan Trustee Information.............................................3
5. Service of Legal Process.............................................3
III
PARTICIPATION IN YOUR PLAN
1. Eligibility Requirements.............................................3
2. Participation Requirements...........................................4
3. Excluded Employees...................................................4
IV
CONTRIBUTIONS TO YOUR PLAN
1. Employer Contributions to the Plan...................................4
2. Participant Salary Reduction Election................................5
3. Your Share of Employer Contributions.................................6
4. Compensation.........................................................7
5. Forfeitures..........................................................8
6. Transfers From Qualified Plans (Rollovers)...........................8
7. Directed. Investments................................................8
3
V
BENEFITS UNDER YOUR PLAN
1. Distribution of Benefits Upon Normal Retirement .........................8
2. Distribution of Benefits Upon Early Retirement ..........................9
3. Distribution of Benefits Upon Late Retirement ...........................9
4. Distribution of Benefits Upon Death .....................................9
5. Distribution of Benefits Upon Disability ...............................11
6. Distribution of Benefits Upon Termination of
Employment..............................................................11
7. Vesting in Your Plan....................................................12
8. Benefit Payment Options.................................................12
9. Hardship Distribution of Benefits.......................................13
10. Treatment of Distributions From Your Plan...............................14
11. Domestic Relations Order................................................15
12. Pension Benefit Guaranty Corporation....................................16
VI
YEAR OF SERVICE RULES
1. Year of Service and Hour of Service ....................................16
2. 1-Year Break in Service ................................................17
VII
YOUR PLAN'S "TOP HEAVY RULES"
1. Explanation of "Top Heavy Rules" .......................................18
VIII
LOANS
1. Loan Requirements ......................................................18
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IX
CLAIMS BY PARTICIPANTS AND BENEFICIARIES
1. The Claims Review Procedure ............................................20
X
STATEMENT OF ERISA RIGHTS
1. Explanation of Your ERISA Rights .......................................21
XI
AMENDMENT AND TERMINATION OF YOUR PLAN
1. Amendment ................................................................23
2. Termination ..............................................................23
5
VIASAT, INC.
401(K) PROFIT SHARING PLAN
SUMMARY PLAN DESCRIPTION
I
INTRODUCTION TO YOUR PLAN
VIASAT, INC. wishes to recognize the efforts its employees have made to
its success and to reward them by adopting a 401(k) Profit Sharing Plan and
Trust. This 401(k) Profit Sharing Plan and Trust will be for the exclusive
benefit of eligible employees and their beneficiaries.
Your Plan is a "salary reduction plan." It is also called a "401(k)
plan." Under this type of plan, you may choose to reduce your compensation and
have these amounts contributed to this Plan on your behalf.
The purpose of this Plan is to reward eligible employees for long and
loyal service by providing them with retirement benefits.
Between now and your retirement, your Employer intends to make
contributions for you and other eligible employees. When you retire, you will be
eligible to receive the value of the amounts which have accumulated in your
account.
Your Employer has the right to submit this Plan to the Internal Revenue
Service for approval. The Internal Revenue Service will issue a "determination
letter" to your Employer approving this Plan as a "qualified" retirement plan,
if this Plan meets specific legal requirements.
This Summary Plan Description is a brief description of your Plan and
your rights, obligations , and benefits under that Plan. Some of the statements
made in this Summary Plan Description are dependent upon this Plan being
"qualified" under the provisions of the Internal Revenue Code. This Summary Plan
Description is not meant to interpret, extend, or change the provisions of your
Plan in any way. The provisions of your Plan may only be determined accurately
by reading the actual Plan document, including the Adoption Agreement.
A copy of your Plan and the Adoption Agreement are on file at your
Employer's office and may be read by you, your beneficiaries, or your legal
representatives at any reasonable time. If you have any questions regarding
either your Plan, the Adoption Agreement or this Summary Plan Description, you
should ask your Plan's Administrator. In the event of any discrepancy between
this Summary Plan Description and the actual provisions of the Plan, the Plan
will govern.
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II
GENERAL INFORMATION ABOUT YOUR PLAN
There is certain general information which you may need to know about
your Plan. This information has been summarized for you in this Section.
1. General Plan Information
VIASAT, INC. 401(k) Profit Sharing Plan is the name of your Plan.
Your Employer has assigned Plan Number 001 to your Plan.
The provisions of your Plan become effective on January 1, 1990, which
is called the Effective Date of the Plan.
Your Plan's records are maintained on a twelve-month period of time.
This is known as the Plan Year. The Plan Year begins on January 1st and ends on
December 31st.
Certain valuations and distributions are made on the Anniversary Date
of your Plan. This date is December 31st.
The contributions made to your Plan will be held and invested by the
Trustee of your Plan.
Your Plan and Trust will be governed by the laws of the State of
California.
2. Employer Information
Your Employer's name, address and identification number are:
VIASAT, INC.
2290 Cosmos Court
Carlsbad, California 92009-1585
33-0174996
Your Plan allows other employers to adopt its provisions. You or your
beneficiaries may examine or obtain a complete list of employers, if any, who
have adopted your Plan by making a written request to the Administrator.
3. Plan Administrator Information
The name, address and business telephone number of your Plan's
Administrator are:
VIASAT, INC.
2290 Cosmos Court
Carlsbad California 92009-1585
(619) 438-8099
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Your Plan's Administrator keeps the records for the Plan and is
responsible for the administration of the Plan. The Administrator has
discretionary authority to construe the terms of the Plan and make
determinations on questions which may affect your eligibility for benefits. Your
Plan's Administrator will also answer any questions you may have about your
Plan.
4. Plan Trustee Information
The name of your Plan's Trustee is:
First Interstate Bank
The principal place of business of your Plan's Trustee is:
P.O. Box 129113
San Diego, California 92112-9113
Your Plan's Trustee has been designated to hold and invest Plan assets
for the benefit of you and other Plan participants. The trust fund established
by the Plan's Trustee will be the funding medium used for the accumulation of
assets from which benefits will be distributed.
5. Service of Legal Process
The name and address of your Plan's agent for service of legal process
are:
VIASAT, INC.
2290 Cosmos Court
Carlsbad, California 92009-1585
Service of legal process may also be made upon the Trustee or
Administrator.
III
PARTICIPATION IN YOUR PLAN
Before you become a member or a "participant" in the Plan, there are
certain eligibility and participation rules which you must meet. These rules are
explained in this Section.
1. Eligibility Requirements
You will participate in the Plan as of the Effective Date of the Plan
which is January 1, 1990 if you were employed on such date. Otherwise, you will
be eligible to participate in the Plan if you have completed 90 days and have
attained age 21.
You should review the Article in this Summary entitled "YEAR OF SERVICE
RULES" for a further explanation of these eligibility requirements.
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2. Participation Requirements
Once you have satisfied your Plan's eligibility requirements, your next
step will be to actually become a member or a "participant" in the Plan. You
will become a participant on a specified day of the Plan Year. This day is
called the Effective Date of Participation.
You will become a participant on the first day of the month coinciding
with or next following the date you satisfy the eligibility requirements.
3. Excluded Employees
There are certain employees who will not be eligible to participate in
your Plan. Those employees are:
(a) employees whose employment is governed by a collective
bargaining agreement under which retirement benefits were the subject
of good faith bargaining, unless such agreement expressly provides for
participation in this Plan.
(b) certain non-resident aliens who have no earned income from
sources within the United States.
IV
CONTRIBUTIONS TO YOUR PLAN
1. Employer Contributions to the Plan
Each year, your Employer will contribute to your Plan the following
amounts:
(a) The total amount of the salary reduction you elected to
defer. (See the Section in this Article entitled "Participant Salary
Reduction Election.")
(b) A discretionary matching contribution equal to a
percentage of the amount of the salary reduction you elected to defer,
which percentage will be determined each year by the Employer.
For a participant to qualify for a matching contribution, the
following conditions apply:
-If you are actively employed on the last day of the Plan
Year, you will share regardless of the number of Hours of
Service credited during the Plan Year.
-You will share in the matching contribution for the year
regardless of the number of Hours of Service credited in the
year of your death, disability or retirement.
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(c) A discretionary amount determined each year by your
Employer.
For a participant to qualify for the discretionary
contribution, the following conditions apply:
- If you are actively employed on the last day of the Plan
Year, you will share regardless of the number of Hours of
Service credited during the Plan Year.
- If you terminate employment (not actively employed on the
last day of the Plan Year), you must be credited with more
than 500 Hours of Service.
- You will share for the year regardless of the number of
Hours of Service credited in the year of your death,
disability or retirement.
2. Participant Salary Reduction Election
Effective July 1, 1994, you may elect to defer not less than 1% nor
more than 15% of your compensation each year instead of receiving that amount in
cash. However, your total deferrals in any taxable year may not exceed a dollar
limit which is set by law. The limit for 1994 is $9,240. This limit will be
increased in future years for cost of living changes.
You may elect to defer your salary as of the first day of each month.
Such election will become effective as soon as administratively feasible. Your
election will remain in effect until you modify or terminate it. You may modify
your election as of January 1st and July 1st of any year. The modification will
become effective as soon as administratively feasible..
The amount you elect to defer, and any earnings on that amount, will
not be subject to income tax until it is actually distributed to you. This money
will, however, be subject to Social Security taxes at all times.
You should also be aware that the annual dollar limit is an aggregate
limit which applies to all deferrals you may make under this plan or other cash
or deferred arrangements (including tax-sheltered 403(b) annuity contracts,
simplified employee pensions or other 401(k) plans in which you may be
participating). Generally, if your total deferrals under all cash or deferred
arrangements for a calendar year exceed the annual dollar limit, the excess must
be included in your income for the year. For this reason, it is desirable to
request in writing that these excess deferrals be returned to you. If you fail
to request such a return, you may be taxed a second time when the excess
deferral is ultimately distributed from the Plan.
You must decide which plan or arrangement you would like to have return
the excess. If you decide that the excess should be
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distributed from this Plan, you should communicate this in writing to the
Administrator no later than the March 1st following the close of the calendar
year in which such excess deferrals were made. The Administrator may then return
the excess deferral and any earnings to you by April 15th.
In the event you receive a hardship distribution from your deferrals to
this Plan or any other plan maintained by your Employer, you will not be allowed
to make additional salary reductions for a period of twelve (12) months after
you receive the distribution. Furthermore, the dollar limitation set by law with
respect to your taxable year following the year in which you received the
distribution, will be reduced by your salary reductions, if any, for the taxable
year of the distribution.
You will always be 100% vested in the amount you deferred. This means
that you will always be entitled to all of the deferred amount. This money will,
however, be affected by any investment gains or losses. If the Trustee invested
this money and there was a gain, the balance in your account would increase. Of
course, if there was a loss, the balance in your account would decrease.
Distributions from your deferred account are not permitted before age
59 1/2 EXCEPT in the event of death, disability, termination of employment or
financial hardship (See Section in Article V entitled Hardship Distribution of
Benefits).
In addition, if you are a highly compensated employee (generally
owners, officers or individuals receiving wages in excess of certain amounts
established by law), a distribution from your deferred account of certain excess
contributions may be required to comply with the law. The Administrator will
notify you when a distribution is required.
3. Your Share of Employer Contributions
Your Employer will allocate the amount you elect to defer to an
account maintained on your behalf.
If you are eligible, your Employer will also allocate the matching
contribution made to the Plan on your behalf. (See the Section in this
Article entitled "Employer Contributions to the Plan.")
Your Employer's discretionary contribution will be "allocated" or
divided among participants eligible to share in the contribution for the Plan
Year. Your share of the contribution will depend upon how much compensation you
received during the year and the compensation received by other eligble
participants.
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Your share of your Employer's discretionary contribution is determined by the
following fraction:
Your Compensation
Employer's X ___________________________________
Discretionary Contribution Total Compensation of All
Participants Eligible to
Share
For example:
Suppose the Employer's discretionary contribution for the Plan Year is
$20,000. Employee A's compensation for the Plan Year is $25,000. The
total compensation of all participants eligible to share, including
Employee A, is $250,000. Employee A's share will be:
$25,000
$20,000 X ---------- or $2,000
$250,000
In addition to the Employer's contributions made to your account, your
account will be credited annually with a share of the investment earnings or
losses of the trust fund.
You should also be aware that the law imposes certain limits on how
much money may be allocated to your account for a year. These limits are
extremely complex, but generally no more than the lesser of $30,000 or 25% of
your compensation may be allocated to you (excluding earnings) in any year. The
Administrator will inform you if these limits have affected you.
4. Compensation
Your Compensation during the Calendar Year coinciding with or ending
within the Plan Year determines your share of the Employer contribution for that
Plan Year. Compensation is defined as follows:
Total compensation actually paid that is subject to income tax
and is reflected on your W-2 Form for such year.
In addition, salary reduction contributions to any cafeteria plan, tax
sheltered annuity, SEP or 401(k) Plan will not be included as compensation for
Plan purposes.
Your compensation will be recognized for benefit purposes from your
date of entry into the Plan.
The Plan, by law, cannot recognize compensation in excess of $150,000.
This amount will be adjusted in future years for cost of living increases. It
will also be applied to certain highly compensated employees and their family
members as if they were a single participant. If you or a member of your family
may be
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affected by this rule, ask your Administrator for further details.
5. Forfeitures
Forfeitures are created when participants terminate employment before
becoming entitled to their full benefits under the Plan. Your account may grow
from the forfeitures of other participants. Forfeitures will be "allocated" or
divided among participants eligible to share for a Plan Year.
6. Transfers From Qualified Plans (Rollovers)
At the discretion of the Administrator, you may be permitted to deposit
into your Plan distributions you have received from other plans. Such a deposit
is called a "rollover" and may result in tax savings to you. You should consult
qualified counsel to determine if a rollover is in your best interest.
Your rollover will be placed in a separate account called a
"participant's rollover account." The Administrator may establish rules for
investment.
You will always be 100% vested in your "rollover account." This means
that you will always be entitled to all of your rollover contributions. Rollover
contributions will be affected by any investment gains or losses. If the Trustee
invested this money and there was a gain, the balance in your account would
increase. Of course, if there was a loss from an investment, the balance in your
account would decrease.
7. Directed Investments
The Administrator may establish rules for investment of your account
balance. If the Administrator approves, you may direct the investment of your
account balance.
V
BENEFITS UNDER YOUR PLAN
1. Distribution of Benefits Upon Normal Retirement
Your Normal Retirement Date is the date of your 65th birthday or your
5th anniversary of joining the Plan, if later (Normal Retirement Age).
At your Normal Retirement Age, you will be entitled to 100% of your
account balance. Payment of your benefits will begin as soon as practicable
following your Normal Retirement Date.
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2. Distribution of Benefits Upon Early Retirement
Your Early Retirement Date is the date on which you have reached your
55th birthday and completed 10 Years of Service with your Employer. You will
have completed a Year of Service if you are credited with 1000 Hours of Service
during a Plan Year, even if you were not employed on the first or last day of
the Plan Year. You may elect to retire when you reach your Early Retirement
Date.
On your Early Retirement Date, you will be entitled to 100% of your
account balance. Payment of your Early Retirement benefits will begin, at your
election, as soon as practicable following your Early Retirement Date.
3. Distribution of Benefits Upon Late Retirement
You may remain employed past your Plan's Normal Retirement Date and
retire instead on your Late Retirement Date. Your Late Retirement Date is any
date you choose to retire, after first having reached your Normal Retirement
Date. On your Late Retirement Date, you will be entitled to 100% of your account
balance. Actual benefit payments will begin as soon as practicable following
your Late Retirement Date.
4. Distribution of Benefits Upon Death
Your beneficiary will be entitled to 100% of your account balance upon
your death and 50% of such account balance is the "spouses death benefit."
If you are married at the time of your death, your spouse will be the
beneficiary of the "spouse's death benefit," which will be equal in value to 50%
of your account balance as of your date of death. You may elect in writing, on a
form to be furnished to you by the Administrator, a beneficiary for the
"spouse's death benefit" other than your spouse. IF YOU WISH TO DESIGNATE A
BENEFICIARY OTHER THAN YOUR SPOUSE, YOUR SPOUSE MUST IRREVOCABLY CONSENT TO
WAIVE ANY RIGHT TO THE "SPOUSE'S DEATH BENEFIT." YOUR SPOUSE'S CONSENT MUST BE
IN WRITING, BE WITNESSED BY A NOTARY OR A PLAN REPRESENTATIVE AND ACKNOWLEDGE
THE SPECIFIC NONSPOUSE BENEFICIARY.
If no valid waiver is in effect, the "spouse's death benefit" payable
to your spouse will be in the form of a survivor annuity, that is, periodic
payments over the life of your spouse. Your spouse may direct that payments
begin within a reasonable period of time after your death. The size of the
monthly payments will depend on the value of your account at the time of your
death. The death benefit may also be distributed in a single 1ump sum, provided
your spouse consents in writing to this alternative form.
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Generally, the period during which you and your spouse may waive this
survivor annuity begins as of the first day of the Plan Year in which you reach
age 35 and ends when you die. The Administrator must provide you with a detailed
explanation of the survivor annuity. This explanation must be given to you
during the period of time beginning on the first day of the Plan Year in which
you reach age 32 and ending on the first day of the Plan Year in which you reach
age 35.
It is, therefore, important that you inform the Administrator when you
turn age 32 so that you may receive this information.
If, however,
(a) your spouse has validly waived any right to the death
benefit in the manner outlined above,
(b) your spouse cannot be located; or
(c) you are not married at the time of your death,
then the "spouse's death benefit" will be paid to the beneficiary of your own
choosing in a single lump sum. You may designate the beneficiary on a form to be
supplied to you by the Administrator. If you change your designation, your
spouse must again consent to the change. Also, since the death benefit upon your
death is your entire account balance, you may, at all times designate the
beneficiary for amounts in excess of the "spouse's death benefit" without your
spouse's consent.
Under a special rule, you and your spouse may waive the survivor
annuity form of payment any time before you turn age 35. However, any waiver
will become invalid at the beginning of the Plan Year in which you turn age 35,
and you and your spouse will be required to make another waiver.
Regardless of the method of distribution selected, your entire death
benefit must generally be paid to your beneficiaries within five years after
your death (the "5-year rule"). However, if your designated beneficiary is a
person (instead of your estate or most trusts), then you or your beneficiary may
elect to have minimum distributions begin within one year of your death and it
may be paid over the designated beneficiary's life expectancy (the "1-year
rule"). If your spouse is the beneficiary, then under the "1-year rule" the
start of payments may be delayed until the year in which you would have attained
age 70 1/2. The election to have death benefits distributed under the "1-year
rule" instead of the "5 year rule" must be made no later than the time at which
minimum distributions must commence under the "1-year rule" (or, in the case of
a surviving spouse, the "5-year rule," if earlier).
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Since your spouse participates in these elections and has certain
rights in the death benefit, you should immediately report any change in your
marital status to the Administrator.
5. Distribution of Benefits Upon Disability
Under your Plan, disability is defined as a physical or mental
condition resulting from bodily injury, disease, or mental disorder which
renders you incapable of continuing any gainful occupation with your Employer.
Your disability will be determined by a licensed physician chosen by the
Administrator. However, if your condition constitutes total disability under the
federal Social Security Act, then the Administrator may deem that you are
disabled for purposes of the Plan.
If you become disabled while a participant, you will be entitled to
100% of your account balance. Payment of your disability benefits will be made
to you as if you had retired. (See the Section in this Article entitled "Benefit
Payment Options.")
6. Distribution of Benefits Upon Termination of Employment
Your Plan is designed to encourage you to stay with your Employer until
retirement. Payment of your account balance under your Plan is generally only
available upon your death, disability or retirement.
If your employment terminates for reasons other than those listed
above, you will be entitled to receive only your "vested percentage" of your
account balance and the remainder of your account will be forfeited. Only
contributions made by your Employer are subject to forfeiture. (See the Section
in this Article entitled "Vesting in Your Plan.")
If you so elect, the Administrator will direct the Trustee to
distribute your vested benefit to you before the date it would normally be
distributed (upon your death, disability or retirement). If your vested benefit
under the Plan at the time of any prior distribution exceeded $3,500 or
currently exceeds $3,500, you (and your spouse, if you are married) must give
written consent before the distribution may be made. Also, if you want the
distribution to be in a form other than an annuity payment, you and your spouse
must first waive the annuity form of payment. Amounts of $3,500 or less will be
distributed without the need for consent. (See the Section in this Article
entitled "Benefit Payment Options" for a further explanation of how benefits are
paid from the Plan.)
Under the Plan's administrative procedures, if the value of your vested
account is zero, any non-vested account balance will be forfeited immediately.
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7. Vesting in Your Plan
Your "vested percentage" in your account is determined under the
following schedule and is based on vesting Years of Service. You will always,
however, be 100% vested upon your Early or Normal Retirement Age. (See the
Section in this Article entitled "Distribution of Benefits Upon Normal
Retirement.")
Vesting Schedule
Years of Service Percentage
2 20%
3 40%
4 60%
5 80%
6 100%
Regardless of this vesting schedule, you are always 100% vested in your
salary reduction amounts contributed to the Plan.
8. Benefit Payment Options
There are various methods by which benefits may be distributed to you
from your Plan. The method depends on your marital status, as well as the
elections you and your spouse make. All methods of distribution, however, have
equivalent values. The rules under this Section apply to all distributions you
will receive from the Plan, whether by reason of retirement, termination, or any
other event which may result in a distribution of benefits.
If you are married on the date your benefits are to begin, you will
automatically receive a joint and 50% survivor annuity, unless you otherwise
elect. This means that if you die and are survived by a spouse, your spouse will
receive a monthly benefit for the remainder of his life equal to 50% of the
benefit you were receiving at the time of your death. You may elect a joint and
75% or 100% survivor annuity instead of the standard joint and 50% survivor
annuity. It should be noted that a joint and survivor annuity may provide a
lower monthly benefit than other forms of payment. You should consult qualified
tax counsel before making such election.
If you are not married on the date your benefits are to begin, you will
automatically receive a life annuity, which means you will receive payments for
as long as you live.
You may, however, elect to waive these forms of payment, subject to the
following rules.
When you are about to receive any distribution, the Administrator will
explain the joint and survivor annuity or the life annuity to you in greater
detail. You will be given the option of waiving the joint and survivor annuity
or the life
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annuity form of payment during the 90-day period before the annuity is to begin.
IF YOU ARE MARRIED, YOUR SPOUSE MUST IRREVOCABLY CONSENT IN WRITING TO THE
WAIVER IN THE PRESENCE OF A NOTARY OR A PLAN REPRESENTATIVE. You may revoke any
waiver. The Administrator will provide you with forms to make these elections.
Since your spouse participates in these elections, you must immediately inform
the Administrator of any change in your marital status.
If you and your spouse elect not to take a joint and survivor annuity,
or if you are not married when your benefits are scheduled to begin and have
elected not to take a life annuity, you may elect to receive your benefits in
one lump-sum payment in cash or in property.
Regardless of the form of payment you receive, its value to you will be
the same value as each alternative form of payment.
GENERALLY, WHENEVER A DISTRIBUTION IS TO BE MADE TO YOU ON OR BEFORE AN
ANNIVERSARY DATE, IT MAY BE POSTPONED BY THE PLAN FOR A PERIOD OF UP TO 180
DAYS, FOR ADMINISTRATIVE CONVENIENCE. HOWEVER, UNLESS YOU ELECT IN WRITING TO
DEFER THE RECEIPT OF BENEFITS, NO DISTRIBUTION MAY BEGIN LATER THAN THE 60TH DAY
AFTER THE CLOSE OF THE PLAN YEAR IN WHICH THE LATEST OF THE FOLLOWING EVENTS
OCCURS:
(a) the date on which you reach the age of 65 or your Normal
Retirement Age;
(b) the 10th anniversary of the year in which you become a
participant in the Plan;
(c) the date you terminated employment with your Employer.
Regardless of whether you elect to delay the receipt of benefits, there
are other rules which generally require minimum payments to begin no later than
the April 1st following the year in which you reach age 70 1/2. You should see
the Administrator if you feel you may be affected by this rule.
9. Hardship Distribution of Benefits
The Administrator may direct the Trustee to distribute up to 100% of
your account balance attributable to your salary reduction election in the event
of immediate and heavy financial need. This hardship distribution is not in
addition to your other benefits and will therefore reduce the value of the
benefits you will receive at normal retirement.
Withdrawal will be authorized only if the distribution is to be used
for one of the following purposes:
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(a) The payment of medical expenses (described in Section
213(d) of the Internal Revenue Code) previously incurred by you or your
dependent or necessary for you or your dependent to obtain medical
care;
(b) The costs directly related to the purchase Of your
principal residence (excluding mortgage payments);
(c) The payment of tuition and related educational fees for
the next twelve (12) months of post-secondary education for yourself,
your spouse or dependent;
(d) The payment necessary to prevent your eviction from your
principal residence or foreclosure on the mortgage of your principal
residence.
There are restrictions placed on hardship distributions which are made
from certain accounts. These accounts are generally the accounts which receive
your salary reduction contributions and other Employer contributions which are
used to satisfy special rules that apply to 401(k) plans. Any hardship
distribution from these accounts will be limited to your salary reduction
contributions. Ask your Administrator if you need further details.
In addition, a distribution will be made from these accounts only if
you certify and agree that all of the following conditions are satisfied:
(a) The distribution is not in excess of the amount of your
immediate and heavy financial need;
(b) You have obtained all distributions, other than hardship
distributions, and all nontaxable loans currently available under all
plans maintained by your Employer;
(c) That your elective contributions and employee
contributions will be suspended for at least twelve (12) months after
your receipt of the hardship distribution; and
(d) That you will not make elective contributions for your
taxable year immediately following the taxable year of the hardship
distribution, except to the extent permitted by the Plan.
10. Treatment of Distributions From Your Plan
Whenever you receive a distribution from your Plan, it will normally be
subject to income taxes. You may, however, reduce, or defer entirely, the tax
due on your distribution through use of one of the following methods:
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(a) The rollover of all or a portion of the distribution to an
Individual Retirement Account (IRA) or another qualified employer plan.
This will result in no tax being due until you begin withdrawing funds
from the IRA or other qualified employer plan. The rollover of the
distribution, however, MUST be made within strict time frames
(normally, within 60 days after you receive your distribution). Under
certain circumstances all or a portion of a distribution may not
qualify for this rollover treatment. In addition, most distributions
made after December 31, 1992 will be subject to mandatory federal
income tax withholding at a rate of 20%. This will reduce the amount
you actually receive. For this reason, if you wish to rollover all or a
portion of your distribution amount, the direct transfer option
described in paragraph (b) below would be the better choice.
(b) You may request for most distributions made after December
31, 1992, that a direct transfer of all or a portion of your
distribution amount be made to either an Individual Retirement Account
(IRA) or another qualified employer plan willing to accept the
transfer. A direct transfer will result in no tax being due until you
withdraw funds from the IRA or other qualified employer plan. Like the
rollover, under certain circumstances all or a portion of the amount to
be distributed may not qualify for this direct transfer. If you elect
to actually receive the distribution rather than request a direct
transfer, then in most cases 20% of the distribution amount will be
withheld for federal income tax purposes. If you decide to directly
transfer all or a portion of your distribution amount, you (and your
spouse, if you are married) must first waive the annuity form of
payment. (See the Section in this Article entitled "Benefit Payment
Options" for a further explanation of this waiver requirement.)
(c) The election of favorable income tax treatment under
"10-year forward averaging," "5-year forward averaging" or, if you
qualify, "capital gains" method of taxation.
WHENEVER YOU RECEIVE A DISTRIBUTION, THE ADMINISTRATOR WILL DELIVER TO
YOU A MORE DETAILED EXPLANATION OF THESE OPTIONS. HOWEVER, THE RULES WHICH
DETERMINE WHETHER YOU QUALIFY FOR FAVORABLE TAX TREATMENT ARE VERY COMPLEX. YOU
SHOULD CONSULT WITH QUALIFIED TAX COUNSEL BEFORE MAKING A CHOICE.
11. Domestic Relations Order
As a general rule, your interest in your account, including your
"vested interest," may not be alienated. This means that your interest may not
be sold, used as collateral for a loan, given away or otherwise transferred. In
addition, your creditors may not attach, garnish or otherwise interfere with
your account.
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There is an exception, however, to this general rule. The Administrator
may be required by law to recognize obligations you incur as a result of court
ordered child support or alimony payments. The Administrator must honor a
"qualified domestic relations order." A "qualified domestic relations order" is
defined as a decree or order issued by a court that obligates you to pay child
support or alimony, or otherwise allocates a portion of your assets in the Plan
to your spouse, former spouse, child or other dependent. If a qualified domestic
relations order is received by the Administrator, all or a portion of your
benefits may be used to satisfy the obligation. The Administrator will determine
the validity of any domestic relations order received.
12. Pension Benefit Guaranty Corporation
Benefits provided by your Plan are NOT insured by the Pension Benefit
Guaranty Corporation (PBGC) under Title IV of the Employee Retirement Income
Security Act of 1974 because the insurance provisions under ERISA are not
applicable to your Plan.
VI
YEAR OF SERVICE RULES
1. Year of Service and Hour of Service
The term "Year of Service" is used throughout this Summary Plan
Description and throughout your Plan. A Year of Service for eligibility purposes
is defined as follows:
You will have completed a Year of Service if, at the end of your first
twelve consecutive months of employment with your Employer, you have
been credited with 1000 Hours of Service.
You will have completed a Year of Service for vesting purposes if you
are credited with 1000 Hours of Service during a Plan Year, even if you were not
employed on the first or last day of the Plan Year.
An "Hour of Service" has a special meaning for Plan purposes. You will
be credited with an Hour of Service for:
(a) each hour for which you are directly or indirectly
compensated by your Employer for the performance of duties during the
Plan Year;
(b) each hour for which you are directly or indirectly
compensated by your Employer for reasons other than performance of
duties (such as vacation, holidays, sickness, disability, lay-off,
military duty, jury duty or leave of absence during the Plan Year); and
(c) each hour for back pay awarded or agreed to by your
Employer.
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You will not be credited for the same Hours of Service both under (a)
or (b), A the case may be, and under (c).
2. 1-Year Break in Service
A 1-Year Break in Service is a computation period during which you have
not completed more than 500 Hours of Service with your Employer.
A 1-Year Break in Service does NOT occur, however, in the computation
period in which you enter or leave the Plan for reasons of:
(a) an authorized leave of absence;
(b) certain maternity or paternity absences.
The Administrator will be required to credit you with Hours of Service
for a maternity or paternity absence. These are absences taken on account of
pregnancy, birth, or adoption of your child. No more than 501 Hours of Service
will be credited for this purpose and these Hours of Service will be credited
solely to avoid your incurring a 1-Year Break in Service. The Administrator may
require you to furnish proof that your absence qualifies as a maternity or
paternity absence.
These break in service rules may be illustrated by the following
examples:
Employee A works 300 hours in a Plan Year. At the end of the Plan
Year, Employee A will have a 1-Year Break in Service because she has
worked less than 501 hours in a Plan Year. Employee B works 300 hours
in a Plan Year and takes an authorized leave of absence for which he is
credited with an additional 250 hours. Employee B will NOT have a
1-Year Break in Service because he is credited with more than 500 hours
in a Plan Year.
If you are reemployed after a 1-Year Break in Service and were vested
in any portion of your account derived from Employer contributions, you will
receive credit for all Years of Service credited to you before your 1-Year Break
in Service.
If you do not have a "vested interest" in the Employer contributions
allocated to your account when you terminate your employment, you will lose
credit for your pre-break Years of Service when your consecutive 1-Year Breaks
in Service equal or exceed the greater of 5 years, or your pre-break Years of
Service. For example:
Employee B terminated employment on January 1, 2000 with 2 Years of
Service. Employee B was not vested at the time of his termination of
employment. Employee B returns to work on January 1, 2003. Employee B
will be credited with his 2
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pre-break Years of Service because his period of termination (3 years)
did not exceed 5 years.
VII
YOUR PLAN'S "TOP HEAVY RULES"
1. Explanation of "Top Heavy Rules"
A 401(k) Profit Sharing Plan that primarily benefits "key employees" is
called a "top heavy plan." Key employees are certain owners or officers of your
Employer. A Plan is a "top heavy plan" when more than 60% of the contributions
or benefits have been allocated to key employees.
Each year, the Administrator is responsible for determining whether
your Plan is a "top heavy plan."
If your Plan becomes top heavy in any Plan Year, then non-key employees
will be entitled to certain "top heavy minimum benefits," and other special
rules will apply. Among these top heavy rules are the following:
(a) Your Employer may be required to make a contribution equal
to 3% of your compensation to your account;
(b) If you are a participant in more than one Plan, you may
not be entitled to minimum benefits under both Plans.
VIII
LOANS
You may apply to the Administrator for a loan from the Plan. Your
application must be in writing on forms which the Administrator will provide to
you. The Administrator may also request that you provide additional information,
such as financial statements, tax returns and credit reports. After considering
your application, the Administrator may, in its discretion, determine that you
qualify for the loan. The Administrator will inform the Trustee that you
qualify. The Trustee may then review the Administrator's determination and make
a loan to you if it is a prudent investment for the Plan.
1. Loan Requirements
There are various rules and requirements that apply for any loan. These
rules are outlined in this Section. In addition, your Employer has established a
written loan program which explains these requirements in more detail. You can
request a copy of the loan program from the Administrator. Generally, the rules
for loans include the following:
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(a) Loans must be made available to all participants and their
beneficiaries on a uniform and non-discriminatory basis.
(b) All loans must be adequately secured. You may use up to
one-half (1/2) of your vested account balance under the Plan as
security for the loan. If more security is required, your principal
residence may be used, if permitted by State law. The Plan may also
require that repayments on the loan obligation be by payroll deduction.
(c) All loans must bear a reasonable rate of interest. The
interest rate must be one a bank or other professional lender would
charge for making a loan in a similar circumstance.
(d) All loans must have a definite repayment period which
provides for payments to be made not less frequently than quarterly,
and for the loan to be amortized on a level basis over a reasonable
period of time, not to exceed five (5) years. However, if you use the
loan to acquire your principal residence, you may repay the loan over a
reasonable period of time that may be longer than five (5) years.
(e) All loans will be considered a directed investment from
your account under the Plan. All payments of principal and interest by
you on a loan will be credited to your account.
(f) The amount the Plan may loan to you is limited by rules
under the Internal Revenue Code. All loans, when added to the
outstanding balance of all other loans from the Plan, will be limited
to the lesser of:
(1) $50,000 reduced by the excess, if any, of your highest
outstanding balance of loans from the Plan during the one-year
period prior to the date of the loan over your current
outstanding balance of loans; or
(2) 1/2 of your vested account balance.
(g) Your spouse must consent to any loan before it can be made
if you use your vested interest as security for the loan. This rule
only applies if the vested interest used as security exceeds $3,500.
(h) If you fail to make payments when they are due under the
loan, you will be considered to be "in default". The Trustee would
then have authority to take all reasonable actions to collect the
balance owing on the loan. This could include filing a lawsuit or
foreclosing on the security for the loan. Under certain circumstances,
a loan that is in default may be considered a distribution from the
Plan, and could result in taxable income to you. In any event, your
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failure to repay a loan will reduce the benefit you would otherwise be
entitled to from the Plan.
IX
CLAIMS BY PARTICIPANTS AND BENEFICIARIES
Benefits will be paid to participants and their beneficiaries without
the necessity of formal claims. You or your beneficiaries, however, may make a
request for any Plan benefits to which you may be entitled. Any such request
must be made in writing, and it should be made to the Administrator. (See the
Article in this Summary entitled "GENERAL INFORMATION ABOUT YOUR PLAN.")
Your request for Plan benefits will be considered a claim for Plan
benefits, and it will be subject to a full and fair review. If your claim is
wholly or partially denied, the Administrator will furnish you with a written
notice of this denial. This written notice must be provided to you within a
reasonable period of time (generally 90 days) after the receipt of your claim by
the Administrator. The written notice must contain the following information:
(a) the specific reason or reasons for the denial;
(b) specific reference to those Plan provisions on which the
denial is based;
(c) a description of any additional information or material
necessary to correct your claim and an explanation of why such
material or information is necessary; and
(d) appropriate information as to the steps to be taken if you
or your beneficiary wishes to submit your claim for review.
If notice of the denial of a claim is not furnished to you in
accordance with the above within a reasonable period of time, your claim will be
deemed denied. You will then be permitted to proceed to the review stage
described in the following paragraphs.
If your claim has been denied, and you wish to submit your claim for
review, you must follow the Claims Review Procedure.
1. The Claims Review Procedure
(a) Upon the denial of your claim for benefits, you may file
your claim for review, in writing, with the Administrator.
(b) YOU MUST FILE THE CLAIM FOR REVIEW NO LATER THAN 60 DAYS
AFTER YOU HAVE RECEIVED WRITTEN NOTIFICATION OF THE DENIAL OF YOUR
CLAIM FOR BENEFITS OR, IF NO WRITTEN DENIAL OF
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YOUR CLAIM WAS PROVIDED, NO LATER THAN 60 DAYS AFTER THE DEEMED DENIAL OF YOUR
CLAIM.
(c) You may review all pertinent documents relating to the
denial of your claim and submit any issues and comments, in writing, to
the Administrator.
(d) Your claim for review must be given a full and fair
review. If your claim is denied, the Administrator must provide you
with written notice of this denial within 60 days after the
Administrator's receipt of your written claim for review. There may be
times when this 60-day period may be extended. This extension may only
be made, however, where there are special circumstances which are
communicated to you in writing within the 60-day period. If there is an
extension, a decision will be made as soon as possible, but not later
than 120 days after receipt by the Administrator of your claim for
review.
(e) The Administrator's decision on your claim for review will
be communicated to you in writing and will include specific references
to the pertinent Plan provisions on which the decision was based.
(f) If the Administrator's decision on review is not furnished
to you within the time limitations described above, your claim will be
deemed denied on review.
(g) If benefits are provided or administered by an insurance
company, insurance service, or other similar organization which is
subject to regulation under the insurance laws, the claims procedure
relating to these benefits may provide for review. If so, that company,
service, or organization will be the entity to which claims are
addressed. If you have any questions regarding the proper person or
entity to address claims, you should ask the Administrator.
X
STATEMENT OF ERISA RIGHTS
1. Explanation of Your ERISA Rights
As a participant in this Plan you are entitled to certain rights and
protections under the Employee Retirement Income Security Act of 1974, also
called ERISA. ERISA provides that all Plan participants are entitled to:
(a) examine without charge, all Plan documents, including:
(1) insurance contracts;
(2) collective bargaining agreements; and
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(3) copies of all documents filed by the Plan with the U.S.
Department of Labor, such as detailed annual reports and Plan
descriptions.
This examination may take place at the Administrator's office and at
other specified employment locations of the Employer. (See the Article in this
Summary entitled "GENERAL INFORMATION ABOUT YOUR PLAN");
(b) obtain copies of all Plan documents and other Plan
information upon written request to the Plan Administrator. The
Administrator may make a reasonable charge for the copies;
(c) receive a summary of the Plan's annual financial report.
The Administrator is required by law to furnish each participant with a
copy of this summary annual report;
(d) obtain a statement telling you whether you have a right to
receive a retirement benefit at Normal Retirement Age and, if so, what
your benefits would be at Normal Retirement Age if you stop working
under the Plan now. If you do not have a right to a retirement benefit,
the statement will tell you how many years you have to work to get a
right to a retirement benefit. THIS STATEMENT MUST BE REQUESTED IN
WRITING AND IS NOT REQUIRED TO BE GIVEN MORE THAN ONCE A YEAR. The Plan
must provide the statement free of charge.
In addition to creating rights for Plan participants, ERISA imposes
duties upon the people who are responsible for the operation of the Plan. The
people who operate your Plan, called "fiduciaries" of the Plan, have a duty to
do so prudently and in the interest of you and other Plan participants and
beneficiaries. No one including your employer or any other person, may fire you
or otherwise discriminate against you in any way to prevent you from obtaining a
pension benefit or exercising your rights under ERISA.
If your claim for a retirement benefit is denied in whole or in part,
you must receive a written explanation of the reason for the denial. You have
the right to have the Administrator review and reconsider your claim. (See the
Article in this Summary entitled "CLAIMS BY PARTICIPANTS AND BENEFICIARIES.")
Under ERISA, there are steps you can take to enforce the above rights.
For instance, if you request materials from the Plan and do not receive them
within 30 days, you may file suit in a federal court. In such a case, the court
may require the Administrator to provide the materials and pay you up to $100.00
a day until you receive the materials, unless the materials were not sent
because of reasons beyond the control of the Administrator.
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If you have a claim for benefits which is denied or ignored, in whole
or in part, you may file suit in a state or federal court.
If the Plan's fiduciaries misuse the Plan's money, or if you are
discriminated against for asserting your rights, you may seek assistance from
the U.S. Department of Labor, or you may file suit in a federal court. The court
will decide who should pay court costs and legal fees. If you are successful,
the court may order the person you have sued to pay these costs and fees. If you
lose, the court may order you to pay these costs and fees if, for example, it
finds your claim is frivolous.
If you have any questions about this statement, or about your rights
under ERISA, you should contact the nearest Area Office of the U.S.
Labor-Management Services Administration, Department of Labor.
XI
AMENDMENT AND TERMINATION OF YOUR PLAN
1. Amendment
Your Employer has the right to amend your Plan at any time. Any such
amendment shall be adopted by formal action of the Employer's board of directors
and executed by an officer authorized to act on behalf of the Employer. In no
event, however, will any amendment:
(a) authorize or permit any part of the Plan assets to be used
for purposes other than the exclusive benefit of participants or their
beneficiaries; or
(b) cause any reduction in the amount credited to your
account; or
(c) cause any part of your Plan assets to revert to the
Employer.
2. Termination
Your Employer has the right to terminate the Plan at any time. Upon
termination, all amounts credited to your accounts will become 100% vested.
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1
EXHIBIT 10.13
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is made and entered into as of 9/15,
1995 by and between ViaSat, Inc., a California corporation ("Borrower") and
Union Bank, a California banking corporation ("Bank").
SECTION 1. THE LOAN
1.1.1 THE REVOLVING LOAN. Bank will loan to Borrower an amount not
to exceed Four Million Dollars ($4,000,000) outstanding in the aggregate at any
one time (the "Revolving Loan"). Borrower may borrow, repay and reborrow all or
part of the Revolving Loan in amounts of not less than Ten Thousand Dollars
($10,000) in accordance with the terms of the Revolving Note. All borrowings of
the Revolving Loan must be made before September 15, 1997 at which time all
unpaid principal and interest of the Revolving Loan shall be due and payable.
The Revolving Loan shall be evidenced by a promissory note (the "Revolving
Note") on the standard form used by Bank for commercial loans as modified by
the Addendum attached thereto. Bank shall enter each amount borrowed and repaid
in Bank's records and such entries shall be deemed to be the amount of the
Revolving Loan outstanding. Omission of Bank to make any such entries shall not
discharge Borrower of its obligation to repay in full with interest all amounts
borrowed.
1.1.2 THE EQUIPMENT LOAN I. Bank will loan to Borrower an amount not
to exceed Two Million Dollars ($2,000,000) outstanding in the aggregate at any
one time ("Equipment Loan I"). Borrower may borrow all or part of Equipment Loan
I in amounts of not less than Ten Thousand Dollars ($10,000) in accordance with
the terms of Equipment Note I. All borrowings will be limited to an Eighty
percent (80%) advance against the purchase price, net of sales tax, delivery,
and insurance. All borrowings of Equipment Loan I must be made before September
15, 1996, at which time all unpaid principal under Equipment Loan I shall be
converted to a fully amortizing loan for a period of Thirty-six (36) months with
a maturity date of September 15, 1999. In the event of a prepayment of principal
after such conversion and payment of any resulting fees, any prepaid amounts
shall be applied to the scheduled principal payments in the reverse order of
their maturity. Equipment Loan I shall be evidenced by a promissory note
("Equipment Note I") on the standard form used by Bank for commercial loans as
modified by the Addendum attached thereto. Bank shall enter each amount borrowed
and repaid in Bank's records and such entries shall be deemed to be the amount
of Equipment Loan I outstanding. Omission of Bank to make any such entries
shall not discharge Borrower of its obligation to repay in full with interest
all amounts borrowed.
1.1.3 THE EQUIPMENT LOAN II. Beginning September 16, 1996 Bank will
loan to Borrower an amount not to exceed Two Million Dollars ($2,000,000)
outstanding in the aggregate
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at any one time ("Equipment Loan II"). Borrower may borrow all or part of
Equipment Loan II in amounts of not less than Ten Thousand Dollars ($10,000) in
accordance with the terms of Equipment Note II. All borrowings will be limited
to an Eighty percent (80%) advance against the purchase price, net of sales tax,
delivery, and insurance. All borrowings of Equipment Loan II must be made before
September 15, 1997, at which time all unpaid principal under Equipment Loan II
shall be converted to a fully amortizing loan for a period of Thirty-six (36)
months with a maturity date of September 15, 2000. In the event of a prepayment
of principal after such conversion and payment of any resulting fees, any
prepaid amounts shall be applied to the scheduled principal payments in the
reverse order of their maturity. Equipment Loan II shall be evidenced by a
promissory note ("Equipment Note II") on the standard form used by Bank for
commercial loans attached hereto as Exhibit "A". Bank shall enter each amount
borrowed and repaid in Bank's records and such entries shall be deemed to be the
amount of Equipment Loan II outstanding. Omission of Bank to make any such
entries shall not discharge Borrower of its obligation to repay in full with
interest all amounts borrowed.
1.2 TERMINOLOGY.
As used herein the word "Loan" shall mean, collectively, all
the credit facilities described above.
As used herein the word "Note" shall mean, collectively, all
the promissory notes described above.
As used herein, the words "Loan Documents" shall mean all
documents executed in connection with this Agreement.
1.3 BORROWING BASE. Notwithstanding any other provision of this
Agreement, Bank shall not be obligated to advance funds under the Revolving
Loan, at any time when both (i) the aggregate of Borrower's obligations
thereunder is greater than One Million Dollars ($ 1,000,000) and (ii) the
aggregate of said obligation exceeds the sum of Eighty percent (80%) of
Borrower's Eligible Billed Accounts plus Fifty (50%) of Borrower's Eligible
Inventory. In no event, however, shall the aggregate amount of advances based on
Eligible Inventory exceed, at any one time, the sum of Five Hundred Thousand
Dollars ($500,000). If at any time Borrower's obligations to Bank under the
above facilities exceed the sum so permitted, Borrower shall immediately repay
to Bank such excess.
1.3.1 ELIGIBLE BILLED ACCOUNTS. The term "Billed Accounts" means all
presently existing and hereafter arising accounts receivable, contract rights,
chattel paper, and all other forms of obligations owing to Borrower, payable in
United States Dollars, arising out of the sale or lease of goods, or the
rendition of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties and other security therefor, as well as all
merchandise returned to or reclaimed by Borrower and Borrower's books and
records relating to any of the foregoing.
The term "Eligible Billed Accounts" means those Billed Accounts, net of
finance charges, which are due and payable within Ninety (90) days, or less,
from the date of the invoice, have been
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validly assigned to Bank and strictly comply with all of Borrower's warranties
and representations to Bank, but Eligible Billed Accounts shall not include the
following:
(a) Any Billed Account with respect to which the account
debtor is an officer, shareholder, director, employee or agent of Borrower;
(b) Any Billed Account with respect to which the account
debtor is a subsidiary of, related to, or affiliated or has common officers or
directors with Borrower;
(c) Any Billed Account relating to goods placed on
consignment, guaranteed sale or other terms by reason of which the payment by
the account debtor may be conditional;
(d) Any Billed Account with respect to which the account
debtor is not a resident of the United States or Canada;
(e) Intentionally deleted;
(f) Any Billed Account with respect to which Borrower is or
may become liable to the account debtor for goods sold or services rendered by
the account debtor to Borrower;
(g) Any Billed Account with respect to which there is asserted
a defense, counterclaim, discount or setoff, whether well-founded or otherwise,
except for those discounts, allowances and returns arising in the ordinary
course of Borrower's business;
(h) Any Billed Account with respect to which the account
debtor becomes insolvent, fails to pay its debts as they mature or goes out of
business or is owed by an account debtor which has become the subject of a
proceeding under any provision of the United States Bankruptcy Code, as amended,
or under any other bankruptcy or insolvency law, including, but not limited to,
assignments for the benefit of creditors, formal or informal moratoriums,
compositions or extensions with all or substantially all of its creditors;
(i) Intentionally deleted;
(j) Any Billed Account that is not paid by the account debtor
within ninety (90) days of date of invoice;
(k) Intentionally deleted; and
(l) Intentionally deleted.
1.3.2 ELIGIBLE INVENTORY. The term "Eligible Inventory" means that
portion of Borrower's inventory of raw materials and finished goods consisting
of Borrower's main lines of business products, which is (a) owned by Borrower,
free and clear of all liens or encumbrances except those in favor of Bank, (b)
held for sale or lease by Borrower and normally and currently saleable in
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the ordinary course of Borrower's business, (c) of good and merchantable
quality, free from defects, (d) located only at locations of which Bank is
notified in writing, and (e) as to which Bank has been able to perfect and
maintain perfected a first priority security interest. Eligible Inventory does
not include any of the following: work in process, spare parts, returned items,
damaged, defective or recalled items, items unfit for further processing,
obsolete or unmerchantable items, items used as salesperson's samples or
demonstrators, inventory held in stock more than twelve (12) months.
1.4 PURPOSE OF LOAN. The proceeds of the Revolving Loan shall be
used for general working capital purposes and the proceeds of the Equipment Loan
shall be used only for purchases of equipment, machinery, and software directly
related to Borrower's main lines of business.
1.5.1 REVOLVING LOAN INTEREST. The unpaid principal balance of the
Revolving Loan shall bear interest at the Reference Rate as more specifically
provided in the Revolving Note.
1.5.2 EQUIPMENT LOANS INTEREST. The unpaid principal balance of
Equipment Loans I & II shall bear interest at the rate of Thirty-five hundredths
percent (.35%) per annum in excess of the Reference Rate as more specifically
provided in Equipment Notes I & II.
1.6 UNUSED COMMITMENT FEE. On the last calendar day of the third
month following the execution of this Agreement and on the last calendar day of
each three-month period thereafter until September 15, 1997, or the earlier
termination of the Loan, Borrower shall pay to Bank a fee of Twenty-five
hundredths percent (.25%) per year on the average unused portion of the
Revolving Loan for the preceding quarter computed on the basis of actual days
elapsed of a year of 360 days.
1.7 EQUIPMENT LOANS COMMITMENT FEE. Borrower shall pay in advance a
commitment fee of Three Thousand Five Hundred Dollars ($3,500) on or before the
date of execution of this Agreement and a commitment fee of Two Thousand
Dollars ($2,000) on September 15 of each year thereafter for so long as any
portion of either Equipment Loan I or Equipment Loan II is outstanding. No
portion of this fee shall be reimbursable.
1.8 BALANCES. Borrower shall maintain its major depository accounts
with Bank until the Note and all sums payable pursuant to this Agreement have
been paid in full.
1.9 DISBURSEMENT. Upon execution hereof, Bank shall disburse the
proceeds of the Loan as provided in Bank's standard form Authorization executed
by Borrower.
1.10 SECURITY. Prior to any disbursement of the Loan, Borrower shall
have executed a security agreement, on Bank's standard form, and a financing
statement, suitable for filing in the office of the Secretary of State of the
State of California and any other state designated by Bank, granting to Bank a
first priority security interest in such of Borrower's property as is described
in said security agreement. Exceptions to Bank's first priority, if any, are
permitted only as otherwise
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provided in this Agreement. At Bank's request, Borrower will also obtain
executed landlord's and mortgagee's waivers on Bank's form covering all of
Borrower's property located on leased or encumbered real property.
1.11 CONTROLLING DOCUMENT. In the event of any inconsistency between
the terms of this Agreement and any Note or any of the other Loan Documents, the
terms of such Note or other Loan Document will prevail over the terms of this
Agreement.
SECTION 2. CONDITIONS PRECEDENT
Bank shall not be obligated to disburse all or any portion of the proceeds
of the Loan unless at or prior to the time for the making of such disbursement,
the following conditions have been fulfilled to Bank's reasonable satisfaction:
2.1 COMPLIANCE. Borrower shall have performed and complied with all
terms and conditions required by this Agreement to be performed or complied with
by it prior to or at the date of the making of such disbursement and shall have
executed and delivered to Bank the Note and other documents deemed necessary by
Bank.
2.2 BORROWING RESOLUTION. Borrower shall have provided Bank with
certified copies of resolutions duly adopted by the Board of Directors of
Borrower, authorizing this Agreement and the Loan Documents. Such resolutions
shall also designate the persons who are authorized to act on Borrower's behalf
in connection with this Agreement and to do the things required of Borrower
pursuant to this Agreement.
2.3 TERMINATION STATEMENTS. Borrower shall have provided Bank with
UCC-2 termination statements executed by such secured creditors as may be
required by Bank suitable for filing with the Secretary of State in each state
designated by Bank.
2.4 CONTINUING COMPLIANCE. At the time any disbursement is to be
made, there shall not exist any event, condition or act which constitutes an
event of default under Section 6 hereof or any event, condition or act which
with notice, lapse of time or both would constitute such event of default; nor
shall there be any such event, condition, or act immediately after the
disbursement were it to be made.
2.5 FINANCIAL STATEMENTS. Borrower shall have provided its audited
fiscal year ending March 31, 1995 financial statements to Bank including both a
balance sheet at March 31, 1995, together with supporting schedules, and an
income statement for the Twelve (12) months ended March 31, 1995. Borrower shall
have provided, if appropriate, a management letter from the certified public
accountant which prepared its audited financial statements for the fiscal year
ending March 31, 1995. Borrower shall have provided its unaudited financial
statements to Bank for the fiscal quarter ending June 30, 1995 including both a
balance sheet at June 30, 1995 and an income
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and expense statement with supportive schedules and statement of retained
earnings for that fiscal quarter, prepared in accordance with generally accepted
accounting principles;
2.6 ACCOUNTS RECEIVABLE AND INVENTORY CERTIFICATION. Prior to any
advance under the Revolving Loan which would cause the total amount of the
Revolving Loan to exceed One Million Dollars ($ 1,000,000), the Borrower shall
have delivered to the Bank its monthly accounts receivable aging schedule along
with a Compliance Certificate and Borrowing Base Certificate in the form of
Exhibits D and E, respectively, executed by Borrower's chief financial officer
or other duly authorized officer of the Borrower. The Borrowing Base Certificate
shall accurately report Borrower's accounts receivable, Eligible Billed
Accounts, inventory and Eligible Inventory as of the end of the calendar month
preceding the month most recently ended.
SECTION 3. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that:
3.1 BUSINESS ACTIVITY. The principal business of Borrower is the
design and development of digital satellite and terrestrial communications
equipment.
3.2 AFFILIATES AND SUBSIDIARIES. Borrower's affiliates and
subsidiaries (those entities in which Borrower has either a controlling interest
or at least a 25% ownership interest), if applicable, and their addresses, and
the names of Borrower's shareholders holding at least 15% of the issued and
outstanding common stock of Borrower, are as provided on Exhibit B attached
hereto.
3.3 AUTHORITY TO BORROW. The execution, delivery and performance of
this Agreement, the Note and all other agreements and instruments required by
Bank in connection with the Loan are not in contravention of any of the terms of
any indenture, agreement or undertaking to which Borrower is a party or by which
it or any of its property is bound or affected.
3.4 FINANCIAL STATEMENTS. The audited financial statements of
Borrower, including both a balance sheet at March 31, 1995, together with
supporting schedules, and an income statement for the Twelve (12) months ended
March 31, 1995, as well as its unaudited balance sheet at June 30, 1995,
together with supporting schedules, and an income statement for the Three (3)
months ended June 30, 1995 have heretofore been furnished to Bank, and are true
and complete and fairly represent the financial condition of Borrower during the
period covered thereby. Since June 30, 1995, there has been no material adverse
change in the financial condition or operations of Borrower.
3.5 TITLE. Except for assets which may have been disposed of in the
ordinary course of business, Borrower has good and marketable title to all of
the property reflected in its financial statements delivered to Bank and to all
property acquired by Borrower since the date of said
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financial statements, free and clear of all liens, encumbrances, security
interests and adverse claims except those specifically referred to in Section 5,
paragraph 5.1 of this Agreement.
3.6 LITIGATION. Except as set forth (with estimates of the dollar
amounts involved) on Exhibit C attached hereto, there is no litigation or
proceeding pending or threatened against Borrower or any of its property which
is reasonably likely to affect the financial condition, property or business of
Borrower in a materially adverse manner.
3.7 DEFAULT. Borrower is not now in default in the payment of any of
its material obligations, and there exists no event, condition or act which
constitutes an event of default under Section 6 hereof and no condition, event
or act which with notice or lapse of time, or both, would constitute an event of
default.
3.8 ORGANIZATION. Borrower is duly organized and existing under the
laws of the state of its organization, and has the power and authority to carry
on the business in which it is engaged and/or proposes to engage.
3.9 POWER. Borrower has the power and authority to enter into this
Agreement and to execute and deliver the Note and all of the other Loan
Documents.
3.10 AUTHORIZATION. This Agreement and all things required by this
Agreement have been duly authorized by all requisite action of Borrower.
3.11 QUALIFICATION. Borrower is duly qualified and in good standing
in any jurisdiction where such qualification is required.
3.12 COMPLIANCE WITH LAWS. Borrower is not in violation with respect
to any applicable laws, rules, ordinances or regulations which materially affect
the operations or financial condition of Borrower.
3.13 ERISA. Any defined benefit pension plans as defined in the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), of
Borrower meet, as of the date hereof, the minimum funding standards of Section
302 of ERISA, and no Reportable Event or Prohibited Transaction as defined in
ERISA has occurred with respect to any such plan.
3.14 REGULATION U. No action has been taken or is currently planned
by Borrower, or any agent acting on its behalf, which would cause this Agreement
or the Note to violate Regulation U or any other regulation of the Board of
Governors of the Federal Reserve System or to violate the Securities and
Exchange Act of 1934, in each case as in effect now or as the same may hereafter
be in effect. Borrower is not engaged in the business of extending credit for
the purpose of purchasing or carrying margin stock as one of its important
activities and none of the proceeds of the Loan will be used directly or
indirectly for such purpose.
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3.15 CONTINUING REPRESENTATIONS. These representations shall be
considered to have been made again at and as of the date of each disbursement of
the Loan and shall be true and correct as of such date or dates.
SECTION 4. AFFIRMATIVE COVENANTS
Until the Note and all sums payable pursuant to this Agreement or any
other of the Loan Documents have been paid in full, unless Bank waives
compliance in writing, Borrower agrees that:
4.1 USE OF PROCEEDS. Borrower will use the proceeds of the Loan only
as provided in subsection 1.4 above.
4.2 PAYMENT OF OBLIGATIONS. Borrower will pay and discharge promptly
all taxes, assessments and other governmental charges and claims levied or
imposed upon it or its property, or any part thereof, provided, however, that
Borrower shall have the right in good faith to contest any such taxes,
assessments, charges or claims and, pending the outcome of such contest, to
delay or refuse payment thereof provided that adequately funded reserves are
established by it to pay and discharge any such taxes, assessments, charges and
claims.
4.3 MAINTENANCE OF EXISTENCE. Borrower will maintain and preserve
its existence and assets and all rights, franchises, licenses and other
authority necessary for the conduct of its business and will maintain and
preserve its property, equipment and facilities in good order, condition and
repair. Bank may, at reasonable times and upon reasonable notice to Borrower,
visit and inspect any of the properties of Borrower.
4.4 RECORDS. Borrower will keep and maintain full and accurate
accounts and records of its operations according to generally accepted
accounting principles and will permit Bank to have access thereto, to make
examination and photocopies thereof, and to make audits during regular business
hours. Costs for such audits shall be paid by Borrower.
4.5 INFORMATION FURNISHED. Borrower will furnish to Bank:
(a) Within Thirty (30) days after the close of each calendar
month its unaudited balance sheet as of the close of such calendar month, its
unaudited income and expense statement with supportive schedules and statement
of retained earnings for that calendar month, prepared in accordance with
generally accepted accounting principles;
(b) Within Forty-five (45) days after the close of each fiscal
quarter, except for the final quarter of each fiscal year, its unaudited balance
sheet as of the close of such fiscal quarter, its unaudited income and expense
statement with supportive schedules and statement of retained earnings for that
fiscal quarter, prepared in accordance with generally accepted accounting
principles;
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(c) Within One Hundred Twenty (120) days after the close of
each fiscal year, a copy of its statement of financial condition including at
least its balance sheet as of the close of such fiscal year, its income and
expense statement and retained earnings statement for such fiscal year, examined
and prepared on an audited basis by independent certified public accountants
selected by Borrower and reasonably satisfactory to Bank, in accordance with
generally accepted accounting principles applied on a basis consistent with that
of the previous year;
(d) Upon request of Bank, copies of such financial statements
and reports as Borrower may file with any state or federal agency;
(e) Such other financial statements and information as Bank
may reasonably request from time to time,
(f) Intentionally deleted;
(g) In connection with each fiscal year-end statement required
hereunder, any management letter of Borrower's certified public accountants,
(h) Within Forty-five (45) days after each fiscal quarter, a
certification of compliance with all covenants under this Agreement, executed by
Borrower's chief financial officer or other duly authorized officer of Borrower,
in the form of Exhibit D;
(i) As soon as possible, and in no event later than five (5)
days after the occurrence of an event of default under Section 6 hereof or the
occurrence of an event, condition or act which with notice, lapse of time or
both would constitute such an event of default, a statement of the chief
executive officer, the president or the chief financial officer of Borrower
setting forth the details thereof and the action which Borrower has taken, is
taking or proposes to take with respect thereto;
(j) Prompt written notice to Bank of all events of any
litigation which, if decided adversely to Borrower, would have a material
adverse effect on Borrower's financial condition; and of any other matter which
has resulted in, or is likely to result in, a material adverse change in its
financial condition or operations;
(k) Nor written notice to Bank of any changes in Borrower's
officers (to the extent that prior knowledge exists), Borrower's name, the
location of Borrower's assets, or Borrower's principal place of business or
chief executive office.
(l) Within Thirty (30) days after each calendar month end, but
only if a Revolving Loan is then outstanding in an aggregate amount greater than
One Million Dollars ($1,000,000), a copy of Borrower's monthly accounts
receivable aging and a certification of compliance with the Borrowing Base
described above, executed by Borrower's chief financial officer or other duly
authorized officer of Borrower, in the form of Exhibit E, which certificate
shall accurately report Borrower's accounts receivable, Eligible Billed
Accounts, inventory and Eligible
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Inventory. Borrower will permit Bank to audit Bank's collateral upon reasonable
notice and during regular business hours.
4.6 TANGIBLE NET WORTH. Beginning with fiscal year ending March 31,
1995, Borrower will at all times maintain Tangible Net Worth of not less than
Two Million Nine Hundred Thousand Dollars ($2,900,000). Thereafter, Borrower
will at all times maintain a minimum Tangible Net Worth that increases from said
amount as of the end of each of Borrower's fiscal quarter by Ninety percent
(90%) of Borrower's net profit after taxes. "Tangible Net Worth" shall mean net
worth increased by indebtedness of Borrower subordinated to Bank and decreased
by patents, licenses, trademarks, trade names, goodwill and other similar
intangible assets, organizational expenses, and monies due from affiliates
(including officers, shareholders and directors).
4.7 DEBT TO TANGIBLE NET WORTH. Borrower will at all times maintain
a ratio of Total Debt ("Total Debt" shall mean all of Borrower's liabilities
with the exception of cash advances from customers) to Tangible Net Worth of not
greater than 3.0: 1.O.
4.8 PROFITABILITY. Borrower will maintain a net profit, before
provision for income taxes, of a positive amount as reported at its fiscal year
end.
4.9 CASH FLOW. Borrower will maintain a ratio of Cash Flow to Debt
Service of not less than 1.5: 1.O. Compliance with this subsection shall be
measured as of the end of each fiscal quarter. "Cash Flow" shall mean net profit
after taxes to which depreciation, amortization, other non cash expenses, and
interest expense are added for the twelve (12) month period immediately
preceding the date of calculation. "Debt Service" shall mean the sum of that
portion of long-term liabilities and capital leases coming due within twelve
(12) months of the date of calculation plus interest expense and dividends for
the twelve (12) month period immediately preceding the date of calculation.
4.10 INSURANCE. Borrower will keep all of its insurable property,
real, personal or mixed, insured by companies and in amounts approved by Bank,
which approval shall not be unreasonably withheld, against fire and such other
risks, and such amounts, as is customarily obtained by companies conducting
similar business with respect to like properties. Borrower will furnish to Bank
statements of its insurance coverage, will promptly furnish other or additional
insurance deemed necessary by and upon request of Bank to the extent that such
insurance may be available and hereby assigns to Bank, as Security for
Borrower's obligations to Bank, the proceeds of any such insurance. Prior to any
disbursement of the Loan, Bank will be named loss payee on all policies insuring
collateral. Borrower will maintain adequate worker's compensation insurance and
adequate insurance against liability for damage to persons or property. All
policies shall require at least ten (10) days' written notice to Bank before any
policy may be altered or cancelled.
4.11 ADDITIONAL REQUIREMENTS. Borrower will promptly, upon demand by
Bank, take such further action and execute all such additional documents and
instruments in connection with this Agreement as Banking its reasonable
discretion deems necessary in order to consummate the
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transactions contemplated hereby or of any future amendments, modifications, or
supplements to this Agreement or the other Loan Documents, and promptly supply
Bank with such other information concerning its affairs as Bank may reasonably
request from time to time.
4.12 LITIGATION AND ATTORNEYS' FEES. Borrower will pay promptly to
Bank upon demand, reasonable attorneys' fees (including but not limited to the
reasonable estimate of the allocated costs and expenses of in-house legal
counsel and legal staff) and all costs and other expenses paid or incurred by
Bank in collecting, modifying or compromising the Loan or in enforcing or
exercising its rights or remedies created by, connected with or provided for in
this Agreement or any of the Loan Documents, whether or not an arbitration,
judicial action or other proceeding is commenced. If such proceeding is
commenced, only the prevailing party shall be entitled to attorneys' fees and
court costs.
4.13 BANK EXPENSES. Borrower will pay or reimburse Bank for all
costs, expenses and fees incurred by Bank in preparing and documenting all
amendments and modifications to this Agreement and the Loan, including but not
limited to all filing and recording fees, costs of appraisals, insurance and
reasonable attorneys' fees, including the reasonable estimate of the allocated
costs and expenses of in-house legal counsel and legal staff.
4.14 REPORTS UNDER PENSION PLANS. Borrower will furnish to Bank, as
soon as possible and in any event within 15 days after Borrower knows or has
reason to know that any event or condition with respect to any defined benefit
pension plans of Borrower described in Section 3 above has occurred, a statement
of an authorized officer of Borrower describing such event or condition and the
action, if any, which Borrower proposes to take with respect thereto.
SECTION 5. NEGATIVE COVENANTS
Until the Note and all other sums payable pursuant to this Agreement or
any other of the Loan Documents have been paid in full, unless Bank waives
compliance in writing, Borrower agrees that:
5.1 ENCUMBRANCES AND LIENS. Borrower will not create, assume or
suffer to exist any mortgage, pledge, security interest, encumbrance, or lien
(other than for taxes not delinquent and for taxes and other items being
contested in good faith) on property of any kind, whether real, personal or
mixed, now owned or hereafter acquired, or upon the income or profits thereof,
except to Bank and except for; (a) minor encumbrances and easements on real
property which do not materially affect its market value; (b) existing liens on
Borrower's personal property; described in Borrower's most recent financial
statement delivered to Bank or otherwise described in a schedule heretofore
delivered by Borrower to Bank; (c) future purchase money security interests
encumbering only the personal property purchased; (d) statutory liens of
bankers, carriers, warehousemen, mechanics, materialmen, and other similar liens
imposed by law, which are incurred in the ordinary course of business for sums
not delinquent or which are being contested in good faith by appropriate
proceedings; (e) deposits made in the ordinary course of business to secure
liability to insurance carriers; (f) attachment and judgement liens securing
claims less than $250,000 in the
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aggregate (excluding for purposes of said calculation any such liens for which
payment is covered in full by insurance, or the Borrower is prosecuting an
appeal in good faith by appropriate proceedings, a stay of execution pending
appeal having been secured): and (g) monetary obligations of the Borrower under
any leasing or similar arrangement which, in accordance with generally accepted
accounting principles is classified as a capital lease. All of such permitted
personal property liens, excluding liens in favor of Bank, shall not exceed, in
the aggregate, Three Million Dollars ($3,000,000) at any time.
5.2 BORROWINGS. Borrower will not sell, discount or otherwise
transfer any account receivable or any note, draft or other evidence of
indebtedness, except to Bank or except to a financial institution at face value
for deposit or collection purposes only and without any fee other than fees
normally charged by the financial institution for deposit or collection
services. Borrower will not borrow any money, become contingently liable to
borrow money, nor enter any agreement to directly or indirectly obtain borrowed
money, except, (a) pursuant to agreements made with Bank, (b) trade debt
incurred in the ordinary course of business, and (c) debt secured by liens
permitted pursuant to Section 5.1 above.
5.3 SALE OF ASSETS, LIQUIDATION OR MERGER. Borrower will neither
liquidate nor dissolve nor enter into any consolidation, merger, partnership or
other combination, nor convey, nor sell, nor lease all or the greater part of
its assets or business, nor purchase or lease all or the greater part of the
assets or business of another, nor acquire the stock or assets of another
business or corporation.
5.4 LOANS, ADVANCES AND GUARANTIES. Borrower will not, except in the
ordinary course of business as currently conducted, make any loans or advances,
become a guarantor or surety, pledge its credit or properties in any manner
except as set forth herein, or extend credit.
5.5 INVESTMENTS. Borrower shall not purchase any debt of another
person except for:
(a) certificates of deposit, time deposits, Eurodollar time
deposits, repurchase agreements, reverse repurchase agreements, or bankers'
acceptances, having in each case a maturity date of not more than twelve months
from the date of acquisitions by Borrower issued by the Bank or any U.S.
commercial bank or any branch or agency of a non-U.S. bank licensed to conduct
business in the U.S. having combined capital and surplus or not less than
$50,000,000 whose short term securities are rated at least "A" by Standard &
Poor's Corporation (or the equivalent rating provided by any of Moody's
Investors Service, Inc., Duff & Phelps Credit Rating Co. or Fitch Investors
Services, Inc.),
(b) interest bearing or discounted obligations of the United
States Government, any agency thereof (including without limitation the Federal
Home Loan Mortgage Corporations, the Government National Mortgage Association,
the Federal National Mortgage Association and the Federal Farm Credit System)
or any entities or pools of mortgages or other instruments formed by the United
States Government or any such agencies, and in any case only if such obligation
has a maturity date not more than twelve months from the date of acquisition by
Borrower;
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(c) obligations issued by states and local governments or
their agencies, instrumentalities, authorities or subdivisions, is such issuer
has received a rating of at least "A" by Standard & Poor's Corporation (or the
equivalent rating provided by any of Moody's Investors Service, Inc., Duff &
Phelps Credit Rating Co. or Fitch Investors Services, Inc., and in any case only
if such obligation has a maturity date of not more than twelve months from the
date of acquisition by Borrower;
(d) commercial paper of an issuer rated at least "A" by
Standard & Poor's Corporation (or the equivalent rating provided by any of
Moody's Investors Service, Inc., Duff & Phelps Credit Rating Co. or Fitch
Investors Services, Inc., and in any case only if such obligation has a maturity
date of not more than twelve months from the date of acquisition by Borrower; or
(e) investments in money market funds including short-term
adjustable rate money market funds.
5.6 PAYMENT OF DIVIDENDS. Intentionally deleted.
5.7 RETIREMENT OF STOCK. Borrower will not acquire or retire any
share of its capital stock for value in excess of Five percent (5%) of market
value in any fiscal year.
5.8 CAPITAL EXPENDITURES. Borrower will not make capital
expenditures in excess of Four Million Dollars ($4,000,000) in any fiscal year;
and shall only make such expenditures as are necessary for Borrower in the
conduct of its ordinary course of business. Each said expenditure shall be
needed by Borrower in the ordinary course of its business. Expenditures as used
in this subsection shall include without limitation, expenditures under Capital
Leases.
5.9 LEASE OBLIGATIONS. Intentionally deleted.
SECTION 6. EVENTS OF DEFAULT
The occurrence of any of the following events ("Events of Default") shall
terminate any obligation on the part of Bank to make or continue the Loan and
automatically, unless otherwise provided under the Note, shall make all sums of
interest and principal and any other amounts owing under the Loan immediately
due and payable, without notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor, or any other notices or demands:
6.1 Borrower shall fail to pay within three (3) days of the date
when due any principal, interest or other payment required under the terms of
the Note, this Agreement or any of the other Loan Documents (as each of the same
may be amended, modified, extended, supplemented or replaced from time to time);
or
6.2 Any default shall occur under the Note; or
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6.3 Any guaranty or subordination agreement required hereunder is
breached or becomes ineffective, or any Guarantor or subordinating creditor
dies, disavows or attempts to revoke or terminate such guaranty or subordination
agreement; or
6.4 There is a change in ownership or control of ten percent (10%)
or more of the issued and outstanding capital stock of Borrower or any
Guarantor.
SECTION 7. MISCELLANEOUS PROVISIONS
7.1 ADDITIONAL REMEDIES. The rights, powers and remedies given to
Bank hereunder shall be cumulative and not alternative and shall be in addition
to all rights, powers and remedies given to Bank by law against Borrower or any
other person, including but not limited to Bank's rights of setoff or banker's
lien.
7.2 NONWAIVER. Any forbearance or failure or delay by Bank in
exercising any right, power or remedy hereunder shall not be deemed a waiver
thereof and any single or partial exercise of any right, power or remedy shall
not preclude the further exercise thereof No waiver shall be effective unless it
is in writing and signed by an officer of Bank.
7.3 INUREMENT. The benefits of this Agreement shall inure to the
successors and assigns of Bank and the permitted successors and assignees of
Borrower, and any assignment of Borrower without Bank's consent shall be null
and void.
7.4 APPLICABLE LAW. This Agreement and all other agreements and
instruments required by Bank in connection therewith shall be governed by and
construed according to the laws of the State of California.
7.5 SEVERABILITY. Should any one or more provisions of this
Agreement be determined to be illegal or unenforceable, all other provisions
nevertheless shall be effective.
7.6 INTEGRATION CLAUSE. Except for documents and instruments
specifically referenced herein, this Agreement constitutes the entire agreement
between Bank and Borrower regarding the Loan and all prior communications verbal
or written between Borrower and Bank shall be of no further effect or
evidentiary value.
7.7 CONSTRUCTION. The section and subsection headings herein are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
7.8 AMENDMENTS. This Agreement may be amended only in writing signed
by all parties hereto.
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7.9 COUNTERPARTS. Borrower and Bank may execute one or more
counterparts to this Agreement, each of which shall be deemed an original.
SECTION 8. SERVICE OF NOTICES
8.1 Any notices or other communications provided for or allowed
hereunder shall be effective only when given by one of the following methods and
addressed to the respective party at its address given with the signatures at
the end of this Agreement and shall be considered to have been validly given:
(a) upon delivery, if delivered personally; (b) upon receipt, if mailed, first
class postage prepaid, with the United States Postal Service; (c) on the next
business day, if sent by overnight courier service of recognized standing; and
(d) upon telephoned confirmation of receipt, if telecopied.
8.2 The addresses to which notices or demands are to be given may be
changed from time to time by notice delivered as provided above.
THIS AGREEMENT is executed on behalf of the parties by duly authorized
officers as of the date first above written.
UNION BANK
/s/ /s/
By:_______________________________ By:_________________________________
Vice President Vice President
Title_____________________________ Title_______________________________
Address:
530 "B" Street, Fourth Floor
San Diego, California 92101
Attention: Dick Petrie
Telecopier: (619) 230-3766
Telephone: (619) 230-3754
VIASAT, INC.
/s/
By:_______________________________ By:_________________________________
Vice President
Title_____________________________ Title_______________________________
Address:
2290 Cosmos Court
Carlsbad, California 92009-1585
Attention: Mark Dankberg
Telecopier: (619) 438-8489
Telephone: (619) 438-8099
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[UNION BANK FORM]
EXHIBIT "A"
COMMERCIAL PROMISSORY NOTE
- --------------------------------------------------------------------------------
Borrower Name ViaSat, Inc.
- --------------------------------------------------------------------------------
Borrower Address Office Loan Number
40061
-------------------------------------------
2290 COSMOS CT. Maturity Date Amount
CARLSBAD, CA 92009-1585
- --------------------------------------------------------------------------------
SAN DIEGO
________________________, California Date__________________ $_______________
FOR VALUE RECEIVED, the undersigned ("Debtor") promises to pay to the order of
UNION BANK ("Bank"), as indicated below, the principal sum of _________________
_____________________________Dollars ($_____________), or so much thereof as is
disbursed, together with interest on the balance of such principal sum from
time to time outstanding, at a per annum rate equal to the Reference Rate plus
______________________ percent (____________%), such per annum rate to change
as and when the Reference Rate shall change, provided, however, Debtor shall
pay total interest over the term of this note of not less than $500.
As used herein, the term "Reference Rate" shall mean the rate announced by Bank
from time to time at its corporate headquarters as its "Reference Rate." The
Reference Rate is an index rate determined by Bank from time to time as a means
of pricing certain extensions of credit and is neither directly tied to any
external rate of interest or index nor necessarily the lowest rate of interest
charged by Bank at any given time. All computations of interest under this note
shall be made on the basis of a year of 360 days, for actual days elapsed.
1. PAYMENTS. INTEREST PAYMENTS. Debtor shall pay interest on the ____________
day of each ________________________commencing ___________________________ .
ON ALL PRINCIPAL THEN OUTSTANDING SHALL BE PAID
PRINCIPAL PAYMENTS. __________________________________________________________
IN 36 EQUAL MONTHLY INSTALLMENTS BEGINNING ON
______________________________________________________________________________
______________________________________________________________________________
On _____________________________ all principal and interest then unpaid shall
be due and payable.
Debtor shall pay all amounts due under this note in lawful money of the United
SAN DIEGO REGIONAL
States at Bank's ___________________________________ Office, or such other
office as may be designated by Bank, from time to time.
2. LATE PAYMENTS. If any installment payment required by the terms of this note
shall remain unpaid ten days after due, at the option of Bank, Debtor shall pay
a fee of $100 to Bank.
3. INTEREST RATE FOLLOWING DEFAULT. In the event of default, at the option of
Bank, and, to the extent permitted by law, interest shall be payable on the
outstanding principal under this note at a per annum rate equal to five percent
(5%) in excess of the interest rate specified in the initial paragraph of this
note, calculated from the date of default until all amounts payable under this
note are paid in full.
4. DEFAULT AND ACCELERATION OF TIME FOR PAYMENT.*
5. ADDITIONAL AGREEMENTS OF DEBTOR. If any amounts owing under this note are
not paid when due, Debtor promises to pay all costs and expenses, including
reasonable attorneys' fees, incurred by Bank in the collection or enforcement
of this note. Debtor and any endorsers of this note, for the maximum period of
time and the full extent permitted by law, (a) waive diligence, presentment,
demand, notice of nonpayment, protest, notice of protest, and notice of every
kind; (b) waive the right to assert the defense of any statute of limitations
to any debt or obligation hereunder; and (c) consent to renewals and extensions
of time for the payment of any amounts due under this note. If this note is
signed by more than one party, the term "Debtor" includes each of the
undersigned and any successors in interest thereof; all of whose liability
shall be joint and several. Any married person who signs this note agrees that
recourse may be had against the separate property of that person for any
obligations hereunder. The receipt of any check or other item of payment by
Bank, at its option, shall not be considered a payment on account until such
check or other item of payment is honored when presented for payment at the
drawee bank. Bank may delay the credit of such payment based upon Bank's
schedule of funds availability, and interest under this note shall accrue until
the funds are deemed collected. In any action brought under or arising out of
this note, Debtor and any Obligor, including their successors or assigns,
hereby consents to the jurisdiction of any competent court within the State of
California, as provided in any addendum attached hereto, and consents to
service of process by any means authorized by California law. The term "Bank"
includes, without limitation, any holder of this note. This note shall be
construed in accordance with and governed by the laws of the State of
California.
THIS NOTE IS SUBJECT TO THE ARBITRATION AGREEMENT ATTACHED HERETO AND
INCORPORATED BY REFERENCE HEREIN.
* See Addendum "A", consisting of two (2) pages, attached hereto and
incorporated herein.
17
EXHIBIT "A" ATTACHMENT
ADDENDUM "A" TO COMMERCIAL PROMISSORY NOTE,
DATED XXXXXXXXXXXXXX, 1995, EXECUTED BY
VIASAT, INC. IN FAVOR OF UNION BANK
4. DEFAULT AND ACCELERATION OF TIME FOR PAYMENT. Default shall include, but not
be limited to, any of the following: (a) Debtor shall fail to pay within three
(3) days of the date when due any principal, interest or other payment required
under the terms of this note, that certain Loan Agreement between Debtor and
Bank, of even date herewith, and any amendments, modifications, extensions,
supplements or replacements thereof (the "Loan Agreement") or any of the other
Loan Documents (as defined in the Loan Agreement); (b) Debtor shall fail to
observe or perform any covenant, obligation, condition or agreement set forth in
Section 5, or in paragraphs 4.5(i), 4.6, 4.7, 4.8 or 4.9, of the Loan Agreement;
(c) Debtor shall fail to observe or perform any other covenant, obligation,
condition or agreement contained in the Loan Agreement or the other Loan
Documents, and such failure shall continue for twenty (20) days after written
notice thereof to Debtor from Bank; (d) any representation, warranty,
certificate or other statement (financial or otherwise) made or furnished by or
on behalf of Debtor to Bank in or in connection with this note, the Loan
Agreement or any of the other Loan Documents, or as an inducement to Bank to
enter into the Loan Agreement and the other Loan Documents, shall be false,
incorrect, incomplete or misleading in any material respect when made or
furnished; (e) Debtor, any guarantor, co-maker, endorser, or any person or
entity other than Debtor providing security for this note (hereinafter
individually and collectively referred to as the "Obligor") shall fail to pay
when due any principal or interest payment required under the terms of any bond,
debenture, note or other evidence of indebtedness required to be paid by such
obligor (except for payments required hereunder, under the Loan Agreement or
under the other Loan Documents) beyond any period of grace provided with respect
thereto, or shall default in the observance or performance of any other
agreement, term or condition contained in any such bond, debenture, note or
other evidence of indebtedness, and the effect of such failure or default is to
cause, or permit the holder or holders thereof to cause, the indebtedness
evidenced by such bond, debenture, note or other evidence of indebtedness to
become due prior to its stated date of maturity; (f) any obligor shall (i) apply
for or consent to the appointment of a receiver, trustee, liquidator or
custodian of itself or of all or a substantial part of its property, (ii) be
unable, or admit in writing its inability, to pay its debts generally as they
mature, (iii) make a general assignment for the benefit of its or any of its
creditors, (iv) be dissolved or liquidated (or an obligor who is a natural
person shall die), (v) commence a voluntary case or other proceedings seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or consent to any such relief or to the appointment of or taking possession of
its
Form of Note Page 1 of 2
Exhibit A
18
property by any official in an involuntary case or other proceeding commenced
against it, or (vi) take any corporate action for the purpose of effecting any
of the foregoing; (g) proceedings for the appointment of a receiver, trustee,
liquidator or custodian of any Obligor or of all or a substantial part of its
property, or an involuntary case or other proceedings seeking liquidation,
reorganization or other similar relief with respect to any Obligor or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect, shall be commenced and shall not be dismissed or discharged within
thirty (30) days of commencement; or (h) a final judgment or order for the
payment of money in excess of Two Hundred Fifty Thousand Dollars ($250,000.00)
(exclusive of amounts covered by insurance) shall be rendered against any
Obligor and the same shall remain undischarged for a period of thirty (30) days
during which execution shall not be effectively stayed, or any judgment, writ,
warrant of attachment, or execution or similar process shall be issued or levied
against a substantial part of any Obligor's property and such judgment, writ or
similar process shall not be released, stayed, vacated, bonded or otherwise
dismissed within twenty (20) days after its issue or levy. Upon the occurrence
of any such default, Bank, in its discretion, may cease to advance funds
hereunder and may declare all obligations under this note immediately due and
payable; provided, however, upon the occurrence of a default under (f) or (g) ,
all principal and interest shall automatically become immediately due and
payable.
Form of Note Page 2 of 2
Exhibit A
19
EXHIBIT "B"
Shareholders holding at least fifteen (15%) percent of the issued and
outstanding common stock of ViaSat, Inc. are:
Mark Dankberg
Steven Hart
EXHIBIT "C"
Litigation: None
20
VIASAT(R) [LOGO]
2290 Cosmos Court
Carlsbad, CA 92009-1585
Tel: (619) 438-8099
Fax: (619) 438-8489
FORM OF COMPLIANCE CERTIFICATE
13 September 1995
Mr. Richard A. Petrie
Vice President
Union Bank
Post Office Box 85324
San Diego, CA 92186-9879
Dear Dick:
For the quarter ended _____, ViaSat, Inc. has performed and observed each and
every covenant to be performed by it as contained in the Loan Agreement dated
_____. ViaSat, Inc. does hereby certify that the Company is in compliance with
all stated covenants and that no event of default has occurred and no
condition exists which constitutes an event of default thereunder, or would
constitute an event of default upon giving notice, the lapse of time or both.
Sincerely,
Gregory D. Monahan
Vice President, Administration
and General Counsel
EXHIBIT "D"
21
DATE:
BORROWING BASE CERTIFICATE
for
______________________ ("BORROWER")
As defined in and pursuant to that Loan Agreement by and between Borrower and
Union Bank dated ______________ ("LOAN AGREEMENT")
Date of aging:
1. Total Accounts(A/R) _____________________
2. Less Ineligible A/R.
a.) Cross Aged _____% _____________________
b.) Concentration % _____________________
c.) Offer/Emp/Inter-Co. _____________________
d.) Foreign/Gov't Accts _____________________
e.) Retentions _____________________
f.) Contra Accts _____________________
g.) Insolvent Accts _____________________
h.) Consignments/CODs _____________________
i.) Credit Balances >90 _____________________
j.) Other _____________________
Total Ineligible A/R _____________________
3. Total Eligible A/R (1-2) _____________________
4. Advance Rate on A/R (%) _____________________
5. Funds Available ON A/R (3*4) _____________________
6. Inventory:
a.) Raw Materials _____________________
b.) Advance Rate on
Raw Materials (%) _____________________
c.) Finished Goods _____________________
d.) Advance Rate on
Finished Goods (%) _____________________
e.) Ineligible Inventory _____________________
f.) Inventory Availability _____________________
Calculation [(A*B)+(C*D)-E]
g.) Inventory Sublimit
h.) Funds Available on
Inventory (Not to exceed 3g)
7. Borrowing Base (5+6) _____________________
8. Loan Balance _____________________
9. Outstanding Letters of Credit _____________________
10. Availability/(OverAdvanced) (7-8-9) _____________________
The undersigned represents and warrants that i.) the foregoing information is
true, correct and complete, ii.) that the accompanying accounts receivable
aging, accounts payable aging, and inventory report provided in support of this
certificate are true, correct and complete, and iii.) Borrower is in compliance
with the terms, conditions, warranties, representations and covenants as set
forth in the Loan Agreement.
________________________________
Signature of officer, title
Exhibit E
22
at least $500,000, or (iii) the conversion of more than 50% of the shares of
Preferred Stock issued to the Investors pursuant to the Purchase Agreement.
IN WITNESS WHEREOF, the parties have executed this Shareholders'
Agreement as of the day and year first above written.
VIASAT, INC. SOUTHERN CALIFORNIA VENTURES
By__________________________________ By______________________________________
/s/Robert W. Johnson
____________________________________ ________________________________________
Robert W. Johnson Mark D. Dankberg
____________________________________ ________________________________________
Thomas A. Tisch Steven R. Hart
________________________________________
Mark J. Miller
7.
23
at least $500,000, or (iii) the conversion of more than 50% of the shares of
Preferred Stock issued to the Investors pursuant to the Purchase Agreement.
IN WITNESS WHEREOF, the parties have executed this Shareholders'
Agreement as of the day and year first above written.
VIASAT, INC. SOUTHERN CALIFORNIA VENTURES
By__________________________________ By______________________________________
____________________________________ ________________________________________
Robert W. Johnson Mark D. Dankberg
/s/Thomas A. Tisch
____________________________________ ________________________________________
Thomas A. Tisch Steven R. Hart
________________________________________
Mark J. Miller
7.
1
EXHIBIT 10.14
COMMERCIAL SECURITY AGREEMENT
- ----------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
$1,000,000.00 04-05-1994 07-05-1995 17650-34733 040 50/51 105 /s/
- ----------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- -------------------------------------------------------------------------------
BORROWER: VIASAT, INC. LENDER: SCRIPPS BANK
2290 COSMOS COURT LA JOLLA
CARLSBAD, CA 92009-1565 7817 IVANHOE AVENUE
P.O. BOX 8669
LA JOLLA, CA 92038-8669
===============================================================================
THIS COMMERCIAL SECURITY AGREEMENT IS ENTERED INTO BETWEEN VIASAT, INC.
(REFERRED TO BELOW AS "GRANTOR"); AND SCRIPPS BANK (REFERRED TO BELOW AS
"LENDER"). FOR VALUABLE CONSIDERATION, GRANTOR GRANTS TO LENDER A SECURITY
INTEREST IN THE COLLATERAL TO SECURE THE INDEBTEDNESS AND AGREES THAT LENDER
SHALL HAVE THE RIGHTS STATED IN THIS AGREEMENT WITH RESPECT TO THE COLLATERAL,
IN ADDITION TO ALL OTHER RIGHTS WHICH LENDER MAY HAVE BY LAW.
DEFINITIONS. The following words shall have the following meanings when used
in this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
AGREEMENT. The word "Agreement" means this Commercial Security Agreement,
as this Commercial Security Agreement may be amended or modified from time
to time, together with all exhibits and schedules attached to this
Commercial Security Agreement from time to time.
COLLATERAL. The word "Collateral" means the following described property
of Grantor, whether now owned or hereafter acquired, whether now existing
or hereafter arising, and wherever located:
ALL INVENTORY, CHATTEL PAPER, ACCOUNTS, CONTRACT RIGHTS, EQUIPMENT,
GENERAL INTANGIBLES AND FIXTURES
In addition, the word "Collateral" includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located:
(a) All attachments, accessions, accessories, tools, parts, supplies,
increases, and additions to and all replacements of and substitutions
for any property described above.
(b) All products and produce of any of the property described in this
Collateral section.
(c) All accounts, contract rights, general intangibles, instruments,
rents, monies, payments, and all other rights arising out of a sale,
lease, or other disposition of any of the property described in this
Collateral section.
(d) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property described
in this Collateral section.
(e) All records and data relating to any of the property described in
this Collateral section, whether in the form of a writing, photograph,
microfilm, microfiche, or electronic media, together with all of
Grantor's right, title, and interest in and to all computer software
required to utilize, create, maintain, and process any such records or
data on electronic media.
EVENT OF DEFAULT. The words "Event of Default" mean and include any of the
Events of Default set forth below in the section titled "Events of
Default."
GRANTOR. The word "Grantor" means VIASAT, INC., its successors and
assigns
GUARANTOR. The word "Guarantor" means and includes without limitation,
each and all of the guarantors, sureties, and accommodation parties in
connection with the Indebtedness.
INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by
the Note, including all principal and interest, together with all other
indebtedness and costs and expenses for which Grantor is responsible under
this Agreement or under any of the Related Documents.
LENDER. The word "Lender" means Scripps Bank, its successors and assigns.
NOTE. The word "Note" means the note or credit agreement dated April 5,
1994, in the principal amount of $1,000,000.00 from Grantor to Lender,
together with all renewals of, extensions of, modifications of,
refinancings of, consolidations of and substitutions for the note or credit
agreement.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
guaranties, security agreements, mortgages, deeds of trust, and all other
instruments, agreements and documents, whether now or hereafter existing,
executed in connection with the Indebtedness.
DEPOSIT ACCOUNTS. Grantor hereby grants Lender a contractual possessory
security interest in and hereby assigns, conveys, delivers, pledges, and
transfers all of Grantor's right, title and interest in and to Grantor's
accounts with Lender (whether checking, savings, or some other account),
including all accounts held jointly with someone else and all accounts Grantor
may open in the future, excluding however all IRA, Keogh, and trust accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
PERFECTION OF SECURITY INTEREST. Grantor agrees to execute such financing
statements and to take whatever other actions are requested by Lender to
perfect and continue Lender's security interest in the Collateral. Upon
request of Lender, Grantor will deliver to Lender any and all of the
documents evidencing or constituting the Collateral, and Grantor will note
Lender's interest upon any and all chattel paper if not delivered to Lender
for possession by Lender. Grantor hereby appoints Lender as its irrevocable
attorney-in-fact for the purpose of executing any documents necessary to
perfect or to continue the security interest granted in this Agreement.
Lender may at any time, and without further authorization from Grantor,
file a carbon, photographic or other reproduction of any financing
statement or of this Agreement for use as a financing statement. Grantor
will reimburse Lender for all expenses for the perfection and the
continuation of the perfection of Lender's security interest in the
Collateral. Grantor promptly will notify Lender before any change in
Grantor's name including any change to the assumed business names of
Grantor. THIS IS A CONTINUING SECURITY AGREEMENT AND WILL CONTINUE IN
EFFECT EVEN THOUGH ALL OR ANY PART OF THE INDEBTEDNESS IS PAID IN FULL AND
EVEN THOUGH FOR A PERIOD OF TIME GRANTOR MAY NOT BE INDEBTED TO LENDER.
NO VIOLATION. The execution and delivery of this Agreement will not
violate any law or agreement governing Grantor or to which Grantor is a
party, and its certificate or articles of incorporation and bylaws do not
prohibit any term or condition of this Agreement.
ENFORCEABILITY OF COLLATERAL. To the extent the Collateral consists of
accounts, contract rights, chattel paper, or general intangibles, the
Collateral is enforceable in accordance with its terms, is genuine, and
complies with applicable laws concerning form, content and manner of
preparation and execution, and all persons appearing to be obligated on the
Collateral have authority and capacity to contract and are in fact
obligated as they appear to be on the Collateral. At the time any account
becomes subject to a security interest in favor of Lender, the account
shall be a good and valid account representing an undisputed, bona fide
indebtedness incurred by the account debtor, for merchandise held subject
to delivery instructions or theretofore shipped or delivered pursuant to a
contract of sale, or for services theretofore performed by Grantor with or
for the account debtor; there shall be no setoffs or counterclaims against
any such account; and no agreement under which any deductions or discounts
may be claimed shall have been made with the account debtor except those
disclosed to Lender in writing.
LOCATION OF THE COLLATERAL. Grantor, upon request of Lender, will deliver
to Lender in form satisfactory to Lender a schedule of real properties and
Collateral locations relating to Grantor's operations, including without
limitation the following: (a) all real property owned or being purchased by
Grantor; (b) all real property being rented or leased by Grantor; (c) all
storage facilities owned, rented, leased, or being used by Grantor; and (d)
all other properties where Collateral is or may be located. Except in the
ordinary course of its business, Grantor shall not remove the Collateral
from its existing locations without the prior written consent of Lender.
REMOVAL OF COLLATERAL. Grantor shall keep the Collateral (or to the extent
the Collateral consists of intangible property such as accounts, the
records concerning the Collateral) at Grantor's address shown above, or at
such other locations as are acceptable to Lender. Except in the ordinary
course of its business, including the sales of inventory, Grantor shall not
remove the Collateral from its existing locations without the prior written
consent of Lender. To the extent that the Collateral consists of vehicles,
or other titled property, Grantor shall not take or permit any action which
would require application for certificates of title for the vehicles
outside the State of California, without the prior written consent of
Lender.
TRANSACTIONS INVOLVING COLLATERAL. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business, Grantor shall not sell,
offer to sell, or otherwise transfer or dispose of the Collateral. While
Grantor is not in default under this Agreement, Grantor may sell inventory, but
only in the ordinary course of its business and only to buyers who qualify as a
buyer in the ordinary course of business. A sale in the ordinary course of
Grantor's business does not include a transfer in partial or total satisfaction
of a debt or any bulk sale. Grantor shall not pledge, mortgage, encumber or
otherwise permit the Collateral to be subject to any lien, security interest,
encumbrance or charge other than the
2
04-05-1994 COMMERCIAL SECURITY AGREEMENT Page 2
Loan No 17650-34733 (Continued)
================================================================================
security interest provided for in this Agreement, without the prior written
consent of Lender. This includes security interests even if junior in right to
the security interests granted under this Agreement. Unless waived by Lender,
all proceeds from any disposition of the Collateral (for whatever reason) shall
be held in trust for Lender and shall not be commingled with any other funds;
provided however, this requirement shall not constitute consent by Lender to
any sale or other disposition. Upon receipt, Grantor shall immediately deliver
any such proceeds to Lender.
TITLE. Grantor represents and warrants to Lender that it holds good and
marketable title to the Collateral, free and clear of all liens and
encumbrances except for the lien of this Agreement. No financing statement
covering any of the Collateral is on file in any public office other than those
which reflect the security interest created by this Agreement or to which
Lender has specifically consented. Grantor shall defend Lender's rights in the
Collateral against the claims and demands of all other persons.
COLLATERAL SCHEDULES AND LOCATIONS. As often as Lender shall require, and
insofar as the Collateral consists of accounts and general intangibles, Grantor
shall deliver to Lender schedules of such Collateral, including such
information as Lender may require, including without limitation names and
addresses of account debtors and agings of accounts and general intangibles.
Insofar as the Collateral consists of inventory and equipment, Grantor shall
deliver to Lender, as often as Lender shall require, such lists, descriptions,
and designations of such Collateral as Lender may require to identify the
nature, extent, and location of such Collateral. Such information shall be
submitted for Grantor and each of its subsidiaries or related companies.
MAINTENANCE AND INSPECTION OF COLLATERAL. Grantor shall maintain all tangible
Collateral in good condition and repair. Grantor will not commit or permit
damage to or destruction of the Collateral or any part of the Collateral.
Lender and its designated representatives and agents shall have the right at
all reasonable times to examine, inspect, and audit the Collateral wherever
located. Grantor shall immediately notify Lender of all cases involving the
return, rejection, repossession, loss or damage of or to any Collateral; of any
request for credit or adjustment or of any other dispute arising with respect
to the Collateral; and generally of all happenings and events affecting the
Collateral or the value or the amount of the Collateral.
TAXES, ASSESSMENTS AND LIENS. Grantor will pay when due all taxes, assessments
and liens upon the Collateral, its use or operation, upon this Agreement, upon
any promissory note or notes evidencing the indebtedness, or upon any of the
other Related Documents. Grantor may withhold any such payment or may elect to
contest any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as Lender's interest in
the Collateral is not jeopardized in Lender's sole opinion. If the collateral
is subjected to a lien which is not discharged with fifteen (15) days, Grantor
shall deposit with Lender cash, a sufficient corporate surely bond or other
security satisfactory to Lender in an amount adequate to provide for the
discharge of the lien plus any interest, costs, attorneys' fees or other
charges that could accrue as a result of foreclosure or sale of the Collateral.
In any contest Grantor shall defend itself and Lender and shall satisfy any
final adverse judgment before enforcement against the Collateral. Grantor shall
name Lender as an additional obligee under any surety bond furnished in the
contest proceedings.
COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor shall comply promptly with
all laws, ordinances and regulations of all governmental authorities applicable
to the production, disposition, or use of the collateral. Grantor may contest in
good faith any such law, ordinance or regulation and withhold compliance during
any proceeding, including appropriate appeals, so long as Lender's interest in
the Collateral, in Lender's opinion, is not jeopardized.
HAZARDOUS SUBSTANCES. Grantor represents and warrants that the Collateral never
have been, and never will be so long as this Agreement remains a lien on the
collateral, used for the generation, manufacture, storage, transportation,
treatment, disposal, release or threatened release of any hazardous waste or
substance, as those terms are defined in the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C.
Section 9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization
Act of 1986, Pub. L. No. 99-499 ("SATA"), the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation
and Recovery Act, 49 U.S.C. Section 6901, et seq., Chapters 6.5 through 7.7 of
Division 20 of the California Health and Safety Code, Section 25100, et seq.,
or other applicable state or Federal laws, rules, or regulations adopted
pursuant to any of the foregoing. The terms "hazardous waste" and "hazardous
substance" shall also include, without limitation, petroleum and petroleum
by-products or any fraction thereof and asbestos. The representations and
warranties contained herein are based on Grantor's due diligence in
investigating the Collateral for hazardous wastes and substances. Grantor
hereby (a) releases and waives any future claims against Lender for indemnity
or contribution in the event Grantor becomes liable for cleanup or other costs
under any such laws, and (b) agrees to indemnify and hold harmless Lender
against any and all claims and losses resulting from a breach of this provision
of this Agreement. This obligation to indemnify shall survive the payment of
the indebtedness and the satisfaction of this Agreement.
MAINTENANCE OF CASUALTY INSURANCE. Grantor shall procure and maintain all
risks insurance, including with limitation fire, theft and liability coverage
together with such other insurance as Lender may require with respect to the
Collateral, in form, amount, coverages and basis reasonably acceptable to
Lender and issued by a company or companies reasonably acceptable to Lender.
Grantor, upon request of Lender, will deliver to Lender from time to time the
policies or certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without at
least ten (10) days' prior written notice to Lender and not including any
disclaimer of the insurer's liability for failure to give such a notice. In
connection with all policies covering assets in which Lender holds or is
offered a security interest, Grantor will provide Lender with such loss payable
or other endorsements as Lender may require. In no event shall the insurance be
in an amount less than the amount agreed upon in the Agreement to Provide
Insurance. If Grantor at any time fails to obtain or maintain any insurance as
required under this Agreement, Lender may (but shall not be obligated to)
obtain such insurance as Lender deems appropriate, including if it so chooses
"single interest insurance," which will cover only Lender's interest in the
Collateral.
APPLICATION OF INSURANCE PROCEEDS. Grantor shall promptly notify Lender of any
loss or damage to the Collateral. Lender may make proof of loss if Grantor
fails to do so within fifteen (15) days of the casualty. All proceeds of any
insurance on the Collateral, including accrued proceeds thereon, shall be held
by Lender as part of the Collateral. If Lender consents to repair or
replacement of the damaged or destroyed Collateral, Lender shall, upon
satisfactory proof of expenditure, pay or reimburse Grantor from the proceeds
for the reasonable cost of repair or restoration. If Lender does not consent to
repair or replacement of the Collateral, Lender shall retain a sufficient amount
of the proceeds to pay all of the Indebtedness, and shall pay the balance to
Grantor. Any proceeds which have not been disbursed within six (6) months after
their receipt and which Grantor has not committed to the repair or restoration
of the Collateral shall be used to prepay the indebtedness.
INSURANCE RESERVES. Lender may require Grantor to maintain with lender
reserves for payment of insurance premiums, which reserves shall be created by
monthly payments from Grantor of a sum estimated by lender to be sufficient to
produce, at least fifteen (15) days before the premium due date, amounts at
least equal to the insurance premiums to be paid. If fifteen (15) days before
payment is due, the reserve funds are insufficient, Grantor shall upon demand
pay any deficiency to Lender. The reserve funds shall be held by lender as a
general deposit and shall constitute a non-interest-bearing account which lender
may satisfy by payment of the insurance premiums required to be paid by Grantor
as they become due. Lender does not hold the reserve funds in trust for
Grantor, and Lender is not the agent of Grantor for payment of the insurance
premiums required to be paid by Grantor. The responsibility for the payment of
premiums shall remain Grantor's sole responsibility.
INSURANCE REPORTS. Grantor, upon request of Lender, shall furnish to Lender
reports on each existing policy of insurance showing such information as Lender
amy reasonably request including the following: (a) the name of the insurer; (b)
the risks insured; (c) the amount of the policy; (d) the property insured; (e)
the then current value on the basis of which insurance has been obtained and
the manner of determining that value; and (f) the expiration date of the
policy. In addition, Grantor shall upon request by Lender (however not more
often than annually) have an independent appraiser satisfactory to Lender
determine, as applicable, the cash value or replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and
except as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to
possession and beneficial use shall not apply to any Collateral where
possession of the Collateral by Lender is required by law to perfect Lender's
security interest in such Collateral. Until otherwise notified by lender,
Grantor may collect any of the Collateral consisting of accounts. At any time
and even though no Event of Default exists, Lender may exercise its rights to
collect the accounts and to notify account debtors to make payment directly to
Lender for application to the Indebtedness. If Lender at any time has
possession of any Collateral, whether before or after an Event of Default,
Lender shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral if Lender takes such action for that purpose as
Grantor shall request or as Lender, in Lender's sole discretion, shall deem
appropriate under the circumstances, but failure to honor any request by
Grantor shall not of itself be deemed to be a failure to exercise reasonable
care. lender shall not be required to take any steps necessary to preserve any
rights in the Collateral against prior parties, nor to protect, preserve or
maintain any security interest given to secure the Collateral.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without
limitation all taxes, liens, security interests, encumbrances, and other
claims, at any time levied or placed on the Collateral. Lender also may (but
shall not be obligated to) pay all costs for insuring, maintaining and
preserving the Collateral. All such expenditures incurred or paid by Lender for
such purposes will then bear interest at the rate charged under the Note from
the date incurred or paid by Lender to the date or repayment by Grantor. All
such expenses shall become a part of the Indebtedness and, at Lender's option,
will (a) be payable on demand, (b) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (i) the term of any applicable insurance policy or (ii) the
remaining term of the Note, or (c) be treated as a balloon payment which will
be due and payable at the Note's maturity. This Agreement also will secure
payment of these amounts. Such right shall be in addition to all other rights
and remedies to which Lender may be entitled upon the occurrence of an Event of
Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
3
04-05-1994 COMMERCIAL SECURITY AGREEMENT Page 3
Loan No. 17650-34733 (Continued)
===============================================================================
DEFAULT ON INDEBTEDNESS. Failure of Grantor to make any payment when due
on the Indebtedness.
OTHER DEFAULTS. Failure of Grantor to comply with or to perform any
other term, obligation, covenant or condition contained in this
Agreement or in any of the Related Documents or in any other agreement
between Lender and Grantor. If any default, other than a Default on
Indebtedness, is curable and if Grantor has not been given a prior
notice of a breach of the same provision of this Agreement, it may be
cured (and no Event of Default will have occurred) if Grantor, after
Lender sends written notice demanding cure of such default, (a) cures
the default within fifteen (15) days; or (b), if the cure requires more
than fifteen (15) days, immediately initiates steps which Lender deems
in Lender's sole discretion to be sufficient to cure the default and
thereafter continues and completes all reasonable and necessary steps
sufficient to product compliance as soon as reasonably practical.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Grantor under this Agreement is
false or misleading in any material respect, either now or at the time
made or furnished.
DEFECTIVE COLLATERALIZATION. This Agreement or any other Related
Documents ceases to be in full force and effect (including failure of
any collateral documents to create a valid and perfected security
interest or lien) at any time and for any reason.
INSOLVENCY. The dissolution or termination of Grantor's existence as a
going business, the insolvency of Grantor, the appointment of a
receiver for any part of Grantor's property, any assignment for the
benefit of creditors, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Grantor.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against the Collateral or any other collateral
securing the Indebtedness. This includes a garnishment of any of
Grantor's deposit accounts with Lender. However, this Event of Default
shall not apply if there is a good faith dispute by Grantor as to the
validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Grantor gives Lender written
notice of the creditor or forfeiture proceeding and deposits with
Lender monies or a surety bond for the creditor or forfeiture
proceeding, in an amount determined by the Lender, in its sole
discretion, as being an adequate reserve or bond for the dispute.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or such Guarantor
dies or becomes incompetent. Lender, at its option, may, but shall not
be required to, permit the Guarantor's estate to assume unconditionally
the obligations arising under the guaranty in a manner satisfactory to
Lender, and, in doing so, cure the Event of Default.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a
secured party under the California Uniform Commercial Code. In addition and
without limitation, Lender may exercise any one or more of the following rights
and remedies:
ACCELERATE INDEBTEDNESS. Lender may declare the entire Indebtedness,
including any prepayment penalty which Grantor would be required to
pay, immediately due and payable, without notice.
ASSEMBLE COLLATERAL. Lender may require Grantor to deliver to Lender
all or any portion of the Collateral and any and all certificates of
title and other documents relating to the Collateral. Lender may
require Grantor to assemble the Collateral and make it available to
Lender at a place to be designated by Lender. Lender shall have
full power to enter upon the property of Grantor to take possession of
and remove the Collateral. If the Collateral contains other goods not
covered by this Agreement at the time of repossession, Grantor agrees
Lender may take such other goods, provided that Lender makes reasonable
efforts to return them to Grantor after repossession.
SELL THE COLLATERAL. Lender shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof in
its own name or that of Grantor. Lender may sell the collateral at
public auction or private sale. Unless the Collateral threatens to
decline speedily in value or is of a type customarily sold on a
recognized market, Lender will give Grantor reasonable notice of the
time after which any private sale or any other intended disposition of
the Collateral is to be made. The requirements of reasonable notice
shall be met if such notice is given at least ten (10) days, or such
lesser time as required by state law, before the time of the sale or
disposition. All expenses relating to the disposition of the Collateral,
including without limitation the expenses of retaking, holding,
insuring, preparing for sale and selling the Collateral, shall become
a part of the Indebtedness secured by this Agreement and shall be
payable on demand, with interest at the Note rate from date of
expenditure until repaid.
APPOINT RECEIVER. To the extent permitted by applicable law, Lender
shall have the following rights and remedies regarding the appointment
of a receiver: (a) Lender may have a receiver appointed as a matter of
right, (b) the receiver may be an employee of Lender and may serve
without bond, and (c) all fees of the receiver and his or her attorney
shall become part of the Indebtedness secured by this Agreement and
shall be payable on demand, with interest at the Note rate from date of
expenditure until repaid.
COLLECT REVENUES, APPLY ACCOUNTS. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from
the Collateral. Lender may at any time in its discretion transfer any
Collateral into its own name or that of its nominee and receive the
payments, rents, income, and revenues therefrom and hold the same as
security for the Indebtedness or apply it to payment of the
Indebtedness in such order of preference as Lender may determine.
Insofar as the Collateral consists of accounts, general intangibles,
insurance policies, instruments, chattel paper, chooses in action, or
similar property, Lender may demand, collect, receipt for, settle,
compromise, adjust, sue for, foreclose, or realize on the Collateral
as Lender may determine, whether or not Indebtedness or Collateral is
then due. For these purposes, Lender may, on behalf of and in the name
of Grantor, receive, open and dispose of mail addressed to Grantor;
change any address to which mail and payments are to be sent; and
endorse notes, checks, drafts, money orders, documents of title,
instruments and items pertaining to payment, shipment, or storage of
any Collateral. To facilitate collection, Lender may notify account
debtors and obligors on any Collateral to make payments directly to
Lender.
OBTAIN DEFICIENCY. If Lender chooses to sell any or all of the
Collateral, Lender may obtain a judgment against Grantor for any
deficiency remaining on the Indebtedness due to Lender after
application of all amounts received from the exercise of the rights
provided in this Agreement. Grantor shall be liable for a deficiency
even if the transaction described in this subsection is a sale of
accounts or chattel paper.
OTHER RIGHTS AND REMEDIES. Lender shall have all the rights and
remedies of a secured creditor under the provisions of the Uniform
Commercial Code, as may be amended from time to time. In addition,
Lender shall have and may exercise any or all other rights and remedies
it may have available at law, in equity, or otherwise.
CUMULATIVE REMEDIES. All of Lender's rights and remedies, whether
evidenced by this Agreement or the Related Documents or by any other
writing, shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude
pursuit of any other remedy, and an election to make expenditures or to
take action to perform an obligation of Grantor under this Agreement,
after Grantor's failure to perform, shall not affect Lender's right to
declare a default and to exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. No alteration of or amendment
to this Agreement shall be effective unless given in writing and signed
by the party or parties sought to be charged or bound by the alteration
or amendment.
APPLICABLE LAW. This Agreement has been delivered to Lender and
accepted by Lender in the State of California. It there is a lawsuit,
Grantor agrees upon Lender's request to submit to the jurisdiction of
the courts of San Diego County, State of California. This Agreement
shall be governed by and construed in accordance with the laws of the
State of California.
ATTORNEYS' FEES; EXPENSES. Grantor agrees to pay upon demand all of
Lender's costs and expenses, including attorneys' fees and Lender's
legal expenses, incurred in connection with the enforcement of this
Agreement. Lender may pay someone else to help enforce this Agreement,
and Grantor shall pay the costs and expenses of such enforcement. Costs
and expenses include Lender's attorneys' fees and legal expenses
whether or not there is a lawsuit, including attorneys' fees and legal
expenses for bankruptcy proceedings (and including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Grantor also shall pay all court
costs and such additional fees as may be directed by the court.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the
provisions of this Agreement.
MULTIPLE PARTIES; CORPORATE AUTHORITY. All obligations of Grantor under
this Agreement shall be joint and several, and all references to
Grantor shall mean each and every Grantor. This means that each of the
persons signing below is responsible for ALL obligations in this
Agreement.
NOTICES. All notices required to be given under this Agreement shall be
given in writing and shall be effective when actually delivered or when
deposited with a nationally recognized overnight courier or deposited
in the United States mail, first class, postage prepaid, addressed to
the party to whom the notice is to be given at the address shown above.
Any party may change its address for notices under this Agreement by
giving formal written notice to the other parties, specifying that the
purpose of the notice is to change the parties address. To the extent
permitted by applicable law, if there is more than one grantor, notice
to any grantor will constitute notice to all grantors. For notice
purposes, Borrower agrees to keep Lender informed at all times of
Borrower's current address(es).
4
04-05-1994 COMMERCIAL SECURITY AGREEMENT Page 4
Loan No 17650-34733 (Continued)
===============================================================================
POWER OF ATTORNEY. Grantor hereby appoints Lender as its true and lawful
attorney-in-fact, irrevocably, with full power of substitution to do the
following: (b) to execute, sign and endorse any and all claims,
instruments, receipts, checks, drafts or warrants issued in payment for
the Collateral; (c) to settle or compromise any and all claims arising
under the Collateral, and, in the place and stead of Grantor, to execute
and deliver its release and settlement for the claim; and (d) to file
any claim or claims or to take any action or institute or take part in
any proceedings, either in its own name or in the name of Grantor, or
otherwise, which in the discretion of Lender may seem to be necessary or
advisable. this power is given as security for the indebtedness, and the
authority hereby conferred is and shall be irrevocable and shall remain
in full force and effect until renounced by Lender.
PREFERENCE PAYMENTS. Any monies Lender pays because of an asserted
preference claim in Borrower's bankruptcy will become a part of the
indebtedness and, at Lender's option, shall be payable by Borrower as
provided above in the "EXPENDITURES BY LENDER" paragraph.
SEVERABILITY. If a court of competent jurisdiction finds any provision
of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending
provision cannot be so modified, it shall be stricken and all other
provisions of this Agreement in all other respects shall remain valid
and enforceable.
SUCCESSOR INTERESTS. Subject to the limitations set forth above on
transfer to the Collateral, this Agreement shall be binding upon and
inure to the benefit of the parties, their successors and assigns.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender.
No delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender
of a provision of this Agreement shall not prejudice or constitute a
waiver of Lender's right otherwise to demand strict compliance with that
provision or any other provision of this Agreement. No prior waiver by
Lender, nor any course of dealing between Lender and Grantor, shall
constitute a waiver of any of Lender's rights or of any of Grantor's
obligations as to any future transactions. Whenever the consent of
Lender is required under this Agreement, the granting of such consent by
Lender in any instance shall not constitute continuing consent to
subsequent instances where such consent is required and in all cases
such consent may be granted or withheld in the sole discretion of
Lender.
WAIVER OF CO-OBLIGOR'S RIGHTS. If more than one person is obligated for
the indebtedness, Borrower irrevocably waives, disclaims and
relinquishes all claims against such other person which Borrower has or
would otherwise have by virtue of payment of the indebtedness or any
part thereof, specifically including but not limited to all rights of
indemnity, contribution or exoneration.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED APRIL 5,
1994.
GRANTOR:
VIASAT, INC.
X /s/ Gregory Monahan
-------------------------------------
AUTHORIZED SIGNER
===============================================================================
5
NOTICE OF INSURANCE REQUIREMENTS
- --------------------------------------------------------------------------------
LOAN DATE LOAN NO. CALL COLLATERAL CUSTOMER NO OFFICER INITIALS
04-05-1994 17650-34733 040 50/51 105
- --------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- --------------------------------------------------------------------------------
BORROWER: VIASAT, INC. LENDER: SCRIPPS BANK
2290 COSMOS COURT LA JOLLA
CARLSBAD, CA 92009-1565 7817 IVANHOE AVENUE
P.O. BOX 8669
LA JOLLA, CA 92039-8669
===============================================================================
-------------------------------
E.J. PHELPS, INC.
TO: 2250 FOURTH AVENUE, SUITE 200 DATE: APRIL 5, 1994
SAN DIEGO, CA 92101-2100
-------------------------------
DEAR INSURANCE AGENT:
RE: POLICY NUMBER(S): 35290456
VIASAT, INC. ("BORROWER") IS OBTAINING A LOAN FROM SCRIPPS BANK. PLEASE SEND
APPROPRIATE EVIDENCE OF INSURANCE TO SCRIPPS BANK, TOGETHER WITH THE REQUESTED
ENDORSEMENTS, ON THE FOLLOWING PERPERTY, WHICH BORROWER IS GIVING AS SECURITY
FOR THE LOAN.
COLLATERAL: ALL INVENTORY, EQUIPMENT AND FIXTURES.
TYPE. All risks, including fire, theft and liability
AMOUNT. $1,000,000.00.
BASIS. Replacement value.
ENDORSEMENTS. Lender's loss payable clause with stipulation that
coverage will not be cancelled or diminished without a minimum of
ten (10) days' prior written notice to Lender.
DEDUCTIBLES. $250.00.
BORROWER:
VIASAT, INC.
X /s/ Gregory Monahan
----------------------------------
AUTHORIZED SIGNER
MAIL TO:
-------------------------------
SCRIPPS BANK
7817 IVANHOE AVENUE
P.O. BOX 8669
LA JOLLA, CA 92038-8669
-------------------------------
6
AGREEMENT TO PROVIDE INSURANCE
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
$1,000,000.00 04-05-1994 07-05-1995 17650-34733 040 50/51 105
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
Borrower: VIASAT, INC. Lender: Scripps Bank
2290 COSMOS COURT La Jolla
CARLSBAD, CA 92009-1565 7817 Ivanhoe Avenue
P.O. Box 8669
La Jolla, CA 92038-8669
================================================================================
INSURANCE REQUIREMENTS. VIASAT, INC. ("Grantor") understands that insurance
coverage is required in connection with the extending of a loan of the
providing of other financial accommodations to Grantor by Lender. These
requirements are set forth in the security documents. The following minimum
insurance coverages must be provided on the following described collateral (the
"Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type. All risks, including fire, theft and liability.
Amount. $1,000,000.00.
Basis. Replacement value.
Endorsements. Lender's loss payable clause with stipulation that
coverage will not be cancelled or diminished without a minimum of
ten (10) days prior written notice to Lender.
Deductibles. $250.00.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance company
Grantor may choose that is reasonably acceptable to Lender. Grantor understands
that credit may not be denied solely because insurance was not purchased
through Lender.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Lender, ten (10)
days from the date of this Agreement, evidence of the required insurance as
provided above, with an effective date of April 5, 1994, or earlier. Grantor
acknowledges and agrees that if Grantor fails to provide any required insurance
or fails to continue such insurance in force, Lender may do so at Grantor's
expense as provided in the applicable security document. The cost of any such
insurance, at the option of Lender, shall be payable on demand or shall be
added to the indebtedness as provided in the security document. GRANTOR
ACKNOWLEDGES THAT IF LENDER SO PURCHASES ANY SUCH INSURANCE, THE INSURANCE WILL
PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO THE
BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN THE COLLATERAL MAY NOT BE
INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR
PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY
FINANCIAL RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral, Grantor
authorizes Lender to provide to any person (including any insurance agent or
company) all information Lender deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO
PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED APRIL 5,
1994.
GRANTOR:
VIASAT, INC.
x /s/ Gregory Monahan
------------------------
AUTHORIZED SIGNER
- --------------------------------------------------------------------------------
\ FOR LENDER USE ONLY /
\ INSURANCE VERIFICATION /
\ /
\ DATE:______________________ PHONE:_____________________ /
\ AGENT'S NAME: E.J. PHELPS, INC. /
\ ADDRESS: 2250 FOURTH AVENUE, SUITE 200, SAN DIEGO, CA 92101-2100 /
\ INSURANCE COMPANY:________________________________________________________ /
\ POLICY NUMBER(S): 35290456 /
\ EFFECTIVE DATES:__________________________________________________________ /
\ COMMENTS:_________________________________________________________________ /
- --------------------------------------------------------------------------------
================================================================================
7
DISBURSEMENT REQUEST AND AUTHORIZATION
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
$1,000,000.00 04-05-1994 07-05-1995 17650-34733 040 50/51 105 /s/
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
Borrower: VIASAT, INC. Lender: Scripps Bank
2290 COSMOS COURT La Jolla
CARLSBAD, CA 92009-1565 7817 Ivanhoe Avenue
P.O. Box 8669
La Jolla, CA 92038-8669
================================================================================
LOAN TYPE. This is a Variable Rate (1.500% over Wall Street Journal Prime Rate
as published in the Money Rates section. When a range of rates is shown, the
higher rate will be used., making an initial rate of 7.750%), Revolving Line of
Credit Loan to a Corporation for $1,000,000.00 due on July 5, 1995.
PRIMARY PURPOSE OF LOAN. The primary purpose of the loan is for:
[ ] Personal, Family, or Household Purposes or Personal Investment.
[X] Business (including Real Estate Investment).
SPECIFIC PURPOSE. The specific purpose of this loan is: INCREASE EXISTING
$700,000.00 REVOLVING LINE OF CREDIT TO SUPPORT COMPANY GROWTH IN REVENUE AND
ACCOUNT RECEIVABLE.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $1,000,000.00 as follows:
Amount paid on Borrower's account: $350,000.00
$350,000.00 Payment on Loan # 17650-34733 (RENEW)
Amount paid to others on Borrower's behalf: $650,000.00
$650,000.00 UNDISBURSED; TO BE DISBURSED
PER FUNDS TRANSFER AGREEMENT
-------------
Note Principal: $1,000,000.00
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges.
Prepaid Finance Charges Paid In Cash: $500.00
$500.00 DOCUMENT FEE
-------------
Total Charges Paid In Cash: $500.00
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS
AUTHORIZATION IS DATED APRIL 5, 1994.
BORROWER:
VIASAT, INC.
x /s/ Gregory Monahan
----------------------
AUTHORIZED SIGNER
================================================================================
8
BUSINESS LOAN AGREEMENT
- ----------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
$1,000,000.00 04-05-1994 07-05-1995 17650-34733 040 50/51 105 /s/
- ----------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- -------------------------------------------------------------------------------
BORROWER: VIASAT, INC. LENDER: SCRIPPS BANK
2290 COSMOS COURT LA JOLLA
CARLSBAD, CA 92009-1565 7817 IVANHOE AVENUE
P.O. BOX 8669
LA JOLLA, CA 92038-8669
===============================================================================
THIS BUSINESS LOAN AGREEMENT BETWEEN VIASAT, INC. ("BORROWER") AND SCRIPPS BANK
("LENDER") IS MADE AND EXECUTED ON THE FOLLOWING TERMS AND CONDITIONS. BORROWER
HAS RECEIVED PRIOR COMMERCIAL LOANS FROM LENDER OR HAS APPLIED TO LENDER FOR A
COMMERCIAL LOAN OR LOANS AND OTHER FINANCIAL ACCOMMODATIONS, INCLUDING THOSE
WHICH MAY BE DESCRIBED ON ANY EXHIBIT OR SCHEDULE ATTACHED TO THIS AGREEMENT.
ALL SUCH LOANS AND FINANCIAL ACCOMMODATIONS, TOGETHER WITH ALL FUTURE LOANS AND
FINANCIAL ACCOMMODATIONS FROM LENDER TO BORROWER, ARE REFERRED TO IN THIS
AGREEMENT INDIVIDUALLY AS THE "LOAN" AND COLLECTIVELY AS THE "LOANS." BORROWER
UNDERSTANDS AND AGREES THAT: (a) IN GRANTING, RENEWING, OR EXTENDING ANY LOAN,
LENDER IS RELYING UPON BORROWER'S REPRESENTATIONS, WARRANTIES, AND AGREEMENTS,
AS SET FORTH IN THIS AGREEMENT; (b) THE GRANTING, RENEWING, OR EXTENDING OF ANY
LOAN BY LENDER AT ALL TIMES SHALL BE SUBJECT TO LENDER'S SOLE JUDGMENT AND
DISCRETION; AND (c) ALL SUCH LOANS SHALL BE AND SHALL REMAIN SUBJECT TO THE
FOLLOWING TERMS AND CONDITIONS OF THIS AGREEMENT.
TERM. This Agreement shall be effective as of APRIL 5, 1994, and shall
continue thereafter until all indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used
in this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
AGREEMENT. The word "Agreement" means this Business Loan Agreement, as
this Business Loan Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Business Loan
Agreement from time to time.
BORROWER. The word "Borrower" means VIASAT, INC. The word "Borrower" also
includes, as applicable, all subsidiaries and affiliates of Borrower as
provided below in the paragraph titled "Subsidiaries and Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
COLLATERAL. The word "Collateral" means and includes without limitation
all property and assets granted as collateral security for a Loan, whether
real or personal property, whether granted directly or indirectly, whether
granted now or in the future, and whether granted in the form of a security
interest, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien, charge, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien
interest whatsoever, whether created by law, contract, or otherwise.
ERISA. The word "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
EVENT OF DEFAULT. The words "Event of Default" mean and include any of the
Events of Default set forth below in the section titled "EVENTS OF
DEFAULT."
GRANTOR. The word "Grantor" means and includes each and all of the persons
or entities granting a Security Interest in any Collateral for the
Indebtedness, including without limitation all Borrowers granting such a
Security Interest.
GUARANTOR. The word "Guarantor" means and includes without limitation,
each and all of the guarantors, sureties, and accommodation parties in
connection with any Indebtedness.
INDEBTEDNESS. The word "Indebtedness" means and includes without
limitation all Loans, together with all other obligations, debts and
liabilities of Borrower to Lender, or any one or more of them, as well as
all claims by Lender against Borrower, or any one or more of them; whether
now or hereafter existing, voluntary or involuntary, due or not due,
absolute or contingent, liquidated or unliquidated; whether Borrower may be
liable individually or jointly with others; whether Borrower may be
obligated as a guarantor, surety, or otherwise; whether recovery upon such
Indebtedness may be or hereafter may become barred by any statute of
limitations; and whether such Indebtedness may be or hereafter may become
otherwise unenforceable.
LENDER. The word "Lender" means Scripps Bank, its successors and assigns.
LOAN. The word "Loan" or "Loans" means and includes any and all commercial
loans and financial accommodations from Lender to Borrower, whether now or
hereafter existing, and however evidenced, including without limitation
those loans and financial accommodations described herein or described on
any exhibit or schedule attached to this Agreement from time to time.
NOTE. The word "Note" means Borrower's promissory note or notes, if any,
evidencing Borrower's Loan obligations in favor of Lender, as well as any
substitute, replacement or refinancing note or notes therefor.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
guaranties, security agreements, mortgages, deeds of trust, and all other
instruments, agreements and documents, whether now or hereafter existing,
executed in connection with the Indebtedness.
SECURITY AGREEMENT. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
Interest.
SECURITY INTEREST. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the form of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien or title retention contract, lease or consignment intended as
a security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization
Act of 1986 as now or hereafter amended.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender as
of the date of this Agreement and as of the date of each disbursement of Loan
proceeds;
ORGANIZATION. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of California.
Borrower has the full power and authority to own its properties and to
transact the businesses in which it is presently engaged or presently
proposes to engage. Borrower also is duly qualified as a foreign
corporation and is in good standing in all states in which the failure to
so qualify would have a material adverse effect on its business or
financial condition.
AUTHORIZATION. The execution, delivery, and performance of this Agreement
and all Related Documents by Borrower, to the extent to be executed,
delivered or performed by Borrower, have been duly authorized by all
necessary action by Borrower; do not require the consent or approval of any
other person, regulatory authority or governmental body; and do not
conflict with, result in a violation of, or constitute a default under (a)
any provision of its articles of incorporation or organization, or bylaws,
or any agreement or other instrument binding upon Borrower or (b) any law,
governmental regulation, court decree, or order applicable to Borrower.
FINANCIAL INFORMATION. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as of
the date of the statement, and there has been no material adverse change in
Borrower's financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements.
LEGAL EFFECT. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms.
PROPERTIES. Except as contemplated by this Agreement or a previously
disclosed in Borrower's financial statements or in writing to Lender and as
accepted by Lender, and except for property tax liens for taxes not
presently due and payable, Borrower owns and has good title to all of
Borrower's properties free and clear of all Security Interests, and has not
executed any security documents or financing statements relating to such
properties. All of Borrower's properties are titled in Borrower's legal
name, and Borrower has not used, or filed a financing statement under, any
other name for at least the last five (5) years.
HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used in this Agreement,
shall have the same meanings as set forth in the "CERCLA," "SARA," the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the
Resource Conservation and Recovery Act, 49 U.S.C. Section 6901, et seq.,
Chapters 6.5 through 7.7 of Division 20 of the California Health and Safety
Code, Section 25100, et seq., or other applicable state or Federal laws, rules,
or regulations adopted pursuant to any of the foregoing. Except as disclosed to
and acknowledged by Lender in writing, Borrower represents and warrants that:
(a) During the period of
9
04-05-1994 BUSINESS LOAN AGREEMENT Page 2
Loan No 17650-34733 (Continued)
===============================================================================
Borrower's ownership of the properties, there has been no use, generation,
manufacture, storage, treatment, disposal, release or threatened release of
any hazardous waste or substance by any person on, under, or about any of
the properties. (b) Borrower has no knowledge of, or reason to believe that
there has been (i) any use, generation, manufacture, storage, treatment,
disposal, release, or threatened release of any hazardous waste or
substance by any prior owners or occupants of any of the properties, or
(ii) any actual or threatened litigation or claims of any kind by any
person relating to such matters. (c) Neither Borrower nor any tenant,
contractor, agent or other authorized user of any of the properties shall
use, generate, manufacture, store, treat, dispose of, or release any
hazardous waste or substance on, under, or about any of the properties; and
any such activity shall be conducted in compliance with all applicable
federal, state, and local laws, regulations, and ordinances, including
without limitation those laws, regulations and ordinances described above.
Borrower authorizes Lender and its agents to enter upon the properties to
make such inspections and tests as Lender may deem appropriate to determine
compliance of the properties with this section of the Agreement. Any
inspections or tests made by Lender shall be at Borrower's expense and for
Lender's purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to Borrower or to any
other person. The representations and warranties contained herein are based
on Borrower's due diligence in investigating the properties for hazardous
waste. Borrower hereby (a) releases and waives any future claims against
Lender for indemnity or contribution in the event Borrower becomes liable
for cleanup or other costs under any such laws, and (b) agrees to indemnify
and hold harmless Lender against any and all claims, losses, liabilities,
damages, penalties, and expenses which Lender may directly or indirectly
sustain or suffer resulting from a breach of this section of the Agreement
or as a consequence of any use, generation, manufacture, storage, disposal,
release or threatened release occurring prior to Borrower's ownership or
interest in the properties, whether or not the same was or should have been
known to Borrower. The provisions of this section of the Agreement,
including the obligation to indemnify, shall survive the payment of the
indebtedness and the termination or expiration of this Agreement and shall
not be affected by Lender's acquisition of any interest in any of the
properties, whether by foreclosure or otherwise.
LITIGATION AND CLAIMS. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and no other event has occurred which
may materially adversely affect Borrower's financial condition or
properties, other than litigation, claims, or other events, if any, that
have been disclosed to and acknowledged by Lender in writing.
TAXES. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all
taxes, assessments and other governmental charges have been paid in full,
except those presently being or to be contested by Borrower in good faith
in the ordinary course of business and for which adequate reserves have
been provided.
LIEN PRIORITY. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security Interests on or
affecting any of the Collateral directly or indirectly securing repayment
of Borrower's Loan and Note, that would be prior or that may in any way be
superior to Lender's Security Interests and rights in and to such
Collateral.
BINDING EFFECT. This Agreement, the Note and all Security Agreements
directly or indirectly securing repayment of Borrower's Loan and Note are
binding upon Borrower as well as upon Borrower's successors,
representatives and assigns, and are legally enforceable in accordance with
their respective terms.
COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which Borrower may
have any liability complies in all material respects with all applicable
requirements of law and regulations, and (i) no Reportable Event nor
Prohibited Transaction (as defined in ERISA) has occurred with respect to
any such plan, (ii) Borrower has not withdrawn from any such plan or
initiated steps to do so, and (iii) no steps have been taken to terminate
any such plan.
LOCATION OF BORROWER'S OFFICES AND RECORDS. the chief place of business of
Borrower and the office or offices where Borrower keeps its records
concerning the Collateral is located at 2290 COSMOS COURT, CARLSBAD, CA
92009-1565.
INFORMATION. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender will
be, true and accurate in every material respect on the date as of which
such information is dated or certified; and none of such information is or
will be incomplete by omitting to state any material fact necessary to make
such information not misleading.
SURVIVAL OF REPRESENTATION AND WARRANTIES. Borrower understands and agrees
that Lender is relying upon the above representations and warranties in
extending Loan Advances to Borrower. Borrower further agrees that the
foregoing representations and warranties shall be continuing in nature and
shall remain in full force and effect until such time as Borrower's Loan
and Note shall be paid in full, or until this Agreement shall be terminated
in the manner provided above, whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
LITIGATION. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all litigation and
claims and all threatened litigation and claims affecting Borrower or any
Guarantor which could materially affect the financial condition of Borrower
or the financial condition of any Guarantor.
FINANCIAL RECORDS. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis,
and permit Lender to examine and audit Borrower's books and records at all
reasonable times.
ADDITIONAL INFORMATION. Furnish such additional information and statements,
lists of assets and liabilities, agings of receivables and payables,
inventory schedules, budgets, forecasts, tax returns, and other reports
with respect to Borrower's financial condition and business operations as
Lender may request from time to time.
INSURANCE. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect to
Borrower's properties and operations, in form, amounts, coverages and with
insurance companies reasonably acceptable to Lender. Borrower, upon request
of Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without at
least ten (10) days' prior written notice to Lender. In connection with all
policies covering assets in which Lender holds or is offered a security
interest for the Loans, Borrower will provide Lender with such loss payable
or other endorsements as Lender may require.
INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (a) the
name of the insurer; (b) the risks insured; (c) the amount of the policy;
(d) the properties insured; (e) the then current property values on the
basis of which insurance has been obtained, and the manner of determining
those values; and (f) the expiration date of the policy. In addition, upon
request of Lender (however not more often than annually), Borrower will
have an independent appraiser satisfactory to Lender determine, as
applicable, the actual cash value or replacement cost of any Collateral.
OTHER AGREEMENTS. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender immediately in writing of any default in
connection with any other such agreements.
LOAN PROCEEDS. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
TAXES, CHARGES AND LIENS. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all assessments,
taxes, governmental charges, levies and liens, of every kind and nature,
imposed upon Borrower or its properties, income, or profits, prior to the
date on which penalties would attach, and all lawful claims that, if
unpaid, might become a lien or charge upon any of Borrower's properties,
income, or profits. Provided however, Borrower will not be required to pay
and discharge any such assessment, tax, charge, levy, lien or claim so long
as (a) the legality of the same shall be contested in good faith by
appropriate proceedings, and (b) Borrower shall have established on its
books adequate reserves with respect to such contested assessment, tax,
charge, levy, lien, or claim in accordance with generally accepted
accounting practices. Borrower, upon demand of Lender, will furnish to
Lender evidence of payment of the assessments, taxes, charges, levies,
liens and claims and will authorize the appropriate governmental official
to deliver to Lender at any time a written statement of any assessments,
taxes, charges, levies, liens and claims against Borrower's properties,
income, or profits.
PERFORMANCE. Perform and comply with all terms, conditions, and provisions
set forth in this Agreement and in all other instruments and agreements
between Borrower and Lender in a timely manner, and promptly notify Lender
if Borrower learns of the occurrence of any event which constitutes an
Event of Default under this Agreement.
OPERATIONS. Substantially maintain its present executive and management
personnel; conduct its business affairs in a reasonable and prudent manner
and in compliance with all applicable federal, state and municipal laws,
ordinances, rules and regulations respecting its properties, charters,
businesses and operations, including without limitation, compliance with
the Americans With Disabilities Act and with all minimum funding standards
and other requirements of ERISA and other laws applicable to Borrower's
employee benefit plans.
INSPECTION. Permit employees or agents of Lender at any reasonable time to
inspect any and all collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records
and to make copies and memoranda of Borrower's books, accounts, and
records. If Borrower now or at any time hereafter maintains any records
(including without limitation computer generated records and computer
software programs for the generation of such records) in the possession of
a third party, Borrower, upon request of Lender, shall
10
04-05-1994 BUSINESS LOAN AGREEMENT Page 3
Loan No 17650-34733 (Continued)
================================================================================
notify such party to permit Lender free access to such records at all
reasonable times and to provide Lender with copies of any records it may
request, all at Borrower's expense.
COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide
Lender at least annually and at the time of each disbursement of Loan
proceeds with a certificate executed by Borrower's chief financial
officer, or other officer or person acceptable to Lender, certifying
that the representations and warranties set forth in this Agreement are
true and correct as of the date of the certificate and further
certifying that, as of the date of the certificate, no Event of Default
exists under this Agrement.
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such
promissory notes, mortgages, deeds of trust, security agreements,
financing statements, instruments, documents and other agreements as
Lender or its attorneys may reasonably request to evidence and secure
the Loans and to perfect all Security Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent
of Lender:
INDEBTEDNESS AND LIENS. (a) Except for trade debt incurred in the
normal course of business and indebtedness to Lender contemplated by
this Agreement, create, incur or assume indebtedness for borrowed money,
including capital leases, (b) sell, transfer, mortgage, assign, pledge,
lease, grant a security interest in, or encumber any of Borrower's
assets, or (c) sell with recourse any of Borrower's accounts, except to
Lender.
CONTINUITY OF OPERATIONS. (a) Engage in any business activities
substantially different than those in which Borrower is presently
engaged, (b) cease operations, liquidate, merge, transfer, acquire or
consolidate with any other entity, change ownership, dissolve or
transfer or sell Collateral out of the ordinary course of business, or
(c) pay any dividends on Borrower's stock (other than dividends payable
in its stock and except as may be statutorily required for Subchapter S
corporations) or purchase or retire any of Borrower's outstanding shares
or alter or amend Borrower's capital structure.
LOANS, ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance
money or assets, (b) purchase, create or acquire any interest in any
other enterprise or entity, or (c) incur any obligation as surety or
guarantor other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement
or any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower becomes insolvent, files a petition in
bankruptcy or similar proceedings, or is adjudged a bankrupt; (c) there occurs
a material adverse change in Borrower's financial condition, in the financial
condition of any Guarantor, or in the value of any Collateral securing any
Loan; (d) any Guarantor seeks, claims or otherwise attempts to limit, modify or
revoke such Guarantor's guaranty of the Loan or any other loan with Lender; or
(e) Lender in good faith deems itself insecure even though no Event of Default
shall have occurred.
ADDITIONAL PROVISIONS.
1) TOTAL ADVANCES ARE RESTRICTED TO 75% OF ELIGIBLE ACCOUNTS RECEIVABLE,
DEFINED AS THOSE ACCOUNTS RECEIVABLE LESS THAN 90 DAYS OLD, EXCLUDING ALL
FOREIGN AND CONTRA ACCOUNTS RECEIVABLE.
2) A COMPLETED BORROWING BASE CERTIFICATE WILL BE SUBMITTED TO SCRIPPS BANK AT
THE TIME OF ANY REQUEST FOR LINE ADVANCE.
3) BORROWER WILL PROVIDE SCRIPPS BANK, ON A TIMELY BASIS, MONTHLY FINANCIAL
STATEMENTS, INCLUDING AN ACCOUNTS RECEIVABLE AGING REPORT WITH A COMPLETED
BORROWING BASE CERTIFICATE.
4) BORROWER WILL PROVIDE SCRIPPS BANK A COPY OF ITS FEDERAL TAX RETURN UPON
FILING, AND PROVIDE SCRIPPS BANK WITH A COPY OF ITS CPA AUDITED FINANCIAL
STATEMENTS WITHIN 120 DAYS OF FISCAL YEAR END.
5) BORROWER AGREES TO MAINTAIN AT ALL TIMES, A CURRENT RATIO ABOVE 1.5 TO 1.0,
A DEBT TO WORTH RATIO NOT TO EXCEED 1.5 TO 1.0, AND MAINTAIN A NET WORTH ABOVE
$1,250,000.00.
6) BORROWER AGREES TO ASSIGN SCRIPPS BANK ALL U.S. GOVERNMENT CONTRACTS IF IT
IS OUT OF COMPLIANCE ON ANY OF THE FINANCIAL COVENANTS LISTED ABOVE FOR MORE
THAN 60 CONSECUTIVE DAYS. ASSIGNMENTS WILL BE PERFECTED THROUGH THE ASSIGNMENT
OF CLAIMS ACT OF 1940 AND CORRESPONDING UNIFORM COMMERCIAL CODE FILINGS WITH
THE SECRETARY OF STATE.
7) BORROWER AGREES TO BEAR THE COST OF SCRIPPS BANK ACCOUNTS RECEIVABLE AUDITS,
NOT TO EXCEED $200.00 PER QUARTER, AND AUTHORIZES BANK TO DEBIT ITS ACCOUNT FOR
PAYMENT.
8) BORROWER AGREES TO MAINTAIN ITS PRIMARY OPERATING ACCOUNTS WITH SCRIPPS BANK
WHILE THIS CREDIT FACILITY IS IN PLACE.
DEPOSIT ACCOUNTS. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when
due on the Loans.
OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or
failure of Borrower to comply with or to perform any other term,
obligation, covenant or condition contained in any other agreement
between Lender and Borrower.
DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor
default under any loan, extension of credit, security agreement,
purchase or sales agreement, or any other agreement, in favor of any
other creditor or person that may materially affect any of Borrower's
property or Borrower's or any Grantor's ability to repay the Loans or
perform their respective obligations under this Agreement or any of the
Related Documents.
FALSE STATEMENTS. Any warranty, representation, or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under
this Agreement or the Related Documents is false or misleading in any
material respect, either now or at the time made or furnished.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of
any Security Agreement to create a valid and perfected Security
Interest) at any time and for any reason.
INSOLVENCY. The dissolution or termination of Borrower's existence as a
going business, insolvency, appointment of a receiver for any part of
Borrower's property, any assignment for the benefit of creditors, any
type of creditor workout, or the commencement of any proceeding under
any bankruptcy or insolvency laws by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any
creditor of any Grantor against any collateral securing the
indebtedness, or by any governmental agency. This includes a
garnishment, attachment, or levy on or of any of Borrower's deposit
accounts with Lender. However, this Event of Default shall not apply if
there is a good faith dispute by Borrower or Grantor, as the case may
be, as to the validity or reasonableness of the claim which is the basis
of the creditor or forfeiture proceeding, and if Borrower or Grantor
gives Lender written notice of the creditor or forfeiture proceeding and
furnishes reserves or a surety bond for the creditor or forfeiture
proceeding satisfactory to Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the indebtedness or such Guarantor
dies or becomes incompetent. Lender, at its option, may, but shall not
be required to, permit the Guarantor's estate to assume unconditionally
the obligations arising under the guaranty in a manner satisfactory to
lender, and, in doing so, cure the Event of Default.
CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.
INSECURITY. Lender, in good faith, deems itself insecure.
RIGHT TO CURE. If any default, other than a Default on Indebtedness, is
curable and if Borrower or Grantor, as the case may be, has not been
given a notice of a similar default within the preceding twelve (12)
months, it may be cured (and no Event of Default will have occurred) if
Borrower or Grantor, as the case may be, after receiving written notice
from Lender demanding cure of such default: (a) cures the default with
fifteen (15) days; or (b) if the cure requires more than fifteen (15)
days, immediately initiates steps which Lender deems in Lender's sole
discretion to be sufficient to cure the default and thereafter continues
and completes all reasonable and necessary steps sufficient to produce
compliance as soon as reasonably practical.
11
04-05-1994 BUSINESS LOAN AGREEMENT Page 4
Loan No 17650-34733 (Continued)
===============================================================================
Related Documents or any other agreement immediately will terminate (including
any obligation to make Loan Advances or disbursements), and, at Lender's
option, all loans immediately will become due and payable, all without notice
of any kind to Borrower, except that in the case of an Event of Default of the
type described in the "Insolvency" subsection above, such acceleration shall be
automatic and not optional.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. No alteration of or amendment
to this Agreement shall be effective unless given in writing and signed
by the party or parties sought to be charged or bound by the alteration
or amendment.
APPLICABLE LAW. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND
ACCEPTED BY LENDER IN THE STATE OF CALIFORNIA. IF THERE IS A LAWSUIT,
BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF
THE COURTS OF SAN DIEGO COUNTY, THE STATE OF CALIFORNIA. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA.
CAPTION HEADINGS. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define
the provisions of this Agreement.
MULTIPLE PARTIES; CORPORATE AUTHORITY. All obligations of Borrower
under this Agreement shall be joint and several, and all references to
Borrower shall mean each and every Borrower. This means that each of
the persons signing below is responsible for ALL obligations in this
Agreement.
CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation
interests in the Loans to one or more purchasers, whether related or
unrelated to Lender. Lender may provide,without any limitation
whatsoever, to any one or more purchasers, or potential purchasers, any
information or knowledge Lender may have about Borrower or about any
other matter relating to the Loan, and Borrower hereby waives any
rights to privacy it may have with respect to such matters. Borrower
additionally waives any and all notices of sale of participation
interests, as well as all notices of any repurchase of such
participation interest. Borrower also agrees that the purchasers of any
such participation interests will be considered as the absolute owners
of such interests in the Loans and will have all the rights granted
under the participation agreement or agreements governing the sale of
such participation interests. Borrower further waives all rights of
offset or counterclaim that it may have now or later against Lender or
against any purchaser of such a participation interest and
unconditionally agrees that either Lender or such purchaser may enforce
Borrower's obligation under the Loans irrespective of the failure or
insolvency of any holder of any interest in the Loans. Borrower
further agrees that the purchaser of any such participation interests
may enforce its interests irrespective of any personal claims or
defenses that Borrower may have against Lender.
COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's
out-of-pocket expenses, including attorneys' fees, incurred in
connection with the preparation, execution, enforcement and collection
of this Agreement or in connection with the Loans made pursuant to this
Agreement. Lender may pay someone else to help collect the Loans and to
enforce this Agreement, and Borrower will pay that amount. This
includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses, whether or not there is a
lawsuit, including attorneys' fees for bankruptcy proceedings (including
efforts to modify or vacate any automatic stay or injunction), appeals,
and any anticipated post-judgment collection services. Borrower also
will pay any court costs, in addition to all other sums provided by law.
NOTICES. All notices required to be given under this Agreement shall be
given in writing and shall be effective when actually delivered or when
deposited with a nationally recognized overnight courier or deposited in
the United States mail, first class, postage prepaid, addressed to the
party to whom the notice is to be given at the address shown above. any
party may change its address for notices under this Agreement by giving
formal written notice to the other parties, specifying that the purpose
of the notice is to change the party's address. To the extent permitted
by applicable law, if there is more than one Borrower, notice to any
Borrower will constitute notice to all Borrowers. For notice purposes,
Borrower agrees to keep Lender informed at all times of Borrower's
current address(es).
SEVERABILITY. If a court of competent jurisdiction finds any provision
of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending
provision cannot be so modified, it shall be stricken and all other
provisions of this Agreement in all other respect shall remain valid
and enforceable.
SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of
any provisions of this Agreement makes it appropriate, including without
limitation any representation, warranty or covenant, the word "Borrower"
as used herein shall include all subsidiaries and affiliates of
Borrower. Notwithstanding the foregoing however, under no circumstances
shall this Agreement be construed to require Lender to make any Loan or
other financial accommodation to any subsidiary or affiliate of
Borrower.
SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall inure
to the benefit of Lender, its successors and assigns. Borrower shall
not, however, have the right to assign its rights under this Agreement
or any interest therein, without the prior written consent of Lender.
SURVIVAL. All warranties, representations, and covenants made by
Borrower in this Agreement or in any certificate or other instrument
delivered by Borrower to Lender under this Agreement shall be considered
to have been relied upon by Lender and will survive the making of the
Loan and delivery to Lender of the Related Documents, regardless of any
investigation made by Lender or on Lender's behalf.
TIME IS OF THE ESSENCE. Time is of the essence in the performance of
this Agreement.
WAIVER. Lender shall no be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender.
No delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender
of a provision of this Agreement shall not prejudice or constitute a
waiver of Lender's right otherwise to demand strict compliance with that
provision or any other provision of this Agreement. No prior waiver by
Lender, no any course of dealing between Lender and Borrower, or between
Lender and any Grantor, shall constitute a waiver of any of Lender's
rights or of any obligations of Borrower or of any Grantor as to any
future transactions. Whenever the consent of Lender is required under
this Agreement, the granting of such consent by Lender in any instance
shall not constitute continuing consent in subsequent instances where
such consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
APRIL 5, 1994.
BORROWER:
VIASAT, INC.
X /s/ Gregory Monahan
-----------------------------------
AUTHORIZED SIGNER
LENDER:
Scripps Bank
By: __________________________________
Authorized Officer
================================================================================
12
CORPORATE RESOLUTION TO BORROW
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
$1,000,000.00 04-05-1994 07-05-1995 17650-34733 040 50/51 105 /s/
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
Borrower: VIASAT, INC. Lender: Scripps Bank
2290 COSMOS COURT La Jolla
CARLSBAD, CA 92009-1565 7817 Ivanhoe Avenue
P.O. Box 8669
La Jolla, CA 92038-8669
================================================================================
I, the undersigned Secretary or Assistant Secretary of VIASAT, INC. (the
"Corporation"), HEREBY CERTIFY that the Corporation is organized and existing
under and by virtue of the laws of the State of California as a corporation for
profit, with its principal office at 2290 COSMOS COURT, CARLSBAD, CA
92009-1565, and is duly authorized to transact business in the State of
California.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation (or by
other duly authorized corporate action in lieu of a meeting), duly called and
held on ______________________________, at which a quorum was present and
voting, the following resolutions were adopted:
BE IT RESOLVED, that any one (1) of the following named officers, employees, or
agents of this Corporation, whose actual signatures are shown below:
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
MARK DANKBERG PRESIDENT X /s/ Mark Dankberg
------------------
GREG MONAHAN VICE PRESIDENT X /s/ Greg Monahan
------------------
acting for and on behalf of this Corporation and as its act and deed be, and
they hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from Scripps Bank ("Lender"),
on such terms as may be agreed upon between the officers, employees, or
agents and Lender, such sum or sums of money as in their judgment should
be borrowed; however, not exceeding at any one time the amount of One
Million & 00/100 Dollars ($1,000,000.00), in addition to such sum or
sums of money as may be currently borrowed by the Corporation from
Lender.
EXECUTE NOTES. To execute and deliver to Lender the promissory note or
notes of the Corporation, on Lender's forms, at such rates of interest
and on such terms as may be agreed upon, evidencing the sums of money so
borrowed or any indebtedness of the Corporation to Lender, and also to
execute and deliver to Lender one or more renewals, extensions,
modifications, refinancings, consolidations, or substitutions for one or
more of the notes, or any portion of the notes.
GRANT SECURITY. To mortgage, pledge, hypothecate, or otherwise encumber
deliver to Lender, as security for the payment of any loans so obtained,
any promissory notes so executed, or any other or further indebtedness
of the Corporation to Lender at any time owing, however the same may be
evidenced, any property now or hereafter belonging to the Corporation or
in which the Corporation now or hereafter may have an interest,
including without limitation all real property and all personal property
of the Corporation. Such property may be mortgaged, pledged,
hypothecated, or encumbered at the time such loans are obtained or such
indebtedness is incurred, or at any other time or times, and may be
either in addition to or in lieu of any property theretofore mortgaged,
pledged, hypothecated, or encumbered.
EXECUTE SECURITY DOCUMENTS. To execute and deliver to Lender the forms
of mortgage, deed or trust, pledge agreement, hypothecation agreement,
and other security agreements and financing statements which may be
submitted by Lender, and which shall evidence the terms and conditions
under and pursuant to which such liens and encumbrances, or any of them,
are given; and also to execute and deliver to Lender any other written
instruments, any chattel paper, or any other collateral, of any kind of
nature, which they may in their discretion deem reasonably necessary or
proper in connection with or pertaining to the giving of the liens and
encumbrances. Notwithstanding the foregoing, any one of the above
authorized officers, employees, or agents may execute, deliver, or
record financing statements.
NEGOTIATE ITEMS. To draw, endorse, and discount with Lender all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness
payable to or belonging to the Corporation or in which the Corporation
may have an interest, and either to receive cash for the same or to
cause such proceeds to be credited to the account of the Corporation
with Lender, or to cause such other disposition of the proceeds derived
therefrom as they may deem advisable.
FURTHER ACTS. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances
thereunder, and in all cases, to do and perform such other acts and
things, to pay any and all fees and costs, and to execute and deliver
such other documents and agreements as they may in their discretion deem
reasonably necessary or proper in order to carry into effect the
provisions of these Resolutions. The following person or persons are
authorized to request advances and authorize payments under the line of
credit until Lender receives written notice of revocation of their
authority: MARK DANKBERG, PRESIDENT; and GREG MONAHAN, VICE PRESIDENT.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
resolutions and performed prior to the passage of these resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Lender may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Lender. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect
at the time notice is given.
I FURTHER CERTIFY that at a special meeting of the shareholders of the
Corporation, duly called and held (or by consent of the shareholders) in
accordance with the laws of the State of California), not less than the
required percentage of shareholders adopted or consented to all the Resolutions
set forth above.
I FURTHER CERTIFY that the officers, employees, and agents named above are duly
elected, appointed, or employed by or for the Corporation, as the case may be,
and occupy the positions set opposite their respective names; that the
foregoing Resolutions now stand of record on the books of the Corporation; and
that the Resolutions are in full force and effect and have not been modified or
revoked in any manner whatsoever. The Corporation has no corporate seal, and
therefore, no seal is affixed to this certificate.
IN TESTIMONY WHEREOF, I have hereunto set my hand on April 5, 1994 and attest
that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
X /s/ Mark J. Miller
--------------------------------
*Secretary or Assistant Secretary
X
--------------------------------
*NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, this certificate should
also be signed by a second Officer or Director of the Corporation.
13
PROMISSORY NOTE
- ----------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
$1,000,000.00 04-05-1994 07-05-1995 17650-34733 040 50/51 105 /s/
- ----------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- -------------------------------------------------------------------------------
BORROWER: VIASAT, INC. LENDER: SCRIPPS BANK
2290 COSMOS COURT LA JOLLA
CARLSBAD, CA 92009-1565 7817 IVANHOE AVENUE
P.O. BOX 8669
LA JOLLA, CA 92038-8669
===============================================================================
PRINCIPAL AMOUNT: $1,000,000.00 INITIAL RATE: 7.750%
DATE OF NOTE: APRIL 5, 1994
PROMISE TO PAY. VISAT, INC. ("BORROWER") PROMISES TO PAY SCRIPPS BANK
("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE
PRINCIPAL AMOUNT OF ONE MILLION & 00/100 DOLLARS ($1,000,000.00) OR SO MUCH AS
MAY BE OUTSTANDING, TOGETHER WITH INTEREST ON THE UNPAID OUTSTANDING PRINCIPAL
BALANCE OF EACH ADVANCE. INTEREST SHALL BE CALCULATED FROM THE DATE OF EACH
ADVANCE UNTIL REPAYMENT OF EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING
PRINCIPAL PLUS ALL ACCRUED UNPAID INTEREST ON JULY 5, 1995. IN ADDITION,
BORROWER WILL PAY REGULAR MONTHLY PAYMENTS OF ACCRUED UNPAID INTEREST BEGINNING
MAY 5, 1994, AND ALL SUBSEQUENT INTEREST PAYMENTS ARE DUE ON THE SAME DAY OF
EACH MONTH AFTER THAT. Interest on this Note is computed on a 365/365 simple
interest basis; that is, by applying the ratio of the annual interest rate over
the number of days in a year, multiplied by the outstanding principal balance,
multiplied by the actual number of days the principal balance is outstanding.
Borrower will pay Lender at Lender's address shown above or at such other place
as Lender may designate in writing. Unless otherwise agreed or required by
applicable law, payments will be applied first to accrued unpaid interest, then
to principal, and any remaining amount to any unpaid collection costs and late
charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an independent index which is the Wall
Street Journal Prime Rate as published in the Money Rates section. When a range
of rates is shown, the higher rate will be used. (the "Index"). The Index is
not necessarily the lowest rate charged by Lender on its loans. If the Index
becomes unavailable during the term of this loan, Lender may designate a
substitute index after notice to Borrower. Lender will tell Borrower the
current index rate upon Borrower's request. Borrower understands that Lender
may make loans based on other rates as well. The interest rate change will not
occur more often than each month (adjustment will be made on the last date of
each month). THE INDEX CURRENTLY IS 6.250% PER ANNUM. THE INTEREST RATE TO BE
APPLIED TO THE UNPAID PRINCIPAL BALANCE OF THIS NOTE WILL BE AT A RATE OF 1.500
PERCENTAGE POINTS OVER THE INDEX, RESULTING IN AN INITIAL RATE OF 7.750% PER
ANNUM. NOTICE: Under no circumstances will the interest rate on this Note be
more than the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and
other prepaid finance charges are earned fully as of the date of the loan and
will not be subject to refund upon early payment (whether voluntary or as a
result of default), except as otherwise required by law. In any event, even
upon full prepayment of this Note, Borrower understands that Lender is entitled
to a MINIMUM INTEREST CHARGE OF $100.00. Other than Borrower's obligation to
pay any minimum interest charge, Borrower may pay without penalty all or a
portion of the amount owed earlier than it is due. Early payments will not,
unless agreed to by Lender in writing, relieve Borrower of Borrower's
obligation to continue to make payments under the payment schedule. Rather,
they will reduce the principal balance due and may result in Borrower making
fewer payments.
LATE CHARGE. If a payment is 10 DAYS OR MORE LATE, Borrower will be charged
5.000% OF THE REGULARLY SCHEDULED PAYMENT OR $10.00, WHICHEVER IS GREATER.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to perform promptly at the time
and strictly in the manner provided in this Note or any agreement related to
this Note, or in any other agreement or loan Borrower has with Lender. (c)
Borrower defaults under any loan, extension of credit, security agreement,
purchase or sales agreement, or any other agreement, in favor of any other
creditor or person that may materially affect any of Borrower's property or
Borrower's ability to repay this Note or perform Borrower's obligations under
this Note or any of the Related Documents. (d) Any representation or statement
made or furnished to Lender by Borrower or on Borrower's behalf is false or
misleading in any material respect. (e) Borrower becomes insolvent, a receiver
is appointed for any part of Borrower's property, Borrower makes an assignment
for the benefit of creditors, or any proceeding is commenced either by Borrower
or against Borrower under any bankruptcy or insolvency laws. (f) Any creditor
tries to take any of Borrower's property on or in which Lender has a lien or
security interest. This includes a garnishment of any of Borrower's accounts
with Lender. (g) Any of the events described in this default section occurs
with respect to any guarantor of this Note. (h) Lender in good faith deems
itself insecure.
If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Note within
the preceding twelve (12) months, it may be cured (and no event of default will
have occurred) if Borrower, after receiving written notice from Lender
demanding cure of such default; (a) cures the default within fifteen (15) days;
or (b) if the cure requires more than fifteen (15) days, immediately initiates
steps which Lender deems in Lender's sole discretion to be sufficient to cure
the default and thereafter continues and completes all reasonable and necessary
steps sufficient to produce compliance as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
on this Note and all accrued unpaid interest immediately due, without notice,
and then Borrower will pay that amount. Upon Borrower's failure to pay all
amounts declared due pursuant to this section, including failure to pay upon
final maturity, Lender, at its option, may also, if permitted under applicable
law, do one or both of the following: (a) increase the variable interest rate
on this Note to 6.500 percentage points over the Index, and (b) add any unpaid
accrued interest to principal and such sum will bear interest therefrom until
paid at the rate provided in this Note (including any increase rate). Lender
may hire or pay someone else to help collect this Note if Borrower does not
pay. Borrower also will pay Lender that amount. This includes, subject to any
limits under applicable law, Lender's attorneys' fees and Lender's legal
expenses whether or not there is a lawsuit, including attorneys' fees and legal
expenses for bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated post-judgment
collection services. Borrower also will pay any court costs, in addition to all
other sums provided by law. THIS NOTE HAS BEEN DELIVERED TO LENDER AND ACCEPTED
BY LENDER IN THE STATE OF CALIFORNIA. IF THERE IS A LAWSUIT, BORROWER AGREES
UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF SAN DIEGO
COUNTY, THE STATE OF CALIFORNIA. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
DEPOSIT ACCOUNTS. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested either orally or in writing by Borrower or by an
authorized person. Lender may, but need not, require that all oral requests be
confirmed in writing. All communications, instructions, or directors by
telephone, or otherwise to Lender are to be directed to Lender's office shown
above. The following party or parties are authorized to request advances under
the line of credit until Lender receives from Borrower at Lender's address
shown above written notice of revocation of their authority: MARK DANKBERG,
PRESIDENT; AND GREG MONAHAN, VICE PRESIDENT. Borrower agrees to be liable for
all sums either: (a) advanced in accordance with the instructions of an
authorized person (b) credited to any of Borrower's accounts with Lender. The
unpaid principal balance owing on this Note at any time may be evidenced by
endorsements on this Note or by Lender's internal records, including daily
computer print-outs. Lender will have no obligation to advance funds under this
Note if: (a) Borrower or any guarantor is in default under the terms of the
Note or any agreement that Borrower or any guarantor has with Lender, including
any agreement made in connection with the signing of this Note; (b) Borrower or
any guarantor ceases doing business or is insolvent; (c) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor's
guarantee of this Note or any other loan with Lender; (d) Borrower has applied
funds provided pursuant to this Note for purposes other than those authorized
by Lender; or (e) Lender in good faith deems itself insecure under this Note or
any other agreement between Lender and Borrower.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
any applicable statute of limitations, presentment, demand for payment, protest
and notice of dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan, or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender's security
interest in the collateral; and take any other action deemed necessary by
Lender without the consent of or notice to anyone. All such parties also agree
that Lender may modify this loan without the consent of or notice to anyone
other than the party with whom the modification is made.
14
04-05-1994 PROMISSORY NOTE Page 2
Loan No 17650-34733 (Continued)
===============================================================================
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
VIASAT, INC.
X /s/ Gregory Monahan
-------------------------------------------
AUTHORIZED SIGNER
===============================================================================
15
[SCRIPPS BANK LETTERHEAD]
May 17, 1995
Mr. Gregory Monahan, VP & General Counsel
ViaSat, Inc.
2290 Cosmos Court
Carlsbad, CA 92009-1565
Dear Greg,
Scripps Bank is pleased to provide the following credit commitment for ViaSat,
Inc. under these terms and conditions:
APPLICATION:
Type: Equipment term financing commitment
Amount: $500,000
Purpose: To provide financing for equipment needs of company.
Maturity/Expiration: The term financing commitment will expire on July 5, 1995
(maturity date of company credit line). Each advance will be for a minimum
$25,000, and evidenced by a separate promissory note and other supporting
documents. Each note will be fully amortized over a maximum 48 month term with
monthly payments.
Interest Rate: Prime Rate plus 1.5%, fixed as of the date of loan
documentation for 100% financing of total costs.
Fees: There is a $150 documentation fee for each term loan extended,
plus $5.00 UCC recording fees.
Guarantors: Not applicable.
Security/Collateral: Scripps Bank will have a first lien position on the
equipment being purchased as evidenced by an executed security agreement and UCC
filing with the State of California.
Conditions:
Borrower to have executed documentation reducing its revolving credit
line facility with Bank from $1,000,000 to $500,000. Rate to be reduced
to Prime plus 1% and maturity date extended to July 5, 1996 with
execution of documents.
16
[SCRIPPS BANK LETTERHEAD]
Mr. Gregory Monhan, VP & General Counsel May 17, 1995
ViaSat, Inc.
Page 2
Borrower to provide annually to Bank a copy of its audited financial
statements and IRS return, and interim statements as may be requested by
Bank.
Borrower to provide Bank with invoices and any other documentation
required by Bank to allow Bank to determine exact costs and sufficient
information regarding equipment to allow Bank to perfect its lien.
Scripps Bank is pleased to provide thes credit commitment to support the growth
and succes of ViaSat, Inc. It is understood that this commitment is subject to
specific loan documentation to follow which will embody other covenants and
conditions that the Bank deems appropriate.
Please acknowledge your understanding and acceptance of the terms and
conditions outlined above by signing below and returning a copy of this letter
to me.
Sincerely,
/s/ Rick Poe
_______________________
Rick Poe
Vice President
Accepted: ViaSat, Inc.
/s/ Gregory Monahan
____________________________________ ________________________________ By:
Gregory Monahan, VP & General Counsel Date
17
CHANGE IN TERMS AGREEMENT
- --------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
$500,000.00 07-05-1995 17650-34733 040 50/51 105 /s/
- --------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- -------------------------------------------------------------------------------
BORROWER: VIASAT, INC. LENDER: SCRIPPS BANK
2290 COSMOS COURT LA JOLLA
CARLSBAD, CA 92009-1565 7817 IVANHOE AVENUE
P.O. BOX 8669
LA JOLLA, CA 92038-8669
===============================================================================
PRINCIPAL AMOUNT: $500,000.00 DATE OF AGREEMENT: MAY 17, 1995
DESCRIPTION OF EXISTING INDEBTEDNESS, PROMISSORY NOTE DATED APRIL 5, 1994 IN
THE AMOUNT OF $1,000,000.00.
DESCRIPTION OF COLLATERAL. BUSINESS ASSETS AS STATED ON THE SECURITY AGREEMENT
DATED APRIL 5, 1994, WHICH IS FURTHER SUPPORTED BY UCC-1 DATED NOVEMBER 13,
1990, FILED NOVEMBER 30, 1990, FILE #90-289875.
DESCRIPTION OF CHANGE IN TERMS. THE ORIGINAL PROMISSORY NOTE DATED APRIL 5,
1994 IN THE AMOUNT OF $1,000,000.00 MODIFIED AS FOLLOWS: THE MATURITY DATE IS
EXTENDED FROM JULY 5, 1995 TO JULY 5, 1996, THE PRINCIPAL AMOUNT IS REDUCED
FROM $1,000,000.00 TO $500,00.00 AND THE RATE OF INTEREST IS REDUCED FROM THE
RATE OF 1.5% OVER THE PRIME AS SHOWN IN THE WALL STREET JOURNAL TO THE RATE OF
1% OVER THE PRIME RATE AS SHOWN IN THE WALL STREET JOURNAL.
PROMISE TO PAY. VIASAT, INC. ("BORROWER") PROMISES TO PAY TO SCRIPPS BANK
("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE
PRINCIPAL AMOUNT OF FIVE HUNDRED THOUSAND & 00/1000 DOLLARS ($500,000.00) OR SO
MUCH AS MAY BE OUTSTANDING, TOGETHER WITH INTEREST ON THE UNPAID OUTSTANDING
PRINCIPAL BALANCE OF EACH ADVANCE. INTEREST SHALL BE CALCULATED FROM THE DATE
OF EACH ADVANCE UNTIL REPAYMENT OF EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING
PRINCIPAL PLUS ALL ACCRUED UNPAID INTEREST ON JULY 5, 1996. IN ADDITION,
BORROWER WILL PAY REGULAR MONTHLY PAYMENTS OF ACCRUED UNPAID INTEREST BEGINNING
JUNE 5, 1995, AND ALL SUBSEQUENT INTEREST PAYMENTS ARE DUE ON THE SAME DAY OF
EACH MONTH AFTER THAT. Interest on this Agreement is computed on a 365/365
simple interest basis; that is, by applying the ratio of the annual interest
rate over the number of days in a year, multiplied by the outstanding principal
balance, multiplied by the actual number of days the principal balance is
outstanding. Borrower will pay Lender at Lender's address shown above or at
such other place as Lender may designate in writing. Unless otherwise agreed or
required by applicable law, payments will be applied first to accrued unpaid
interest, then to principal, and any remaining amount to any unpaid collection
costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Agreement is subject to
change from time to time based on changes in an independent index which is the
Wall Street Journal Prime Rate as published in the Money Rates section. When a
range of rate is shown, the higher rate will be used, (the "Index"). The Index
is not necessarily the lowest rate charged by Lender on its loans. If the Index
becomes unavailable during the term of this loan, Lender may designate a
substitute index after notice to Borrower. Lender will tell Borrower the
current Index rate upon Borrower's request. Borrower understands that Lender
may make loans based on other rates as well. The interest rate change will not
occur more often than each time that Prime Rate changes as shown in the Money
Rates section of the Wall Street Journal. THE INDEX CURRENTLY IS 9.000% PER
ANNUM. THE INTEREST RATE TO BE APPLIED TO THE UNPAID PRINCIPAL BALANCE OF THIS
AGREEMENT WILL BE AT A RATE OF 1.000 PERCENTAGE POINT OVER THE INDEX, RESULTING
IN AN INITIAL RATE OF 10.000% PER ANNUM. NOTICE: Under no circumstances will
the interest rate on this Agreement be more than the maximum rate allowed by
applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and
other prepaid finance charges are earned fully as of the date of the loan and
will not be subject to refund upon early payment (whether voluntary or as a
result of default), except as otherwise required by law. In any event, even
upon full prepayment of this Agreement, Borrower understands that Lender is
entitled to a MINIMUM INTEREST CHARGE OF $100.00. Other than Borrower's
obligation to pay any minimum interest charge, Borrower may pay without penalty
all or a portion of the amount owed earlier than it is due. Early payments will
not, unless agreed to by Lender in writing, relieve Borrower of Borrower's
obligation to continue to make payments of accrued unpaid interest. Rather,
they will reduce the principal balance due.
LATE CHARGE. If a payment is 10 DAYS OR MORE LATE, Borrower will be charged
5.000% OF THE REGULARLY SCHEDULED PAYMENT OR $10.00, WHICHEVER IS GREATER.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to perform promptly at the time
and strictly in the manner provided in this Agreement or any agreement related
to this Agreement, or in any other agreement or loan Borrower has with Lender.
(c) Any representation or statement made or furnished to Lender by Borrower or
on Borrower's behalf is false or misleading in any material respect. (d)
Borrower becomes insolvent, a receiver is appointed for any part of Borrower's
property, Borrower makes an assignment for the benefit of creditors, or any
proceeding is commenced either by Borrower or against Borrower under any
bankruptcy or insolvency laws. (e) Any creditor tries to take any of Borrower's
property on or in which Lender has a lien or security interest. This includes a
garnishment of any of Borrower's accounts with Lender. (f) Any of the events
described in this default section occurs with respect to any guarantor of this
Agreement. (g) Lender in good faith deems itself insecure.
If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Agreement
within the preceding twelve (12) months, it may be cured (and no event of
default will have occurred) if Borrower, after receiving written notice from
Lender demanding cure of such default: (a) cures the default with fifteen (15)
days; or (b) if the cure requires more than fifteen (15) days, immediately
initiates steps which Lender deems in Lender's sole discretion to be sufficient
to cure the default and thereafter continues and completes all reasonable and
necessary steps sufficient to produce compliance as soon as reasonably
practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
on this Agreement and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon Borrower's failure to pay
all amounts declared due pursuant to this section, including failure to pay
upon final maturity, Lender, at its option, may also, if permitted under
applicable law, do one or both of the following: (a) increase the variable
interest rate on this Agreement to 6.000 percentage points over the Index, and
(b) add any unpaid accrued interest to principal and such sum will bear
interest therefrom until paid at the rate provided in this Agreement (including
any increased rate). Lender may hire or pay someone else to help collect this
Agreement if Borrower does not pay. Borrower also will pay Lender that amount.
This includes, subject to any limits under applicable law, Lender's attorneys'
fees and Lender's legal expenses whether or not there is a lawsuit, including
attorneys' fees and legal expenses for bankruptcy proceedings (including
efforts to modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgment collection services. Borrower also will pay any court
costs, in addition to all other sums provided by law. THIS AGREEMENT HAS BEEN
DELIVERED TO LENDER AND ACCEPTED BY LENDER IN THE STATE OF CALIFORNIA. IF THERE
IS A LAWSUIT, BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF SAN DIEGO COUNTY, THE STATE OF CALIFORNIA. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA.
DEPOSIT ACCOUNTS. Borrower grants to lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts.
LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances
under this Agreement may be requested either orally or in writing by Borrower
or by an authorized person. Lender may, but need not, require that all oral
requests be confirmed in writing. All communications, instructions, or
directions by telephone or otherwise to Lender are to be directed to Lender's
office shown above. The following party or parties are authorized to request
advances under the line of credit until Lender receives from Borrower at
Lender's address shown above written notice of revocation of their authority:
GREGORY D. MONAHAN, VICE PRESIDENT. Borrower agrees to be liable for all sums
either: (a) advanced in accordance with the instructions of an authorized
person or (b) credited to any of Borrower's accounts with Lender. The unpaid
principal balance owing on this Agreement at any time may be evidenced by
endorsements on this Agreement or by Lender's internal records, including daily
computer print-outs. Lender will have no obligation to advance funds under this
Agreement if: (a) Borrower or any guarantor is in default under the terms of
this Agreement or any agreement that Borrower or any guarantor has with Lender,
including any agreement made in connection with the signing of this Agreement;
(b) Borrower or any guarantor ceases doing business or is insolvent; (c) any
guarantor seeks, claims or otherwise attempts to limit, modify or revoke such
guarantor's guarantee of this Agreement or any other loan with Lender; (d)
Borrower has applied funds provided pursuant to this Agreement for purposes
other than those authorized by Lender; or (e) Lender in good faith deems itself
insecure under this Agreement or any other agreement between lender and
Borrower.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms
of the original obligation or obligations, including all agreements evidenced
or securing the obligation(s), remain unchanged and in full force and effect.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a
satisfaction of the obligation(s). It is the intention of Lender to retain as
liable parties all makers and endorsers of the original obligation(s),
including accommodation parties, unless a party is expressly released by Lender
in writing. Any maker or endorser, including accommodation parties
18
05-17-1995 CHANGE IN TERMS AGREEMENT Page 2
Loan No 17650-34733 (Continued)
===============================================================================
will not be released by virtue of this Agreement. If any person who signed the
original obligation does not sign this Agreement below, then all persons
signing below acknowledge that this Agreement is given conditionally, based on
the representation to Lender that the non-signing party consents to the changes
and provisions of this Agreement or otherwise will not be released by it. This
waiver applies not only to any initial extension, modification or release, but
also to all such subsequent actions.
MISCELLANEOUS PROVISIONS. Lender may delay or forgo enforcing any of its rights
or remedies under this Agreement without losing them. Borrower and any other
persons who signs, guarantees or endorses this Agreement, to the extent allowed
by law, waive any applicable statute of limitations, presentment, demand for
payment, protest and notice of dishonor. Upon any change in the terms of this
Agreement, and unless otherwise expressly stated in writing, no party who signs
this Agreement, whether as maker, guarantor, accommodation maker or endorser,
shall be released from liability. All such parties agree that Lender may renew
or extend (repeatedly and for any length of time) this loan, or release any
party or guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action deemed
necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
BORROWER AGREES TO THE TERMS OF THE AGREEMENT AND ACKNOWLEDGES RECEIPT OF A
COMPLETED COPY OF THE AGREEMENT.
BORROWER:
VIASAT, INC.
By: /s/ G.D. Monahan
-----------------------------------
GREGORY D. MONAHAN, VICE PRESIDENT
19
AGREEMENT TO PROVIDE INSURANCE
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
$500,000.00 07-05-1995 17650-34733 040 50/51 105 /s/
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
Borrower: VIASAT, INC. Lender: Scripps Bank
2290 COSMOS COURT La Jolla
CARLSBAD, CA 92009-1565 7817 Ivanhoe Avenue
P.O. Box 8669
La Jolla, CA 92038-8669
================================================================================
INSURANCE REQUIREMENTS. VIASAT, INC. ("Grantor") understands that insurance
coverage is required in connection with the extending of a loan or the
providing of other financial accommodations to Grantor by Lender. These
requirements are set forth in the security documents. The following minimum
insurance coverages must be provided on the following described collateral (the
"Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type. All risks, including fire, theft and liability.
Amount. Full insurable value.
Basis. Replacement value.
Endorsements. Lender's loss payable clause with stipulation that
coverage will not be cancelled or diminished without a minimum of
ten (10) days prior written notice to Lender.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance company
Grantor may choose that is reasonably acceptable to Lender. Grantor understands
that credit may not be denied solely because insurance was not purchased
through Lender.
INSURANCE MAILING ADDRESS. All documents and other materials relating to
insurance for this loan should be mailed, delivered or directed to the
following address:
SCRIPPS BANK - NOTE DEPARTMENT
P.O. BOX 8669
LA JOLLA, CA 92038
(619) 456-2265
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Lender, ten (10)
days from the date of this Agreement, evidence of the required insurance as
provided above, with an effective date of May 17, 1995, or earlier. Grantor
acknowledges and agrees that if Grantor fails to provide any required insurance
or fails to continue such insurance in force, Lender may do so at Grantor's
expense as provided in the applicable security document. The cost of any such
insurance, at the option of Lender, shall be payable on demand or shall be
added to the indebtedness as provided in the security document. GRANTOR
ACKNOWLEDGES THAT IF LENDER SO PURCHASES ANY SUCH INSURANCE, THE INSURANCE WILL
PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO THE
BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN THE COLLATERAL MAY NOT BE
INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR
PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY
FINANCIAL RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral, Grantor
authorizes Lender to provide to any person (including any insurance agent or
company) all information Lender deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO
PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED MAY 17, 1995.
GRANTOR:
VIASAT, INC.
by /S/ Gregory Monahan
------------------------------------
Gregory D. Monahan, Vice President
- --------------------------------------------------------------------------------
\ FOR LENDER USE ONLY /
\ INSURANCE VERIFICATION /
\ /
\ DATE:______________________ PHONE:_____________________ /
\ AGENT'S NAME: ____________________________________________________________ /
\ ADDRESS: _________________________________________________________________ /
\ INSURANCE COMPANY:________________________________________________________ /
\ POLICY NUMBER(S): ________________________________________________________ /
\ EFFECTIVE DATES:__________________________________________________________ /
\ COMMENTS:_________________________________________________________________ /
- --------------------------------------------------------------------------------
================================================================================
20
DISBURSEMENT REQUEST AND AUTHORIZATION
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
$500,000.00 07-05-1995 17650-34733 040 50/51 105 /s/
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
Borrower: VIASAT, INC. Lender: Scripps Bank
2290 COSMOS COURT La Jolla
CARLSBAD, CA 92009-1565 7817 Ivanhoe Avenue
P.O. Box 8669
La Jolla, CA 92038-8669
================================================================================
LOAN TYPE. This is a Variable Rate (1.000% over Wall Street Journal Prime Rate
as published in the Money Rates section. When a range of rates is shown, the
higher rate will be used., making an initial rate of 10.000%), Revolving Line of
Credit Loan to a Corporation for $500,000.00 due on July 5, 1996.
PRIMARY PURPOSE OF LOAN. The primary purpose of the loan is for:
[ ] Personal, Family, or Household Purposes or Personal Investment.
[X] Business (including Real Estate Investment).
SPECIFIC PURPOSE. The specific purpose of this loan is: RENEWAL WITH VOLUNTARY
CREDIT LIMIT REDUCTION, WITH RATE LOWERED TO PRIME PLUS 1%.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $500,000.00 as follows:
Amount paid to others on Borrower's behalf: $500,000.00
$500,000.00 UNDISBURSED; TO BE DISBURSED
PER FUNDS
TRANSFER AGREEMENT
-----------
Note Principal: $500,000.00
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges.
Prepaid Finance Charges Paid In Cash: $500.00
$500.00 DOCUMENT FEE
-------------
Total Charges Paid In Cash: $500.00
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS
AUTHORIZATION IS DATED MAY 17, 1995.
BORROWER:
VIASAT, INC.
x /s/ G.D. Monahan
-----------------------------------
GREGORY D. MONAHAN, VICE PRESIDENT
================================================================================
1
EXHIBIT 10.15
[HERITAGE LEASING CAPITAL LETTERHEAD]
EFA No. 16281-1
- -------------------------------------------------------------------------------
EQUIPMENT FINANCING COMMITMENT
- -------------------------------------------------------------------------------
Subject to the terms set forth in this commitment, the following equipment
financing transaction is agreed to by the undersigned Debtor and Heritage
Leasing Capital ("Secured Party") in connection with the terms of the Equipment
Financing Agreement herein referenced (the "Agreement").
Equipment Financing Agreement: dated as of April 28, 1994
Equipment (all Equipment to be acceptable to Secured Party): COMPUTER AND
LABORATORY EQUIPMENT.
Commitment Amount: $400,000.00
Installment Payments: 48 payments of 2.442% of advance payable monthly in
advance First and last such payments due at time of
scheduling.
Commitment Expiration Date: June 30, 1994. As more fully explained below.
Security Party has no obligation to make any
advance with respect to Equipment not covered by
a Schedule to the Agreement executed by Secured
Party and Debtor on or prior to this date.
Debtor will comply with, procure, execute and or have executed, acknowledge,
have acknowledged, deliver to Secured Party, record and file any documents set
forth in Exhibit A or accompanying this commitment. The form, substance and
sufficiency of all documents and showings employed in documenting the
contemplated financing transaction must be acceptable to Secured Party and its
counsel. Debtor will do likewise as to such further documents and showings as
Secured Party and its counsel may now or hereafter deem necessary or advisable
to protect Secured Party's rights under the Agreement and interest in the
Equipment. Debtor will pay as directed by Secured Party or reimburse Secured
Party for all searches, filings, title reports, attorney's services and other
charges incurred by Secured Party in connection with all such documents and
showings and any similar documents and showings Secured Party may procure.
Secured Party may, at its option, terminate its obligations to Debtor hereunder
with respect to any and all unscheduled Items of Equipment: (a) at or
subsequent to the Commitment Expiration Date, (b) upon the advent of a material
adverse change in Debtor's financial condition or Debtor's probable ability to
perform its obligations under the Agreement, (c) if the Agreement or any other
agreement under which Debtor has obligations to Secured Party is in default or
an event which with the giving of notice or lapse of time or both would
constitute such a default has occurred and is continuing or (d) with respect to
which more than fifteen percent (15%) would be advanced for shipping costs,
installation charges and design costs by giving Debtor written notice of such
termination.
ACCEPTED AND AGREED to as of ACCEPTED AND AGREED to as of
April 28, 1994 April 28, 1994
- --------------------------------------- ---------------------------------
Heritage Leasing Capital VIASAT, INC.
(Secured Party) ---------------------------------
5775 Chesapeake Court (Debtor)
San Diego, CA 92123
Address: 2290 Cosmos Court
-------------------------
Carlsbad, CA 92009
-------------------------
/s/ Ronald L. Wagner President
By:_________________________________ /s/ Gregory Monahan Vice President
Ronald L. Wagner (Title) of
Administration
By:___________________________________
Gregory Monahan (Title)
By:___________________________________
(Title)
2
[HERITAGE LEASING CAPITAL LETTERHEAD] Page 1 of 2
EFA No. 16281-1
- -------------------------------------------------------------------------------
EXHIBIT A TO EQUIPMENT FINANCING COMMITMENT
Accepted by Debtor as of April 28, 1994
- -------------------------------------------------------------------------------
These provisions hereby become part of the Equipment Financing Commitment dated
April 28, 1994, between HERITAGE LEASING CAPITAL and its assignee(s), Secured
Party, and VIASAT, INC., Debtor.
In addition to the terms of the Agreement, Debtor further agrees to the
following additional provisions:
1. UCC SEARCH/RELEASES
--------------------
The Secured Party may search all public records of Debtor to locate and
identify any conflicting liens against the above referenced Equipment.
Releases from any intervening parties holding a security interest in
said Equipment shall be required prior to funding provided herein.
2. TYPE OF FINANCING
-----------------
This is a net equipment financing transaction whereby maintenance,
insurance, property taxes, and all items of a similar nature are for
the account of the Debtor.
3. EXPENSES
--------
All expenses associated with the completion of this Agreement
including, but not limited to, UCC filing fees and searches,
documentation costs, legal expenses, and equipment verification
costs are for the account of the Debtor.
4. MASTER AGREEMENT
----------------
This is a Master Equipment Financing Agreement whereby Schedules may be
funded as equipment is delivered. Each Schedule to the Agreement,
however, shall cover equipment with a minimum aggregate cost of
$20,000.00.
INITIAL
/s/
3
[HERITAGE LEASING CAPITAL LETTERHEAD] Page 2 of 2
EFA No. 16281-1
- -------------------------------------------------------------------------------
EXHIBIT A TO EQUIPMENT FINANCING COMMITMENT
Accepted by Debtor as of April 28, 1994
- -------------------------------------------------------------------------------
5. INSTALLMENT PAYMENT AMOUNT
--------------------------
The installment payment amount of $24.42 per $1,000.00 of advance
payable monthly in advance is based on the yield of two-year Treasury
Notes yielding 5.03% as published in the Wall Street Journal on
Wednesday, March 23, 1994 (the "Index") and will apply for all schedules
funded by April 30, 1994. If a financing schedule is funded after April
30, 1994 the rate shall be increased proportionally to any increase in
the Index. No downward adjustment will be made below the floor index
rate of 5.03%. Once a schedule is funded, however, the rate will then be
fixed for the term of the agreement.
6. COMMITMENT EXPIRATION DATE
--------------------------
The commitment expiration date of June 30, 1994 may be extended ninety
(90) days upon review by Secured Party of the Debtor's then current
financial condition. Debtor agrees to provide Secured Party such
financial information and other information Secured Party may reasonably
request to evaluate Debtor's financial condition for purposes of
granting such extension.
INITIAL
/s/
4
[HERITAGE LEASING CAPITAL LETTERHEAD]
EFA No. 16281-1
EQUIPMENT FINANCING AGREEMENT
THIS EQUIPMENT FINANCING AGREEMENT ("agreement") is dated as of the
date set forth at the foot hereof and is between HERITAGE LEASING
CAPITAL ("Secured Party") and the debtor designated at the foot
hereof ("Debtor").
1. EQUIPMENT; SECURITY INTEREST. The terms and conditions of this agreement
cover each item of machinery, equipment and other property
(individually an "Item" or "Item of Equipment" and collectively the
"Equipment") described in a schedule now or hereafter executed by the
parties hereto and made a part hereof (individually a "Schedule" and
collectively the "Schedules"). Debtor hereby grants Secured Party a
security interest in and to all Debtor's right, title and interest in
and to the Equipment under the Uniform Commercial Code, such grant with
respect to an Item of Equipment to be as of Debtor's execution of a
related equipment financing commitment referencing this agreement or,
if Debtor then has no interest in such Item, as of such subsequent time
as Debtor acquires an interest in the Item. Such security interest is
granted by Debtor to secure performance by Debtor of Debtor's
obligations to Secured Party hereunder and under any other agreements
under which Debtor has or may hereafter have obligations to Secured
Party. Debtor will ensure that such security interest will be and
remain a sole and valid first lien security interest subject only to
the lien of current taxes and assessments not in default but only if
such taxes are entitled to priority as a matter of law.
2. DEBTOR'S OBLIGATIONS. The obligations of Debtor under this agreement
respecting an Item of Equipment, except the obligation to pay
installment payments with respect thereto which will commence as set
forth in paragraph 3 below, commence upon the grant to Secured Party of
a security interest in the Item. Debtor's obligations hereunder with
respect to an Item of Equipment and Secured Party's security interest
therein will continue until payment of all amounts due, and performance
of all terms and conditions required, hereunder with respect thereto;
provided, however, that if this agreement is then in default said
obligations and security interest will continue during the continuance
of said default. Upon termination of Secured Party's security interest
in an Item of Equipment, Secured Party will execute such release of
interest with respect thereto as Debtor reasonably requests.
3. INSTALLMENT PAYMENTS AND OTHER PAYMENTS. Debtor will repay advances
Secured Party makes on account of the Equipment together with interest
in installment payments in the amounts and at the times set forth in the
Schedules, whether or not Secured Party has rendered an invoice
therefor, at the office of Secured Party set forth at the foot hereof,
or to such person and/or at such other place as Secured party may from
time to time designate on notice to Debtor. Any other amounts required
to be paid Secured Party by Debtor hereunder are due upon Debtor's
receipt of Secured Party's invoice therefor and will be payable as
directed in the invoice. Payments under this agreement may be applied to
Debtor's then accrued obligations to Secured Party in such order as
Secured Party may choose.
4. NET AGREEMENT; NO OFFSET; SURVIVAL. This agreement is a net agreement,
and Debtor will not be entitled to any abatement of installment payments
or other payments due hereunder or any reduction thereof under any
circumstances or for any reason whatsoever. Debtor hereby waives any and
all existing and future claims, as offsets, against any installment
payments or other payments due hereunder and agrees to pay the
installment payments and other amounts due hereunder as and when due
regardless of any offset or claim which may be asserted by Debtor or on
its behalf. The obligations and liabilities of Debtor hereunder will
survive the termination of this agreement.
5. FINANCING AGREEMENT. THIS AGREEMENT IS SOLELY A FINANCING AGREEMENT.
DEBTOR ACKNOWLEDGES THAT THE EQUIPMENT HAS OR WILL HAVE BEEN SELECTED
AND ACQUIRED SOLELY BY DEBTOR FOR DEBTOR'S PURPOSES, THAT SECURED PARTY
IS NOT AND WILL NOT BE THE VENDOR OF ANY EQUIPMENT AND THAT SECURED
PARTY HAS NOT MADE AND WILL NOT MAKE ANY AGREEMENT, REPRESENTATION OR
WARRANTY WITH RESPECT TO THE MERCHANTABILITY, CONDITION, QUALIFICATION
OR FITNESS FOR A PARTICULAR PURPOSE OR VALUE OF THE EQUIPMENT OR ANY
OTHER MATTER WITH RESPECT THERETO IN ANY RESPECT WHATSOEVER.
6. NO AGENCY. DEBTOR ACKNOWLEDGES THAT NO AGENT OF THE MANUFACTURER OR
OTHER SUPPLIER OF AN ITEM OF EQUIPMENT OR OF ANY FINANCIAL INTERMEDIARY
IN CONNECTION WITH THIS AGREEMENT IS AN AGENT OF SECURED PARTY. SECURED
PARTY IS NOT BOUND BY A REPRESENTATION OF ANY SUCH PARTY AND, AS
CONTEMPLATED IN PARAGRAPH 27 BELOW, THE ENTIRE AGREEMENT OF SECURED
PARTY AND DEBTOR CONCERNING THE FINANCING OF THE EQUIPMENT IS CONTAINED
IN THIS AGREEMENT AS IT MAY BE AMENDED AS PROVIDED IN THAT PARAGRAPH.
7. ACCEPTANCE. Execution by Debtor and Secured Party of a Schedule covering
the Equipment or any Items thereof will conclusively establish that such
Equipment has been included under and will be subject to all the terms
and conditions of this agreement. If Debtor has not furnished Secured
Party with a Schedule by the earlier of fourteen (14) days after receipt
thereof or expiration of the commitment period set forth in the
applicable equipment financing commitment, Secured Party may terminate
its obligation to advance funds as to the applicable Equipment.
8. LOCATION; INSPECTION; USE. Debtor will keep, or in the case of motor
vehicles, permanently garage and not remove from the United States, as
appropriate, each Item of Equipment in Debtor's possession and control
at the Equipment Location designated in the applicable Schedule, or at
such other location to which such Item may have been moved with the
prior written consent of Secured Party. Whenever requested by Secured
Party, Debtor will advise Secured Party as to the exact location of an
Item of Equipment; Secured Party will have the right to inspect the
Equipment and observe its use during normal business hours and to enter
into and upon the premises where the Equipment may be located for such
purpose. The Equipment will at all times be used solely for commercial
or business purposes and operated in a careful and proper manner and in
compliance with all applicable laws, ordinances, rules and regulations,
all conditions and requirements of the policy or policies of insurance
required to be carried by Debtor under the terms of this agreement and
all manufacturer's instructions and warranty requirements. Any
modifications or additions to the Equipment required by any such
governmental edict or insurance policy will be promptly made by Debtor.
5
INITIAL /s/
-----
17. DEFAULT. Any of the following will constitute an event of default hereunder:
(a) Debtor's failure to pay when due any installment payment or other amount
due hereunder, which failure continues for ten (10) days after the due date
thereof; (b) Debtor's default in performing any other obligation, term or
condition of this agreement or any other agreement between Debtor and
Secured Party or default under any further agreement providing security for
the performance by Debtor of its obligations hereunder, provided such
default has continued for more than twenty (20) days, except as provided in
(c) and (d) hereinbelow, or, without limiting the generality of subparagraph
(1) hereinbelow, default under any lease or any mortgage or other instrument
contemplating the provision of financial accommodation applicable to the
real estate where an Item of Equipment is located; (c) any writ or order of
attachment or execution or other legal process being levied on or charged
against any Item of Equipment and not being released or satisfied within
ten (10) days; (d) Debtor's failure to comply with its obligations under
paragraph 14 above or any transfer by Debtor in violation of paragraph 21
below; (e) a non-appealable judgment for the payment of money in excess of
$100,000 being rendered by a court of record against Debtor which Debtor
does not discharge or make provision for discharge in accordance with the
terms thereof within ninety (90) days from the date of entry thereof; (f)
death or judicial declaration of incompetency of Debtor, if an individual;
(g) the filing by Debtor of a petition under the Bankruptcy Act or any
amendment thereto or under any other insolvency law or law providing for
the relief of debtors, including, without limitation, a petition for
reorganization, arrangement or extension, or the commission by Debtor of
an act of bankruptcy; (h) the filing against Debtor of any such petition
not dismissed or permanently stayed within thirty (30) days of the filing
thereof; (i) the voluntary or involuntary making of an assignment of
substantial portion of its assets by Debtor for the benefit of creditors,
appointment of a receiver or trustee for Debtor or for any of Debtor's
assets, institution by or against Debtor or any other type of insolvency
proceeding (under the Bankruptcy Act or otherwise) or of any formal or
informal proceeding for dissolution, liquidation, settlement of claims
against or winding up of the affairs of Debtor, Debtor's cessation of
business activities or the making by Debtor of a transfer of all or a
material portion of Debtor's assets or inventory not in the ordinary
course of business; (j) the occurrence of any event described in parts
(e), (f), (g), (h) or (i) hereinabove with respect to any guarantor or
other party liable for payment or performance of this agreement; (k) any
certificate, statement, representation, warranty or audit heretofore or
hereafter furnished with respect hereto by or on behalf of Debtor or any
guarantor or other party liable for payment or performance of this
agreement proving to have been false in any material respect at the time
as of which the facts therein set forth were stated or certified or having
omitted any substantial contingent or unliquidated liability or claim
against Debtor or any such guarantor or other party; [struck through text]
(m) a transfer of effective control of Debtor, if an organization.
18. REMEDIES. Upon the occurrence of an event of default, Secured Party will
have the rights, options, duties and remedies of a secured party, and Debtor
will have the rights and duties of a debtor, under the Uniform Commercial
Code (regardless of whether such Code or a law similar thereto has been
enacted in a jurisdiction wherein the rights or remedies are asserted) and,
without limiting the foregoing, Secured Party may exercise any one or more
of the following remedies: (a) declare the Casualty Value or such lesser
amounts as may be set by law immediately due and payable with respect to
any or all Items of Equipment without notice or demand to Debtor; (b) sue
from time to time for and recover all installment payments and other
payments then accrued and which accrue during the pendency of such action
with respect to any or all Items of Equipment; (c) take possession of and,
if deemed appropriate, render unusable any or all Items of Equipment,
without demand or notice, wherever same may be located, without any court
order or other process of law and without liability for any damages
occasioned by such taking of possession and remove, keep and store the same
or use and operate or lease the same until sold; (d) require Debtor to
assemble any or all Items of Equipment at the Equipment Location therefor,
such location to which such Equipment may have been moved with the written
consent of Secured Party or such other location in reasonable proximity to
either of the foregoing as Secured Party designates; (e) upon ten days
notice to Debtor or such other notice as may be required by law, sell or
otherwise dispose of any Item of Equipment, whether or not in Secured
Party's possession, in a commercially reasonable manner at public or private
sale at any place deemed appropriate and apply the net proceeds of such
sale, after deducting all costs of such sale, including, but not limited to,
costs of transportation, repossession, storage, refurbishing, advertising
and brokers fees, to the obligations of Debtor to Secured Party hereunder or
otherwise, with Debtor remaining liable for any deficiency and with any
excess being returned to Debtor; (f) upon thirty (30) days notice to Debtor,
retain any repossessed or assembled Items of Equipment as Secured Party's
own property in full satisfaction of Debtor's liability for the installment
payments due hereunder with respect thereto, provided that Debtor will have
the right to redeem such Items by payment in full of its obligations to
Secured Party hereunder or otherwise or to require Secured Party to sell or
otherwise dispose of such Items in the manner set forth in subparagraph (e)
hereinabove upon notice to Secured Party within such thirty (30) day period
or (g) utilize any other remedy available to Secured Party under the Uniform
Commercial Code or similar provision of law or otherwise at law or in
equity.
No right or remedy conferred herein is exclusive of any other right or
remedy conferred herein or by law; but all such remedies are cumulative of
every other right or remedy conferred hereunder or at law or in equity, by
statute or otherwise, and may be exercised concurrently or separately from
time to time. Any sale contemplated by subparagraph (e) of this paragraph 18
may be adjourned from time to time by announcement at the time and place
appointed for such sale, or for any such adjourned sale, without further
published notice, and Secured Party may bid and become the purchaser at any
such sale. Any sale of an Item of Equipment, whether under said subparagraph
or by virtue of judicial proceedings, will operate to divest all right,
title, interest, claim and demand whatsoever, either at law or in equity, of
Debtor in and to said Item and will be a perpetual bar to any claim against
such Item, both at law and in equity, against Debtor and all persons
claiming by, through or under Debtor.
19. DISCONTINUANCE OF REMEDIES. If Secured Party proceeds to enforce any right
under this agreement and such proceedings are discontinued or abandoned for
any reason or are determined adversely, then and in every such case Debtor
and Secured Party will be restored to their former positions and rights
hereunder.
20. SECURED PARTY'S EXPENSES. Debtor will pay Secured Party all costs and
expenses, including attorney's fees and court costs and sales costs not
offset against sales proceeds under paragraph 18 above, incurred by Secured
Party in exercising any of its rights or remedies hereunder or enforcing any
of the terms, conditions or provisions hereof. This obligation includes the
payment or reimbursement of all such amounts whether an action is ultimately
filed and whether an action filed is ultimately dismissed.
21. ASSIGNMENT. Without the prior written consent of Secured Party, Debtor will
not sell, lease, pledge or hypothecate, except as provided in this
agreement, any Item of Equipment or any interest therein or assign,
transfer, pledge or hypothecate this agreement or any interest in this
agreement or permit the Equipment to be subject to any lien, charge or
encumbrance of any nature except the security interest of Secured Party
contemplated hereby. Debtor's interest herein is not assignable and will
not be assigned or transferred by operation of law. Consent to any of the
foregoing prohibited acts applies only in the given instance and is not a
consent to any subsequent like act by Debtor or any other person.
All rights of Secured Party hereunder may be assigned, pledged, mortgaged,
transferred or otherwise disposed of, either in whole or in part, without
notice to Debtor but always, however, subject to the rights of Debtor under
this agreement. If Debtor is given notice of any such assignment, Debtor
will acknowledge receipt thereof in writing. In the event Secured Party
assigns this agreement or the installment payments due or to become due
hereunder or any other interest herein, whether as security for any of its
indebtedness or
6
IN WITNESS WHEREOF, the undersigned have executed this agreement as of April 28,
1994.
HERITAGE LEASING CAPITAL VIASAT, INC.
_______________________________________
(Debtor)
Vice
President of
By: /s/ Ronald L. Wagner President By: /s/ Gregory Monahan Administration
____________________________________ ___________________________________
Ronald L. Wagner (Title) Gregory Monahan (Title)
By: ___________________________________
(Title)
Address: 2290 Cosmos Court
______________________________
Carlsbad, CA 92009
_______________________________________
(Individual or Partnership
Notarial Acknowledgement)
INDIVIDUAL or PARTNERSHIP:
State of
County of ss:
On this _____ day of ______________, 19___, before me _________________,
a notary public for the County of ________________________, personally appeared
______________________________, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person(s) whose name (is)(are)
subscribed to this instrument, and acknowledged that (he)(she)(they) executed it
(in [his][her][their] capacity as a partner and as the act of the partnership).
In witness whereof I hereunto set my hand and official seal.
(SEAL)
My commission expires. ___________________________________
Notary Public
86-585 (500)
7
CERTIFICATE OF SECRETARY
AS TO ADOPTION OF RESOLUTIONS
(Corporate Customer)
The undersigned, Mark J. Miller
--------------------------------------------------------------
(Corporate Secretary)
hereby certifies that he/she is now, and at all times herein mentioned has
been, the duly elected, qualified and acting Secretary of
VIASAT, INC.
- ---------------------------------------------------------------------------,
(Name of Corporation)
a duly organized and existing corporation, and in charge of the minute book and
corporate records of said corporation; that the following is a full, true and
correct copy of certain resolutions adopted by the Board of Directors of said
corporation at a meeting thereof duly held on
4/18/94
- --------------------, at which meeting a quorum of said Board was at all times
(Date)
present and acting; and that said resolutions have not been modified nor
rescinded and are at the date of this certificate in full force and effect:
WHEREAS it is in the best interest of this corporation to enter into a
certain Equipment Lease Agreement, Equipment Financing Agreement or other
HERITAGE LEASING CAPITAL
agreement with ----------------------------------------------------------
("Lessor/Secured Party") and, where appropriate, commitments now or
hereafter contemplating the receipt by this corporation of financial
accommodation from Lessor/Secured Party under the terms and conditions of
said Equipment Lease Agreement, Equipment Financing Agreement or other
agreement and may in the future be in this corporation's best interests to
enter into further such agreements or other agreements with Lessor/Secured
Party.
NOW THEREFORE BE IT RESOLVED: That the officers of this corporation listed
below, and each of them, are hereby authorized and directed to execute,
acknowledge and deliver in the name of and on behalf of this corporation
said Equipment Lease Agreement, Equipment Financing Agreement or other
agreement, said commitments and any such further agreement.
RESOLVED FURTHER: That the officers, agents and employees of this
corporation be and each of them is hereby authorized and empowered to do
and perform such other acts and things, and to make, execute, acknowledge,
procure and deliver all such other instruments and documents, on behalf of
this corporation as may be necessary or be by such officer, agent or
employee deemed appropriate to comply with, or to evidence compliance with,
the terms, conditions or provisions of said Equipment Lease Agreement,
Equipment Financing Agreement or other agreement, any such commitment or
any said further agreement and to consummate the transactions from time to
time contemplated thereby.
RESOLVED FURTHER: That this corporation hereby ratifies and confirms the
acts of the officers, agents or employees of this corporation in heretofore
entering into any Equipment Lease Agreement, Equipment Financing Agreement,
commitment or other agreement with Lessor/Secured Party together with any
other acts performed in relation thereto.
RESOLVED FURTHER: That the Secretary of this corporation be and he/she is
hereby authorized and directed to execute, acknowledge and deliver a
certified copy of these resolutions to Lessor/Secured Party and any other
person or agency which may require a copy of these resolutions.
RESOLVED FURTHER: That the following are the true names and specimen
signatures of the incumbent officers of this corporation authorized by
these resolutions to so execute, acknowledge and deliver said Equipment
Lease Agreement, Equipment Financing Agreement or other agreement, said
commitments and said further agreements.
(Type names below) (For Signature)
_____________________________, President X ________________________
_____________________________, Vice Pres. X ________________________
Mark J. Miller /s/ Mark J. Miller
_____________________________, Secretary X ________________________
Vice President of
Gregory Monahan Administration /s/ Gregory Monahan
_____________________________,__________ X ________________________
(Title)
RESOLVED FURTHER: That Lessor/Secured Party is authorized to act upon these
resolutions until written notice of the revocation thereof is delivered to
Lessor/Secured Party, any such revocation in no way to affect the
obligations of this corporation to Lessor/Secured Party under any
agreements entered into by this corporation pursuant to the terms of these
resolutions prior to receipt by Lessor/Secured Party of such notice of
revocation.
28th
IN WITNESS WHEREOF, the undersigned has executed this Certificate the ______ day
April 94
of________, 19______.
/s/ Mark J. Miller
----------------------------------
(Secretary)
(Corporate Seal Must Be Affixed
But Failure Not To Affect
Validity Or Reliance)
Heritage Leasing Capital
5775 Chesapeake Court
San Diego, CA 92123
1
EXHIBIT 10.16
[HERITAGE LEASING CAPITAL LETTERHEAD]
EFA No. 16333
EQUIPMENT FINANCING COMMITMENT
Subject to the terms set forth in this commitment, the following
equipment financing transaction is agreed to by the undersigned Debtor and
HERITAGE LEASING CAPITAL ("Secured Party") in connection with the terms of the
Equipment Financing Agreement herein referenced (the "Agreement").
Equipment Financing Agreement: dated as of May 13, 1994
Equipment (all Equipment to be acceptable to Secured Party): COMPUTER
AND LABORATORY EQUIPMENT.
Commitment Amount: $400,000.00
Installment Payments: 48 payments of 2.442% of advance payable
monthly in advance
First and last such payments due at time of scheduling.
Commitment Expiration Date: June 21, 1994. As more fully explained
below, Security Party has no obligation to make any advance with respect
to Equipment not covered by a Schedule to the Agreement executed by
Secured Party and Debtor on or prior to this date.
Debtor will comply with, procure, execute and/or have executed, acknowledge,
have acknowledged, deliver to Secured Party, record and file any documents set
forth in Exhibit A or accompanying this commitment. The form, substance and
sufficiency of all documents and showings employed in documenting the
contemplated financing transaction must be acceptable to Secured Party and its
counsel. Debtor will do likewise as to such further documents and showings as
Secured Party and its counsel may now or hereafter deem necessary or advisable
to protect Secured Party's rights under the Agreement and interest in the
Equipment. Debtor will pay as directed by Secured Party or reimburse Secured
Party for all searches, filings, title reports, attorney's services and other
charges incurred by Secured Party in connection with all such documents and
showings and any similar documents and showings Secured Party may procure.
Secured Party may, at its option, terminate its obligations to Debtor hereunder
with respect to any and all unscheduled Items of Equipment: (a) at or subsequent
to the Commitment Expiration Date, (b) upon the advent of a material adverse
change in Debtor's financial condition or Debtor's probable ability to perform
its obligations under the Agreement, (c) if the Agreement or any other
agreement under which Debtor has obligations to Secured Party is in default or
an event which with the giving of notice or lapse of time or both would
constitute such a default has occurred and is continuing or (d) with respect to
which more than fifteen percent (15%) would be advanced for shipping costs,
installation charges and design costs by giving Debtor written notice of such
termination.
ACCEPTED AND AGREED to as of ACCEPTED AND AGREED to as of
May 13, 1994 May 13, 1994
- ------------------------------------ -----------------------------------
Heritage Leasing Capital VIASAT, INC.
(Secured Party) -----------------------------------
5775 Chesapeake Court (Debtor)
San Diego, CA 92123
Address 2290 Cosmos Court
----------------------------
By: /s/ RONALD L. WAGNER President
------------------------------- Carlsbad, CA 92009
Ronald L. Wagner (Title) -----------------------------
By: /s/ GREGORY MONAHAN Vice
President
of
Administration
--------------------------------
Gregory Monahan (Title)
By:
---------------------------------
(Title)
2
Page 1 of 2
EFA No. 16333
[HERITAGE LEASING CAPITAL LETTERHEAD]
EXHIBIT A TO EQUIPMENT FINANCING COMMITMENT
Accepted by Debtor as of May 13, 1994
These provisions hereby become part of the Equipment Financing Commitment dated
May 13, 1994, between HERITAGE LEASING CAPITAL and its assignee(s), Secured
Party, and VIASAT, INC., Debtor.
In addition to the terms of the Agreement, Debtor further agrees to the
following additional provisions:
1. UCC SEARCH/RELEASES
The Secured Party may search all public records of Debtor to locate and
identify any conflicting liens against the above referenced Equipment.
Releases from any intervening parties holding a security interest in
said Equipment shall be required prior to funding provided herein.
2. TYPE OF FINANCING
This is a net equipment financing transaction whereby maintenance,
insurance, property taxes, and all items of a similar nature are for
the account of the Debtor.
3. EXPENSES
All expenses associated with the completion of this Agreement including,
but not limited to, UCC filing fees and searches, documentation costs,
legal expenses, and equipment verification costs are for the account of
the Debtor.
4. MASTER AGREEMENT
This is a Master Equipment Financing Agreement whereby Schedules may be
funded as equipment is delivered. Each Schedule to the Agreement,
however, shall cover equipment with a minimum aggregate cost of
$20,000.00.
INITIAL
/s/
-----------------
3
Page 2 of 2
EFA No. 16333
[HERITAGE LEASING CAPITAL LETTERHEAD]
EXHIBIT A TO EQUIPMENT FINANCING COMMITMENT
Accepted by Debtor as of May 13, 1994
5. INSTALLMENT PAYMENT AMOUNT
The installment payment amount of $24.42 per $1,000.00 of advance
payable monthly in advance is based on the yield of two-year Treasury
Notes yielding 5.03% as published in the Wall Street Journal on
Wednesday, March 23, 1994 (the "Index") and will apply for all schedules
funded by April 30, 1994. If a financing schedule is funded after
April 30, 1994 the rate shall be increased proportionally to any
increase in the Index. No downward adjustment will be made below the
floor index rate of 5.03%. Once a schedule is funded, however, the rate
will then be fixed for the term of the agreement.
6. COMMITMENT EXPIRATION DATE
The commitment expiration date of June 30, 1994 may be extended ninety
(90) days upon review by Secured Party of the Debtor's then current
financial condition. Debtor agrees to provide Secured Party such
financial information and other information Secured Party may reasonably
request to evaluate Debtor's financial condition for purposes of
granting such extension.
INITIAL
/s/
-----------------
4
[HERITAGE LEASING CAPITAL LETTERHEAD]
EFA No. 16333
EQUIPMENT FINANCING AGREEMENT
THIS EQUIPMENT FINANCING AGREEMENT ("agreement") is dated as of the date
set forth at the foot hereof and is between HERITAGE LEASING CAPITAL
("Secured Party") and the debtor designated at the foot hereof
("Debtor").
1. EQUIPMENT; SECURITY INTEREST. The terms and conditions of this agreement
cover each item of machinery, equipment and other property (individually an
"Item" or "Item of Equipment" and collectively the "Equipment") described in
a schedule now or hereafter executed by the parties hereto and made a part
hereof (individually a "Schedule" and collectively the "Schedules"). Debtor
hereby grants Secured Party a security interest in and to all Debtor's
right, title and interest in and to the Equipment under the Uniform
Commercial Code, such grant with respect to an Item of Equipment to be as of
Debtor's execution of a related equipment financing commitment referencing
this agreement or, if Debtor then has no interest in such Item, as of such
subsequent time as Debtor acquires an interest in the Item. Such security
interest is granted by Debtor to secure performance by Debtor of Debtor's
obligations to Secured Party hereunder and under any other agreements under
which Debtor has or may hereafter have obligations to Secured Party. Debtor
will ensure that such security interest will be and remain a sole and valid
first lien security interest subject only to the lien of current taxes and
assessments not in default but only if such taxes are entitled to priority
as a matter of law.
2. DEBTOR'S OBLIGATIONS. The obligations of Debtor under this agreement
respecting an Item of Equipment, except the obligation to pay installment
payments with respect thereto which will commence as set forth in paragraph
3 below, commence upon the grant to Secured Party of a security interest in
the Item. Debtor's obligations hereunder with respect to an Item of
Equipment and Secured Party's security interest therein will continue until
payment of all amounts due, and performance of all terms and conditions
required, hereunder with respect thereto; provided, however, that if this
agreement is then in default said obligations and security interest will
continue during the continuance of said default. Upon termination of Secured
Party's security interest in an Item of Equipment, Secured Party will
execute such release of interest with respect thereto as Debtor reasonably
requests.
3. INSTALLMENT PAYMENTS AND OTHER PAYMENTS. Debtor will repay advances Secured
Party makes on account of the Equipment together with interest in
installment payments in the amounts and at the times set forth in the
Schedules, whether or not Secured Party has rendered an invoice therefor, at
the office of Secured Party set forth at the foot hereof, or to such person
and/or at such other place as Secured Party may from time to time designate
on notice to Debtor. Any other amounts required to be paid Secured Party by
Debtor hereunder are due upon Debtor's receipt of Secured Party's invoice
therefor and will be payable as directed in the invoice. Payments under this
agreement may be applied to Debtor's then accrued obligations to Secured
Party in such order as Secured Party may choose.
4. NET AGREEMENT; NO OFFSET; SURVIVAL. This agreement is a net agreement, and
Debtor will not be entitled to any abatement of installment payments or
other payments due hereunder or any reduction thereof under any
circumstances or for any reason whatsoever. Debtor hereby waives any and all
existing and future claims, as offsets, against any installment payments or
other payments due hereunder and agrees to pay the installment payments and
other amounts due hereunder as and when due regardless of any offset or
claim which may be asserted by Debtor or on its behalf. The obligations and
liabilities of Debtor hereunder will survive the termination of this
agreement.
5. FINANCING AGREEMENT. THIS AGREEMENT IS SOLELY A FINANCING AGREEMENT. DEBTOR
ACKNOWLEDGES THAT THE EQUIPMENT HAS OR WILL HAVE BEEN SELECTED AND ACQUIRED
SOLELY BY DEBTOR FOR DEBTOR'S PURPOSES, THAT SECURED PARTY IS NOT AND WILL
NOT BE THE VENDOR OF ANY EQUIPMENT AND THAT SECURED PARTY HAS NOT MADE AND
WILL NOT MAKE ANY AGREEMENT, REPRESENTATION OR WARRANTY WITH RESPECT TO THE
MERCHANTABILITY, CONDITION, QUALIFICATION OR FITNESS FOR A PARTICULAR
PURPOSE OR VALUE OF THE EQUIPMENT OR ANY OTHER MATTER WITH RESPECT THERETO
IN ANY RESPECT WHATSOEVER.
6. NO AGENCY. DEBTOR ACKNOWLEDGES THAT NO AGENT OF THE MANUFACTURER OR OTHER
SUPPLIER OF AN ITEM OF EQUIPMENT OR OF ANY FINANCIAL INTERMEDIARY IN
CONNECTION WITH THIS AGREEMENT IS AN AGENT OF SECURED PARTY. SECURED PARTY
IS NOT BOUND BY A REPRESENTATION OF ANY SUCH PARTY AND, AS CONTEMPLATED IN
PARAGRAPH 27 BELOW, THE ENTIRE AGREEMENT OF SECURED PARTY AND DEBTOR
CONCERNING THE FINANCING OF THE EQUIPMENT IS CONTAINED IN THIS AGREEMENT AS
IT MAY BE AMENDED AS PROVIDED IN THAT PARAGRAPH.
7. ACCEPTANCE. Execution by Debtor and Secured Party of a Schedule covering the
Equipment or any Items thereof will conclusively establish that such
Equipment has been included under and will be subject to all the terms and
conditions of this agreement. If Debtor has not furnished Secured Party with
a Schedule by the earlier of fourteen (14) days after receipt thereof or
expiration of the commitment period set forth in the applicable equipment
financing commitment, Secured Party may terminate its obligation to advance
funds as to the applicable Equipment.
8. LOCATION; INSPECTION; USE. Debtor will keep, or in the case of motor
vehicles, permanently garage and not remove from the United States, as
appropriate, each Item of Equipment in Debtor's possession and control at
the Equipment Location designated in the applicable Schedule, or at such
other location to which such Item may have been moved with the prior written
consent of Secured Party. Whenever requested by Secured Party, Debtor will
advise Secured Party as to the exact location of an Item of Equipment;
Secured Party will have the right to inspect the Equipment and observe its
use during normal business hours and to enter into and upon the premises
where the Equipment may be located for such purpose. The Equipment will at
all times be used solely for commercial or business purposes and operated in
a careful and proper manner and in compliance with all applicable laws,
ordinances, rules and regulations, all conditions and requirements of the
policy or policies of insurance required to be carried by Debtor under the
terms of this agreement and all manufacturer's instructions and warranty
requirements. Any modifications or additions to the Equipment required by
any such governmental edict or insurance policy will be promptly made by
Debtor.
5
9. ALTERATIONS; SECURITY INTEREST COVERAGE. Without the prior written
consent of Secured Party, Debtor will not make any alterations,
additions or improvements to any Item of Equipment which detract from
its economic value or functional utility, except as may be required
pursuant to paragraph 8 above. Secured Party's security interest in the
Equipment will include all modifications and additions thereto and
replacements and substitutions therefor, in whole or in part. Such
reference to replacements and substitutions will not grant Debtor
greater rights to replace or substitute than are provided in paragraph
11 below or as may be allowed upon the prior written consent of Secured
Party.
10. MAINTENANCE. Debtor will maintain the Equipment in good repair,
condition and working order. Debtor will also cause each Item of
Equipment for which a service contract is generally available to the
covered by such a contract which provides coverages typical as to
property of the type involved and is issued by a competent servicing
entity.
11. LOSS AND DAMAGE; CASUALTY VALUE. In the event of the loss of, theft of,
requisition of, damage to or destruction of an Item of Equipment
("Casualty Occurrence") Debtor will give Secured Party prompt notice
thereof and will thereafter place such Item in good repair, condition
and working order; provided, however, that if such Item is determined by
Secured Party to be lost, stolen, destroyed or damaged beyond repair, is
requisitioned or suffers a constructive total loss as defined in any
applicable insurance policy carried by Debtor in accordance with
paragraph 14 below. Debtor, at Secured Party's option, will (a) replace
such Item with like equipment in good repair, condition and working
order whereupon such replacement equipment will be deemed such Item for
all purposes hereof or (b) pay Secured Party the "Casualty Value" of
such Item which will equal the total of (i) all installment payments and
other amounts due from Debtor to Secured Party at the time of such
payment and (ii) each future installment payment due with respect to
such Item with each such payment other than any final uneven payment
discounted at eight percent (8%) per annum simple interest from the date
due to the date of such payment. Any final uneven payment will be due
without discount. The discounting contemplated in this paragraph will be
in accordance with the Financial Compound Interest and Annuity Tables,
Sixth Edition published by the Financial Publishing Company. Upon such
replacement or payment, as appropriate, this agreement and Secured
Party's security interest will terminate with, and only with, respect to
the Item of Equipment so replaced or as to which such payment is made in
accordance with paragraph 2 above.
12. TITLING; REGISTRATION. Each Item of Equipment subject to title
registration laws will at all times be titled and/or registered by
Debtor as Secured Party's agent and attorney-in-fact with full power and
authority to register (but without power to affect title to) the
Equipment in such manner and in such jurisdiction or jurisdictions as
Secured Party directs. Debtor will promptly notify Secured Party of any
necessary or advisable retitling and/or reregistration of an Item of
Equipment in a jurisdiction other than one in which such Item is then
titled and/or registered. Any and all documents of title will be
furnished or caused to be furnished Secured Party by Debtor within sixty
(60) days of the date any titling or registering or retitling or
reregistering, as appropriate, is directed by Secured Party.
13. TAXES. Debtor will make all filings as to and pay when due all personal
property and other ad valorem taxes and all other taxes, fees, charges
and assessments based on the ownership or use of the Equipment and will
pay as directed by Secured Party or reimburse Secured Party for all
other taxes, including, but not limited to, gross receipts taxes
(exclusive of federal and state taxes based on Secured Party's net
income, unless such net income taxes are in substitution for or relieve
Debtor from any taxes which Debtor would otherwise be obligated to pay
under the terms of this paragraph 13), fees, charges and assessments
whatsoever, however designated, whether based on the installment
payments or other amounts due hereunder, levied, assessed or imposed
upon the Equipment or otherwise related hereto or to the Equipment, now
or hereafter levied, assessed or imposed under the authority of a
federal, state or local taxing jurisdiction, regardless of when and by
whom payable. Filings with respect to such other amounts will, at
Secured Party's option, be made by Secured Party or by Debtor as
directed by Secured Party.
14. INSURANCE. Debtor will procure and continuously maintain all risk
insurance against loss of or damage to the Equipment from any cause
whatsoever for not less than the full replacement value thereof naming
Secured Party as Loss Payee. Such insurance must be in a form and with
companies approved by Secured Party, much provide at least thirty (30)
days advance written notice to Secured Party of cancellation, change or
modification in any term, condition or amount of protection provided
therein, must provide full breach of warranty protection and must
provide that the coverage is "primary coverage" (does not require
contribution from any other applicable coverage). Debtor will provide
Secured Party with an original policy or certificate evidencing such
insurance. In the event of an assignment of this agreement of which
Debtor has notice, Debtor will cause such insurance to provide the same
protection to the assignee as its interests may appear. The proceeds of
such insurance, at the option of Secured Party or such assignee, as
appropriate, will be applied toward (a) repair or replacement of the
appropriate Item or Items of Equipment, (b) payment of the Casualty
Value thereof or (c) payment of, or as provision for, satisfaction of
any other accrued obligations of Debtor hereunder. Debtor hereby
appoints Secured Party as Debtor's attorney-in-fact with full power and
authority to do all things, including, but not limited to, making
claims, receiving payments and endorsing documents, checks or drafts,
necessary to secure payments due under any policy contemplated hereby on
account of a Casualty Occurrence. Debtor and Secured Party contemplate
that the jurisdictions where the Equipment will be located will not
impose any liability upon Secured Party for personal injury and/or
property damage resulting out of the possession, use, operation or
condition of the Equipment. In the event Secured Party determines that
such is not or may not be the case with respect to a given
jurisdiction, Debtor will provide Secured Party with public liability
and property damage coverage applicable to the Equipment in such amounts
and in such form as Secured Party requires.
15. SECURED PARTY'S PAYMENT. If Debtor fails to pay any amounts due
hereunder or to perform any of its other obligations under this
agreement, Secured Party may, at its option, but without any obligation
to do so, pay such amounts or perform such obligations, and Debtor will
reimburse Secured Party the amount of such payment or cost of such
performance.
16. INDEMNITY. Debtor does hereby assume liability for and does agree to
indemnify, defend, protect, save and keep harmless Secured Party from
and against any and all liabilities, losses, damages, penalties, claims,
actions, suits, costs, expenses and disbursements, including court costs
and legal expenses, of whatever kind and nature, imposed on, incurred by
or asserted against Secured Party (whether or not also indemnified
against by any other person) in any way relating to or arising out of
this agreement or the manufacture, financing, ownership, delivery,
possession, use, operation, condition or disposition of the Equipment by
Secured Party of Debtor, including, without limitation, any claim
alleging latent and other defects, whether or not discoverable by
Secured Party or Debtor, and any other claim arising out of strict
liability in tort, whether or not in either instance relating to an
event occurring while Debtor remains obligated under this agreement, and
any claim for patent, trademark or copyright infringement. Debtor agrees
to give Secured Party and Secured Party agrees to give Debtor notice of
any claim or liability hereby indemnified against promptly following
learning thereof.
6
INITIAL /s/
-----
17. DEFAULT. Any of the following will constitute an event of default hereunder:
(a) Debtor's failure to pay when due any installment payment or other amount
due hereunder, which failure continues for ten (10) days after the due date
thereof; (b) Debtor's default in performing any other obligation, term or
condition of this agreement or any other agreement between Debtor and
Secured Party or default under any further agreement providing security for
the performance by Debtor of its obligations hereunder, provided such
default has continued for more than twenty (20) days, except as provided in
(c) and (d) hereinbelow, or, without limiting the generality of subparagraph
(1) hereinbelow, default under any lease or any mortgage or other instrument
contemplating the provision of financial accommodation applicable to the
real estate where an Item of Equipment is located; (c) any writ or order of
attachment or execution or other legal process being levied on or charged
against any Item of Equipment and not being released or satisfied within ten
(10) days; (d) Debtor's failure to comply with its obligations under
paragraph 14 above or any transfer by Debtor in violation of paragraph 21
below; (e) a non-appealable judgment for the payment of money in excess of
$100,000 being rendered by a court of record against Debtor which Debtor
does not discharge or make provision for discharge in accordance with the
terms thereof within ninety (90) days from the date of entry thereof; (f)
death or judicial declaration of incompetency of Debtor, if an individual;
(g) the filing by Debtor of a petition under the Bankruptcy Act or any
amendment thereto or under any other insolvency law or law providing for the
relief of debtors, including, without limitation, a petition for
reorganization, arrangement or extension, or the commission by Debtor of an
act of bankruptcy; (h) the filing against Debtor of any such petition not
dismissed or permanently stayed within thirty (30) days of the filing
thereof; (i) the voluntary or involuntary making of an assignment of
substantial portion of its assets by Debtor for the benefit of creditors,
appointment of a receiver or trustee for Debtor or for any of Debtor's
assets, institution by or against Debtor or any other type of insolvency
proceeding (under the Bankruptcy Act or otherwise) or of any formal or
informal proceeding for dissolution, liquidation, settlement of claims
against or winding up of the affairs of Debtor, Debtor's cessation of
business activities or the making by Debtor of a transfer of all or a
material portion of Debtor's assets or inventory not in the ordinary course
of business; (j) the occurrence of any event described in parts (e), (f),
(g), (h) or (i) hereinabove with respect to any guarantor or other party
liable for payment or performance of this agreement; (k) any certificate,
statement, representation, warranty or audit heretofore or hereafter
furnished with respect hereto by or on behalf of Debtor or any guarantor or
other party liable for payment or performance of this agreement proving to
have been false in any material respect at the time as of which the facts
therein set forth were stated or certified or having omitted any substantial
contingent or unliquidated liability or claim against Debtor or any such
guarantor or other party; [struck through text] (m) a transfer of
effective control of Debtor, if an organization.
18. REMEDIES. Upon the occurrence of an event of default, Secured Party will
have the rights, options, duties and remedies of a secured party, and Debtor
will have the rights and duties of a debtor, under the Uniform Commercial
Code (regardless of whether such Code or a law similar thereto has been
enacted in a jurisdiction wherein the rights or remedies are asserted) and,
without limiting the foregoing, Secured Party may exercise any one or more
of the following remedies: (a) declare the Casualty Value or such lesser
amount as may be set by law immediately due and payable with respect to any
or all Items of Equipment without notice or demand to Debtor; (b) sue from
time to time for and recover all installment payments and other payments
then accrued and which accrue during the pendency of such action with
respect to any or all Items of Equipment; (c) take possession of and, if
deemed appropriate, render unusable any or all Items of Equipment, without
demand or notice, wherever same may be located, without any court order or
other process of law and without liability for any damages occasioned by
such taking of possession and remove, keep and store the same or use and
operate or lease the same until sold; (d) require Debtor to assemble any or
all Items of Equipment at the Equipment Location therefor, such location to
which such Equipment may have been moved with the written consent of Secured
Party or such other location in reasonable proximity to either of the
foregoing as Secured Party designates; (e) upon ten days notice to Debtor or
such other notice as may be required by law, sell or otherwise dispose of
any Item of Equipment, whether or not in Secured Party's possession, in a
commercially reasonable manner at public or private sale at any place deemed
appropriate and apply the net proceeds of such sale, after deducting all
costs of such sale, including, but not limited to, costs of transportation,
repossession, storage, refurbishing, advertising and brokers fees, to the
obligations of Debtor to Secured Party hereunder or otherwise, with Debtor
remaining liable for any deficiency and with any excess being returned to
Debtor; (f) upon thirty (30) days notice to Debtor, retain any repossessed
or assembled Items of Equipment as Secured Party's own property in full
satisfaction of Debtor's liability for the installment payments due
hereunder with respect thereto, provided that Debtor will have the right to
redeem such Items by payment in full of its obligations to Secured Party
hereunder or otherwise or to require Secured Party to sell or otherwise
dispose of such Items in the manner set forth in subparagraph (e)
hereinabove upon notice to Secured Party within such thirty (30) day period
or (g) utilize any other remedy available to Secured Party under the Uniform
Commercial Code or similar provision of law or otherwise at law or in
equity.
No right or remedy conferred herein is exclusive of any other right or
remedy conferred herein or by law; but all such remedies are cumulative of
every other right or remedy conferred hereunder or at law or in equity, by
statute or otherwise, and may be exercised concurrently or separately from
time to time. Any sale contemplated by subparagraph (e) of this paragraph 18
may be adjourned from time to time by announcement at the time and place
appointed for such sale, or for any such adjourned sale, without further
published notice, and Secured Party may bid and become the purchaser at any
such sale. Any sale of an Item of Equipment, whether under said subparagraph
or by virtue of judicial proceedings, will operate to divest all right,
title, interest, claim and demand whatsoever, either at law or in equity, of
Debtor in and to said Item and will be a perpetual bar to any claim against
such Item, both at law and in equity, against Debtor and all persons
claiming by, through or under Debtor.
19. DISCONTINUANCE OF REMEDIES. If Secured Party proceeds to enforce any right
under this agreement and such proceedings are discontinued or abandoned for
any reason or are determined adversely, then and in every such case Debtor
and Secured Party will be restored to their former positions and rights
hereunder.
20. SECURED PARTY'S EXPENSES. Debtor will pay Secured Party all costs and
expenses, including attorneys' fees and court costs and sales costs not
offset against sales proceeds under paragraph 18 above, incurred by Secured
Party in exercising any of its rights or remedies hereunder or enforcing any
of the terms, conditions or provisions hereof. This obligation includes the
payment or reimbursement of all such amounts whether an action is ultimately
filed and whether an action filed is ultimately dismissed.
21. ASSIGNMENT. Without the prior written consent of Secured Party, Debtor will
not sell, lease, pledge or hypothecate, except as provided in this
agreement, any Item of Equipment or any interest therein or assign,
transfer, pledge or hypothecate this agreement or any interest in this
agreement or permit the Equipment to be subject to any lien, charge or
encumbrance of any nature except the security interest of Secured Party
contemplated hereby. Debtor's interest herein is not assignable and will not
be assigned or transferred by operation of law. Consent to any of the
foregoing prohibited acts applies only in the given instance and is not a
consent to any subsequent like act by Debtor or any other person.
All rights of Secured Party hereunder may be assigned, pledged,
mortgaged, transferred or otherwise disposed of, either in whole or in part,
without notice to Debtor but always, however, subject to the rights of
Debtor under this agreement. If Debtor is given notice of any such
assignment, Debtor will acknowledge receipt thereof in writing. In the event
Secured Party assigns this agreement or the installment payments due or to
become due hereunder or any other interest herein, whether as security for
any of its indebtedness or
7
otherwise, no breach or default by Secured Party hereunder or pursuant
to any other agreement between Secured Party and Debtor, should there be
one, will excuse performance by Debtor of any provision hereof, it being
understood that in the event of such default or breach by Secured Party
that Debtor will pursue any rights on account thereof solely against
Secured Party. No such assignee, unless such assignee agrees in writing,
will be obligated to perform any duty, covenant or condition required to
be performed by Secured Party in connection with this agreement.
Subject always to the foregoing, this agreement inures to the benefit
of, and is binding upon, the heirs, legatees, personal representatives,
successors and assigns of the parties hereto.
22. MARKINGS; PERSONAL PROPERTY. If Secured Party supplies Debtor with
labels, plates, decals or other markings stating that Secured Party has
an interest in the Equipment. Debtor will affix and keep the same
prominently displayed on the Equipment or will otherwise mark the
Equipment or its then location or locations, as appropriate, at Secured
Party's request to indicate Secured Party's security interest in the
Equipment. The Equipment is, and at all times will remain, personal
property notwithstanding that the Equipment or any Item thereof may now
be, or hereafter become, in any manner affixed or attached to, or
embedded in, or permanently resting upon real property or any
improvement thereof or attached in any manner to what is permanent as by
means of cement, plaster, nails, bolts, screws or otherwise. If
requested by Secured Party, Debtor will obtain and deliver to Secured
Party waivers of interest or liens in recordable form satisfactory to
Secured Party from all persons claiming any interest in the real
property on which an Item of Equipment is or is to be installed or
located.
23. LATE CHARGE. If Debtor fails to pay any installment payment or any other
sum to be paid by Debtor to Secured Party within seven (7) days of when
due, Debtor will pay to Secured Party (a) Secured Party's collection
costs paid third parties relevant to the collection thereof and (b)
interest on such unpaid installment or other amount at the rate of
eighteen percent (18%) per annum, or at such greater or lesser contract
rate as may be applicable, computed from the date due to the date paid.
24. NON-WAIVER. No covenant or condition of this agreement can be waived
except by the written consent of Secured Party. Forebearance or
indulgence by Secured Party in regard to any breach hereunder will not
constitute a waiver of the related covenant or condition to be performed
by Debtor.
25. ADDITIONAL DOCUMENTS. In connection with and in order to perfect and
evidence the security interest in the Equipment granted Secured Party
hereunder Debtor will execute and deliver to Secured Party such
financing statements and similar documents as Secured Party requests.
Debtor authorizes Secured Party where permitted by law to make filings
of such financing statements without Debtor's signature. Debtor further
will furnish Secured Party (a) a fiscal year end financial statement
including balance sheet and profit and loss statement within one hundred
twenty (120) days of the close of each fiscal year, (b) any other
information normally provided by Debtor to the public and (c) such other
financial data or information relative to this agreement and the
Equipment, including, without limitation, copies of vendor proposals and
purchase orders and agreements, listings of serial numbers or other
identification data and confirmations of such information, as Secured
Party may from time to time reasonably request. Debtor will procure
and/or execute, have executed, acknowledge, have acknowledged, deliver
to Secured Party, record and file such other documents and showings as
Secured Party deems necessary or desirable to protect its interest in
and rights under this agreement and interest in the Equipment. Debtor
will pay as directed by Secured Party or reimburse Secured Party for all
filing, search, title report, legal and other fees incurred by Secured
Party in connection with any documents to be provided by Debtor pursuant
to this paragraph or paragraph 22 and any further similar documents
Secured Party may procure.
26. DEBTOR'S WARRANTIES. Debtor certifies and warrants that the financial
data and other information which Debtor has submitted, or will submit,
to Secured Party in connection with this agreement is, or will be at
time of delivery, as appropriate, a true and complete statement of the
matters therein contained. Debtor further certifies and warrants: (a)
this agreement has been duly authorized by Debtor and when executed and
delivered by the person signing on behalf of Debtor below will
constitute the legal, valid and binding obligation, contract and
agreement of Debtor enforceable against Debtor in accordance with its
respective terms; (b) this agreement and each and every showing provided
by or on behalf of Debtor in connection herewith may be relied upon by
Secured Party in accordance with the terms thereof notwithstanding the
failure of Debtor or other applicable party to ensure proper attestation
thereto, whether by absence or a seal or acknowledgement or otherwise;
(c) Debtor has the right, power and authority to grant a security
interest in the Equipment to Secured Party for the uses and purposes
herein set forth and (d) each Item of Equipment will, at the time such
Item becomes subject hereto, be in good repair, condition and working
order.
27. ENTIRE AGREEMENT. This instrument constitutes the entire agreement
between Secured Party and Debtor and will not be amended, altered
or changed except by a written agreement signed by the parties.
28. NOTICES. Notices under this agreement must be in writing and must be
mailed by United States mail, certified mail with return receipt
requested, duly addressed, with postage prepaid, to the party involved
at its respective address set forth at the foot hereof or at such other
address as such party may provide on notice to other from time to time.
Notices will be effective when deposited. Each party will promptly
notify the other of any change in the first party's address.
29. GENDER, NUMBER: JOINT AND SEVERAL LIABILITY. Whenever the context of
this agreement requires, the neuter gender includes the feminine or
masculine and the singular number includes the plural; and whenever the
words "Secured Party" are used herein, they include all assignees of
Secured Party, it being understood that specific reference to "assignee"
in paragraph 14 above is for further emphasis. If there is more than one
Debtor named in this agreement, the liability of each will be joint and
several.
30. TITLES. The titles to the paragraphs of this agreement are solely for
the convenience of the parties and are not an aid in the interpretation
of the instrument.
31. GOVERNING LAW; VENUE. This agreement will be governed by and construed
in accordance with the law of the State of California. Venue for any
action related to this agreement will be in an appropriate court in San
Diego County, California, to which Debtor consents, or in another court
selected by Secured Party which has jurisdiction over the parties. In
the event any provision hereof is declared invalid, such provision will
be deemed severable from the remaining provisions of this agreement
which will remain in full force and effect.
32. TIME. Time is of the essence of this agreement and each and all of
its provisions.
8
IN WITNESS WHEREOF, the undersigned have executed this agreement as of
May 13, 1994
HERITAGE LEASING CAPITAL VIASAT, INC.
_______________________________________
(Debtor)
Vice President of
By: /s/ Ronald L. Wagner President /s/ Gregory Monahan Administration
________________________________ _______________________________________
Ronald L. Wagner (Title) Gregory Monahan (Title)
5775 Chesapeake Court By: ___________________________________
San Diego, CA 92123 (Title)
Address: 2290 Cosmos Court
-----------------------------
Carlsbad, CA 92009
---------------------------------------
(Individual or Partnership
Notarial Acknowledgement)
INDIVIDUAL or PARTNERSHIP:
State of
County of ss:
On this ______ day of ___________________________, 19 ___, before
me ________________________________, a notary public for the County of
____________________________ personally appeared ___________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name (is)(are) subscribed to this instrument, and
acknowledged that (he)(she)(they) executed it (in [his][her][their] capacity as
a partner and as the act of the partnership).
In witness whereof I hereunto set my hand and official seal.
(SEAL)
My commission expires. ___________________________________
Notary Public
9
[HERITAGE LEASING CAPITAL LETTERHEAD]
June 27, 1994
VIASAT, INC.
2290 Cosmos Court
Carlsbad, CA 92009
Gentlemen:
This is written in connection with the Equipment Financing Agreement
between you, as debtor, and us, as secured party, dated as of May 13, 1994 (the
"EFA"), which it is contemplated shall cover certain items of equipment
(collectively the "Equipment" and individually an "Item of Equipment") to be
financed by us thereunder as more fully contemplated in a related commitment
accepted by you as of May 13, 1994 (the "Commitment").
You have requested us to advance your cost for certain of the Equipment
by paying the purchase price therefor for your account to the suppliers thereof
prior to the execution and delivery of the completed Schedule to the EFA
covering such Equipment.
We shall do this subject to the following understandings and agreements:
1. In connection with each request by you to us to make payment
under the terms of this letter, you shall state on a form provided by us that
you (a) accept the Equipment described thereon for all purposes of the EFA and
(b) instruct us to make payment to the suppliers of such Equipment for your
account and/or to reimburse you for your payment to such suppliers, as
appropriate. You understand and agree that your instructions to pay suppliers
for your account and/or to reimburse you under the provisions of this paragraph
are to be issued by you in such a manner as to maximize the amount of each such
payment to be made by us and minimize the number of occasions on which such
payments are to be made and that accordingly each request shall cover Equipment
with a cost of not less than $10,000.00. Your letter transmitting this material
should make reference to this letter agreement.
2. Each Item of Equipment with respect to which we make an advance
in the manner described above shall be covered by the terms and conditions
(including, without limitation, the security interest and insurance terms) of
the EFA and you will pay us interim interest (the "interim interest") equal to
the product of (a) .00034, (b) the advance amount as to such Equipment and (c)
the number of days from the date of the issuance of payment by us to but
excluding the day of the repayment by you under the terms of this letter or the
date of the applicable Schedule to the EFA. Accrued and previously unpaid
interim interest will be payable in arrears on the first day of each month
commencing with the month following our initial advance hereunder.
10
3. When all the Items of Equipment to be covered by a given
Schedule have been delivered to you and accepted or ready for acceptance if the
advance has not previously been made hereunder, as appropriate, for purposes of
the EFA, you shall advise us, we shall prepare the Schedule and provide the
Schedule to you, and you shall execute the Schedule and deliver it to us. We
will separately invoice you and you will pay any then unpaid interim interest.
4. If there occurs an event giving rise to our option to terminate
our obligations under the Commitment, including, but not limited to, a material
adverse change in your financial condition, expiration of the commitment period
contemplated by the Commitment or a default under the EFA, and our exercise of
such option, then our obligations hereunder and under the Commitment will
terminate. You would then be obligated to repay us all amounts which we have
advanced under the terms of this letter plus all accrued but unpaid interim
interest up to and including the date of such repayment. Your payment hereunder
shall be performed upon three (3) days' written notice from us that we have the
right to terminate our obligations hereunder and under the Commitment and have
elected to do so. We would have the various remedies of a secured creditor
contemplated in the EFA in the event of failure by you to make this repayment
as contemplated.
If the terms of this letter are satisfactory to you, please so indicate
by executing at the place provided at the foot of the enclosed copy of this
letter and returning the same to us. The original of this letter is for your
files.
Very truly yours,
HERITAGE LEASING CAPITAL
By: /s/ Gil Evans
-------------------------------------
Gil Evans, Executive Vice President
ACCEPTED AND AGREED to this 27th day of June, 1994.
VIASAT INC.
By: /s/ Gregory Monahan
-------------------------------------------------
Gregory Monahan, Vice President of Administration
11
June 27, 1994
Heritage Leasing Capital
5775 Chesapeake Court
San Diego, CA 92123
Gentlemen:
Please refer to the interim payment letter agreement dated June 27, 1994
between our two companies.
Pursuant to paragraph 1 of said letter agreement and with respect to the
invoices, the originals of which are attached hereto, we hereby (a) approve
each of said attached invoice(s), (b) accept each item of Equipment described
thereon for all purposes of the EFA, as defined in such agreement, and (c)
instruct you to make payment for our account to the issuer of each invoice in
accordance therewith.
We have indicated on each of the attached invoices (where it is not otherwise
made clear) the address where each Item of Equipment is to be permanently
located.
The total amount of the attached invoices and the total amount we request you
to pay hereunder is $10,200.00 payable to the following in the amounts
indicated:
Commworld Of San Diego-North, Inc. $10,200.00
We acknowledge that neither Heritage Leasing Capital nor its assignee or
successor shall be responsible for the delivery of any Item of Equipment, and we
will be obligated to repay all amounts you disburse, together with interest as
stated in the interim payment letter agreement whether or not the Equipment is
delivered to and accepted by us.
Very truly yours,
VIASAT, INC.
By: /s/ Gregory Monahan
-------------------------------------------------
Gregory Monahan, Vice President of Administration
12
[HERITAGE LEASING CAPITAL LETTERHEAD]
March 28, 1994
Mr. Gregory Monahan
Vice President of Administration
ViaSat, Inc.
2290 Cosmos Court
Carlsbad, CA 92009-1585
Dear Greg:
Enclosed please find a set of Master Equipment Lease documents for your review.
I have elected to change the method of documentation from a Master Equipment
Lease Line of Credit to an Equipment Financing Line of Credit. This change was
prompted by my phone conversation with Pat McGill who indicated some pieces of
equipment to be financed have been delivered and paid for. Using an Equipment
Financing Agreement (EFA), ViaSat retains title of ownership and Heritage
Leasing takes a security interest in the equipment. To document an equipment
lease, we would need to secure new invoices from vendors showing equipment sold
to Heritage Leasing Capital and the invoices must reflect the total equipment
cost as the balance due on the invoice. To avoid this requirement of new
invoices, we think it is best to document this initial $400,000 equipment
financing transaction using an EFA. Please call me if you have any questions
regarding this documentation.
In addition, I have changed the credit commitment letter to reflect an
equipment financing transaction.
I expect to receive a second credit approval for an additional $400,000 of
equipment financing this week.
I look forward to working with you and Pat on these financing transactions.
Sincerely,
HERITAGE LEASING CAPITAL
/s/ GIL EVANS
Gil Evans, CLP
Executive Vice President
GE:dw
Enclosure
13
[HERITAGE LEASING CAPITAL LETTERHEAD]
March 28, 1994
Mr. Gregory Monahan
Vice President of Administration
ViaSat, Inc.
2290 Cosmos Court
Carlsbad, CA 92009-1585
Dear Greg:
We are pleased to present the following Master Equipment Financing Agreement
credit commitment for your review and acceptance. This credit commitment is
subject to receipt and acceptance by Secured Party of a detailed equipment
list, prior to documentation, satisfactory to Secured Party.
BORROWER : ViaSat, Inc.
SECURED PARTY : Heritage Leasing Capital or its nominee.
EQUIPMENT : Personal Computers; Test Equipment;
Laboratory Equipment.
AMOUNT : $400,000.00 line of credit.
TERM : Forty-Eight (48) Months
ADVANCE PAYMENTS : First and Last Months' Payments
PAYMENT AMOUNT : Borrower will make forty-eight (48)
consecutive monthly installment payments,
in advance, at the monthly rate of $24.42
per $1,000 of equipment cost. For an
equipment cost of $400,000.00, the monthly
payment would be $9,768.00.
14
Master Equipment Financing Credit Commitment
ViaSat, Inc.
March 28, 1994
Page Two
MONTHLY RATE
ADJUSTMENT : The above rate is based on the yield of two-year Treasury Notes
yielding 5.03% as published in the Wall Street Journal on
Wednesday, March 23, 1994 (the "Index") and will apply for all
schedules funded by April 30, 1994. If a financing schedule is
funded after April 30, 1994 the rate shall be increased
proportionally to any increase in the Index. No downward
adjustment will be made below the floor index rate of 5.03%.
Once a schedule is funded, however, the rate will then be fixed
for the term of the agreement.
BALLOON
PAYMENT : None; this is fully amortized over the term proposed.
MASTER
AGREEMENT : This is a Master Agreement whereby schedules may be funded as
equipment is delivered. Each schedule to the agreement, however,
shall cover an equipment cost with a minimum aggregate cost of
$40,000.00.
TYPE OF
TRANSACTION : This is a net financing transaction whereby maintenance,
insurance, property taxes, documentation costs, and all items
of a similar nature are for the account of the Borrower.
CREDIT
COMMITMENT
EXPIRATION : Equipment financed under the agreement shall be delivered and
funded no later than July 31, 1994.
Greg, if this credit commitment is acceptable to you, please indicate by
signing the acceptance on the following page and returning it to Heritage
Leasing Capital.
I look forward to being of service to you in this transaction and will work
closely with you until it is completed to your entire satisfaction.
Sincerely,
HERITAGE LEASING CAPITAL
/s/ Gil Evans
Gil Evans
Executive Vice President
15
Master Equipment Financing Credit Commitment
ViaSat, Inc.
March 28, 1994
Page Three
ACCEPTANCE:
VIASAT, INC.
By:_______________________________
Gregory Monahan
Title: Vice President of Administration
Date:_____________________________
1
EXHIBIT 10.17
HERITAGE LEASING CAPITAL
EQUIPMENT FINANCING COMMITMENT EFA No. 16439
Subject to the terms set forth in this commitment, the following equipment
financing transaction is agreed to by the undersigned Debtor and HERITAGE
LEASING CAPITAL ("Secured Party") in connection with the terms of the Equipment
Financing Agreement herein referenced (the "Agreement").
Equipment Financing Agreement: dated as of SEPTEMBER 19, 1994.
Equipment (all Equipment to be acceptable to Secured Party): COMPUTER AND
LABORATORY EQUIPMENT
Commitment Amount: $400,000.00
Installment Payments: FORTY-EIGHT (48) payments of 2.493% of advance payable
MONTHLY in ADVANCE. FIRST AND LAST SUCH PAYMENTS ARE DUE AT TIME OF SCHEDULING.
Commitment Expiration Date: DECEMBER 14, 1994. As more fully explained below,
Secured Party has no obligation to make any advance with respect to Equipment
not covered by a Schedule to the Agreement executed by Secured Party and Debtor
on or prior to this date.
Debtor will comply with, procure, execute and/or have executed, acknowledge,
have acknowledged, deliver to Secured Party, record and file any documents set
forth in Exhibit A or accompanying this commitment. The form, substance and
sufficiency of all documents and showings employed in documenting the
contemplated financing transaction must be acceptable to Secured Party and its
counsel. Debtor will do likewise as to such further documents and showings as
Secured Party and its counsel may now or hereafter deem necessary or advisable
to protect Secured Party's rights under the Agreement and interest in the
Equipment. Debtor will pay as directed by Secured Party or reimburse Secured
Party for all searches, filings, title reports, attorney's services and other
charges incurred by Secured Party in connection with all such documents and
showings and any similar documents and showings Secured Party may procure.
Secured Party may, at its option, terminate its obligations to Debtor hereunder
with respect to any and all unscheduled Items of Equipment: (a) at or
subsequent to the Commitment Expiration Date, (b) upon the advent of a material
adverse change in Debtor's financial condition or Debtor's probable ability to
perform its obligations under the Agreement, (c) if the Agreement or any other
agreement under which Debtor has obligations to Secured Party is in default or
an event which with the giving of notice or lapse of time or both would
constitute such a default has occurred and is continuing or (d) with respect to
which more than fifteen percent (15%) would be advanced for shipping costs,
installation charges and design costs by giving Debtor written notice of such
termination.
ACCEPTED AND AGREED to as of ACCEPTED AND AGREED to as of
September 19, 1994 September 19, 1994
- ----------------------------
VIASAT, INC.
Heritage Leasing Capital (Debtor)
(Secured Party)
5775 Chesapeake Court Address: 2290 Cosmos Court
San Diego, CA 92123 Carlsbad, CA 92009
Vice President of
By: /s/ RONALD L. WAGNER, President By: /s/ GREGORY MONAHAN, Administration
------------------------------- -------------------------------------
Ronald L. Wagner Gregory Monahan (Title)
2
HERITAGE LEASING CAPITAL
Page 1 of 1
EXHIBIT A TO EQUIPMENT FINANCING COMMITMENT
Accepted by Debtor as of September 19, 1994
These provisions hereby become part of the Equipment Financing Commitment dated
September 19, 1994, between HERITAGE LEASING CAPITAL and its assignee(s),
Secured Party, and VIASAT, INC., Debtor.
In addition to the terms of the Agreement, Debtor further agrees to the
following additional provisions:
1. UCC SEARCH/RELEASES
The Secured Party may search all public records of Debtor to locate and
identify any conflicting liens against the above referenced Equipment.
Releases from any intervening parties holding a security interest in
said Equipment shall be required prior to funding provided herein.
2. TYPE OF FINANCING
This is a net equipment financing transaction whereby maintenance,
insurance, property taxes, and all items of a similar nature are for the
account of the Debtor.
3. EXPENSES
All expenses associated with the completion of this Agreement including,
but not limited to, UCC filing fees and searches, documentation costs,
legal expenses, and equipment verification costs are for the account of
the Debtor.
4. MASTER AGREEMENT
This is a Master Equipment Financing Agreement whereby Schedules may be
funded as equipment is delivered. Each Schedule to the Agreement,
however, shall cover equipment with a minimum aggregate cost of
$20,000.00.
5. INSTALLMENT PAYMENT AMOUNT
The installment payment amount of $24.93 per $1,000.00 of advance
payable monthly in advance is based on the yield of two-year Treasury
Notes yielding 6.24% as published in the Wall Street Journal on
Thursday, September 15, 1994 (the "Index") and will apply for all
schedules funded by October 31, 1994. If a financing schedule is funded
after October 31, 1994 the rate shall be increased proportionally to any
increase in the Index. No downward adjustment will be made below the
floor index rate of 6.24%. Once a schedule is funded, however, the rate
will then be fixed for the term of the agreement.
6. COMMITMENT EXPIRATION DATE
The commitment expiration date of December 14, 1994 may be extended
ninety (90) days upon review by Secured Party of the Debtor's then
current financial condition. Debtor agrees to provide Secured Party such
financial information and other information Secured Party may reasonably
request to evaluate Debtor's financial condition for purposes of
granting such extension.
INITIAL
/s/
-------
3
[HERITAGE LEASING CAPITAL LOGO]
HERITAGE LEASING CAPITAL
16439
EQUIPMENT FINANCING AGREEMENT
THIS EQUIPMENT FINANCING AGREEMENT ("agreement") is dated as of the date
set forth at the foot hereof and is between HERITAGE LEASING CAPITAL
("Secured Party") and the debtor designated at the foot hereof
("Debtor").
1. EQUIPMENT; SECURITY INTEREST. The terms and conditions of this agreement
cover each item of machinery, equipment and other property (individually
an "Item" or "Item of Equipment" and collectively the "Equipment")
described in a schedule now or hereafter executed by the parties hereto
and made a part hereof (individually a "Schedule" and collectively the
"Schedules"). Debtor hereby grants Secured Party a security interest in
and to all Debtor's right, title and interest in and to the Equipment
under the Uniform Commercial Code, such grant with respect to an Item of
Equipment to be as of Debtor's execution of a related equipment
financing commitment referencing this agreement or, if Debtor then has
no interest in such Item, as of such subsequent time as Debtor acquires
an interest in the Item. Such security interest is granted by Debtor to
secure performance by Debtor of Debtor's obligations to Secured Party
hereunder and under any other agreements under which Debtor has or may
hereafter have obligations to Secured Party. Debtor will ensure that
such security interest will be and remain a sole and valid first lien
security interest subject only to the lien of current taxes and
assessments not in default but only if such taxes are entitled to
priority as a matter of law.
2. DEBTOR'S OBLIGATIONS. The obligations of Debtor under this agreement
respecting an Item of Equipment, except the obligation to pay
installment payments with respect thereto which will commence as set
forth in paragraph 3 below, commence upon the grant to Secured Party of
a security interest in the Item. Debtor's obligations hereunder with
respect to an Item of Equipment and Secured Party's security interest
therein will continue until payment of all amounts due, and performance
of all terms and conditions required, hereunder with respect thereto;
provided, however, that if this agreement is then in default said
obligations and security interest will continue during the continuance
of said default. Upon termination of Secured Party's security interest
in an Item of Equipment, Secured Party will execute such release of
interest with respect thereto as Debtor reasonably requests.
3. INSTALLMENT PAYMENTS AND OTHER PAYMENTS. Debtor will repay advances
Secured Party makes on account of the Equipment together with interest
in installment payments in the amounts and at the times set forth in the
Schedules, whether or not Secured Party has rendered an invoice
therefor, at the office of Secured Party set forth at the foot hereof,
or to such person and/or at such other place as Secured Party may from
time to time designate on notice to Debtor. Any other amounts required
to be paid Secured Party by Debtor hereunder are due upon Debtor's
receipt of Secured Party's invoice therefor and will be payable as
directed in the invoice. Payments under this agreement may be applied to
Debtor's then accrued obligations to Secured Party in such order as
Secured Party may choose.
4. NET AGREEMENT; NO OFFSET; SURVIVAL. This agreement is a net agreement,
and Debtor will not be entitled to any abatement of installment payments
or other payments due hereunder or any reduction thereof under any
circumstances or for any reason whatsoever. Debtor hereby waives any and
all existing and future claims, as offsets, against any installment
payments or other payments due hereunder and agrees to pay the
installment payments and other amounts due hereunder as and when due
regardless of any offset or claim which may be asserted by Debtor or on
its behalf. The obligations and liabilities of Debtor hereunder will
survive the termination of this agreement.
5. FINANCING AGREEMENT. THIS AGREEMENT IS SOLELY A FINANCING AGREEMENT.
DEBTOR ACKNOWLEDGES THAT THE EQUIPMENT HAS OR WILL HAVE BEEN SELECTED
AND ACQUIRED SOLELY BY DEBTOR FOR DEBTOR'S PURPOSES, THAT SECURED PARTY
IS NOT AND WILL NOT BE THE VENDOR OF ANY EQUIPMENT AND THAT SECURED
PARTY HAS NOT MADE AND WILL NOT MAKE ANY AGREEMENT, REPRESENTATION OR
WARRANTY WITH RESPECT TO THE MERCHANTABILITY, CONDITION, QUALIFICATION
OR FITNESS FOR A PARTICULAR PURPOSE OR VALUE OF THE EQUIPMENT OR ANY
OTHER MATTER WITH RESPECT THERETO IN ANY RESPECT WHATSOEVER.
6. NO AGENCY. DEBTOR ACKNOWLEDGES THAT NO AGENT OF THE MANUFACTURER OR
OTHER SUPPLIER OF AN ITEM OF EQUIPMENT OR OF ANY FINANCIAL INTERMEDIARY
IN CONNECTION WITH THIS AGREEMENT IS AN AGENT OF SECURED PARTY. SECURED
PARTY IS NOT BOUND BY A REPRESENTATION OF ANY SUCH PARTY AND, AS
CONTEMPLATED IN PARAGRAPH 27 BELOW, THE ENTIRE AGREEMENT OF SECURED
PARTY AND DEBTOR CONCERNING THE FINANCING OF THE EQUIPMENT IS CONTAINED
IN THIS AGREEMENT AS IT MAY BE AMENDED AS PROVIDED IN THAT PARAGRAPH.
7. ACCEPTANCE. Execution by Debtor and Secured Party of a Schedule covering
the Equipment or any Items thereof will conclusively establish that such
Equipment has been included under and will be subject to all the terms
and conditions of this agreement. If Debtor has not furnished Secured
Party with a Schedule by the earlier of fourteen (14) days after receipt
thereof or expiration of the commitment period set forth in the
applicable equipment financing commitment, Secured Party may terminate
its obligation to advance funds as to the applicable Equipment.
4
8. LOCATION; INSPECTION; USE. Debtor will keep, or in the case of motor
vehicles, permanently garage and not remove from the United States, as
appropriate, each Item of Equipment in Debtor's possession and control
at the Equipment Location designated in the applicable Schedule, or at
such other location to which such Item of Equipment may have been
moved with the prior written consent of Secured Party. Whenever
requested by Secured Party, Debtor will advise Secured Party as to the
exact location of an Item of Equipment. Secured Party will have the
right to inspect the Equipment and observe its use during normal
business hours and to enter into and upon the premises where the
Equipment may be located for such purpose. The Equipment will at all
times be used solely for commercial or business purposes and operated in
a careful and proper manner and in compliance with all applicable laws,
ordinances, rules and regulations, all conditions and requirements of
the policy or policies of insurance required to be carried by Debtor
under the terms of this agreement and all manufacturer's instructions
and warranty requirements. Any modifications or additions to the
Equipment required by any such governmental edict or insurance policy
will be promptly made by Debtor.
9. ALTERATIONS; SECURITY INTEREST COVERAGE. Without the prior written
consent of Secured Party, Debtor will not make any alterations,
additions or improvements to any Item of Equipment which detract from
its economic value or functional utility, except as may be required
pursuant to paragraph 8 above. Secured Party's security interest in the
Equipment will include all modifications and additions thereto and
replacements and substitutions therefor, in whole or in part. Such
reference to replacements and substitutions will not grant Debtor
greater rights to replace or substitute than are provided in paragraph
11 below or as may be allowed upon the prior written consent of Secured
Party.
10. MAINTENANCE. Debtor will maintain the Equipment in good repair,
condition and working order. Debtor also will cause each Item of
Equipment for which a service contract is generally available to the
covered by such a contract which provides coverages typical as to
property of the type involved and is issued by a competent servicing
entity.
11. LOSS AND DAMAGE; CASUALTY VALUE. In the event of the loss of, theft of,
requisition of, damage to or destruction of an Item of Equipment
("Casualty Occurrence") Debtor will give Secured Party prompt notice
thereof and will thereafter place such Item in good repair, condition
and working order; provided, however, that if such Item is determined by
Secured Party to be lost, stolen, destroyed or damaged beyond repair, is
requisitioned or suffers a constructive total loss as defined in any
applicable insurance policy carried by Debtor in accordance with
paragraph 14 below, Debtor, at Secured Party's option, will (a) replace
the Item with like equipment in good repair, condition and working order
whereupon such replacement equipment will be deemed such Item for all
purposes hereof or (b) pay Secured Party the "Casualty Value" of such
Item which will equal the total of (i) all installment payments and
other amounts due from Debtor to Secured Party at the time of such
payment and (ii) each future installment payment due with respect to
such Item with each such payment other than any final uneven payment
discounted at eight percent (8%) per annum simple interest from the date
due to the date of such payment. Any final uneven payment will be due
without discount. The discounting contemplated in this paragraph will be
in accordance with the Financial Compound Interest and Annuity Tables,
Sixth Edition published by the Financial Publishing Company. Upon such
replacement or payment, as appropriate, this agreement and Secured
Party's security interest will terminate with, and only with, respect to
the Item of Equipment so replaced or as to which such payment is made in
accordance with paragraph 2 above.
12. TITLING; REGISTRATION. Each Item of Equipment subject to title
registration laws will at all times be titled and/or registered by
Debtor as Secured Party's agent and attorney-in-fact with full power and
authority to register (but without power to affect title to) the
Equipment in such manner and in such jurisdiction or jurisdictions as
Secured Party directs. Debtor will promptly notify Secured Party of any
necessary or advisable retitling and/or reregistration of an Item of
Equipment in a jurisdiction other than one in which such Item is then
titled and/or registered. Any and all documents of title will be
furnished or caused to be furnished Secured Party by Debtor within sixty
(60) days of the date any titling or registering or retitling or
reregistering, as appropriate, is directed by Secured Party.
13. TAXES. Debtor will make all filings as to and pay when due all personal
property and other ad valorem taxes and all other taxes, fees, charges
and assessments based on the ownership or use of the Equipment and will
pay as directed by Secured Party or reimburse Secured Party for all
taxes, including, but not limited to, gross receipts taxes (exclusive of
federal and state taxes based on Secured Party's net income, unless such
net income taxes are in substitution for or relieve Debtor from any
taxes which Debtor would otherwise be obligated to pay under the terms
of this paragraph 13), fees, charges and assessments whatsoever, however
designated, whether based on the installment payments or other amounts
due hereunder, levied, assessed or imposed upon the Equipment or
otherwise related hereto or to the Equipment, now or hereafter levied,
assessed or imposed under the authority of a federal, state or local
taxing jurisdiction, regardless of when and by whom payable. Filings
with respect to such other amounts will, at Secured Party's option, be
made by Secured Party or by Debtor as directed by Secured Party.
14. INSURANCE. Debtor will procure and continuously maintain all risk
insurance against loss of or damage to the Equipment from any cause
whatsoever for not less than the full replacement value thereof naming
Secured Party as Loss Payee. Such insurance must be in a form and with
companies approved by Secured Party, must provide for at least thirty
(30) days advance written notice to Secured Party of cancellation,
change or modification in any term, condition or amount of protection
provided therein, must provide full breach of warranty protection and
must provide that the coverage is "primary coverage" (does not require
contribution from any other applicable coverage). Debtor will provide
Secured Party with an original policy or certificate evidencing such
insurance. In the event of an assignment of this agreement by Secured
Party of which Debtor has notice, Debtor will cause such insurance to
provide the same protection to the assignee as its interest may appear.
The proceeds of such insurance, at the option of Secured Party or such
assignee, as appropriate, will be applied toward (a) the repair or
replacement of the appropriate Item or Items of Equipment, (b) payment
of the Casualty Value thereof or (c) payment of, or as provision for,
satisfaction of any other accrued obligations of Debtor hereunder.
Debtor hereby appoints Secured Party as Debtor's attorney-in-fact with
full power and authority to do all things, including, but not limited
to, making claims, receiving payments and endorsing documents, checks or
drafts, necessary to secure payments due under any policy contemplated
hereby on account of a Casualty Occurrence. Debtor and Secured Party
contemplate that the jurisdictions where the Equipment will be located
will not impose any liability upon Secured Party for personal injury
and/or property damage resulting out of the possession, use, operation
or condition of the Equipment. In the event Secured Party determines
that such is not or may not be the case with respect to a given
jurisdiction, Debtor will provide Secured Party will public liability
and property damage coverage applicable to the Equipment in such amounts
and in such form as Secured Party requires.
5
15. SECURED PARTY'S PAYMENT. If Debtor fails to pay any amounts due
hereunder or to perform any of its other obligations under this
agreement, Secured Party may, at its option, but without obligation to
do so, pay such amounts or perform such obligations, and Debtor will
reimburse Secured Party the amount of such payment or cost of such
performance.
16. INDEMNITY. Debtor does hereby assume liability for and does agree to
indemnify, defend, protect, save and keep harmless Secured Party from
and against any and all liabilities, losses, damages, penalties, claims,
actions, suits, costs, expenses and disbursements, including court costs
and legal expenses, of whatever kind and nature, imposed on, incurred by
or asserted against Secured Party (whether or not also indemnified
against by any other person) in any way relating to or arising out of
this agreement or the manufacture, financing, ownership, delivery,
possession, use, operation, condition or disposition of the Equipment by
Secured Party or Debtor, including, without limitation, any claim
alleging latent and other defects, whether or not discoverable by
Secured Party or Debtor, and any other claim arising out of strict
liability in tort, whether or not in either instance relating to an
event occurring while Debtor remains obligated under this agreement, and
any claim for patent, trademark or copyright infringement. Debtor agrees
to give Secured Party and Secured Party agrees to give Debtor notice of
any claim or liability hereby indemnified against promptly following
learning thereof.
17. DEFAULT. Any of the following will constitute an event of default here
under: (a) Debtor's failure to pay when due any installment payment or
other amount due hereunder, which failure continues for ten (10) days
after the due date thereof; (b) Debtor's default in performing any other
obligation, term or condition of this agreement or any other agreement
between Debtor and Secured Party or default under any further agreement
providing security for the performance by Debtor of its obligations
hereunder,
provided such default has continued for more than twenty (20) days,
except as provided in (c) and (d) hereinbelow, or, without limiting the
generality of subparagraph (l) hereinbelow, default under any lease or
any mortgage or other instrument contemplating the provision of
financial accommodation applicable to the real estate where an Item of
Equipment is located; (c) any writ or order of attachment or execution
or other legal process being levied on or charged against any Item of
Equipment and not being released or satisfied within ten (10) days; (d)
Debtor's failure to comply with its obligations under paragraph 14 above
or any transfer by Debtor in violation of paragraph 21 below; (e) a
non-appealable judgement for the payment of money in excess of $100,000
being rendered by a court of record against Debtor which Debtor does not
discharge or make provision for discharge in accordance with the terms
thereof within ninety (90) days from the date of entry thereof; (f)
death or judicial declaration of incompetency of Debtor, if an
individual; (g) the filing by Debtor of a petition under the Bankruptcy
Act or any amendment thereto or under any other insolvency law or law
providing for the relief of debtors, including, without limitation, a
petition for reorganization, arrangement or extension, or the commission
by Debtor of an act of bankruptcy; (h) the filing against Debtor of any
such petition not dismissed or permanently stayed with thirty (30) days
of the filing thereof; (i) the voluntary or involuntary making of an
assignment of substantial portion of its assets by Debtor for the
benefit of creditors, appointment of a receiver or trustee for Debtor or
for any of Debtor's assets, institution by or against Debtor or any
other type of insolvency proceeding (under the Bankruptcy Code or
otherwise) or of any formal or informal proceeding for dissolution,
liquidation, settlement of claims against or winding up of the affairs
of Debtor, Debtor's cessation of business activities or the making by
Debtor of a transfer of all or a material portion of Debtor's assets or
inventory not in the ordinary course of business; (j) the occurrence of
any event described in parts (e), (f), (g), (h) or (i) hereinabove with
respect to any guarantor or other party liable for payment or
performance of this agreement; (k) any certificate, statement,
representation, warranty or audit heretofore or hereafter furnished with
respect hereto by or on behalf of Debtor or any guarantor or other party
liable for payment or performance of this agreement proving to have been
false in any material respect at the time as of which the facts therein
set forth were stated or certified or having omitted any substantial
contingent or unliquidated liability or claim against Debtor or any such
guarantor or other party; (l) [STRUCK THROUGH TEXT] (m) a transfer of
effective control of Debtor, if an organization.
18. REMEDIES. Upon the occurrence of an event of default, Secured Party will
have the rights, options, duties and remedies of a secured party, and
Debtor will have the rights and duties of a debtor, under the Uniform
Commercial Code (regardless of whether such Code or a law similar
thereto has been enacted in a jurisdiction wherein the rights or
remedies are asserted) and, without limiting the foregoing, Secured
Party may exercise any one or more of the following remedies: (a)
declare the Casualty Value or such lesser amount as may be set by law
immediately due and payable with respect to any or all Items of
Equipment without notice or demand to Debtor; (b) sue from time to time
for and recover all installment payments and other payments then accrued
and which accrue during the pendency of such action with respect to any
or all Items of Equipment; (c) take possession of and, if deemed
appropriate, render unusable any or all Items of Equipment, without
demand or notice, wherever same may be located, without any court order
or other process of law and without liability for any damages occasioned
by such taking of possession and remove, keep and store the same or use
and operate or lease the same until sold; (d) require Debtor to assemble
any or all Items of Equipment at the Equipment Location therefor, such
location to which such Equipment may have been moved with the written
consent of Secured Party or such other location in reasonable proximity
to either of the foregoing as Secured Party designates; (e) upon ten
days notice to Debtor or such other notice as may be required by law,
sell or otherwise dispose of any Item of Equipment, whether or not in
Secured Party's possession, in a commercially reasonable manner at
public or private sale at any place deemed appropriate and apply the net
proceeds of such sale, after deducting all costs of such sale,
including, but not limited to, costs of transportation, repossession,
storage, refurbishing, advertising and broker's fees, to the obligations
of Debtor to Secured Party hereunder or otherwise, with Debtor remaining
liable for any deficiency and with any excess being returned to Debtor;
(f) upon thirty (30) days notice to Debtor, retain any repossessed or
assembled Items of Equipment as Secured Party's own property in full
satisfaction or Debtor's liability for the installment payments due
hereunder with respect thereto, provided that Debtor will have the right
to redeem such Items by payment in full of its obligations to Secured
Party hereunder or otherwise or to require Secured Party to sell or
otherwise dispose of such Items in the manner set forth in subparagraph
(e) hereinabove upon notice to Secured Party within such thirty (30) day
period or (g) utilize any other remedy available to Secured Party under
the Uniform Commercial Code or similar provision of law or otherwise at
law or in equity.
No right or remedy conferred herein is exclusive of any other
right or remedy conferred herein or by law; but all such remedies are
cumulative of every other right or remedy conferred hereunder or at law
or in equity, by statute or otherwise, and may be exercised concurrently
or separately from time to time. Any sale contemplated by subparagraph
(e) of this paragraph 18 may be adjourned from time to time by
announcement at the time and place appointed for such sale, or for any
such adjourned sale, without further published notice, and Secured Party
may bid and become the purchaser at any such sale. Any sale of an Item
of Equipment, whether under said subparagraph or by virtue of judicial
proceedings, will operate to divest all right, title, interest, claim
and demand whatsoever, either at law or in equity, of
6
Debtor in and to said Item and will be a perpetual bar to any claim
against such Item, both at law and in equity, against Debtor and all
persons claiming by, through or under Debtor.
19. DISCONTINUANCE OF REMEDIES. If Secured Party proceeds to enforce any
right under this agreement and such proceedings are discontinued or
abandoned for any reason or are determined adversely, then and in every
such case Debtor and Secured Party will be restored to their former
positions and rights thereunder.
20. SECURED PARTY'S EXPENSES. Debtor will pay Secured Party all costs and
expenses, including attorney's fees and court costs and sales costs not
offset against sales proceeds under paragraph 18 above, incurred by
Secured Party in exercising any of its rights or remedies hereunder or
enforcing any of the terms, conditions or provisions hereof. This
obligation includes the payment or reimbursement of all such amounts
whether an action is ultimately filed and whether an action filed is
ultimately dismissed.
21. ASSIGNMENT. Without the prior written consent of Secured Party, Debtor
will not sell, lease, pledge or hypothecate, except as provided in this
agreement, an Item of Equipment or any interest therein or assign,
transfer, pledge or hypothecate this agreement or any interest in this
agreement or permit the Equipment to be subject to any lien, charge or
encumbrance of any nature except the security interest of Secured Party
contemplated hereby. Debtor's interest herein is not assignable and
will not be assigned or transferred by operation of law. Consent to any
of the foregoing prohibited acts applies only in the given instance and
is not a consent to any subsequent like act by Debtor or any person.
All rights of Secured Party hereunder may be assigned pledged,
mortgaged, transferred or otherwise disposed of, either in whole or in
part, without notice to Debtor but always, however, subject to the
rights of Debtor under this agreement. If Debtor is given notice of any
such assignment, Debtor will acknowledge receipt thereof in writing. In
the event Secured Party assigns this agreement or the installment
payments due or to become due hereunder or any other interest herein,
whether as security for any of its indebtedness or otherwise, no breach
or default by Secured Party hereunder or pursuant to any other agreement
between Secured Party and Debtor, should there be one, will excuse
performance by Debtor of any provision hereof, it being understood that
in the event of such default or breach by Secured Party that Debtor will
pursue any rights on account thereof solely against Secured Party. No
such assignee, unless such assignee agrees in writing, will be obligated
to perform any duty, covenant or condition required to be performed by
Secured Party in connection with this agreement.
Subject always to the foregoing, this agreement insures to the
benefit of, and is binding upon, the heirs, legatees, personal
representatives, successors and assigns of the parties thereto.
22. MARKINGS; PERSONAL PROPERTY. If Secured Party supplies Debtor with
labels, plates, decals or other markings stating that Secured Party has
an interest in the Equipment, Debtor will affix and keep the same
prominently displayed on the Equipment or will otherwise make the
Equipment or its then location or locations, as appropriate, at Secured
Party's request to indicate Secured Party's security interest in the
Equipment. The Equipment is, and at all times will remain, personal
property notwithstanding that the Equipment or any Item thereof may now
be, or hereafter become, in any manner affixed or attached to, or
embedded in, or permanently resting upon real property or any
improvement thereof or attached in any manner to what is permanent as by
means of cement, plaster, nails, bolts, screws or otherwise. If
requested by Secured Party, Debtor will obtain and deliver to Secured
Party waivers of interest or liens in recordable form satisfactory to
Secured Party from all persons claiming any interest in the real
property on which an Item of Equipment is or is to be installed or
located.
23. LATE CHARGE. If Debtor fails to pay any installment payment or any other
sum to be paid by Debtor to Secured Party within seven (7) days of when
due, Debtor will pay to Secured Party (a) Secured Party's collection
costs paid third parties relevant to the collection thereof and (b)
interest on such unpaid installment or other amount at the rate of
eighteen (18%) per annum, or at such greater or lesser contract rate as
may be applicable, computed from the date due to the date paid.
24. NON-WAIVER. No covenant or condition of this agreement can be waived
except by the written consent of Secured Party. Forbearance or
indulgence by Secured Party in regard to any breach hereunder will not
constitute a waiver of the related covenant or condition to be performed
by Debtor.
25. ADDITIONAL DOCUMENTS. In connection with and in order to perfect and
evidence the security interest in the Equipment granted Secured Party
hereunder Debtor will execute and deliver to Secured Party such
financing statements and similar documents as Secured Party requests.
Debtor authorizes Secured Party where permitted by law to make filings
of such financing statements without Debtor's signature. Debtor further
will furnish Secured Party (a) a fiscal year end financial statement
including balance sheet and profit and loss statement within one hundred
twenty (120) days of the close of each fiscal year, (b) any other
information normally provided by Debtor to the public and (c) such other
financial data or information relative to this agreement and the
Equipment, including, without limitation, copies of vendor proposals and
purchase orders and agreements, listings of serial numbers or other
identification data and confirmations of such information, as Secured
Party may from time to time reasonably request. Debtor will procure
and/or execute, have executed, acknowledge, have acknowledged, deliver
to Secured Party, record and file such other documents and showings as
Secured Party deems necessary or desirable to protect its interest in
and rights under this agreement and interest in the Equipment. Debtor
will pay as directed by Secured Party or reimburse Secured Party for all
filing, search, title report, legal and other fees incurred by Secured
Party in connection with any documents to be provided by Debtor pursuant
to this paragraph or paragraph 22 and any further similar documents
Secured Party may procure.
26. DEBTOR'S WARRANTIES. Debtor certifies and warrants that the financial
data and other information which Debtor has submitted, or will submit,
to Secured Party in connection with this agreement is, or will be at
time of delivery, as appropriate, a true and complete statement of the
matters therein contained. Debtor further certifies and warrants that
(a) this agreement has been duly authorized by Debtor and when executed
and delivered by the person signing on behalf of Debtor below will
constitute the legal, valid and binding obligation, contract and
agreement of Debtor enforceable against Debtor in accordance with its
respective terms; (b) this agreement and each and every showing provided
by or on behalf of Debtor in connection herewith may be relied upon by
Secured Party in accordance with the terms thereof notwithstanding the
failure of Debtor or other applicable party to ensure proper attestation
thereto, whether by absence of a seal or acknowledgement or otherwise;
(c) Debtor has the right, power and authority to grant a security
interest in the Equipment to Secured Party
7
for the uses and purposes herein set forth and (d) each Item of
Equipment will, at the time such Item becomes subject hereto, be in good
repair, condition and working order.
27. ENTIRE AGREEMENT. This instrument constitutes the entire agreement
between Secured Party and Debtor and will not be amended, altered or
changed except by a written agreement signed by the parties.
28. NOTICES. Notices under this agreement must be in writing and must be
mailed by United States mail, certified mail with return receipt
requested, duly addressed, with postage prepaid, to the party involved
at its respective address set forth at the foot hereof or at such other
address as such party may provide on notice to the other from time to
time. Notices will be effective when deposited. Each party will promptly
notify the other of any change in the first party's address.
29. GENDER; NUMBER; JOINT AND SEVERAL LIABILITY. Whenever the context of
this agreement requires, the neuter gender includes the feminine or
masculine and the singular number includes the plural; and whenever the
words "Secured Party" are used herein, they include all assignees of
Secured Party, it being understood that specific reference to "assignee"
in paragraph 14 above is for further emphasis. If there is more than one
Debtor named in this agreement, the liability of each will be joint and
several.
30. TITLES. The titles to the paragraphs of this agreement are solely for
the convenience of the parties and are not an aid in the interpretation
of the instrument.
31. GOVERNING LAW; VENUE. This agreement will be governed and construed in
accordance with the law of the State of California. Venue for any action
related to this agreement will be in an appropriate court in San Diego
County, California, to which Debtor consents, or in another court
selected by Secured Party which has jurisdiction over the parties. In
the event any provision hereof is declared invalid, such provision will
be deemed severable from the remaining provisions of this agreement
which will remain in full force and effect.
32. TIME. Time is of the essence of this agreement and each and all of its
provisions.
IN WITNESS WHEREOF, the undersigned have executed this agreement as of this
19th day or September, 1994.
HERITAGE LEASING CAPITAL VIASAT, INC.
(Secured Party) -------------------------------
(Debtor)
Vice President of
By: /s/ RONALD L. WAGNER, President By: /s/ GREGORY MONAHAN, Administration
------------------------------- -------------------------------------
Ronald L. Wagner (Title) Gregory Monahan (Title)
By:_____________________________________
(Title)
Address: 5775 Chesapeake Court Address: 2290 Cosmos Court
San Diego, CA 92123 -------------------------------
Carlsbad, CA 92009
-------------------------------
8
CERTIFICATE OF SECRETARY
AS TO ADOPTION OF RESOLUTIONS
(CORPORATE CUSTOMER)
The undersigned, Mark J. Miller ,
----------------------------------------------
(Corporate Secretary)
hereby certifies that he/she is now, and at all times herein mentioned has
been, the duly elected, qualified and acting Secretary of
VIASAT, INC. ,
- -----------------------------------------------------------------------
(Name of Corporation)
a duly organized and existing corporation, and in charge of the minute book and
corporate records of said corporation; that the following is a full, true and
correct copy of certain resolutions adopted by the Board of Directors of said
corporation at a meeting thereof duly held on
19/Sept. 1994 , at which meet a quorum of said Board was at all times
- ------------------------ present and acting;
(Date)
and that said resolutions have not been modified nor rescinded and are at the
date of this certificate in full force and effect:
WHEREAS it is in the best interest of this corporation to enter into a certain
Equipment Lease Agreement, Equipment Financing Agreement or other agreement with
HERITAGE LEASING CAPITAL
- -------------------------------------------------------------------------------
("Lessor/Secured Party") and, where appropriate, commitments now or hereafter
contemplating the receipt by this corporation of financial accommodation from
Lessor/Secured Party under the terms and conditions of said Equipment Lease
Agreement, Equipment Financing Agreement or other agreement and may in the
future be in this corporation's best interests to enter into further such
agreements or other agreements with Lessor/Secured Party.
NOW THEREFORE BE IT RESOLVED: That the officers of this corporation listed
below, and each of them, are hereby authorized and directed to execute,
acknowledge and deliver in the name of and on behalf of this corporation said
Equipment Lease Agreement, Equipment Financing Agreement or other agreement,
said commitments and any such further agreement.
RESOLVED FURTHER: That the officers, agents and employees of this corporation be
and each of them is hereby authorized and empowered to do and perform such other
acts and things, and to make, execute, acknowledge, procure and deliver all such
other instruments and documents, on behalf of this corporation as may be
necessary or be by such officer, agent or employee deemed appropriate to comply
with, or to evidence compliance with, the terms, conditions or provisions of
said Equipment Lease Agreement, Equipment Financing Agreement or other
agreement, any such commitment or any said further agreement and to consummate
the transactions from time to time contemplated thereby.
RESOLVED FURTHER: That this corporation hereby ratifies and confirms the acts of
the officers, agents or employees of this corporation in heretofore entering
into any Equipment Lease Agreement, Equipment Financing Agreement, commitment or
other agreement with Lessor/Secured Party together with any other acts performed
in relation thereto.
RESOLVED FURTHER: That the Secretary of this corporation be and he/she is hereby
authorized and directed to execute, acknowledge and deliver a certified copy of
these resolutions to Lessor/Secured Party and any other person or agency which
may require a copy of these resolutions.
RESOLVED FURTHER: That the following are the true names and specimen signatures
of the incumbent officers of this corporation authorized by these resolutions to
so execute, acknowledge and deliver said Equipment Lease Agreement, Equipment
Financing Agreement or other agreement, said commitments and said further
agreements.
(Type names below) (For Signature)
, President X
- ---------------------------- -------------------------------
, Vice Pres. X
- ---------------------------- -------------------------------
Mark J. Miller , Secretary X /s/ Mark J. Miller
- ---------------------------- -------------------------------
Vice President,
Gregory Monahan , Administration X /s/ Gregory Monahan
- ---------------------------- -------------------------------
(Title)
RESOLVED FURTHER, That Lessor/Secured Party is authorized to act upon these
resolutions until written notice of the revocation thereof is delivered to
Lessor/Secured Party, any such revocation in no way to affect the obligations
of this corporation to Lessor/Secured Party under any agreements entered into
by this corporation pursuant to the terms of these resolutions prior to receipt
by Lessor/Secured Party of such notice of revocation.
IN WITNESS WHEREOF, the undersigned has executed this Certificate the 19th day
of September, 1994.
/s/ Mark J. Miller
---------------------------------
Mark J. Miller (Secretary)
(Corporate Seal Must Be Affixed
But Failure Not To Affect
Validity Or Reliance)
Heritage Leasing Capital
5775 Chesapeake Court
San Diego, CA 92123
9
CERTIFICATE OF SECRETARY
AS TO ADOPTION OF RESOLUTIONS
(Corporate Customer)
The undersigned, Mark J. Miller
----------------------------------------------------
(Corporate Secretary)
hereby certifies that he/she is now, and at all times herein mentioned has been,
the duly elected, qualified and acting Secretary of VIASAT, INC.
---------------------------
(Name of Corporation)
a duly organized and existing corporation, and in charge of the minute book and
corporate records of said corporation; that the following is a full, true and
correct copy of certain resolutions adopted by the Board of Directors of said
corporation at a meeting thereof duly held on
___________________________________________________________, at which meeting a
(Date)
quorum of said Board was at all times present and acting; and that said
resolutions have not been modified nor rescinded and are at the date of this
certificate in full force and effect:
WHEREAS it is in the best interest of this corporation to enter into a
certain Equipment Lease Agreement, Equipment Financing Agreement or
other agreement with HERITAGE LEASING CAPITAL ("Lessor/ Secured Party")
and, where appropriate, commitments now or hereafter contemplating the
receipt by this corporation of financial accommodation from Lessor/
Secured Party under the terms and conditions of said Equipment Lease
Agreement, Equipment Financing Agreement or other agreement and may in
the future be in this corporation's best interests to enter into
further such agreements or other agreements with Lessor/Secured Party.
NOW THEREFORE BE IT RESOLVED: That the officers of this corporation
listed below, and each of them, are hereby authorized and directed to
execute, acknowledge and deliver in the name of and on behalf of this
corporation said Equipment Lease Agreement, Equipment Financing
Agreement or other agreement, said commitments and any such further
agreement.
RESOLVED FURTHER: That the officers, agents and employees of this
corporation be and each of them is hereby authorized and empowered to
do and perform such other acts and things, and to make, execute,
acknowledge, procure and deliver all such other instruments and
documents, on behalf of this corporation as may be necessary or be by
such officer, agent or employee deemed appropriate to comply with, or
to evidence compliance with, the terms, conditions or provisions of
said Equipment Lease Agreement, Equipment Financing Agreement or other
agreement, any such commitment or any said further agreement and to
consummate the transactions from time to time contemplated thereby.
RESOLVED FURTHER: That this corporation hereby ratifies and confirms
the acts of the officers, agents or employees of this corporation in
heretofore entering into any Equipment Lease Agreement, Equipment
Financing Agreement, commitment or other agreement with Lessor/Secured
Party together with any other acts performed in relation thereto.
RESOLVED FURTHER: That the Secretary of this corporation be and he/she
is hereby authorized and directed to execute, acknowledge and deliver a
certified copy of these resolutions to Lessor/Secured Party and any
other person or agency which may require a copy of these resolutions.
RESOLVED FURTHER: That the following are the true names and specimen
signatures of the incumbent officers of this corporation authorized by
these resolutions to so execute, acknowledge and deliver said Equipment
Lease Agreement, Equipment Financing Agreement or other agreement, said
commitments and said further agreements.
10
FROM: VIASAT, INC.
2290 Cosmos Court
Carlsbad, CA 92009
TO: Mr. Carl Rosen
E. J. PHELPS & COMPANY
2250 Fourth Avenue, Suite 200
San Diego, CA 92101
Phone: (619) 231-1643
Fax: (619) 231-0432
Dear Mr. Rosen:
We have entered into an equipment financing agreement arranged by HERITAGE
LEASING CAPITAL, for the equipment shown below or on the attached schedule.
EQUIPMENT LOCATION: Same as above
EQUIPMENT DESCRIPTION: Computer and Laboratory Equipment
Please provide Heritage with an insurance certificate with the following
endorsements:
LENDER'S LOSS PAYABLE: BANK OF THE WEST
EFA #: 16439
EQUIPMENT COST: $400,000.00
Please FAX A COPY of the Certificate of Insurance to Heritage Leasing at
619/277-0302, and forward the original to:
BANK OF THE WEST
1450 TREAT BOULEVARD
WALNUT CREEK, CA 94596
Very truly yours,
VIASAT, INC.
By: /s/ Gregory Monahan
--------------------------------------
Gregory Monahan
Vice President of Administration
11
IMPORTANT--READ INSTRUCTIONS ON BACK BEFORE FILLING OUT FORM
This FINANCING STATEMENT is presented for filing and will remain effective with
certain exceptions for a period of five years from the date of filing pursuant
to section 9403 of the California Uniform Commercial Code.
16439
- --------------------------------------------------------------------------------
1. DEBTOR (LAST NAME FIRST--IF AN INDIVIDUAL) 1A. SOCIAL SECURITY OR FEDERAL TAX NO.
VIASAT, INC. 33-0174996
- ----------------------------------------------------------------------------------------------------------------------------------
1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE
2290 Cosmos Court Carlsband, CA 92009
- ----------------------------------------------------------------------------------------------------------------------------------
2. ADDITIONAL DEBTOR (IF ANY) (LAST NAME FIRST--IF AN INDIVIDUAL 2A. SOCIAL SECURITY OR FEDERAL TAX NO.
- ----------------------------------------------------------------------------------------------------------------------------------
2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE
- ----------------------------------------------------------------------------------------------------------------------------------
3. DEBTOR'S TRADE NAMES OR STYLES (IF ANY) 3A. FEDERAL TAX NUMBER
- ----------------------------------------------------------------------------------------------------------------------------------
4. SECURED PARTY 4A. SOCIAL SECURITY NO., FEDERAL
TAX NO. OR BANK TRANSIT AND
A.B.A. NO.
NAME HERITAGE LEASING CAPITAL
MAILING ADDRESS 5775 Chesapeake Court 33-0098465
CITY San Diego STATE CA ZIP CODE 92123
- ----------------------------------------------------------------------------------------------------------------------------------
5. ASSIGNEE OF SECURED PARTY (IF ANY) 5A. SOCIAL SECURITY NO., FEDERAL
TAX NO. OR BANK TRANSIT AND
A.B.A. NO.
NAME Bank of the West, Equipment Leasing
MAILING ADDRESS P.O. Box 8188 94-0475440
CITY Walnut Creek STATE CA ZIP CODE 94596
- ----------------------------------------------------------------------------------------------------------------------------------
6. This FINANCING STATEMENT covers the following types or items of property (INCLUDE DESCRIPTION OF REAL PROPERTY ON WHICH
LOCATED AND OWNER OF RECORD WHEN REQUIRED BY INSTRUCTION 4).
All equipment and other property now or hereafter covered by that certain Equipment Financing Agreement between Secured
Party and Debtor, EFA Number 16439 dated as of September 19, 1994 and all accessions and additions to, modifications of and
replacements and substitutions for such equipment and other property. Such equipment includes property of the following
type or types:
COMPUTER AND LABORATORY EQUIPMENT
- ----------------------------------------------------------------------------------------------------------------------------------
7. CHECK [ x ] 7A. [ ] PRODUCTS OF COLLATERAL 7B. DEBTOR(S) SIGNATURE NOT REQUIRED IN ACCORDANCE WITH
IF APPLICABLE ARE ALSO COVERED INSTRUCTION 5(a) ITEM:
[ ] (1) [ ] (2) [ ] (3) [ ] (4)
- ----------------------------------------------------------------------------------------------------------------------------------
8. CHECK [ x ]
IF APPLICABLE [ ] DEBTOR IS A "TRANSMITTING UTILITY" IN ACCORDANCE WITH UCC SEC. 9105(1)(n)
- ----------------------------------------------------------------------------------------------------------------------------------
9. DATE: 9-19-94 C 10. THIS SPACE FOR USE OF FILING OFFICER
O (DATE, TIME, FILE NUMBER
-- /s/ GREGORY MONAHAN D AND FILING OFFICER)
Gregory Monahan, V.P. of Administration E
SIGNATURE(S) OF DEBTOR(S)
- ---------------------------------------------------------------------------------
VIASAT, INC. 1
TYPE OR PRINT NAMES(S) OF DEBTOR(S) 2
- ---------------------------------------------------------------------------------
-- 3
SIGNATURE(S) OF SECURED PARTY(IES) 4
- ---------------------------------------------------------------------------------
HERITAGE LEASING CAPITAL 5
TYPE OR PRINT NAME(S) OF SECURED PARTY(IES) 6
=================================================================================
11. Return copy to: 7
NAME [ ]
[ ] 8
ADDRESS [ ]
[ ] 9
CITY [ ]
[ ] 0
STATE [ ]
[ ]
ZIP CODE [ ]
=================================================================================
FORM UCC-1
APPROVED BY THE SECRETARY OF STATE
1
EXHIBIT 10.18
- --------------------------------------------------------------------------------
HERITAGE LEASING CAPITAL
- --------------------------------------------------------------------------------
EQUIPMENT FINANCING COMMITMENT EFA No. 16492
- --------------------------------------------------------------------------------
Subject to the terms set forth in this commitment, the following equipment
financing transaction is agreed to by the undersigned Debtor and HERITAGE
LEASING CAPITAL ("Secured Party") in connection with the terms of the Equipment
Financing Agreement herein referenced (the "Agreement").
Equipment Financing Agreement: dated as of DECEMBER 6, 1994.
Equipment (all Equipment to be acceptable to Secured Party): COMPUTER AND
LABORATORY EQUIPMENT
Commitment Amount: $400,000.00
Installment Payments: FORTY-EIGHT (48) payments of 2.542% of advance payable
MONTHLY in ADVANCE. FIRST AND LAST SUCH PAYMENTS ARE DUE
AT TIME OF SCHEDULING.
Commitment Expiration Date: FEBRUARY 2, 1995. As more fully explained below,
Secured Party has no obligation to make any advance
with respect to Equipment not covered by a Schedule
to the Agreement executed by Secured Party and
Debtor on or prior to this date.
Debtor will comply with, procure, execute and/or have executed, acknowledge,
have acknowledged, deliver to Secured Party, record and file any documents set
forth in Exhibit A or accompanying this commitment. The form, substance and
sufficiency of all documents and showings employed in documenting the
contemplated financing transaction must be acceptable to Secured Party and its
counsel. Debtor will do likewise as to such further documents and showings as
Secured Party and its counsel may now or hereafter deem necessary or advisable
to protect Secured Party's rights under the Agreement and interest in the
Equipment. Debtor will pay as directed by Secured Party or reimburse Secured
Party for all searches, filings, title reports, attorney's services and other
charges incurred by Secured Party in connection with all such documents and
showings and any similar documents and showings Secured Party may procure.
Secured Party may, at its option, terminate its obligations to Debtor hereunder
with respect to any and all unscheduled Items of Equipment: (a) at or subsequent
to the Commitment Expiration Date, (b) upon the advent of a material adverse
change in Debtor's financial condition or Debtor's probable ability to perform
its obligations under the Agreement, (c) if the Agreement or any other agreement
under which Debtor has obligations to Secured Party is in default or an event
which with the giving of notice or lapse of time or both would constitute such a
default has occurred and is continuing or (d) with respect to which more than
fifteen percent (15%) would be advanced for shipping costs, installation charges
and design costs by giving Debtor written notice of such termination.
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
December 6, 1994 December 6, 1994
HERITAGE LEASING CAPITAL VIASAT, INC.
(Secured Party) (Debtor)
Vice President
By: /s/ Ronald L. Wagner President By: /s/ Gregory Monahan of Administration
-------------------------------- --------------------------------------
Ronald L. Wagner (Title) Gregory Monahan (Title)
Address: 5775 Chesapeake Court Address: 2290 Cosmos Court
San Diego, CA 92123 Carlsbad, CA 92009
- --------------------------------------------------------------------------------
2
HERITAGE LEASING CAPITAL
Page 1 of 1
EXHIBIT A TO EQUIPMENT FINANCING COMMITMENT
Accepted by Debtor as of December 6, 1994
These provisions hereby become part of the Equipment Financing Commitment dated
December 6, 1994, between HERITAGE LEASING CAPITAL and its assignee(s), Secured
Party, and VIASAT, INC., Debtor.
In addition to the terms of the Agreement, Debtor further agrees to the
following additional provisions:
1. UCC SEARCH/RELEASES
The Secured Party may search all public records of Debtor to locate and
identify any conflicting liens against the above referenced Equipment.
Releases from any intervening parties holding a security interest in
said Equipment shall be required prior to funding provided herein.
2. TYPE OF FINANCING
This is a net equipment financing transaction whereby maintenance,
insurance, property taxes, and all items of a similar nature are for
the account of the Debtor.
3. EXPENSES
All expenses associated with the completion of this Agreement including,
but not limited to, UCC filing fees and searches, documentation costs,
legal expenses, and equipment verification costs are for the account
of the Debtor.
4. MASTER AGREEMENT
This is a Master Equipment Financing Agreement whereby Schedules may
be funded as equipment is delivered. Each Schedule to the Agreement,
however, shall cover equipment with a minimum aggregate cost of
$20,000.00.
5. INSTALLMENT PAYMENT AMOUNT
The installment payment amount of $25.42 per $1,000.00 of advance
payable monthly in advance is based on the yield of two-year Treasury
Notes yielding 7.38% as published in the Wall Street Journal on Friday,
December 2, 1994 (the "Index") and will apply for all schedules funded
by January 2, 1995. If a financing schedule is funded after January 2,
1995 the rate shall be increased proportionally to any increase in the
Index. No downward adjustment will be made below the floor index rate
of 7.38%. Once a schedule is funded, however, the rate will then be
fixed for the term of the agreement.
6. COMMITMENT EXPIRATION DATE
The commitment expiration date of February 2, 1995 may be extended
sixty (60) days upon review by Secured Party of the Debtor's then
current financial condition. Debtor agrees to provide Secured Party
such financial information and other information Secured Party may
reasonably request to evaluate Debtor's financial condition for purposes
of granting such extension.
INITIAL
[ GM ]
3
[HERITAGE LEASING CAPITAL LOGO] HERITAGE LEASING CAPITAL
EQUIPMENT FINANCING AGREEMENT
EFA NO. 16492
THIS EQUIPMENT FINANCING AGREEMENT ("agreement") is dated as of the date set
forth at the foot hereof and is between HERITAGE LEASING CAPITAL ("Secured
Party") and the debtor designated at the foot hereof ("Debtor").
1. EQUIPMENT; SECURITY INTEREST. The terms and conditions of this agreement
cover each item of machinery, equipment and other property (individually
an "Item" or "Item of Equipment" and collectively the "Equipment")
described in a schedule now or hereafter executed by the parties hereto
and made a part hereof (individually a "Schedule" and collectively the
"Schedules"). Debtor hereby grants Secured Party a security interest in
and to all Debtor's right, title and interest in and to the Equipment
under the Uniform Commercial Code, such grant with respect to an Item
of Equipment to be as of Debtor's execution of a related equipment
financing commitment referencing this agreement or, if Debtor then has
no interest in such Item, as of such subsequent time as Debtor acquires
an interest in the Item. Such security interest is granted by Debtor to
secure performance by Debtor of Debtor's obligations to Secured Party
hereunder and under any other agreements under which Debtor has or may
hereafter have obligations to Secured Party. Debtor will ensure that
such security interest will be and remain a sole and valid first lien
security interest subject only to the lien of current taxes and
assessments not in default but only if such taxes are entitled to
priority as a matter of law.
2. DEBTOR'S OBLIGATIONS. The obligations of Debtor under this agreement
respecting an Item of Equipment, except the obligation to pay
installment payments with respect thereto which will commence as set
forth in paragraph 3 below, commence upon the grant to Secured Party
of a security interest in the Item. Debtor's obligations hereunder with
respect to an Item of Equipment and Secured Party's security interest
therein will continue until payment of all amounts due, and performance
of all terms and conditions required, hereunder with respect thereto;
provided, however, that if this agreement is then in default said
obligations and security interest will continue during the continuance
of said default. Upon termination of Secured Party's security interest
in an Item of Equipment, Secured Party will execute such release of
interest with respect thereto as Debtor reasonably requests.
3. INSTALLMENT PAYMENTS AND OTHER PAYMENTS. Debtor will repay advances
Secured Party makes on account of the Equipment together with interest
in installment payments in the amounts and at the times set forth in
the Schedules, whether or not Secured Party has rendered an invoice
therefor, at the office of Secured Party set forth at the foot hereof,
or to such person and/or at such other place as Secured Party may from
time to time designate on notice to Debtor. Any other amounts required
to be paid Secured Party by Debtor hereunder are due upon Debtor's
receipt of Secured Party's invoice therefor and will be payable as
directed in the invoice. Payments under this agreement may be applied
to Debtor's then accrued obligations to Secured Party in such order as
Secured Party may choose.
4. NET AGREEMENT; NO OFFSET; SURVIVAL. This agreement is a net agreement,
and Debtor will not be entitled to any abatement of installment payments
or other payments due hereunder or any reduction thereof under any
circumstances or for any reason whatsoever. Debtor hereby waives any and
all existing and future claims, as offsets, against any installment
payments or other payments due hereunder and agrees to pay the
installment payments and other amounts due hereunder as and when due
regardless of any offset or claim which may be asserted by Debtor
or on its behalf. The obligations and liabilities of Debtor hereunder
will survive the termination of this agreement.
5. FINANCING AGREEMENT. THIS AGREEMENT IS SOLELY A FINANCING AGREEMENT.
DEBTOR ACKNOWLEDGES THAT THE EQUIPMENT HAS OR WILL HAVE BEEN SELECTED
AND ACQUIRED SOLELY BY DEBTOR FOR DEBTOR'S PURPOSES, THAT SECURED
PARTY IS NOT AND WILL NOT BE THE VENDOR OF ANY EQUIPMENT AND THAT
SECURED PARTY HAS NOT MADE AND WILL NOT MAKE ANY AGREEMENT,
REPRESENTATION OR WARRANTY WITH RESPECT TO THE MERCHANTABILITY,
CONDITION, QUALIFICATION OR FITNESS FOR A PARTICULAR PURPOSE OR VALUE
OF THE EQUIPMENT OR ANY OTHER MATTER WITH RESPECT THERETO IN ANY RESPECT
WHATSOEVER.
6. NO AGENCY. DEBTOR ACKNOWLEDGES THAT NO AGENT OF THE MANUFACTURE OR OTHER
SUPPLIER OF AN ITEM OF EQUIPMENT OR OF ANY FINANCIAL INTERMEDIARY IN
CONNECTION WITH THIS AGREEMENT IS AN AGENT OF SECURED PARTY. SECURED
PARTY IS NOT BOUND BY A REPRESENTATION OF ANY SUCH PARTY AND, AS
CONTEMPLATED IN PARAGRAPH 27 BELOW, THE ENTIRE AGREEMENT OF SECURED
PARTY AND DEBTOR CONCERNING THE FINANCING OF THE EQUIPMENT IS
CONTAINED IN THIS AGREEMENT AS IT MAY BE AMENDED AS PROVIDED IN THAT
PARAGRAPH.
7. ACCEPTANCE. Execution by Debtor and Secured Party of a Schedule
covering the Equipment or any Items thereof will conclusively establish
that such Equipment has been included under and will be subject to all
the terms and conditions of this agreement. If Debtor has not furnished
Secured Party with a Schedule by the earlier of fourteen (14) days
after receipt thereof or expiration of the commitment period set forth
in the applicable equipment financing commitment, Secured Party may
terminate its obligation to advance funds as to the applicable
Equipment.
4
-2-
8. LOCATION; INSPECTION; USE. Debtor will keep, or in the case of motor
vehicles, permanently garage and not remove from the United States,
as appropriate, each Item of Equipment in Debtor's possession and
control at the Equipment Location designated in the applicable
Schedule, or at such other location to which such Item or Equipment
may have been moved with the prior written consent of Secured Party.
Whenever requested by Secured Party, Debtor will advise Secured Party
as to the exact location of an Item of Equipment. Secured Party will
have the right to inspect the Equipment and observe its use during
normal business hours and to enter into and upon the premises where
the Equipment may be located for such purpose. The Equipment will at
all times be used solely for commercial or business purposes and
operated in a careful and proper manner and in compliance with all
applicable laws, ordinances, rules and regulations, all conditions and
requirements of the policy of insurance required to be carried by
Debtor under the terms of this agreement and all manufacturer's
instructions and warranty requirements. Any modifications or additions
to the Equipment required by any such governmental edict or insurance
policy will be promptly made by Debtor.
9. ALTERATIONS; SECURITY INTEREST COVERAGE. Without the prior written
consent of Secured Party, Debtor will not make any alterations,
additions or improvements to any Item of Equipment which detract from
its economic value or functional utility, except as may be required
pursuant to paragraph 8 above. Secured Party's security interest in the
Equipment will include all modifications and additions thereto and
replacements and substitutions therefor, in whole or in part. Such
reference to replacements and substitutions will not grant Debtor
greater rights to replace or substitute than are provided in paragraph
11 below or as may be allowed upon the prior written consent of
Secured Party.
10. MAINTENANCE. Debtor will maintain the Equipment in good repair,
condition and working order. Debtor also will cause each Item of
Equipment for which a service contract is generally available to the
covered by such a contract which provides coverages typical as to
property of the type involved and is issued by a competent servicing
entity.
11. LOSS AND DAMAGE; CASUALTY VALUE. In the event of the loss of, theft of,
requisition of, damage to or destruction of an Item of Equipment
("Casualty Occurrence") Debtor will give Secured Party prompt notice
thereof and will thereafter place such Item in good repair, condition
and working order; provided, however, that if such Item is determined
by Secured Party to be lost, stolen, destroyed or damaged beyond
repair, is requisitioned or suffers a constructive total loss as
defined in any applicable insurance policy carried by Debtor in
accordance with paragraph 14 below, Debtor, at Secured Party's option,
will (a) replace the Item with like equipment in good repair,
condition and working order whereupon such replacement equipment will
be deemed such Item for all purposes hereof or (b) pay Secured Party
the "Casualty Value" of such Item which will equal the total of (i) all
installment payments and other amounts due from Debtor to Secured Party
at the time of such payment and (ii) each future installment payment
due with respect to such Item with each such payment other than any
final uneven payment discounted at eight percent (8%) per annum simple
interest from the date due to the date of such payment. Any final uneven
payment will be due without discount. The discounting contemplated in
this paragraph will be in accordance with the Financial Compound
Interest and Annuity Tables, Sixth Edition published by the Financial
Publishing Company. Upon such replacement or payment, as appropriate,
this agreement and Secured Party's security interest will terminate
with, and only with, respect to the Item of Equipment so replaced or as
to which such payment is made in accordance with paragraph 2 above.
12. TITLING; REGISTRATION. Each Item of Equipment subject to title
registration laws will at all times be titled and/or registered by
Debtor as Secured Party's agent and attorney-in-fact with full power and
authority to register (but without power to affect title to) the
Equipment in such manner and in such jurisdiction or jurisdictions as
Secured Party directs. Debtor will promptly notify Secured Party of any
necessary or advisable retitling and/or reregistration of an Item of
Equipment in a jurisdiction other than one in which such Item is then
titled and/or registered. Any and all documents of title will be
furnished or caused to be furnished Secured Party by Debtor within sixty
(60) days of the date any titling or registering or retitling or
reregistering, as appropriate, is directed by Secured Party.
13. TAXES. Debtor will make all filings as to and pay when due all personal
property and other ad valorem taxes and all other taxes, fees, charges
and assessments based on the ownership or use of the Equipment and will
pay as directed by Secured Party or reimburse Secured Party for all
taxes, including, but not limited to, gross receipts taxes (exclusive of
federal and state taxes based on Secured Party's net income, unless such
net income taxes are in substitution for or relieve Debtor from any
taxes which Debtor would otherwise be obligated to pay under the terms
of this paragraph 13), fees, charges and assessments whatsoever, however
designated, whether based on the installment payments or other amounts
due hereunder, levied, assessed or imposed upon the Equipment or
otherwise related hereto or to the Equipment, now or hereafter levied,
assessed or imposed under the authority of a federal, state or local
taxing jurisdiction, regardless of when and by whom payable. Filings
with respect to such other amounts will, at Secured Party's option, be
made by Secured Party or by Debtor as directed by Secured Party.
14. INSURANCE. Debtor will procure and continuously maintain all risk
insurance against loss of or damage to the Equipment from any cause
whatsoever for not less than the full replacement value thereof naming
Secured Party as Loss Payee. Such insurance must be in a form and
with companies approved by Secured Party, must provide at least thirty
(30) days advance written notice to Secured Party of cancellation,
change or modification in any term, condition or amount of protection
provided therein, must provide full breach of warranty protection and
must provide that the coverage is "primary coverage" (does not require
contribution from any other applicable coverage). Debtor will provide
Secured Party with an original policy or certificate evidencing such
insurance. In the event of an assignment of this agreement by Secured
Party of which Debtor has notice, Debtor will cause such insurance to
provide the same protection to the assignee as its interest may appear.
The proceeds of such insurance, at the option of Secured Party or such
assignee, as appropriate, will be applied toward (a) the repair or
replacement of the appropriate Item or Items of Equipment, (b) payment
of the Casualty Value thereof or (c) payment of, or as provision for,
satisfaction of any other accrued obligations of Debtor hereunder.
Debtor hereby appoints Secured Party as Debtor's attorney-in-fact with
full power and authority to do all things, including, but not limited
to, making claims, receiving payments and endorsing documents, checks
or drafts, necessary to secure payments due under any policy
contemplated hereby on account of a Casualty Occurrence. Debtor and
Secured Party contemplate that the jurisdictions where the Equipment
will be located will not impose any liability upon Secured Party for
personal injury and/or property damage resulting out of the possession,
use, operation or condition of the Equipment. In the event Secured
Party determines that such is not or may not be the case with respect
to a given jurisdiction, Debtor will provide Secured Party with public
liability and property damage coverage applicable to the Equipment
in such amounts and in such form as Secured Party requires.
5
-3-
15. SECURED PARTY'S PAYMENT. If Debtor fails to pay any amounts due
hereunder or to perform any of its other obligations under this
agreement, Secured Party may, at its option, but without any
obligation to do so, pay such amounts or perform such obligations, and
Debtor will reimburse Secured Party the amount of such payment or
cost of such performance.
16. INDEMNITY. Debtor does hereby assume liability for and does agree to
indemnify, defend, protect, save and keep harmless Secured Party from
and against any and all liabilities, losses, damages, penalties, claims,
actions, suits, costs, expenses and disbursements, including court costs
and legal expenses, of whatever kind and nature, imposed on, incurred
by or asserted against Secured Party (whether or not also indemnified
against by any other person) in any way relating to or arising out of
this agreement or the manufacture, financing, ownership, delivery,
possession, use, operation, condition or disposition of the Equipment
by Secured Party or Debtor, including, without limitation, any claim
alleging latent and other defects, whether or not discoverable by
Secured Party or Debtor, and any other claim arising out of strict
liability in tort, whether or not in either instance relating to an
event occurring while Debtor remains obligated under this agreement,
and any claim for patent, trademark or copyright infringement. Debtor
agrees to give Secured Party and Secured Party agrees to give Debtor
notice of any claim or liability hereby indemnified against promptly
following learning thereof.
17. DEFAULT. Any of the following will constitute an event of default here
under: (a) Debtor's failure to pay when due any installment payment
or other amount due hereunder, which failure continues for ten (10)
days after the due date thereof; (b) Debtor's default in performing
any other obligation, term or condition of this agreement or any other
agreement between Debtor and Secured Party or default under any further
agreement providing security for the performance by Debtor of its
obligations hereunder, provided such default has
continued for more than twenty (20) days, except as provided in (c) and
(d) hereinbelow, or, without limiting the generality of subparagraph
(1) hereinbelow, default under any lease or any mortgage or other
instrument contemplating the provision of financial accommodation
applicable to the real estate where an Item of Equipment is located;
(c) any writ or order of attachment or execution or other legal process
being levied on or charged against any Item of Equipment and not being
released or satisfied within ten (10) days; (d) Debtor's failure to
comply with its obligations under paragraph 14 above or any transfer
by Debtor in violation of paragraph 21 below; (e) a non-appealable
judgement for the payment of money in excess of $100,000 being rendered
by a court of record against Debtor which Debtor does not discharge or
make provision for discharge in accordance with the terms thereof within
ninety (90) days from the date of entry thereof; (f) death or judicial
declaration of incompetency of Debtor, if an individual; (g) the filing
by Debtor of a petition under the Bankruptcy Act or any amendment
thereto or under any other insolvency law or law providing for the
relief of debtors, including, without limitation, a petition for
reorganization, arrangement or extension, or the commission by Debtor
of an act of bankruptcy; (h) the filing against Debtor of any such
petition not dismissed or permanently stayed within thirty (30) days
of the filing thereof; (i) the voluntary or involuntary making of an
assignment of substantial portion of its assets by Debtor for the
benefit of creditors, appointment of a receiver or trustee for Debtor
or for any of Debtor's assets, institution by or against Debtor or any
other type of insolvency proceeding (under the Bankruptcy Code or
otherwise) or of any formal or informal proceeding for dissolution,
liquidation, settlement of claims against or winding up of the affairs
of Debtor, Debtor's cessation of business activities or the making by
Debtor of a transfer of all or a material portion of Debtor's assets
or inventory not in the ordinary course of business; (j) the occurrence
of any event described in parts (e), (f), (g), (h) or (i) hereinabove
with respect to any guarantor or other party liable for payment or
performance of this agreement; (k) any certificate, statement,
representation, warranty or audit heretofore or hereafter furnished with
respect hereto by or on behalf of Debtor or any guarantor or other party
liable for payment or performance of this agreement proving to have
been false in any material respect at the time as of which the facts
therein set forth were stated or certified or having omitted any
substantial contingent or unliquidated liability or claim against Debtor
or any such guarantor or other party; (1) breach by Debtor of any lease
or agreement providing financial accommodation under which Debtor or
its property is bound or (m) a transfer of effective control of Debtor,
if an organization.
18. REMEDIES. Upon the occurrence of an event of default, Secured Party will
have the rights, options, duties and remedies of a secured party, and
Debtor will have the rights and duties of a debtor, under the Uniform
Commercial Code (regardless of whether such Code or a law similar
thereto has been enacted in a jurisdiction wherein the rights or
remedies are asserted) and, without limiting the foregoing, Secured
Party may exercise any one or more of the following remedies: (a)
declare the Casualty Value or such lesser amount as may be set by law
immediately due and payable with respect to any or all Items of
Equipment without notice or demand to Debtor; (b) sue from time to time
for and recover all installment payments and other payments then accrued
and which accrue during the pendency of such action with respect to
any or all Items of Equipment; (c) take possession of and, if deemed
appropriate, render unusable any or all Items of Equipment, without
demand or notice, wherever same may be located, without any court order
or other process of law and without liability for any damages
occasioned by such taking of possession and remove, keep and store the
same or use and operate or lease the same until sold; (d) require Debtor
to assemble any or all Items of Equipment at the Equipment Location
therefor, such location to which such Equipment may have been moved
with the written consent of Secured Party or such other location in
reasonable proximity to either of the foregoing as Secured Party
designates; (e) upon ten days notice to Debtor or such other notice
as may be required by law, sell or otherwise dispose of any Item of
Equipment, whether or not in Secured Party's possession, in a
commercially reasonable manner at public or private sale at any place
deemed appropriate and apply the net proceeds of such sale, after
deducting all costs of such sale, including, but not limited to, costs
of transportation, repossession, storage, refurbishing, advertising
and broker's fees, to the obligations of Debtor to Secured Party
hereunder or otherwise, with Debtor remaining liable for any
deficiency and with any excess being returned to Debtor; (f) upon thirty
(30) days notice to Debtor, retain any repossessed or assembled Items
of Equipment as Secured Party's own property in full satisfaction of
Debtor's liability for the installment payments due hereunder with
respect thereto, provided that Debtor will have the right to redeem
such Items by payment in full of its obligations to Secured Party
hereunder or otherwise or to require Secured Party to sell or
otherwise dispose of such Items in the manner set forth in
subparagraph (e) hereinabove upon notice to Secured Party within such
thirty (30) day period or (g) utilize any other remedy available to
Secured Party under the Uniform Commercial Code or similar provision
of law or otherwise at law or in equity.
No right or remedy conferred herein is exclusive of any other
right or remedy conferred herein or by law; but all such remedies are
cumulative of every other right or remedy conferred hereunder or at
law or in equity, by statute or otherwise, and may be exercised
concurrently or separately from time to time. Any sale contemplated by
subparagraph (e) of this paragraph 18 may be adjourned from time to
time by announcement at the time and place appointed for such sale, or
for any such adjourned sale, without further published notice, and
Secured Party may bid and become the purchaser at any such sale. Any
sale of an Item of Equipment, whether under said subparagraph or by
virtue of judicial proceedings, will operate to divest all right, title,
interest, claim and demand whatsoever, either at law or in equity, of
6
-4-
Debtor in and to said Item and will be a perpetual bar to any claim
against such Item, both at law and in equity, against Debtor and all
persons claiming by, through or under Debtor.
19. DISCONTINUANCE OF REMEDIES. If Secured Party proceeds to enforce any
right under this agreement and such proceedings are discontinued or
abandoned for any reason or are determined adversely, then and in
every such case Debtor and Secured Party will be restored to their
former positions and rights thereunder.
20. SECURED PARTY'S EXPENSES. Debtor will pay Secured Party all costs and
expenses, including attorney's fees and court costs and sales costs
not offset against sales proceeds under paragraph 18 above, incurred by
Secured Party in exercising any of its rights or remedies hereunder or
enforcing any of the terms, conditions or provisions hereof. This
obligation includes the payment or reimbursement of all such amounts
whether an action is ultimately filed and whether an action filed is
ultimately dismissed.
21. ASSIGNMENT. Without the prior written consent of Secured Party, Debtor
will not sell, lease, pledge or hypothecate, except as provided in
this agreement, an Item of Equipment or any interest therein or assign,
transfer, pledge or hypothecate this agreement or any interest in
this agreement or permit the Equipment to be subject to any lien,
charge or encumbrance of any nature except the security interest of
Secured Party contemplated hereby. Debtor's interest herein is not
assignable and will not be assigned or transferred by operation of law.
Consent to any of the foregoing prohibited acts applies only in the
given instance and is not a consent to any subsequent like act by
Debtor or any person.
All rights of Secured Party hereunder may be assigned pledged,
mortgaged, transferred or otherwise disposed of, either in whole or in
part, without notice to Debtor but always, however, subject to the
rights of Debtor under this agreement. If Debtor is given notice of any
such assignment, Debtor will acknowledge receipt thereof in writing.
In the event Secured Party assigns this agreement or the installment
payments due or to become due hereunder or any other interest herein,
whether as security for any of its indebtedness or otherwise, no breach
or default by Secured Party hereunder or pursuant to any other agreement
between Secured Party and Debtor, should there be one, will excuse
performance by Debtor of any provision hereof, it being understood that
in the event of such default or breach by Secured Party that Debtor
will pursue any rights on account thereof solely against Secured Party.
No such assignee, unless such assignee agrees in writing, will be
obligated to perform any duty, covenant or condition required to be
performed by Secured Party in connection with this agreement.
Subject always to the foregoing, this agreement insures to the
benefit of, and is binding upon, the heirs, legatees, personal
representatives, successors and assigns of the parties hereto.
22. MARKINGS; PERSONAL PROPERTY. If Secured Party supplies Debtor with
labels, plates, decals or other markings stating that Secured Party
has an interest in the Equipment, Debtor will affix and keep the same
prominently displayed on the Equipment or will otherwise make the
Equipment or its then location or locations, as appropriate, at
Secured Party's request to indicate Secured Party's security interest
in the Equipment. The Equipment is, and at all times will remain,
personal property notwithstanding that the Equipment or any Item
thereof may now be, or hereafter become, in any manner affixed or
attached to, or embedded in, or permanently resting upon real property
or any improvement thereof or attached in any manner to what is
permanent as by means of cement, plaster, nails, bolts, screws or
otherwise. If requested by Secured Party, Debtor will obtain and deliver
to Secured Party waivers of interest or liens in recordable form
satisfactory to Secured Party from all persons claiming any interest in
the real property on which an Item of Equipment is or is to be installed
or located.
23. LATE CHARGE. If Debtor fails to pay any installment payment or any
other sum to be paid by Debtor to Secured Party within seven (7) days
of when due, Debtor will pay to Secured Party (a) Secured Party's
collection costs paid third parties relevant to the collection thereof
and (b) interest on such unpaid installment or other amount at the rate
of eighteen percent (18%) per annum, or at such greater or lesser
contract rate as may be applicable, computed from the date due to the
date paid.
24. NON-WAIVER. No covenant or condition of this agreement can be waived
except by the written consent of Secured Party. Forbearance or
indulgence by Secured Party in regard to any breach hereunder will not
constitute a waiver of the related covenant or condition to be
performed by Debtor.
25. ADDITIONAL DOCUMENTS. In connection with and in order to perfect and
evidence the security interest in the Equipment granted Secured
Party hereunder Debtor will execute and deliver to Secured Party such
financing statements and similar documents as Secured Party requests.
Debtor authorizes Secured Party where permitted by law to make filings
of such financing statements without Debtor's signature. Debtor further
will furnish Secured Party (a) a fiscal year end financial statement
including balance sheet and profit and loss statement within one
hundred twenty (120) days of the close of each fiscal year, (b) any
other information normally provided by Debtor to the public and (c)
such other financial data or information relative to this agreement and
the Equipment, including, without limitation, copies of vendor proposals
and purchase orders and agreements, listings of serial numbers or other
identification data and confirmations of such information, as Secured
Party may from time to time reasonably request. Debtor will procure
and/or execute, have executed, acknowledge, have acknowledged, deliver
to Secured Party, record and file such other documents and showings
as Secured Party deems necessary or desirable to protect its interest
in and rights under this agreement and interest in the Equipment.
Debtor will pay as directed by Secured Party or reimburse Secured
Party for all filing, search, title report, legal and other fees
incurred by Secured Party in connection with any documents to be
provided by Debtor pursuant to this paragraph or paragraph 22 and any
further similar documents Secured Party may procure.
26. DEBTOR'S WARRANTIES. Debtor certifies and warrants that the financial
data and other information which Debtor has submitted, or will submit,
to Secured Party in connection with this agreement is, or will be at
time of delivery, as appropriate, a true and complete statement of
the matters therein contained. Debtor further certifies and warrants
that (a) this agreement has been duly authorized by Debtor and when
executed and delivered by the person signing on behalf of Debtor
below will constitute the legal, valid and binding obligation, contract
and agreement of Debtor enforceable against Debtor in accordance with
its respective terms; (b) this agreement and each and every showing
provided by or on behalf of Debtor in connection herewith may be relied
upon by Secured Party in accordance with the terms thereof
notwithstanding the failure of Debtor or other applicable party to
ensure proper attestation thereto, whether by absence of a seal or
acknowledgement or otherwise; (c) Debtor has the right, power and
authority to grant a security interest in the Equipment to Secured
Party
7
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for the uses and purposes herein set forth and (d) each Item of
Equipment will, at the time such Item becomes subject hereto, be in
good repair, condition and working order.
27. ENTIRE AGREEMENT. This instrument constitutes the entire agreement
between Secured Party and Debtor and will not be amended, altered or
changed except by a written agreement signed by the parties.
28. NOTICES. Notices under this agreement must be in writing and must
be mailed by United States mail, certified mail with return receipt
requested, duly addressed, with postage prepaid, to the party involved
at its respective address set forth at the foot hereof or at such other
address as such party may provide on notice to the other from time to
time. Notices will be effective when deposited. Each party will
promptly notify the other of any change in the first party's address.
29. GENDER; NUMBER; JOINT AND SEVERAL LIABILITY. Whenever the context of
this agreement requires, the neuter gender includes the feminine or
masculine and the singular number includes the plural; and whenever
the words "Secured Party" are used herein, they include all assignees
of Secured Party, it being understood that specific reference to
"assignee" in paragraph 14 above is for further emphasis. If there is
more than one Debtor named in this agreement, the liability of each
will be joint and several.
30. TITLES. The titles to the paragraphs of this agreement are solely for
the convenience of the parties and are not an aid in the interpretation
of the instrument.
31. GOVERNING LAW; VENUE. This agreement will be governed and construed in
accordance with the law of the State of California. Venue for any
action related to this agreement will be in an appropriate court in
San Diego County, California, to which Debtor consents, or in another
court selected by Secured Party which has jurisdiction over the parties.
In the event any provision hereof is declared invalid, such provision
will be deemed severable from the remaining provisions of this
agreement which will remain in full force and effect.
32. TIME. Time is of the essence of this agreement and each and all of its
provisions.
IN WITNESS WHEREOF, the undersigned have executed this agreement as of this 6th
day of December, 1994.
HERITAGE LEASING CAPITAL VIASAT, INC.
(Secured Party) --------------------------------------
(Debtor)
Vice President
By: By: /s/ Gregory Monahan of Administration
-------------------------------- --------------------------------------
(Title) Gregory Monahan (Title)
By:
--------------------------------------
(Title)
Address: 5775 Chesapeake Court Address: 2290 Cosmos Court
San Diego, CA 92123 ---------------------------------
Carlsbad, CA 92009
---------------------------------
8
IMPORTANT--READ INSTRUCTIONS ON BACK BEFORE FILLING OUT FORM
This FINANCING STATEMENT is presented for filing and will remain effective with
certain exceptions for a period of five years from the date of filing pursuant
to section 9403 of the California Uniform Commercial Code.
16492
- --------------------------------------------------------------------------------
1. DEBTOR (LAST NAME FIRST--IF AN INDIVIDUAL) 1A. SOCIAL SECURITY OR FEDERAL TAX NO.
VIASAT, INC. 33-0174996
- ----------------------------------------------------------------------------------------------------------------------------------
1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE
2290 Cosmos Court Carlsbad, CA 92009
- ----------------------------------------------------------------------------------------------------------------------------------
2. ADDITIONAL DEBTOR (IF ANY) (LAST NAME FIRST--IF AN INDIVIDUAL) 2A. SOCIAL SECURITY OR FEDERAL TAX NO.
- ----------------------------------------------------------------------------------------------------------------------------------
2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE
- ----------------------------------------------------------------------------------------------------------------------------------
3. DEBTOR'S TRADE NAMES OR STYLES (IF ANY) 3A. FEDERAL TAX NUMBER
- ----------------------------------------------------------------------------------------------------------------------------------
4. SECURED PARTY 4A. SOCIAL SECURITY NO., FEDERAL
TAX NO. OR BANK TRANSIT AND
A.B.A. NO.
NAME HERITAGE LEASING CAPITAL
MAILING ADDRESS 5775 Chesapeake Court 33-0098465
CITY San Diego STATE CA ZIP CODE 92123
- ----------------------------------------------------------------------------------------------------------------------------------
5. ASSIGNEE OF SECURED PARTY (IF ANY) 5A. SOCIAL SECURITY NO., FEDERAL
TAX NO. OR BANK TRANSIT AND
A.B.A. NO.
NAME ORIX USA CORPORATION
MAILING ADDRESS 600 Wilshire Boulevard, Suite 1460
CITY Los Angeles STATE CA ZIP CODE 90017
- ----------------------------------------------------------------------------------------------------------------------------------
6. This FINANCING STATEMENT covers the following types or items of property (INCLUDE DESCRIPTION OF REAL PROPERTY ON WHICH
LOCATED AND OWNER OF RECORD WHEN REQUIRED BY INSTRUCTION 4).
All equipment and other property now or hereafter covered by that certain Equipment Financing Agreement between Secured
Party and Debtor, EFA Number 16492 dated as of December 6, 1994 and all accessions and additions to, modifications of and
replacements and substitutions for such equipment and other property. Such equipment includes property of the following
type or types:
COMPUTER AND LABORATORY EQUIPMENT.
- ----------------------------------------------------------------------------------------------------------------------------------
7. CHECK [ x ] 7A. [ ] PRODUCTS OF COLLATERAL 7B. DEBTOR(S) SIGNATURE NOT REQUIRED IN ACCORDANCE WITH
IF APPLICABLE ARE ALSO COVERED INSTRUCTION 5(a) ITEM:
[ ] (1) [ ] (2) [ ] (3) [ ] (4)
- ----------------------------------------------------------------------------------------------------------------------------------
8. CHECK [ x ]
IF APPLICABLE [ ] DEBTOR IS A "TRANSMITTING UTILITY" IN ACCORDANCE WITH UCC SEC. 9105(1)(n)
- ----------------------------------------------------------------------------------------------------------------------------------
9. DATE: 12-6-94 C 10. THIS SPACE FOR USE OF FILING OFFICER
O (DATE, TIME, FILE NUMBER
-- /s/ GREGORY MONAHAN D AND FILING OFFICER)
Gregory Monahan, V.P. of Administration E
SIGNATURE(S) OF DEBTOR(S) By:
- ---------------------------------------------------------------------------------
VIASAT, INC. 1
TYPE OR PRINT NAMES(S) OF DEBTOR(S) 2
- ---------------------------------------------------------------------------------
-- /s/ [SIG ILLEGIBLE] 3
SIGNATURE(S) OF SECURED PARTY(IES) 4
- ---------------------------------------------------------------------------------
HERITAGE LEASING CAPITAL 5
TYPE OR PRINT NAME(S) OF SECURED PARTY(IES) 6
=================================================================================
11. Return copy to: 7
NAME [ ]
[ P6-0000-262-0 ] 8
ADDRESS [ Heritage Leasing Capital ]
[ 5775 Chesapeake Court ] 9
CITY [ San Diego, CA 92123 ]
[ ] 0
STATE [ ]
[ ]
ZIP CODE [ ]
[ ]
=================================================================================
FORM UCC-1
APPROVED BY THE SECRETARY OF STATE
(4) FILE COPY--DEBTOR
9
INSTRUCTIONS (REV. 1/1/91)
1. PLEASE TYPE THIS FORM USING BLACK TYPEWRITER RIBBON.
2. If the space provided for any item is inadequate:
a. Note "Cont'd." in the appropriate space(s).
b. Continue the item(s) preceded by the Item No. on an additional
8 1/2" x 11" sheet.
c. Head each additional sheet with the Debtor's name (last name
first for individuals) appearing in Item No. 1 of this form.
Be sure to attach a copy of the additional sheet to each
copy of the form.
3. NUMERICAL IDENTIFICATION:
a. If the Debtor, Secured Party or Assignee is an individual,
include Social Security number in the appropriate space.
Disclosure of Social Security number is optional for the filing
of this statement. It will be used to assist in correctly
identifying individuals with similar names. (UCC Section
9403[5])
b. If the Debtor, Secured Party or Assignee is other than an
individual or a bank, show Federal Taxpayer Number in the
appropriate space.
c. If the Secured Party or Assignee is a bank, show Transit and
ABA number in the appropriate space. This must be the complete
10 digit number.
4. COLLATERAL DESCRIPTION--Item 6
a. If the financing statement covers crops growing or to be grown,
the statement must also contain a description of the real estate
concerned in accordance with UCC Section 9402(1).
b. If the financing statement covers timber to be cut or covers
minerals or the like, oil or gas or accounts subject to UCC
Section 9103(5), the statement must show that it covers this
type of collateral and the statement must also show it is to
be recorded in the real estate records, and the financing
statement must contain a description of the real estate
sufficient if it were contained in a mortgage of the real estate
to give constructive notice of the mortgage under the law of
this State. If the debtor does not have an interest of record in
the real estate, the financing statement must show the name
of a record owner in Item No. 6.
5. SIGNATURES:
Before mailing, be sure that the financing statement has been properly
signed. A financing statement requires the signature of the debtor
only except under the following circumstances. If any of these
circumstances apply, check the appropriate box in item 7B and enter
required information in Item 6.
a. Under the provisions of UCC Section 9402(2) a financing
statement is sufficient when it is signed by the secured party
alone if it is filed to perfect a security interest in:
(1) collateral already subject to a security interest in another
jurisdiction when it is brought into this State or when the
debtor's location is changed to this State. Such a financing
statement must state that the collateral was brought into this
State or that the debtor's location was changed to this State.
(2) proceeds under UCC Section 9306, if the security interest
in the original collateral was perfected. Such a financing
statement must describe the original collateral and give the
date of filing and the file number of the prior financing
statement.
(3) collateral as to which the filing has lapsed. Such a
financing statement must include a statement to the effect that
the prior financing statement has lapsed and give the date of
filing and the file number of the prior financing statement.
(4) collateral acquired after a change of name, identity or
corporate structure of the debtor. Such a financing statement
must include a statement that the name, identity or corporate
structure of the debtor has been changed and give the date of
filing and the file number of the prior financing statement
and the name of the debtor as shown in the prior financing
statement.
6. FILING FEE -- PROPER PLACE TO FILE:
Enclose filing fee of dollars payable to the appropriate
Filing Officer. Financing statements and related papers pertaining to
consumer goods should be filed with the County Recorder in the county
of the debtor's residence, or if the debtor is not a resident of this
State, then in the office of the County Recorder of the county in which
the goods are kept. When the collateral is crops growing or to be grown,
timber to be cut, or minerals or the like (including oil and gas), or
accounts subject to UCC Section 9103(5), then filing is with the County
Recorder where the property is located. In all other cases, filing is
with the Secretary of State.
7. REMOVE SECURED PARTY AND DEBTOR COPIES.
Send the original and first copy with interleaved carbon paper to the
Filing Officer with the correct filing fee. The original will be
retained by the Filing Officer. The copy will be returned with the
filing date and time stamped thereon. Indicate the name and mailing
address of the person or firm to whom the copy is to be returned in
Item No. 11.
1
EXHIBIT 10.19
[LOGO]
BUSINESS REAL ESTATE BROKERAGE COMPANY
- --------------------------------------------------------------------------------
July 21, 1993
Mr. Brian Strange
Iliff Thorn & Company
2386 Faraday Avenue, Suite 100
Carlsbad, CA 92008
RE: VIASAT, INC. -- FINAL COUNTER PROPOSAL TO LEASE
WHITTAKER BUILDING
Dear Mr. Strange:
The following is our understanding of the final agreement counter offer for the
above referenced lease proposal.
Viasat's offer is subject to mutually agreeable sublease documentation and
approval by Viasat's board of directors.
1. BUILDING:
Whittaker Building, 2290 Cosmos Court.
2. AREA:
Approximately 37,000 square feet of office and lab space. All
measurements are to be based upon BOMA standards of usable and rentable
square feet and are subject to architectural review.
3. INITIAL TERM:
The initial term of this Lease shall be approximately five (5) years and
four months and shall terminate upon expiration of the Master Lease.
4. COMMENCEMENT:
Sublease shall commence on September 1, 1993.
5. PRIOR OCCUPANCY:
Sublessee shall be permitted to enter the Building and Premises fifteen
(15) days prior to the anticipated commencement date for the purpose of
installing furniture, fixtures and special improvements. Sublessee shall
not be charged for use of elevators, for move-in, electrical consumption
or other costs during construction.
2
Mr. Brian Strange
July 21, 1993
Page 2
6. RENTAL RATE:
Per your verbal offer, we are accepting your last proposal as follows:
Months 1-4: Rent shall be abated.
Months 5-64: $24,605/month, flat, net of separately metered utilities
and interior janitorial. Sublessor shall be responsible
for all other operating expenses for the project including
all future increases. This Sublessor cost shall include
but not be limited to taxes, insurance, all interior and
exterior maintenance (Sublessee shall pay the first $5,000
annually for all maintenance costs. Sublessor shall be
responsible thereafter.) and landscaping. The building
shall be maintained in a first class manner. The first
month's rent shall be due upon execution of the sublease.
7. RIGHT TO CANCEL:
None.
8. ESCALATIONS:
None.
9. OPTION TO RENEW:
Sublessee shall have the option to renew the Lease for the Premises for
up to one (1) additional term of five (5) years in accordance with the
terms of the Master Lease.
10. SPACE PLANNING:
Sublessee shall have the right to engage a space planner of its choice
relative to the preparation of preliminary working drawings and design
with the cost of such services to be the Sublessor's responsibility to
pay to Sublessee $10,000 upon lease execution in addition to tenant
improvement allowance. Sublessee may use any excess funds for purposes
it deems necessary in its sole discretion. Sublessee will be responsible
for review and code compliance of Sublessee's preliminary working
drawings.
11. ENGINEERING:
None.
12. ARBITRATION:
The lease shall provide that any disputes shall be resolved under the
rules of the American Arbitration Association or such other procedures
as are mutually acceptable to both parties.
13. TENANT BUILDOUT:
Sublessor shall provide Sublessee with $50,000 for the alteration of the
existing improvements upon execution of this Sublease. The tenant
improvement allowance shall be utilized by Sublessee at any time during
the term for tenant improvements.
3
Mr. Brian Strange
July 21, 1993
Page 3
In the event that Sublessor fails to pay any allowance or fee (tenant
improvements, moving, space planner, and brokerage fees) in the manner
and within the time required pursuant to the Sublessee workletter or
lease document, as contained in the fully executed Lease. Sublessee
shall be entitled to pay such Contractor(s) directly and any amount so
paid by Sublessee shall be credited against Sublessee's first
obligations to pay rent under the Lease with interest from the date of
payment until the date of rental credit.
14. MOVING EXPENSES:
Sublessor shall provide a moving allowance of Thirty Thousand and 00/100
Dollars ($30,000.00) in addition to any tenant improvement allowance.
Said allowance shall be paid to Sublessee upon occupancy of the
premises.
15. PARKING:
Sublessee shall have the right to use not less than all the parking
spaces at no expense to Sublessee.
16. BUILDING SIGNAGE:
The Landlord and Sublessor shall permit Sublessee to install its name
and logo on a highly visible prominent location on the exterior of the
building. Please specify the exact location as well as the allowable
square footage and sign details. Sublessee shall have the right to
utilize any unused tenant improvement dollars for the fabrication and
installation of said signage.
17. RIGHT TO SUBLEASE:
Sublessee shall be permitted to sublease or assign all or any portion of
Sublessee's Premises, subject to Landlord's consent, which consent will
not be unreasonably withheld, conditioned or delayed, and Sublessee
shall retain 50% of all profit realized from such subletting or
assignment after all cost to sublease have been subtracted from the
gross rental. Landlord shall have no rights to recapture any space
during the initial term or any renewal period.
18. SECURITY DEPOSIT:
Upon execution of this lease, Sublessee shall deliver to Sublessor an
amount equal to $30,000 to be held as a security deposit.
19. NON-DISTURBANCE:
With respect to any first lien mortgages, deeds of trust or other liens
entered into by and between Landlord and any beneficiary of any deed of
trust or other such lien granted by Landlord (collectively referred to
as "Landlord's Mortgagee"), Landlord shall secure and deliver to
Sublessee a Non-Disturbance Agreement from, and executed by, Landlord's
Mortgagee for the benefit of Sublessee prior to the effective date of
the Lease. Sublessee shall also secure a non-disturbance agreement from
the Landlord, acknowledging that in the event of a default on the part
of Whittaker this Sublease shall remain in full force and effect.
4
Mr. Brian Strange
July 21, 1993
Page 4
20. HAZARDOUS MATERIALS:
Sublessor has no knowledge of the presence of any hazardous substances on
the subject property. Sublessor and Sublessee agree to work toward mutually
acceptable language on this issue prior to execution of this proposed
sublease.
21. A.D.A. INDEMNIFICATION:
Sublessor has no knowledge of the presence of any code violation on the
subject property. Sublessor and Sublessee agree to work toward mutually
acceptable language on this issue prior to execution of this proposed
sublease.
22. SUBLEASE PREPARATION:
Upon execution of this document both parties agree to diligently pursue
negotiation and execution of a mutually agreeable final sublease document
incorporating the terms agreed to herein. The executed sublease document
shall represent the legally binding sublease agreement. Sublessor agrees to
forego other opportunities during negotiation of the final sublease
agreement for a period of fifteen (15) days.
Viasat is most interested in arriving at a final decision regarding its
corporate headquarters. Therefore, we request that you RESPOND IN WRITING BY
JULY 21, 1993.
Please feel free to contact me at (619) 431-4208 should you have any questions.
Very truly yours,
BUSINESS REAL ESTATE
BROKERAGE COMPANY
/s/ RICK W. REEDER
- --------------------------
Rick W. Reeder
Office Properties Division
RWR:jrb
080720.a3
AGREED AND ACCEPTED:
SUBLESSEE SUBLESSOR
By: By:
---------------------------- ------------------------
Date: 7/21/93 Date: 7/21/93
-------------------------- -----------------------
5
Continuation of Exhibit 10.19
SUBLEASE
This Sublease ("Sublease") is made and entered into as of the
20th day of August, 1993 by and between Whittaker Corporation, a Delaware
corporation ("Sublessor"), whose address is 10880 Wilshire Boulevard, Los
Angeles, California 90024, and Viasat, Inc., a California corporation
("Sublessee"), whose address for the purpose of this Sublease shall be 2290
Cosmos Court, Carlsbad, California 92009.
RECITALS
A. Sublessor leases a certain building located at 2290 Cosmos
Court, Carlsbad, California 92009 pursuant to that certain Lease dated September
14, 1987 by and between Andrex Development Co. as lessor, and Sublessor as
lessee, which Lease has been supplemented and amended pursuant to an amendment
dated May 10, 1988. The Lease, together with the amendment thereto, are
collectively hereinafter referred to as the "Master Lease", a copy of which is
attached hereto as Exhibit A. Fujita Corporation USA is the
successor-in-interest to Andrex Development Co. as the lessor under the Master
Lease and is hereinafter referred to as the "Master Landlord".
B. Sublessor desires to sublease to Sublessee the property
currently leased to Sublessor under the Master Lease, and Sublessee
desires to sublease the property from Sublessor.
NOW, THEREFORE, Sublessor and Sublessee agree as follows:
1. Leasing and Description of Property. Subject to the
terms, conditions and covenants set forth in this Sublease,
Sublessor hereby leases to Sublessee, and Sublessee hereby leases
from Sublessor, the property located at 2290 Cosmos Court,
Carlsbad, California 92009, as more particularly described in
6
Exhibit A to the Master Lease, together with all improvements located thereon
(the "Subleased Premises").
2. Term. The term of this Sublease shall commence on September
15, 1993 and shall end on November 29, 1998, unless sooner terminated in
accordance with the terms of this Sublease. At any time after September 1, 1993,
Sublessee shall be allowed to enter the Subleased Premises for the sole purpose
of installing Sublessee's personal property and otherwise preparing the
Subleased Premises for Sublessee's occupancy. Sublessee shall be allowed such
access to the Subleased Premises without the obligation to pay rent or charges
for electrical consumption and other similar operating costs. Sublessee hereby
agrees to indemnify and hold Sublessor harmless from and against any and all
claims, losses, liabilities and expenses (including reasonable attorneys' fees)
that arise in any way from Sublessee's early occupancy of the Subleased
Premises.
2.2 Termination of Master Lease. If the Master
Lease shall terminate for any reason whatsoever, then this Sublease shall
thereupon immediately and automatically terminate; provided, however, no such
automatic termination shall relieve either party from its responsibility for
damages, if any, in the event that a breach of this Sublease by a party hereto
leads to such termination.
3. Rent.
3.1 Base Rent. From September 15, 1993 to and
including January 14, 1994, Sublessee shall be allowed to occupy the Subleased
Premises without paying "base rent". From January 15, 1994 to and including the
end of the initial term of this Sublease, Sublessee shall pay to Sublessor as
base rent for the Subleased Premises a monthly rental equal to $24,605. Upon the
consent hereto of Master Landlord, Sublessee shall pay to Sublessor $24,605
2
7
as a prepayment of base rent for the period January 15, 1994 to February 14,
1994. On February 15, 1994, Sublessee shall pay to Sublessor $12,302.50 as base
rent for the period February 15, 1994 to February 28, 1994. Thereafter, base
rent shall be payable on the first day of each calendar month during the term of
this Sublease.
3.2 Additional Rent. In addition to base rent,
Sublessee shall pay to Sublessor, as "additional rent", all additional items of
expense that Sublessee is required, pursuant to any provision of this Sublease,
to pay to Sublessor. Sublessee shall pay amounts of additional rent to Sublessor
within 10 days of Sublessee's receipt of Sublessor's bill therefor.
3.3 Manner of Payment. All base rent and additional
rent shall be paid to Sublessor at the address set forth in the first paragraph
of this Sublease or at any other place designated in writing by Sublessor. All
base rent and additional rent shall be paid hereunder without notice, demand,
deduction, abatement, setoff or counterclaim, in lawful money of the United
States of America, except where this Sublease specifically provides for the
granting of a rent credit to Sublessee.
4. Security Deposit. Sublessee shall deposit with Sublessor upon
the consent hereto of Master Landlord the sum of $30,000 as a security deposit
for Sublessee's faithful performance of Sublessee's obligations hereunder. If
Sublessee fails to pay rent or other charges due hereunder, or otherwise
defaults with respect to any provision of this Sublease, Sublessor may use,
apply or retain all or any portion of said deposit for the payment of any rent
or other charges in default or for the payment of any other sum to which
Sublessor may become obligated by reason of Sublessee's default, or to
compensate Sublessor for any loss or damage which Sublessor may suffer thereby.
If Sublessor so uses or applies all or any portion of said deposit, Sublessee
shall within
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10 days after written demand therefor deposit cash with Sublessor in an amount
sufficient to restore said deposit to the full amount hereinabove stated and
Sublessee's failure to do so shall be a breach of this Sublease, and Sublessor
may at its option thereupon terminate this Sublease. Sublessor shall not be
required to keep said deposit separate from its general accounts and Sublessee
shall not be entitled to interest on said deposit. Within 10 days after the
expiration of this Sublease, on condition Sublessee has vacated the Property and
has fully and faithfully performed every provision of this Sublease to be
performed by it, the security deposit or any balance thereof shall be returned
to Sublessee.
5. Maintenance and Repairs.
5.1 Sublessee's Obligations. During the term of
this Sublease, Sublessee shall be responsible for paying all charges connected
with (i) window cleaning, whether internal or external, and janitorial services
provided to the interior of the Subleased Premises and all supplies necessary in
connection therewith including, without limitation, cleaning supplies,
toiletries and light bulbs; (ii) repairs and maintenance to any fixtures
installed by Sublessee in the Subleased Premises and any signs, whether internal
or external, installed by Sublessee on the Subleased Premises, regardless of
whether the cost of such installations is paid for by Sublessor; (iii) repairs
to the Subleased Premises resulting from any damage caused thereto by Sublessee,
any of its employees, invitees or agents; and (iv) in addition to those items
enumerated in (i) - (iii), above, all other items of maintenance and repair
required to be performed by Sublessor pursuant to paragraph 7.1 of the Master
Lease provided, however, Sublessee's obligation to pay for such charges pursuant
to this subparagraph (iv) shall be limited to a capped amount ("Sublessee's
Current Contribution Cap") during various periods during the term of this
Sublease. During the three-month period commencing on September 1, 1993,
Sublessee's Current Contribution
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Cap shall be $1,250. During each 12-month period thereafter, commencing on
December 1, 1993 and continuing through the expiration of the this Sublease,
Sublessee's Current Contribution Cap shall be $5,000 per period.
5.2 Sublessor's Obligations. Except for those
maintenance and repair obligations to be performed by Sublessee pursuant to
paragraph 5.1 (i) - (iii) hereof, Sublessor shall be responsible for discharging
all items of maintenance and repair ("Sublessor's Maintenance") required to be
performed by Sublessor pursuant to paragraph 7.1 of the Master Lease. Pursuant
to paragraph 5.1 (iv) hereof, Sublessor shall have the right from time to time
to bill Sublessee for the reimbursement of expenses incurred by Sublessor in the
discharge of Sublessor's Maintenance, up to Sublessee's Current Contribution
Cap, and each such bill shall by payable by Sublessee to Sublessor as
"additional rent".
5.3 Performance of Sublessor's Maintenance. If
Sublessee determines at any time that it is reasonably appropriate for a
particular item of Sublessor's Maintenance to be undertaken, then Sublessee may
provide Sublessor with written notice of such determination. If Sublessor does
not commence performance of such Sublessor's Maintenance within seven business
days after receipt of such written notice and thereafter diligently pursue the
same to completion, then Sublessee may take steps reasonably appropriate to
complete such Sublessor's Maintenance. Sublessee shall submit to Sublessor a
bill, together with copies of receipts for payment, for any amounts expended by
Sublessee in performing such work, and any such bill (i) first shall be credited
against Sublessee's Current Contribution Cap until same is satisfied for the
then current period, and (ii) thereafter shall be reimbursed to Sublessee by
Sublessor within 10 days of Sublessor's receipt of Sublessee's bill.
Notwithstanding the foregoing, Sublessee shall not be required to provide
Sublessor with prior written notice before Sublessee undertakes Sublessor's
Maintenance which is immediately
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necessary to avoid damage to person or property, provided that written notice of
same shall be provided to Sublessor as soon as reasonably practicable. Any such
Sublessor's Maintenance so undertaken by Sublessee shall be reimbursed to
Sublessee in accordance with this paragraph 5.3.
6. Moving Allowance. Sublessor shall provide to Sublessee a
moving allowance equal to $30,000. Such allowance shall be paid to
Sublessee upon Sublessee's taking occupancy of the Subleased
Premises or upon Master Landlord's consent hereto, whichever shall
last occur.
7. Tenant Improvements. In order to prepare the Subleased
Premises for its occupancy, Sublessee wishes to make certain alterations and/or
additions to the Subleased Premises including, without limitation, the
construction and installation of a building sign identifying Sublessee's name
and/or logo and the additional alterations and/or additions described on Exhibit
B attached hereto, which alterations and/or additions Sublessor hereby consents
to. Sublessee shall make such alterations and/or additions subject to, and in
accordance with the terms and conditions of, the Master Lease.
7.1 Space Planning. In connection with such
alterations and/or additions, Sublessor shall provide to Sublessee an allowance
for space planning services equal to $10,000. Such allowance shall be paid to
Sublessee upon the consent hereto of the Master Landlord.
7.2 Tenant Improvement Allowance. Sublessor shall
provide to Sublessee an allowance for alterations and/or additions to be made to
the Subleased Premises equal to $50,000. Such allowance shall be paid to
Sublessee upon the consent hereto of the Master Landlord. Sublessee shall be
responsible for paying all parties providing materials and/or services in
connection with such
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alterations and/or additions. Further, Sublessor shall have no responsibility
for the performance of work by such parties and any delays caused by such
parties shall be at Sublessee's risk. Sublessor's sole responsibility hereunder
shall be to pay such $50,000 allowance for alterations and/or additions to be
made to the Subleased Premises.
8. Sublessor's Representations. Sublessor hereby represents
and warrants to Sublessee as follows:
8.1 Hazardous Materials. As of the date hereof, no
Hazardous Materials (as such terms are defined in the Master Lease) have been
located on, disposed upon or released from the Subleased Premises, nor shall any
Hazardous Materials be located on, disposed upon or released from the Subleased
Premises prior to Sublessee's occupancy hereunder.
8.2 Compliance With Law. As of the date hereof,
there is no violation of any applicable building code, regulation or ordinance
with respect to the Subleased Premises, and the Subleased Premises are in
compliance with the Americans with Disabilities Act. Nothing herein contained
shall be construed as a warranty by Sublessor with respect to any improvements
to be made to the Subleased Premises by Sublessee or the use by Sublessee of the
Sublease Premises.
8.3 Prior Assignments, Etc. As of the date hereof,
Sublessor has not assigned, conveyed, encumbered, hypothecated or otherwise
transferred any interest which it has in the Subleased Premises or the Master
Lease.
8.4 Indemnification. Sublessor shall indemnify,
defend, protect and hold harmless Sublessee from and against any losses, claims,
actions, liabilities, obligations, costs or expenses incurred by Sublessee
(including reasonable attorneys' fees) as a
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consequence of a breach of any of the representations and warranties set forth
in paragraphs 8.1, 8.2 or 8.3 hereof.
9. Quiet Enjoyment. Sublessor covenants that Sublessee shall
be entitled to quiet enjoyment of the Subleased Premises, provided
that Sublessee complies with the terms of this Sublease.
10. Condition of the Subleased Premises. Subject to paragraphs 5,
7 and 8 hereof, (i) Sublessee agrees that its act of taking possession of the
Subleased Premises will be an acknowledgement that the Subleased Premises are in
a tenantable and good condition; (ii) Sublessor shall deliver to Sublessee the
Subleased Premises in an "AS-IS" condition, without representation or warranty
of any kind or character; and (iii) Sublessee has examined the Subleased
Premises and Sublessee shall accept the Premises "AS-IS". The provisions of this
paragraph 10 shall not be construed as limiting Sublessor's obligations
hereunder to undertake and pay for Sublessor's Maintenance.
11. Applicability of Master Lease. This Sublease is subject to
and subordinate to the terms and conditions of the Master Lease. Sublessee shall
not commit or permit to be committed any act (including acts of omission) which
shall violate any term or condition of the Master Lease. All of the terms and
conditions contained in the Master Lease are hereby incorporated herein by this
reference as if fully set forth herein (with each reference therein to Lessor
and Lessee being deemed to be references, respectively, to Sublessor and
Sublessee herein), except for the following:
(i) Paragraph 3, relating to "Term";
(ii) Paragraphs 4.1 - 4.4, relating to "Rent";
(iii) Paragraph 5, relating to "Lessee Improvements";
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(iv) Paragraph 6.3, relating to "Condition of Premises";
(v) Paragraph 7.1, relating to "Lessor's and Lessee's
Obligations";
(vi) Paragraph 7.3, relating to "Limitation on Lessor's
Obligations";
(vii) Paragraph 8.1, relating to "Insurance at Lessee's
Expense" (it being understood that Sublessor, at Sublessor's expense, shall
obtain all insurance referenced in such paragraph);
(viii) Paragraph 8.3, relating to "Property Insurance" (it
being understood that Sublessor, at Sublessor's expense, shall obtain all
insurance referenced in such paragraph);
(ix) Paragraphs 10.1 and 10.2, relating to "Real Property
Taxes" (it being understood that Sublessor shall pay, prior to delinquency, all
such taxes);
(x) Paragraph 15, relating to "Brokers";
(xi) Paragraph 17, relating to "Lessor's Liability" (it being
understood that Sublessor shall not further assign, convey, encumber,
hypothecate or otherwise transfer any interest in the Subleased Premises or the
Master Lease, or amend any of the terms of the Master Lease, except with the
prior written consent of Sublessee, which consent shall not be unreasonably
withheld; provided, however, nothing herein shall be deemed to require
Sublessee's consent to the sale of substantially all of Sublessor's stock or
assets);
(xii) Paragraph 22, relating to "Notices";
(xiii) Paragraph 24, relating to "Recording" (it being
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understood, however, that if the Master Landlord permits same that Sublessee
shall have the right to record a short form memorandum of this Sublease, and
that Sublessor shall cooperate with Sublessee in this regard);
(xiv) Paragraph 38, relating to "Option to Purchase and
Right of First Refusal";
(xv) Paragraph 39, relating to "Temporary Space";
(xvi) Paragraph 40, relating to "Carlsbad and Hawthorne
Leases"; and
(xvii) the time periods for the giving of any notice by
Sublessor to Sublessee required or permitted hereunder shall be three (3)
business days less than is provided in the Master Lease for the giving of notice
by Master Landlord to Lessee thereunder, and the time periods for the giving of
any notice by Sublessee to Sublessor required or permitted hereunder shall be
three (3) business days more than is provided in the Master Lease for the giving
of notice by Lessee to Master Landlord thereunder. In addition, Sublessee
waives, with respect to this Sublessee, all rights, statutes and benefits which
Sublessor has waived pursuant to the Master Sublease.
12. Sublessor's Obligations. Sublessor agrees to maintain the
Master Lease during the Term of this Sublease subject, however, to any earlier
termination of the Master Lease without the fault of Sublessor. Sublessor also
agrees to comply with or perform all of its obligations under the Master Lease,
except for those Sublessee has agreed to perform under this Sublease.
13. Brokers and Finders. Sublessee represents and warrants
to Sublessor that it has dealt with no broker or finder in
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connection with this Sublease and/or the Subleased Premises other than Cushman &
Wakefield of California, Inc. and Iliff Thorn & Company, representing Sublessor,
and Business Real Estate Brokerage Company, representing Sublessee. The fees of
such brokers will be paid by Sublessor.
14. Notices. Every notice, demand, request, consent, approval or
other communication (herein without distinction sometimes referred to as
"notices") which Sublessor or Sublessee is respectively required or desires to
give or make or communicate upon or to the other shall be in writing and shall
be given or made or communicated by personally delivering same, sent by fax, or
by mailing the same by registered or certified mail, first class postage and
fees prepaid, return receipt requested, to the address set forth in the first
paragraph hereof, or at such other address or addresses as any party hereto may
designate from time to time and at any time by notice given as herein provided.
All notices so sent shall be deemed to have been delivered, effective, made or
communicated, as the case may be, at the time that the same and the required
copies, if any, shall have been personally delivered, sent by fax, or deposited,
registered or certified, properly addressed, as aforesaid, postage and fees
prepaid, return receipt requested, in the United States mail.
15. Execution in Counterparts. This Sublease may be executed
in two or more counterparts, each of which shall be an original,
but all of which shall constitute but one and the same instrument.
16. Assignment and Subletting. In addition to the provisions of
paragraph 12 of the Master Lease, as incorporated herein by reference, in the
event of any permitted assignment or sublease of the Subleased Premises,
Sublessor and Sublessee shall equally share in any profits derived from such
transaction. Profits shall be deemed to be base rent paid to Sublessee, less the
sum of (i) Sublessee's out of pocket costs in effecting such transaction
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including, without limitation, free rent granted by Sublessee, if any, and (ii)
base rent paid by Sublessee to Sublessor hereunder from and after the date that
Sublessee vacates the portion of the Subleased Premises so assigned or sublet. A
determination as to whether any profits have been derived from such transaction
shall be made on a monthly basis during the term of this Sublease in the event
of any permitted assignment or sublease of the Sublease Premises (it being
understood, however, that Sublessee first shall be permitted to recoup any
previously unrecouped costs, expenses or rent of the type described in clauses
(i) or (ii) of the immediately preceding sentence).
17. Arbitration. Any controversy or claims between the parties
hereto involving the construction or application of any of the terms, covenants,
or conditions of this Sublease shall be submitted to arbitration in San Diego,
California by a retired or former California or Federal judge (selected in the
same manner as arbitrators are selected in American Arbitration Association
arbitrations) on the request of any party to this Sublease, and such arbitration
shall comply with and be governed by the provisions of the California
Arbitration Act, Sections 1280 through 1294.2 of the California Code of Civil
Procedure. The arbitrators in any such arbitration shall have the power to
determine any dispute as to the arbitrability of any dispute and to order and
grant all remedies permitted at law or equity, including without limitation,
provisional and equitable remedies. The exercise by a party of non-judicial or
self-help remedies permitted by law or equity shall not constitute a waiver by
that party of its right to compel arbitration of controversies hereunder. The
parties shall maintain the proceedings in a confidential manner in accordance
with California Evidence Code Section 1152.5, provided that judgment on the
arbitration award may be entered in any court having jurisdiction.
Notwithstanding any provisions of this Sublease to the contrary, if a third
party indispensable to the resolution of a controversy hereunder refuses and
cannot be
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compelled by either party to participate in the arbitration proceeding, then the
parties hall not be compelled to submit said controversy to arbitration and
instead my pursue any other resolutions of said controversy available at law or
equity.
18. Consent by Landlord. The effectiveness of this Sublease is
subject to the condition that on or before September 1, 1993, the Master
Landlord under the Master Lease shall have consented hereto by executing and
delivering to Sublessor a consent in the form affixed hereto. In addition, on or
before September 1, 1993, Sublessor shall exercise its best efforts to obtain a
consent to this Sublease (as evidenced by the execution of a Consent of Fee
Lender in the form affixed hereto) from the holder (the "Fee Lender") of the
indebtedness secured by that certain deed of trust dated December 15, 1981,
executed by Andrex Development Company, a California general partnership, in
favor of Continental Illinois National Bank and Trust Company of Chicago, a
National Banking Association, and recorded December 30, 1981 as Instrument No.
81- 405883 in the Official Records of the County Recorder for San Diego County,
California. Sublessor agrees to indemnify, protect, defend and hold harmless
Sublessee from and against any losses, liabilities, actions, claims,
obligations, costs or expenses (including reasonable attorneys' fees) if and to
the extent that Sublessor fails to obtain the consent of the Fee Lender and the
Fee Lender interfers with Sublessee's right to possession of the Subleased
Premises when Sublessee is not in default hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this
Sublease as of the date specified in the first paragraph of this Sublease.
WHITTAKER CORPORATION VIASAT, INC.
By /s/ Illegible By /s/ Illegible
------------------ ---------------------
Title: Vice President Title: Vice President
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CONSENT OF MASTER LANDLORD
THIS CONSENT is made as of __________________, 1993 for good and
valuable consideration by the Master Landlord in favor of Sublessor. This
Consent is executed in connection with the execution and delivery of the
Sublease to which it is affixed. Capitalized terms used herein without
definition shall have the meanings assigned in the Sublease. Master Landlord
agrees as follows:
1. Consent. Master Landlord consents to the execution, delivery and
performance of the Sublease.
2. Nondisturbance. Master Landlord reserves the right to exercise all
rights and remedies under the Master Lease in the event of a default by
Sublessor thereunder. Notwithstanding the foregoing, Master Landlord agrees
that for so long as Sublessee performs its obligations under the Sublease,
Sublessee shall continue to have the right to quiet enjoyment and occupancy of
the Subleased Premises in accordance with the terms of the Sublease (without
giving effect to any provisions of the Sublease which provide for termination
of the Sublease upon a termination of, or a default under, the Master Lease).
Nothing herein shall be construed as limiting Master Landlord's right to hold
Sublessor liable for a default under the Master Lease.
3. Miscellaneous. If Sublessor commits any act or omission which
constitutes a default under the Master Lease, Master Landlord promptly shall
provide Sublessee with written notice thereof. In the event of a dispute
hereunder, the prevailing party shall be entitled to an award of its attorneys'
fees and other costs. Master Landlord agrees to cooperate in any arbitration
involving disputes under the Sublease. This Consent shall be governed by
California law. This Consent shall be binding upon Master Landlord's successors
and assigns. Master Landlord acknowledges that Sublessee is relying upon this
Consent in entering into and performing under the Sublease.
IN WITNESS WHEREOF, Master Landlord has executed this Consent as of the
date set forth above.
FUJITA CORPORATION USA,
a ___________ corporation
By: _______________________
Name: _______________________
Title:_______________________
CONSENT OF FEE LENDER
THIS CONSENT is made as of _________________, 1993 for good and
valuable consideration by the undersigned (the "Fee Lender") in favor of
Sublessor. This Consent is executed in connection with the execution and
delivery of the Sublease to which it is affixed. Capitalized terms used herein
without definition shall have the meanings assigned in the Sublease. Fee Lender
agrees as follows:
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FIRST AMENDMENT TO SUBLEASE
This First Amendment to Sublease (the "Amendment") is made and entered
into as of the 10th day of September, 1993 by and between Whittaker
Corporation, a Delaware corporation ("Sublessor"), and Viasat, Inc., a
California corporation ("Sublessee"), with reference to the following facts:
A. Sublessor and Sublessee are parties to that certain Sublease dated
as of August 20, 1993 (the "Sublease") concerning certain real property and
improvements commonly known as 2290 Cosmos Court, Carlsbad, California 92009.
B. Sublessor and Sublessee now desire to enter into this Amendment in
order to clarify certain provisions of, and to effect certain changes to, the
Sublease.
NOW, THEREFORE, for good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. Consent of Master Landlord. Attached hereto as Exhibit A is the
consent of the Master Landlord to the Sublease. Notwithstanding that such
consent is not in the form attached to the Sublease, Sublessee hereby
acknowledges and agrees that such consent satisfies the requirements of
paragraph 18 of the Sublease.
2. Personal Property. Attached hereto as Exhibit B is a list of
personal property currently situated in the Subleased Premises. Sublessor
hereby agrees that Sublessee may use such personal property in its business
during the term of the Sublease and shall have no duty to account for such
personal property or the condition thereof at the end of the term of the
Sublease.
3. Adjustment in Base Rent. Paragraph 3.1 of the Sublease is hereby
deleted in its entirety and the following is substituted in lieu thereof;
"3.1 Base Rent. From September 15, 1993 to and
including January 14, 1994, Sublessee shall be
allowed to occupy the Subleased Premises without
paying "base rent". Upon the consent hereto of
Master Landlord, Sublessee shall pay to Sublessor
$24,605 as a prepayment of base rent for the
period January 15, 1994 to and including February
14, 1994. On February 15, 1994, Sublessee shall
pay to Sublessor $6,151.25 as base rent for the
period February 15, 1994 to and including
February 28, 1994. Thereafter, on the first day of
each calendar month during the term of this
Sublease, Sublessee shall pay to Sublessor as
base rent for the Subleased
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Premises a monthly rental amount equal to
$24,605."
4. Effect of Termination of Master Lease. Paragraph 2.2 of the Sublease
is hereby amended by adding at the end thereof the following:
"In furtherance of the foregoing, the parties
hereto acknowledge and agree (i) that a default
by Sublessor under the Master Lease, which
default has not been caused by Sublessee's
failure to perform hereunder, will constitute a
breach by Sublessor of its obligations to
Sublessee under paragraphs 9 and 12 of this
Sublease, and (ii) that a default by Sublessor
under the Master Lease, which default has been
caused by Sublessee's failure to perform
hereunder, will constitute a breach by Sublessee
of its obligations to Sublessor under paragraph
11 of this Sublease. In any such event, the non-
defaulting party shall be entitled to recover
from the other party who is in default hereunder
all damages (including reasonable attorneys' fees)
incurred by such non-defaulting party as a result
of such default, if any, irrespective of the
termination of this Sublease due to the termination
of the Master Lease."
5. Miscellaneous. Any capitalized term which is used but not defined
herein shall have the meaning given to such term in the Sublease. Except as
specifically supplemented and amended hereby, the Sublease is incorporated
herein by this reference as if fully set forth herein in full, and is
reaffirmed by the parties hereto as continuing to evidence their respective
obligations thereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date specified in the first paragraph of this Amendment.
WHITTAKER CORPORATION VIASAT, INC.
By /s/ Gordon J. Loutit By /s/
----------------------- ---------------------
Title: Gordon J. Loutit Title: V.P.
Vice President
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EXHIBIT 10.20
FIRST AMENDMENT TO LEASE AGREEMENT
This First Amendment to Lease Agreement ("Amendment") is entered
into as of January __, 1996, by and between The Campus, LLC, a California
limited liability company ("Landlord"), and Viasat, Inc., a California
corporation ("Tenant"), with reference to the following:
A. Landlord and Tenant entered into that certain Lease Agreement
dated December 8, 1994 ("Lease"), for the lease of certain Premises commonly
described as 5966 La Place Court, Suite 150, Carlsbad, California, as more
particularly described in the Lease ("Premises"). The Premises are a part of an
industrial building project known as The Campus, in Carlsbad, California
("Project").
B. The parties desire to amend the Lease in certain particulars,
as described herein.
NOW, THEREFORE, in consideration of the foregoing recitals, the
covenants and conditions contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. The Premises does not include the East Wing as defined in
Section 2.5 of the Lease. The Premises consists only of the West Wing as defined
in Section 2.5 of the Lease, which as of the date of the Lease consisted of
Thirty One Thousand Nine Hundred Ninety One (31,991) rentable square feet.
Landlord and Tenant have constructed certain improvements and amended the size
of the Premises contained in the West Wing to reduce the size of the Premises to
Thirty Thousand Nine Hundred Fourteen (30,914) rentable square feet.
2. The Premises were constructed and occupied in two phases.
Phase 1 of the Premises consists of Eighteen Thousand Nine Hundred Fourteen
(18,914) rentable square feet and Phase 2 consists of Twelve Thousand (12,000)
rentable square feet.
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3. Due to certain structural additions to portions of the Project
not contained within the Building, the Project Rentable Area has increased.
Pursuant to the increase in the rentable area of the Project and the revision to
the rentable area of the Premises as described above, Section 6 of the Summary
of Basic Lease Information is hereby amended to read as follows:
6. Suite number: 150
Premises Project Rentable Area: 157,886
(Section 2.1 of square feet
Lease):
Building Rentable Area: 49,675
square feet
Premises Rentable Area: 30,914
square feet
Tenant's Building Proportional
Share: 62.23%
Tenant's Project Proportional
Share: 19.58%
4. Tenant exercised the option to change the Lease Term from
sixty months (60) to forty-eight (48) months as set forth in Section 2.5 of the
Lease. Accordingly, Section 8 of the Summary of Basic Lease Information is
revised to reflect that the Lease Term is forty-eight (48) months and that the
Lease expiration date is July 31, 1999, for the entire Premises.
5. Because of the reduction in the rentable area of the Premises,
Section 9 of the Summary of Basic Lease Information is revised to reflect that
the Initial Base Monthly Rent is sixty-seven cents ($.67) per rentable square
foot of the Premises, or Twenty Thousand Seven Hundred Twelve Dollars and
Thirty-Eight Cents ($20,712.38) per month, and that the Initial Base Annual Rent
is Two Hundred Forty-Eight Thousand Five Hundred Forty-Eight Dollars and
Fifty-Six Cents ($248,548.56).
6. The revised Initial Base Monthly Rent, the revised Initial
Base Annual Rent, the revised Tenant's Building Proportional Share and the
revised Tenant's Project Proportional
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Share became effective July 19, 1995, for Phase 1 of the Premises and July 27,
1995 for Phase 2 of the Premises.
7. Section 4.1 of the Lease is amended to provide that the Base
Monthly Rent and the Base Annual Rent shall be increased in accordance with the
following schedule:
Lease Year Base Monthly Rent Base Annual Rent
---------- ----------------- ----------------
2 $21,639.80 $259,677.60
3 $23,185.50 $278,226.00
4 $23,803.78 $285,645.36
8. Exhibit "E" to the Lease is deleted and in its place is
inserted Exhibit "E-1" attached hereto and by this reference incorporated
herein. For all purposes, the Premises will be as described in this Amendment
and as shown on Exhibit "E-1."
9. All initial capitalized terms which are not otherwise defined
in this Amendment shall have the meanings set forth in the Lease.
10. Except as set forth in this Amendment, the Lease is
unmodified and in full force and effect.
Landlord:
THE CAMPUS, LLC, a California
limited liability company
By: NEWPORT NATIONAL CORPORATION, a
California corporation, Member
By:___________________________
Its:_______________________
Tenant:
VIASAT, INC., a California
corporation
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By:_______________________________
Its:___________________________
By:_______________________________
Its:___________________________
4
5
SECOND AMENDMENT TO LEASE AGREEMENT
This Second Amendment to Lease Agreement ("Amendment") is entered
into as of April __, 1996, by and between The Campus, LLC, a California limited
liability company ("Landlord"), and ViaSat, Inc., a California corporation
("Tenant"), with reference to the following:
A. Landlord and Tenant entered into that certain Lease Agreement
dated December 8, 1994, amended by a First Amendment to Lease Agreement ("First
Amendment") dated as of January 12, 1996 (as amended, the "Lease"), for the
lease of certain Premises commonly described as 5964 La Place Court, Suite 150,
Carlsbad, California, as more particularly described in the Lease ("Original
Premises"). The Original Premises are a part of an industrial building project
known as The Campus, in Carlsbad, California ("Project").
B. Tenant desires to expand its occupancy of space in the
Project, and the parties have agreed to amend the Lease to add the additional
space described as 5964 La Place Court, Suite 100, Carlsbad, California, as
further described in this Amendment ("Additional Premises"), pursuant to certain
terms and conditions as described herein.
NOW, THEREFORE, in consideration of the foregoing recitals, the
covenants and conditions contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. Upon execution hereof, the Lease shall be deemed amended as
set forth in this Amendment.
2. The Premises shall, for all purposes except as specifically
set forth in this Amendment, be deemed to include the Original Premises and the
Additional Premises.
3. Section 6 of the Summary of Base Lease Information is hereby
amended to read as follows:
6
6. Premises Suite Numbers: 100 and 150
(Section 2.1 of
Lease): Project Rentable Area: 157,886
square feet
Building Rentable Area: 49,675
square feet
Premises Rentable Area: 49,675
square feet
Original Premises Rentable Area:
30,914 square feet
Additional Premises Rentable Area:
18,761 square feet
Tenant's Building Proportional
Share: 100%
Tenant's Project Proportional
Share: 31.46%
4. Section 8 of the Summary of Basic Lease Information is hereby
amended to read as follows:
8. Lease Term Lease Term: The expiration date
(Article 3 of for the entire Premises is the
Lease): later to occur of July 31, 1999,
or three (3) years
after the Commencement
Date for the payment of
Rent for the Additional
Premises as set forth
in Section 3.2 of the
Lease.
5. Section 9 of the Summary of Basic Lease Information is hereby
amended to read as follows:
2
7
9. Rent Base Rent:
(Article 4 of
Lease): Original Premises: Subject to adjustment
as set forth in Section 4.1, Initial Base
Monthly Rent (from the effective date set
forth in the First Amendment) equal to
$0.67 per rentable square foot of the
Original Premises, or Twenty Thousand
Seven Hundred Twelve Dollars and
Thirty-Eight Cents ($20,712.38), and
Initial Base Annual Rent equal to Two
Hundred Forty-Eight Thousand Five Hundred
Forty-Eight Dollars and Fifty-Six Cents
($248,548.56).
Additional Premises: Subject to
adjustment as set forth in Section 4.1,
Initial Base Monthly Rent equal to $0.68
per rentable square foot of the
Additional Premises, or Twelve Thousand
Seven Hundred Fifty-Seven Dollars and
Forty- Eight Cents ($12,757.48), and
Initial Base Annual Rent of One Hundred
Fifty-Three Thousand Eighty-Nine Dollars
and Seventy- Six Cents ($153,089.76).
Late Charge: Ten percent (10%) of the
overdue amount.
Lease Interest Rate: Ten percent (10%)
per annum.
6. Section 12 of the Summary of Basic Lease Information is hereby
amended to read as follows:
3
8
12. Brokers Landlord's Broker:
(Section 19.17 of Newport National Corporation
Lease):
Tenant's Broker:
Rick Reeder, Business Real
Estate Brokerage Company.
7. Section 14 of the Basic Lease Information is hereby amended to
read as follows:
14. Tenant Ten Dollars ($10.00) per rentable
Improvement square foot of the Original
Allowance (See Premises and zero ($0.00) for the
Work Letter-- Additional Premises.
Exhibit C for
Original Premises
and Work Letter -
Additional
Premises -
Exhibit C-1 for
Additional
Premises):
8. Section 1.27 of the Lease is deemed amended so that "Work
Letter" means either the Work Letter for the Original Premises which was
attached to the Lease as Exhibit "C" or the Work Letter - Additional Premises
for the Additional Premises which is attached hereto as Exhibit "C-1," as the
case may be.
9. Section 2.4 of the Lease is deemed amended so that it applies
only to the Original Premises. As set forth in the Work Letter-Additional
Premises attached, Tenant is performing all of the tenant improvement work
within the Additional Premises and Landlord shall have no responsibility or
liability therefor, except as expressly set forth in the Work Letter -
Additional Premises. Tenant specifically acknowledges that Tenant is accepting
the Additional Premises from Landlord in their present condition, "As Is," and
without any representation or warranty from Landlord as to the condition of the
Additional Premises; provided, however, that Landlord hereby warrants to Tenant
that the HVAC System serving the Additional Premises shall be in good
4
9
condition and proper working order for ninety (90) days following the
Commencement Date with regards to the payment of Rent relating to the Additional
Premises (as described below). Tenant waives any claims against and releases
Landlord from any liability or responsibility for the condition of the
Additional Premises, whether such condition is latent or patent, except as
specifically aforesaid or as set forth in the Work Letter Additional Premises.
10. Section 2.6.2 of the Lease is deemed amended so that
Landlord's obligation to deliver an Option Expansion Notice shall be one time
each calendar quarter.
11. Section 3.2 of the Lease is deemed amended to acknowledge
that the Commencement Date with regards to the Original Premises has occurred.
The Commencement Date with regards to the payment of Rent relating to the
Additional Premises shall be the earlier of (a) completion by Tenant of the
Tenant Improvements in the Additional Premises pursuant to the Work Letter -
Additional Premises, or (b) August 15, 1996; provided, however, that to the
extent the Additional Premises Possession Date (as hereinafter defined) is later
than July 1, 1996, then the date set forth in (b) in this sentence shall be
extended by the same number of days. All of Tenant's other obligations with
respect to the Additional Premises set forth in the Lease (including, but not
limited to, obtaining insurance) shall commence as of the date Landlord makes
the Additional Premises available to Tenant for purposes of Tenant constructing
the Tenant Improvements in the Additional Premises pursuant to the Work Letter -
Additional Premises ("Additional Premises Possession Date").
12. Section 3.3 of the Lease is amended to provide that a delay
in the Additional Premises Possession Date shall affect only the portion of the
Lease relating to the Additional Premises. If the Additional Premises Possession
Date has not occurred by October 1, 1996 ("Termination Date"), due to the
previous occupant of such space not timely moving out or for any other reason
except a Tenant Delay (in which case the Termination Date shall be extended for
the period of such Tenant Delay), then Tenant may terminate this Lease as to the
Additional Premises only by written notice thereof to Landlord by the date which
is thirty (30) days after the Termination Date. If Tenant fails to
5
10
timely deliver such notice of termination, Tenant's right to terminate this
Lease as to the Additional Premises shall be deemed waived. If Tenant does
timely terminate this Lease as to the Additional Premises pursuant to the
foregoing, Landlord shall have no liability or responsibility to Tenant for the
delay or as a result of such termination. The parties agree that Tenant and
Landlord will acknowledge in writing the Additional Premises Possession Date
within five (5) days after such date has occurred.
13. Section 3.4 is deemed amended so that it does not apply to
the Additional Premises.
14. Except as hereinafter set forth, Section 3.5 of the Lease is
amended so that it applies to the entire Premises. The Base Annual Rent for the
first year of each Extension Term shall be equal to (a) ninety-five percent
(95%) of the fair market rental for a two (2) year lease with regards to the
Original Premises only, and (b) one hundred percent (100%) of the fair market
rental for a two (2) year lease with regard to the Additional Premises. The
Extension Options may only be exercised with regards to the entire Premises, and
the Fair Market Rental Calculation shall contain two portions, one relating to
the Original Premises and one relating to the Additional Premises. All other
parts of the process described in Section 3.5 shall apply.
15. The parties acknowledge that Lease Year 2 under the Lease
commences (a) August 1, 1996 for the Original Premises, and (b) the Commencement
Date (as defined in Section 12 above) with regard to the payment of Rent for the
Additional Premises. Given the foregoing, Section 4.1 of the Lease is amended to
provide that the Base Monthly Rent and the Base Annual Rent shall be increased
in accordance with the following schedule:
Additional
----------
Lease Original Premises Premises Total Premises
----- ----------------- ---------- --------------
Year Base Monthly Rent Base Monthly Rent Base Monthly Rent
----- ----------------- ----------------- -----------------
2 $21,639.80 $12,757.48 $34,397.28
3 23,185.50 13,320.31 36,505.81
4 23,803.78 13,883.14 37,686.92
6
11
Additional
----------
Lease Original Premises Premises Total Premises
----- ----------------- ---------- --------------
Year Base Monthly Rent Base Monthly Rent Base Monthly Rent
----- ----------------- ----------------- -----------------
Base Annual Rent Base Annual Rent Base Annual Rent
---------------- ---------------- ----------------
2 $259,677.60 $153,089.76 $412,767.36
3 278,226.00 159,843.72 438,069.72
4 285,645.36 166,597.68 452,243.04
16. Section 5.5.3 of the Lease is amended so that the limitation
contained therein on Tenant's obligation to pay Common Area Maintenance Charges,
Property Taxes and Project Insurance Charges shall apply only to such charges
incurred with respect to the Original Premises. Tenant shall be liable without
limitation for all such charges with regards to the Additional Premises.
17. Section 11.1 of the Lease is amended to provide that Landlord
shall respond within five (5) days of Tenant's request for approval of any such
Alterations.
18. A typographical error in Section 11.6 of the Lease is hereby
corrected so that the reference in the third line from the end is to "this
Section 11.6."
19. Section 18.1 of the Lease is amended so that Tenant shall be
required to surrender the Original Premises to Landlord broom clean and in the
same condition as received except for ordinary wear and tear, which Tenant was
not otherwise obligated to remedy under any provision of this Lease. Tenant
shall be required to surrender the Additional Premises to Landlord broom clean
and in the condition improved with the Tenant Improvements contemplated by the
Work Letter - Additional Premises but without the Tenant Improvements identified
by Landlord for removal at the expiration of the Lease Term during the
Construction Documents approval process as set out in Section 1.3 of the Work
Letter Additional Premises, except for ordinary wear and tear which Tenant was
not otherwise obligated to remedy under any provision of this lease. Thirty (30)
days prior to the expiration of the Lease, Landlord and Tenant will inspect the
Premises for the purposes of Landlord identifying in writing within ten (10)
days
7
12
of such inspection which improvements are to remain and which improvements
are to be removed by Tenant prior to the expiration of the Lease Term pursuant
to the terms of the Lease and the Work Letter - Additional Premises. Tenant's
obligation to remove those improvements identified by Landlord for removal must
be completed prior to the termination of the Lease. If Tenant enters or should
enter any portion of the Premises after the termination of the Lease for the
purpose of removing such improvements, then such entry (or requirement to enter)
shall be deemed to be holding over the entire Premises pursuant to the
provisions of Section 18.5 below. Section 18.2 of the Lease shall be deemed
amended to be consistent with the foregoing requirements.
20. Exhibit "E-1" to the Lease is deleted and in its place is
inserted Exhibit "E-2" attached hereto and by this reference incorporated
herein. For all purposes, the Premises will be as described in this Amendment
and as shown on Exhibit "E-2."
21. All initial capitalized terms which are not otherwise defined
in this Amendment shall have the meanings set forth in the Lease.
22. Except as set forth in this Amendment, the Lease is
unmodified and in full force and effect.
Landlord:
THE CAMPUS, LLC, a California
limited liability company
By: NEWPORT NATIONAL
CORPORATION, a California
corporation, Member
By:____________________________
Its:___________________________
Tenant:
VIASAT, INC., a California
corporation
8
13
By:______________________________
Its:_____________________________
By:______________________________
Its:_____________________________
9
14
LEASE AGREEMENT
THE CAMPUS
LANDLORD
THE CAMPUS, LLC, A CALIFORNIA
LIMITED LIABILITY COMPANY
TENANT
VIASAT, INC., A CALIFORNIA CORPORATION
15
TABLE OF CONTENTS
PAGE
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SUMMARY OF BASIC LEASE INFORMATION....................................................................... i
ARTICLE 1 DEFINITIONS................................................................. 1
1.1 Additional Rent............................................................. 1
1.2 Base Annual Rent............................................................ 1
1.3 Base Monthly Rent........................................................... 1
1.4 Basic Terms................................................................. 1
1.5 Business Days............................................................... 1
1.6 Common Area Maintenance Charges............................................. 1
1.7 Declarations................................................................ 1
1.8 Estimated Commencement Date................................................. 1
1.9 Hazardous Materials......................................................... 1
1.10 Hazardous Materials Laws.................................................... 2
1.11 Landlord.................................................................... 2
1.12 Landlord's Indemnitees...................................................... 2
1.13 Lease Interest Rate......................................................... 2
1.14 Lease Term.................................................................. 2
1.15 Lease Year.................................................................. 2
1.16 Premises.................................................................... 2
1.17 Project..................................................................... 2
1.18 Project Common Area......................................................... 2
1.19 Property Taxes.............................................................. 2
1.20 Rent........................................................................ 3
1.21 Rules and Regulations....................................................... 3
1.22 Site Plan................................................................... 3
1.23 Tenant...................................................................... 3
1.24 Tenant Improvements......................................................... 3
1.25 Tenant's Indemnitees........................................................ 3
1.26 Tenant's Proportional Share................................................. 3
1.27 Work Letter................................................................. 3
ARTICLE 2 PREMISES.................................................................... 3
2.1 Premises.................................................................... 3
2.2 Lease of the Premises....................................................... 4
2.3 Suitability of Premises..................................................... 4
2.4 Landlord's Work in the Premises............................................. 4
2.5 Reduction in Premises and Lease Term........................................ 4
2.6 Right of First Refusal/Option to Expand..................................... 5
2.6.1 Grant of Right of First Refusal.............................. 5
2.6.2 Option to Expand............................................. 6
2.6.3 Absence of Default........................................... 7
2.6.4 New Lease or Amendment to Lease.............................. 8
2.6.5 Option to Expand and Right of First Refusal Personal......... 8
ARTICLE 3 LEASE TERM.................................................................. 8
3.1 Lease Term.................................................................. 8
3.2 Commencement Date; Condition Precedent to Effectiveness..................... 8
3.3 Delay in Commencement....................................................... 8
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(continued)
PAGE
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3.4 Early Occupancy........................................................................ 9
3.5 Option to Extend....................................................................... 9
ARTICLE 4 RENTAL AND OTHER PAYMENTS.............................................................. 11
4.1 Base Monthly Rent...................................................................... 11
4.2 Interest on Past Due Obligations....................................................... 12
4.3 Late Charges........................................................................... 12
4.4 Security Deposit....................................................................... 12
4.4.1 Deposit of Funds........................................................ 12
4.4.2 Transfer of Security Deposit............................................ 12
ARTICLE 5 OTHER CHARGES PAYABLE BY TENANT........................................................ 12
5.1 Additional Rent and Rent............................................................... 12
5.2 Property Taxes......................................................................... 12
5.2.1 Tenant Right to Contest Taxes........................................... 13
5.2.2 Consultation Regarding Taxes............................................ 13
5.2.3 Landlord Right to Contest Taxes; Tax Consulting Service................. 13
5.2.4 Liability for Penalties/Interest........................................ 13
5.3 Insurance Charges...................................................................... 13
5.4 Common Area Maintenance Charges........................................................ 13
5.4.1 Tenant to Bear Proportional Share of Common Area Maintenance Charges.... 13
5.4.2 Landlord's Common Area Maintenance Charges.............................. 13
5.4.3 Charges Under Declarations.............................................. 14
5.5 Payment of Common Area Maintenance Charges, Property Taxes and Project Insurance
Charges................................................................................ 14
5.5.1 Year-End Adjustments.................................................... 15
5.5.2 Disputes Regarding Charges.............................................. 15
5.5.3 Limitation on Increase in Charges....................................... 15
5.6 Personal Property Taxes................................................................ 15
5.6.1 Payment Prior to Delinquency............................................ 15
5.6.2 Contest of Personal Property Taxes...................................... 16
ARTICLE 6 USE OF PROPERTY........................................................................ 16
6.1 Permitted Uses......................................................................... 16
6.2 Manner of Use.......................................................................... 16
6.2.1 Interference with Use/Nuisance.......................................... 16
6.2.2 Violation of Law/Insurance Provisions................................... 16
6.2.3 Permits................................................................. 17
6.3 Rules and Regulations.................................................................. 17
6.4 Landlord's Access...................................................................... 17
6.5 Quiet Possession....................................................................... 17
ARTICLE 7 HAZARDOUS MATERIALS.................................................................... 18
7.1 Prohibition of Storage................................................................. 18
7.2 Disclosure and Warning Obligations..................................................... 18
7.3 Notice of Actions...................................................................... 18
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17
TABLE OF CONTENTS
(continued)
PAGE
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7.4 Hazardous Materials Indemnities........................................................ 19
7.5 Assignment and Subletting.............................................................. 20
7.6 Environmental Tests and Audits......................................................... 20
7.7 Lease "As Is".......................................................................... 20
7.8 Landlord's Representation and Warranty................................................. 20
7.9 Survival............................................................................... 21
7.10 Tenant's Limited Right of Cancellation................................................. 21
ARTICLE 8 SERVICES AND UTILITIES................................................................. 21
8.1 Payment and Arrangement................................................................ 21
8.2 Interruption of Services and Utilities................................................. 21
ARTICLE 9 PARKING AND CONTROL OF COMMON AREAS.................................................... 22
9.1 Control of Project Common Areas by Landlord............................................ 22
9.2 License................................................................................ 22
9.3 Parcelization of the Project........................................................... 23
9.4 Underground Line....................................................................... 23
9.5 Installation of Satellite Dish......................................................... 23
9.5.1 Governmental Approvals.................................................. 23
9.5.2 Maintenance and Surrender............................................... 23
9.5.3 Taxes................................................................... 24
9.5.4 Utilities............................................................... 24
9.5.5 Terms of Lease.......................................................... 24
ARTICLE 10 CONDITION OF PREMISES; MAINTENANCE OF THE PREMISES..................................... 24
10.1 Tenant's Obligations................................................................... 24
10.1.1 Maintenance of the Premises............................................. 24
10.1.2 Repairs Due to Misuse................................................... 24
10.2 Repair by Landlord..................................................................... 24
10.3 Landlord's Obligations................................................................. 25
10.3.1 Landlord's Limited Warranty............................................. 25
ARTICLE 11 ALTERATIONS, IMPROVEMENTS AND SIGNAGE.................................................. 25
11.1 Changes/Alterations.................................................................... 25
11.2 Manner of Construction................................................................. 25
11.3 Intentionally Omitted.................................................................. 26
11.4 Construction Insurance................................................................. 26
11.5 Liens.................................................................................. 26
11.6 Signage................................................................................ 26
ARTICLE 12 INSURANCE AND INDEMNITY................................................................ 27
12.1 Fire and Casualty Insurance............................................................ 27
12.2 Insurance to be Obtained by Tenant..................................................... 27
12.2.1 Liability Insurance..................................................... 27
12.2.2 Insurance of Personal Property.......................................... 27
12.2.3 Additional Insurance Obligations........................................ 28
12.3 Waiver of Subrogation.................................................................. 28
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18
TABLE OF CONTENTS
(continued)
PAGE
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12.4 Form of Policies....................................................................... 28
12.5 Indemnification........................................................................ 28
12.5.1 Indemnification of Landlord............................................. 28
12.5.2 Landlord's Nonliability................................................. 29
12.5.3 Indemnification of Tenant............................................... 29
ARTICLE 13 ASSIGNMENT AND SUBLETTING.............................................................. 29
13.1 Landlord's Consent Required............................................................ 30
13.2 Intentionally Omitted. ................................................................ 30
13.3 Transfer Without Consent............................................................... 30
13.4 No Release of Tenant................................................................... 30
13.5 Effect of a Transfer................................................................... 30
13.6 Event of Bankruptcy.................................................................... 31
13.7 No Merger.............................................................................. 31
13.8 Assignment Fees and Procedures......................................................... 31
ARTICLE 14 DAMAGE OR DESTRUCTION.................................................................. 31
14.1 Repair of Damage by Landlord........................................................... 31
14.2 Rent Abatement Due to Casualty......................................................... 32
14.3 Landlord's Option to Repair............................................................ 32
14.4 Damage Near End of Term................................................................ 32
14.5 Waiver of Statutory Provisions......................................................... 32
ARTICLE 15 CONDEMNATION........................................................................... 33
15.1 Total Condemnation..................................................................... 33
15.2 Partial Condemnation................................................................... 33
15.3 Condemnation of Parking Area........................................................... 33
15.4 Distribution of Condemnation Award..................................................... 33
15.5 Waiver................................................................................. 33
ARTICLE 16 DEFAULTS; REMEDIES..................................................................... 33
16.1 Covenants and Conditions............................................................... 33
16.2 Defaults by Tenant..................................................................... 34
16.3 Remedies............................................................................... 34
16.4 The Right to Relet the Premises........................................................ 35
16.5 Waiver of Rights of Redemption......................................................... 36
16.6 Cumulative Remedies.................................................................... 36
16.7 Additional Remedies Upon Default....................................................... 36
16.8 Default by Landlord.................................................................... 37
16.9 Landlord's Cure........................................................................ 37
ARTICLE 17 PROTECTION OF CREDITORS................................................................ 38
17.1 Subordination.......................................................................... 38
17.2 Attornment............................................................................. 38
17.3 Signing of Documents................................................................... 38
17.4 Estoppel Certificates.................................................................. 38
17.5 Tenant's Financial Condition........................................................... 39
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19
PAGE
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17.6 Mortgagee Protection Clause............................................................ 39
ARTICLE 18 TERMINATION OF LEASE................................................................... 39
18.1 Condition Upon Termination............................................................. 39
18.2 Non-Removal by Tenant.................................................................. 39
18.3 Abandoned Property..................................................................... 40
18.4 Landlord's Actions on Premises......................................................... 40
18.5 Holding Over........................................................................... 40
ARTICLE 19 MISCELLANEOUS PROVISIONS............................................................... 41
19.1 Obligation to Refrain from Discrimination.............................................. 41
19.2 Successors............................................................................. 41
19.3 Severability........................................................................... 41
19.4 Interpretation......................................................................... 41
19.5 Other Tenancies........................................................................ 41
19.6 Entire Agreement....................................................................... 41
19.7 Landlord's Liability................................................................... 42
19.8 Notices................................................................................ 42
19.9 Waivers................................................................................ 42
19.10 No Recordation......................................................................... 42
19.11 Choice of Law.......................................................................... 42
19.12 Corporate Authority; Partnership Authority............................................. 42
19.13 No Partnership......................................................................... 43
19.14 Joint and Several Liability............................................................ 43
19.15 Attorneys' Fees........................................................................ 43
19.16 Lender Modification.................................................................... 43
19.17 Brokers................................................................................ 43
19.18 Force Majeure.......................................................................... 43
19.19 Tenant Obligations Survive Termination................................................. 43
19.20 Tenant's Waiver........................................................................ 43
19.21 Submission of Lease.................................................................... 44
EXHIBITS
Exhibit "A"...............................Site Plan
Exhibit "B"...................Rules and Regulations
Exhibit "C".............................Work Letter
Exhibit "D" ......................Acceptance Letter
Exhibit "E"............................CADD Diagram
I-(v)
20
LEASE AGREEMENT
SUMMARY OF BASIC LEASE INFORMATION
1. Lease Date: December 8, 1994
2. Landlord: The Campus, LLC, a California
limited liability company
3. Address of Landlord: c/o Newport National Corporation
5050 Avenida Encinas, Suite 350
Carlsbad, CA 92008
Attn: Mr. Scott Brusseau
4. Tenant: ViaSat, Inc., a California
corporation
5. Address of Tenant: 2290 Cosmos Court
Carlsbad, CA 92009-1585
6. Premises (Section Suite No.: 150
2.1 of Lease):
Project Rentable Area: 156,436
square feet
Building Rentable Area:
49,675 square feet
Premises Rentable Area:
Approximately 49,675 square feet.
The Premises are comprised of the
East Wing and the West Wing as set
forth in Section 2.5. The East Wing
and the West Wing will be delivered
to Tenant on separate dates as set
forth in Section 3.3 and the Work
Letter. The East Wing consists of
approximately 17,684 rentable square
feet and the West Wing consists of
approximately 31,991 rentable square
feet. The West Wing consists of two
phases, the First Phase and the
Second Phase. The First Phase
contains approximately (20,000)
square feet. The Second Phase
consists of approximately twelve
thousand (12,000) square feet.
Tenant's Building Proportional
Share: 100%
Tenant's Project Proportional Share:
31.75%
7. Project: The Campus, Carlsbad
Building: 5964 La Place Court, Carlsbad,
California 92008
8. Lease Term
(Article 3 of Lease): Lease Term: Sixty (60) months
Estimated Lease Commencement Date:
May 1, 1995
12/18/94 Landlord Initials /s/
-----
Tenant Initials /s/
-----
II-(i)
21
Estimated Lease Expiration Date:
April 30, 2000
9. Rent Base Rent:
(Article 4 of Lease) $.67 per rentable square foot of the
Premises, subject to adjustment as
set forth in Section 4.1
Initial Base Monthly Rent:
$33,282.25
Initial Base Annual Rent:
$399,387.00
First Month's Base Monthly Rent due
upon the date Landlord acquires
title to the Project pursuant to
Section 3.2
Late Charge: Ten percent (10%) of
the overdue amount
Lease Interest Rate: Ten percent
(10%)
10. Use (Article 6 of General Office, Assembly and
Lease): Manufacturing
11. Security Deposit None
(Article 4 of Lease):
12. Brokers (Section Landlord's Broker: None
19.17 of Lease): Tenant's Broker: Rick Reeder,
Business Real Estate
13. Lease Guarantors: None
14. Tenant Improvement Ten Dollars ($10.00) per rentable
Allowance square foot of the Premises
(See Work Letter -
Exhibit "C")
15. Exhibits and Addenda: The following exhibits and addenda are
attached hereto and incorporated into this Lease:
EXHIBITS:
Exhibit "A"..........................................Site Plan
Exhibit "B"..............................Rules and Regulations
Exhibit "C"........................................Work Letter
Exhibit "D" .................................Acceptance Letter
Exhibit "E".......................................CADD Diagram
12/18/94 Landlord Initials /s/
-----
Tenant Initials /s/
-----
II-(ii)
22
OTHER EXHIBITS
None
ADDENDA:
None
The foregoing Summary of Basic Lease Information is hereby
incorporated into and made a part of this Lease. Each reference in this Lease to
the Summary of Basic Lease Information shall mean the information set forth
above and shall be construed to incorporate all of the terms provided under the
particular lease paragraph pertaining to such information. In the event of a
conflict between the Summary of Basic Lease Information and the Lease, the terms
of the Lease shall prevail.
LANDLORD:
The Campus, LLC, a California limited liability company
By: Newport National Corporation, a California corporation
Its: Manager
By:/s/ Scott R. Brusseau
---------------------------------
Name: Scott R. Brusseau
Title: President
TENANT:
ViaSat, Inc., a California corporation
By: /s/ Greg Monahan
---------------------------
Name: Greg Monahan
------------------------
Title:Vice President
------------------------
By:___________________________
Name:_________________________
Title:________________________
12/18/94 Landlord Initials /s/
-----
Tenant Initials /s/
-----
II-(iii)
23
LEASE
This Lease, which includes the Basic Terms (as hereinafter
defined) ("Lease"), is made as of December 8, 1994, by and between The Campus,
LLC, a California limited liability company ("Landlord") and ViaSat, Inc., a
California corporation ("Tenant").
ARTICLE 1
DEFINITIONS
In addition to the defined terms set forth elsewhere in this
Lease, unless the context otherwise requires, the following terms shall have the
meanings set forth below.
1.1 ADDITIONAL RENT. "Additional Rent" refers collectively to the
Tenant's Proportional Share of Common Area Maintenance Charges, Property Taxes
and Project Insurance Charges and any other charges due and payable by Tenant
under this Lease other than Base Monthly Rent or Base Annual Rent.
1.2 BASE ANNUAL RENT. "Base Annual Rent" means the Base Monthly
Rent calculated on an annual basis.
1.3 BASE MONTHLY RENT. "Base Monthly Rent" means the rental
specified in Article 4 of this Lease.
1.4 BASIC TERMS. "Basic Terms" means the Summary of Basic Lease
Information set forth at the beginning hereof.
1.5 BUSINESS DAYS. "Business Days" means any day on which
business is conducted by federal savings banks in San Diego County, California.
1.6 COMMON AREA MAINTENANCE CHARGES. "Common Area Maintenance
Charges" means the costs and expenses described in Section 5.4.2 of this Lease.
1.7 DECLARATIONS. "Declarations" means any Declaration or
Declarations of Covenants, Conditions and Restrictions which have been or may be
recorded against all or a portion of the Project, including but not limited to,
the Declaration of Restrictions recorded April 22, 1982 in the San Diego County
Recorder's Office as Instrument No. 82-114942 and recorded May 12, 1982 as
Instrument No. 82- 141190, as amended from time to time.
1.8 ESTIMATED COMMENCEMENT DATE. "Estimated Commencement Date"
refers to the date specified in Item 8 of the Basic Terms.
1.9 HAZARDOUS MATERIALS. The term "Hazardous Material(s)" shall
mean any toxic or hazardous substance, material or waste or any pollutant or
contaminant or infectious or radioactive material which are, or in the future
become, regulated under applicable local, state or federal law for the
protection of health or the environment, or which are classified as hazardous or
toxic substances, materials or wastes, pollutants or contaminants, as defined,
listed or regulated by any federal, state or local law, regulation or order or
by common law decision, including, without limitation, (i) trichloroethylene,
tetrachloroethylene, perchloroethylene and other chlorinated solvents, (ii) any
petroleum products or
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fractions thereof, (iii) asbestos, (iv) polychlorinated biphenyls, (v) flammable
explosives, (vi) urea formaldehyde and (vii) radioactive materials and waste.
1.10 HAZARDOUS MATERIALS LAWS. The term "Hazardous Materials
Law(s)" shall mean any federal, state or local laws, ordinances, codes,
statutes, regulations, administrative rules, policies and orders, and other
authority, existing now or in the future, which classify, regulate, list or
define hazardous substances, materials, wastes contaminants, pollutants and/or
the Hazardous Materials.
1.11 LANDLORD. "Landlord" means the person or entity described in
Item 2 of the Basic Terms.
1.12 LANDLORD'S INDEMNITEES. "Landlord's Indemnitees" shall refer
collectively to Landlord's agents, partners, members, managers, shareholders,
officers, directors, employees, successors and/or assigns.
1.13 LEASE INTEREST RATE. "Lease Interest Rate" means the
interest rate specified in Item 9 of the Basic Terms.
1.14 LEASE TERM. "Lease Term" means the entire period commencing
with the Commencement Date and continuing for the period specified in Item 8 of
the Basic Terms, plus any extensions, renewals or holding over periods.
1.15 LEASE YEAR. "Lease Year" or "lease year" shall mean a
consecutive twelve (12) month period during the Lease Term commencing on the
Commencement Date provided that the Lease Year may be adjusted by Landlord to
commence on the first day of a calendar month after the Commencement Date.
1.16 PREMISES. "Premises" means the space described in Section
2.1 and delineated on the Site Plan.
1.17 PROJECT. "Project" means the office and industrial project
commonly known as The Campus at Carlsbad, and is more particularly described in
Exhibit "A," together with all fixtures, equipment and personal property owned
by Landlord, now or hereafter situated or located therein or thereupon and used
in connection with the operation and maintenance thereof.
1.18 PROJECT COMMON AREA. "Project Common Area" means all areas,
space, equipment and special services which are from time-to-time provided by
Landlord for the common or joint use and benefit of the occupants of the Project
and Building, their employees, agents, servants, customers and other invitees,
including without limitation, parking areas, access roads, driveways, retaining
walls, landscaped areas, truck service-ways, stairs, ramps, sidewalks, pools,
patios, hardscapes, electrical rooms, mailrooms, common area restrooms and
locker rooms and hallways.
1.19 PROPERTY TAXES. "Property Taxes" means: (i) general real
property and improvements taxes, any form of assessment, special assessment or
reassessment, any fee, license fee, license tax, business license fee,
commercial rental tax, levy, charge, assessment, penalty or other tax imposed by
any authority having the direct or indirect power to tax, including any city,
county, state or federal government, or any school, agriculture, lighting,
drainage or other improvement district thereof, as against any legal or
equitable interest of Landlord in the Project; (ii) any tax on the Landlord's
right to receive, or the receipt of, rent or income from the Project or against
Landlord's business of leasing the Project; (iii) any tax or charge for fire
protection, streets, sidewalks, road maintenance, refuse or other services
provided to the Project by any governmental agency; (iv) any tax imposed upon
this transaction or based upon a reassessment of the Project due to a change in
ownership or transfer of all or part of Landlord's interest in
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the Project; and (v) any charge or fee replacing any tax previously included
within the definition of Property Taxes. "Property Taxes" does not, however,
include Landlord's Federal or State income, franchise, inheritance or estate
taxes.
1.20 RENT. "Rent" and/or "rent" shall mean the Base Monthly Rent,
Additional Rent and any other amounts Tenant is required to pay under this
Lease.
1.21 RULES AND REGULATIONS. "Rules and Regulations" mean the
rules and regulations set forth in Exhibit "B" attached to this Lease.
1.22 SITE PLAN. "Site Plan" refers to the Site Plan attached as
Exhibit "A."
1.23 TENANT. "Tenant" means the person or entity described in
Item 4 of the Basic Terms.
1.24 TENANT IMPROVEMENTS. "Tenant Improvements" shall refer to
the Tenant Improvements as defined in the Work Letter attached hereto as Exhibit
"C."
1.25 TENANT'S INDEMNITEES. "Tenant's Indemnitees" shall refer
collectively to Tenant's agents, partners, members, managers, shareholders,
officers, directors, employees, successors and/or assigns.
1.26 TENANT'S PROPORTIONAL SHARE. "Tenant's Proportional Share"
shall mean both Tenant's Building Proportional Share and Tenant's Project
Proportional Share. Tenant's Building Proportional Share shall be the percentage
obtained by dividing the square footage of the Premises by the total square
footage of the Building and Tenant's Project Proportional Share shall be the
percentage obtained by dividing the square footage of the Premises by the total
leasable square footage of the Project. Tenant's Building Proportional Share and
Tenant's Project Proportional Share shall initially be as set forth in Item 6 of
the Basic Lease Provisions.
1.27 WORK LETTER. "Work Letter" means the Work Letter which is
attached to this Lease as Exhibit "C."
ARTICLE 2
PREMISES
2.1 PREMISES. Upon and subject to the terms, covenants and
conditions hereinafter set forth, Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord the Premises. The Premises are located in the
Building. The Building is, in turn, located in and constitutes a portion of the
Project. Landlord reserves the right to change the shape, size, location, number
and extent of the improvements shown on the Site Plan and eliminate or add any
improvements to any portion of the Project as provided in Article 5. The
rentable area of the Premises, Building and Project are set forth on the CADD
Diagram attached hereto and incorporated herein as Exhibit "E." In the first
thirty (30) days after the Commencement Date, Landlord and Tenant shall verify
the rentable area of the Premises, Building and/or Project and a change shall be
made to such rentable area amounts only to the extent the Tenant Improvements
are constructed in a configuration other than as set forth on the CADD Diagram.
In the event that Landlord determines during such thirty (30) day period that
the rentable area of either the Premises, Building, and Project differ from the
amount set forth in Item 6 of the Basic Terms, all amounts, percentages and
figures appearing or referred to in this Lease, including, without limitation,
Tenant's Proportional Share, based upon such incurred amount shall be revised
accordingly and such revised figures shall be deemed to be the rentable area of
the Premises, Building or Project, respectively. In such case, the Base Monthly
Rent and any other payments due hereunder which are based on a rentable
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square footage basis shall be increased or decreased accordingly. The purpose of
the Site Plan is to show the approximate location of the Premises.
Notwithstanding any other provision contained in this Lease except Section 9.1
with respect to the provision of a minimum number of parking spaces, Landlord
reserves the right at any time to vary and adjust the size of the various
buildings, the location of any other tenant, automobile parking areas, and other
common areas as shown on said Site Plan, provided, however, that said parking
area (including landscaped common areas) shall at all times provide for not less
than the minimum parking required by the local jurisdiction in which the Project
is located and the minimum requirements established under any deed restrictions
or covenants, conditions and restrictions encumbering the Premises.
2.2 LEASE OF THE PREMISES. Tenant acknowledges that this Lease is
subordinate and subject to the Declarations, all liens, encumbrances, deeds of
trust, reservations, restrictions and other matters affecting the Project or the
Premises and any law, regulation, rule, order or ordinance of any governmental
entity applicable to the Project or the Premises or the use or occupancy
thereof, in effect on the execution of this Lease or thereafter promulgated.
Landlord grants Tenant during the Lease Term the concurrent right to use the
Project Common Area on a nonexclusive basis and subject to the provisions of
this Lease. Easements for light and air are not included in the leasing of these
Premises to Tenant. Landlord further reserves the exclusive right of access to
the roof, except for any rights of access specifically granted to Tenant under
the terms of this Lease or any rights of access approved by Landlord, in its
sole discretion, in writing.
2.3 SUITABILITY OF PREMISES. Tenant acknowledges that, except as
expressly set forth herein, Landlord has made no representation or warranty
regarding the condition of the Premises or the Project or the suitability of
such Premises or the Project for the operation or conduct of Tenant's business
thereon or for any other purpose. The taking of possession of the Premises by
Tenant shall conclusively establish that the Premises and the Project were
acceptable to Tenant and in satisfactory condition to conduct business at such
time.
2.4 LANDLORD'S WORK IN THE PREMISES. The Premises shall be
completed as set forth in the Work Letter. Except as specifically set forth in
this Lease and the Work Letter, Landlord shall not provide or pay for any
interior improvement work or services related to the improvement of the
Premises.
2.5 REDUCTION IN PREMISES AND LEASE TERM. In the event that
Landlord does not obtain assurances acceptable to Landlord and Tenant, each
acting in their own reasonable discretion, on or before March 15, 1995 from
Torrey Pines Research ("Existing Tenant") that Existing Tenant will abandon that
portion of the Premises shown on Exhibit "A" attached hereto and incorporated
herein and identified as the "East Wing," on or before October 1, 1995, then (a)
the area of the "Premises" for purpose of this Lease shall be automatically
reduced by the area of the East Wing so that the Premises only includes that
portion of the Premises shown on Exhibit "A" as the "West Wing," and the
provisions set forth in the Summary of Basic Lease Provisions which are
determined by the rentable square footage of the Premises, including Tenant's
Building Proportionate Share, Tenant's Project Proportional Share, Base Rent,
and the Security Deposit, shall be reduced proportionally in accordance with the
percent reduction in the rentable area of the Premises and (b) Tenant shall have
the option, which option may be exercised in Tenant's sole discretion, to give
notice to Landlord on or before July 1, 1995 electing to change the Lease Term
from sixty (60) months to forty-eight (48) months. For purposes of this Section
2.5, the parties agree that the rentable square footage of the East Wing is
seventeen thousand six hundred eighty-four (17,684) rentable square feet. In the
event that Landlord obtains assurances acceptable to Landlord that the Existing
Tenant will abandon by October 1, 1995 the East Wing then Landlord shall provide
notice thereof to Tenant together with such assurances and Tenant, within ten
(10) days thereafter, shall deliver notice to Landlord whether such assurances
are acceptable. If Tenant fails to deliver such notice, Tenant shall be
deemed to approve the assurances provided by Landlord. If Tenant delivers notice
to Landlord that such
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assurances are not acceptable, the parties shall meet within four (4) days
thereafter to discuss the assurances provided and determine what additional
assurances are reasonably necessary, if any. On the date that such assurances
are reasonably approved by Tenant or deemed approved by Tenant, the provisions
of the Work Letter shall be triggered for the East Wing. After the Lease Date
and until March 15, 1995, Landlord shall use its best efforts to cause Existing
Tenant to agree before March 15, 1995 to abandon the East Wing on or before
October 1, 1995, provided, however, that Landlord shall not be required to incur
any cost, expense or liability to obtain such agreement. In the event that
Landlord is unable to obtain reasonable assurances on or before March 15, 1995
and the Premises are reduced as provided herein, but Existing Tenant abandons
the East Wing on or before July 1, 1995 without the requirement of payment or
any other consideration by Landlord to do so, Landlord shall give written notice
to Tenant thereof. Within five (5) Business Days after such notice, Tenant may
elect, by written notice to Landlord, to lease the East Wing on the terms and
conditions contained in this Lease, provided, however, that the Lease Term shall
be sixty (60) months regardless of whether or not Tenant has delivered a notice
under subsection (b) above.
2.6 RIGHT OF FIRST REFUSAL/OPTION TO EXPAND.
2.6.1 GRANT OF RIGHT OF FIRST REFUSAL. Subject to the
conditions set forth herein, Landlord hereby grants to Tenant a right of first
refusal ("Right of First Refusal") to lease certain rentable space within the
Project. If at any time during the Lease Term, Landlord receives an offer to
lease (the "Offer") all or any of the rentable space in the Project ("Expansion
Space"), Landlord shall notify Tenant that Landlord has received an offer to
lease such Expansion Space, which notice shall specify the amount of Base
Monthly Rent for such Expansion Space, the allowance for tenant improvements for
such Expansion Space, the term of the lease for such Expansion Space and the
other terms and conditions contained in the Offer ("Refusal Expansion Notice").
Tenant agrees that the term "Offer" shall not include any exercise of an option
or right of first refusal held by any third party as of the Lease Date. Within
thirty (30) days after the satisfaction of the contingencies contained in
Section 3.2, Landlord shall provide Tenant with a list of those parties holding
a right of first refusal or an option to expand for any portion of the Project
as of the Lease Date.
a. If Tenant, within four (4) Business Days after
receipt of the Refusal Expansion Notice, indicates in writing its agreement to
lease such Expansion Space, such Expansion Space shall be included within the
Premises and leased to Tenant pursuant to the terms and conditions contained in
the Offer, including, but not limited to, with respect to the building located
at 5962 La Place Court, any requirement in the Offer that Tenant use Landlord's
standard form of lease agreement for such Expansion Space which standard form
shall be commercially reasonable given the particularities of the Project and
such Expansion Space.
b. If Tenant does not notify Landlord in writing within
such four (4) Business Day period of its agreement to lease the Expansion Space,
or if Tenant delivers notice of its intent to lease the Expansion Space but
Tenant fails to execute an Amendment of Lease or New Lease as described in
Section 2.6.4 below within five (5) Business Days of delivery of such Amendment
of Lease or ten (10) Business Days after delivery of the New Lease by Landlord
to Tenant (or five (5) Business Days to the extent Landlord and Tenant have
previously negotiated the form of and entered into a New Lease), then this Right
of First Refusal shall expire. If Tenant fails to exercise its Right of First
Refusal and thereafter Landlord fails to execute a lease for such Expansion
Space within one hundred twenty (120) days after delivery of Landlord's Refusal
Expansion Notice with the prospective tenant identified in the Offer, then this
Right of First Refusal shall be reinstated and Tenant shall have the right to
exercise the Right of First Refusal on the same terms as set forth in this
Section 2.6.1.
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2.6.2 OPTION TO EXPAND. Subject to the conditions set forth
herein, Landlord hereby grants to Tenant an Option to Expand ("Option to
Expand") to lease the Expansion Space. If at any time during the Lease Term,
Landlord determines that a portion of the Expansion Space will become available
for lease at any time within the next twelve (12) months and that no third party
has a right of first refusal or option to lease such Expansion Space or upon the
failure of any such third party to exercise any right of first refusal or option
to lease such Expansion Space, Landlord shall notify Tenant that such Expansion
Space is available for lease ("Option Expansion Notice"). Tenant may, in its
sole discretion, elect to exercise the Option to Expand only by delivery of
written notice to Landlord ("Notice of Intention to Expand") within seventy-two
(72) days after receiving the Option Expansion Notice. The parties acknowledge
and agree that this Option to Expand is subordinate to the Right of First
Refusal. Accordingly, if Landlord receives an Offer pursuant to Section 2.6.1 at
any time prior to Tenant's notice to institute the arbitration procedure
pursuant to Section 2.6.2(b) below, Tenant shall have the Right of First Refusal
with respect to such Offer but shall have no further Option to Expand with
respect to such Expansion Space except to the extent Landlord fails to enter
into a lease with respect to the Expansion Space in the time period prescribed
in Section 2.6.1(b).
a. In the event Tenant gives a Notice of Intention to
Expand for such Expansion Space, Tenant shall be subject to all the terms and
conditions of this Lease other than the Business Terms (as such term is defined
below) with respect to any lease of Expansion Space at 5966 La Place Court or
the Building or the terms and conditions of a New Lease (as defined in Section
2.6.4) with respect to any Expansion Space located at 5962 La Place Court with
respect to such Expansion Space; provided, however, that Base Annual Rent for
such Expansion Space shall be equal to ninety-five percent (95%) of the fair
market rental for the Expansion Space if the Expansion Space is located at 5964
La Place Court or in the Building and ninety-eight percent (98%) of the fair
market rental for the Expansion Space if the Expansion Space is located at 5962
La Place Court. For purposes of this Lease, fair market rental ("Fair Market
Rental") shall be the market rental for such Expansion Space, taking into
account the quality of such Expansion Space, the lease term, the quality and
nature of existing tenant improvements, the cap on the tenant improvement set
forth in subsection (b) below, the financial strength of Tenant, the square
footage of such Expansion Space, the other amenities in the Project and any
other Business Terms (as defined in subsection b below).
b. Concurrently with the delivery of the Notice of
Intention to Expand, Tenant shall deliver to Landlord, Tenant's good faith
determination of Tenant's calculation of the Fair Market Rental ("Fair Market
Rental Calculation") and Tenant's other proposed business terms for the lease of
the Expansion Space, including, but not limited to, the lease term (which shall
not be less than eighteen (18) months), the desired tenant improvement allowance
(which shall not be greater than Five Dollars ($5.00) per rentable square foot
except on the East Wing, in the event that the area of the Premises is reduced
pursuant to the terms of Section 2.5 of this Lease, which shall not be greater
than Ten Dollars ($10.00) per rentable square foot), the proposed use of such
Expansion Space (which use shall be consistent with the Permitted Uses or
otherwise consistent with the Project), or any limitation or cap on Tenant's
obligation to pay Tenant's share of common area maintenance or other common
charges applicable to the Project (collectively, "Business Terms"). Such Fair
Market Rental Calculation shall include a narrative explanation of the reasons
justifying Tenant's determination, information regarding rental rates paid at
other comparable projects in the vicinity of the Project and any other
information reasonably requested by Landlord. Landlord shall have the right, in
its reasonable discretion, to accept or reject Tenant's calculation of Fair
Market Rental or the proposed Business Terms. Landlord shall deliver notice of
acceptance or rejection within five (5) Business Days of receipt of Tenant's
calculation of the Fair Market Rental ("Landlord's Notice"). If Landlord rejects
Tenant's calculation of Fair Market Rental or the other proposed Business Terms,
Landlord and Tenant shall meet and negotiate in good faith to attempt to reach
agreement on the Fair Market Rental and the Business Terms. If Landlord and
Tenant are unable to reach agreement within ten (10) days of the delivery of
Landlord's Notice ("Negotiation
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Period"), (a) in the case such Expansion Space is less than one thousand five
hundred (1,500) rentable square feet, Tenant's Expansion Option for such
Expansion Option shall expire and be of no further force and effect until the
expiration of any future lease for such Expansion Space but Tenant shall retain
its Right of First Refusal with respect to such Expansion Space or (b) in the
case such Expansion Space is one thousand five hundred (1,500) or more rentable
square feet, Tenant may elect, by written notice to Landlord within one (1)
Business Day of the expiration of the Negotiation Period, to elect to institute
the arbitration procedure set forth in Subsection (c) below. In the event Tenant
fails to give such notice, Tenant shall be deemed to waive its rights to
institute the arbitration procedure and the Option to Expand for such Expansion
Space shall expire and be of no further force and effect until the expiration of
any future lease for such Expansion Space but Tenant shall retain its Right of
First Refusal with respect to such Expansion Space.
c. Within five (5) days after delivery by Tenant of its
notice to institute the arbitration procedure, Landlord and Tenant shall meet
and appoint a mutually acceptable appraiser to determine the Business Terms and
Fair Market Rental based upon the Business Terms, taking into account the
quality of such Expansion Space, the quality and nature of existing tenant
improvements, the financial strength of Tenant, the square footage of such
Expansion Space and the other amenities in the Project. The appraiser shall be
an appraiser with at least five (5) years experience in appraising similar
projects in San Diego County and an employee or principal of either Lipman,
Stevens & Marshall, Inc. (San Diego office) or D.F. Davis Real Estate, Inc. (San
Diego office). If Landlord and Tenant are unable to select a mutually agreeable
appraiser from either of such companies within such five (5) day period, the
President (or officer of similar stature) of Lipman, Stevens & Marshall, Inc.
(San Diego office) shall choose an appraiser from such company who meets the
above experience requirement and such appraiser appointed shall be the appraiser
for purposes of this subsection (c). If Lipman, Stevens & Marshall, Inc. (San
Diego office) is dissolved or not otherwise in business in San Diego County at
the time the appraisal procedure is implemented, the President (or officer of
similar stature) of D.F. Davis Real Estate, Inc. (San Diego office) shall select
an appraiser from such company. The appraiser shall not have any financial or
personal interest in the result of the appraisal and shall disclose any
circumstances likely to create a presumption of bias or prevent a prompt meeting
with the parties. After selection or appointment of the appraiser, Landlord and
Tenant shall submit information regarding the proposed Business Terms and Fair
Market Rental to the appraiser. To the extent that the parties are able to
stipulate to any or all of the Business Terms, such stipulation shall also be
submitted to the appraiser, otherwise no evidence of negotiations between the
parties shall be submitted to the appraiser. Within fifteen (15) days after
submission of information by Landlord and Tenant to the appraiser, the appraiser
shall determine any remaining Business Terms and the Fair Market Rental for the
Expansion Space. The fees for the arbitrator shall be paid by the party whose
calculation of Fair Market Rental (given the Business Terms) varied the most
from the Fair Market Rental as determined by the arbitrator.
2.6.3 ABSENCE OF DEFAULT. Notwithstanding the foregoing, if
Tenant is in default under this Lease Term, Tenant may not exercise the Option
to Expand or the Right of First Refusal. In addition to the foregoing, all
rights of Tenant to the Option to Expand or the Right of First Refusal shall
terminate and be of no further force and effect, even after Tenant's due and
timely exercise thereof, if, after such exercise, but prior to the commencement
date of the lease for the applicable Expansion Space: (a) Tenant fails more than
three (3) times during the Lease Term to pay to Landlord a monetary obligation
of Tenant for a period of ten (10) days after such obligation has become due;
(b) Tenant fails to cure a material nonmonetary default in a timely fashion
after receiving notice with respect thereto from Landlord as set forth in
Section 16.2.5; or (c) Landlord gives to Tenant three (3) or more notices of
default after defaults by Tenant, whether or not such defaults are ultimately
cured. Landlord's waiver of its right to terminate this Lease due to Tenant's
default in any instance shall not be deemed a waiver of the foregoing conditions
precedent and conditions subsequent to the exercise of the Option to Expand and
Right of First Refusal.
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2.6.4 NEW LEASE OR AMENDMENT TO LEASE. Tenant shall, within
five (5) Business Days after delivery to Tenant, execute a new lease upon the
applicable terms and conditions for any Expansion Space located in the building
at 5962 La Place Court ("New Lease") (except to the extent that Landlord and
Tenant have not previously negotiated the form of and executed a lease for the
building at 5962 La Place Court in which event Tenant shall execute within ten
(10) Business Days) or an amendment to this Lease for any Expansion Space
located in the building located at 5966 La Place Court or in the Building upon
the applicable terms and conditions and only including the Business Terms in
this Lease for the Expansion Space to the extent determined as set forth in
Section 2.6.2 ("Amendment to Lease").
2.6.5 OPTION TO EXPAND AND RIGHT OF FIRST REFUSAL PERSONAL.
The Option to Expand and Right of First Refusal granted to Lessee in this Lease
are personal to the original Lessee and may be exercised only by the original
Lessee while occupying the Premises, and may not be exercised or be assigned,
voluntarily or involuntarily, by or to any person or entity. The Option to
Expand and Right of First Refusal herein granted to Lessee are not assignable
separate and apart from this Lease, nor may the Option to Expand or Right of
First Refusal be separated from the Lease in any manner, either by reservation
or otherwise.
ARTICLE 3
LEASE TERM
3.1 LEASE TERM. The term of this Lease ("Lease Term") shall be
for the period of time specified in the Basic Terms, but shall be extended to
include any fraction of a calendar month between the commencement of the Lease
Term and the first day of the first full calendar month thereof. Notwithstanding
the Lease Term, this Lease is a binding contract between Landlord and Tenant
from and after the date of full execution and delivery hereof by both parties,
enforceable in accordance with its terms.
3.2 COMMENCEMENT DATE; CONDITION PRECEDENT TO EFFECTIVENESS. The
commencement date of the Lease Term ("Commencement Date") shall be the later to
occur of the Substantial Completion of the First Phase of the West Wing (as
defined in the Work Letter) or April 15, 1995. The date of Substantial
Completion of the East Wing or the Second Phase of the West Wing shall not in
any way affect the Commencement Date of this Lease and the expiration date for
the lease of the East Wing and Second Phase of the West Wing shall be the same
date as the expiration date for the lease of the First Phase of the West Wing.
The parties agree that this Lease shall not be effective unless and until
Landlord acquires the Project pursuant to the terms and conditions of that
certain Purchase and Sale Agreement dated October 26, 1994 by and between
Metropolitan Life Insurance Company, as Seller, and NTN Communications, as
Buyer, as amended from time to time. In the event Landlord has not acquired the
Project on or before January 6, 1995, this Lease shall terminate and be of no
further force and effect.
3.3 DELAY IN COMMENCEMENT. If Landlord, for any reason
whatsoever, cannot deliver possession of the Premises to Tenant by the Estimated
Commencement Date, this Lease shall not be void or voidable, nor shall Landlord
be liable to Tenant for any loss or damage resulting therefrom provided,
however, that in the event that the existing tenant in the West Wing, Greenfield
Environmental Systems, Inc. ("Greenfield"), does not vacate the West Wing on or
before May 31, 1995, Landlord shall give written notice thereof to Tenant.
During the two (2) months after delivery of such notice, Tenant can elect, by
written notice to Landlord, to terminate this Lease if Greenfield has not
abandoned the West Wing as of the date of such notice and neither party shall
have any further
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obligations hereunder or be liable for any loss or damage resulting from such
termination. If Greenfield has not abandoned the West Wing on or before July 31,
1995, this Lease shall automatically terminate and neither party shall have any
further obligations hereunder or be liable for any loss or damages resulting
from such termination. The parties also acknowledge and agree that any delay by
Greenfield in abandoning the West Wing on or before May 31, 1995 will result in
similar delays in Landlord's ability to deliver the West Wing and the parties
ability to meet certain of the Tenant Improvement deadlines set forth herein.
Landlord agrees to use commercially reasonable efforts to prosecute an unlawful
detainer action against Greenfield in the event Greenfield does not abandon the
space occupied by Greenfield at the expiration of Greenfield's lease. In
addition to the above, Tenant may terminate this Lease on or before fifteen (15)
days after the Latest Delivery Date (as defined below) by written notice thereof
to Landlord in the event Landlord is unable to deliver possession of the West
Wing after Substantial Completion thereof (as defined in the Work Letter) on or
before August 1, 1995, as such date shall be extended for the period of any
Tenant Delays (as defined in the Work Letter) or Force Majeure ("Latest Delivery
Date"). Furthermore, the parties recognize that any delay in the Commencement
Date will result in the adjustment of certain dates in this Lease that are
dependent upon or tied to the Commencement Date. Upon delivery of possession of
the Premises to Tenant, Tenant shall, within five (5) days of request therefor
by Landlord, execute an acceptance letter ("Acceptance Letter") in substantially
the form of the Acceptance Letter attached hereto as Exhibit "D"; provided,
however, that the failure of Tenant to execute such Acceptance Letter shall not
affect any obligation of Tenant hereunder or Landlord's determination of the
Commencement Date. If the Tenant fails to execute and deliver such Acceptance
Letter in the form proposed by Landlord, then Landlord and any prospective
purchaser or encumbrancer may conclusively presume and rely upon the following
facts: (i) that the Premises were in an acceptable condition and were delivered
in compliance with all requirements of the Work Letter and (ii) the Commencement
Date is the date specified in the Acceptance Letter proposed by Landlord. In
addition to the above, the parties recognize and acknowledge that the Premises
are comprised of the East Wing and the West Wing and that possession to the East
Wing will be delivered to Tenant subsequent to the delivery of the West Wing.
During the period prior to Substantial Completion of the East Wing, the Rent
associated with the East Wing, including the Base Monthly Rent and Tenant's
Proportional Share, shall be abated and waived.
3.4 EARLY OCCUPANCY. Landlord shall notify Tenant of the
anticipated Commencement Date at least twenty (20) days but not more than forty
(40) days prior to the Commencement Date. Tenant shall have the right, but not
the obligation, to enter the Premises, from and after the date which is fifteen
(15) days prior to the anticipated Commencement Date set forth in the Landlord's
notice for the purpose of installing furniture, fixtures and special
improvements on the terms and conditions contained in the Work Letter; provided
however, Tenant shall not unreasonably interfere with Landlord's construction
and installation of Tenant Improvements. If Tenant enters or occupies the
Premises prior to the Commencement Date solely for the purpose of preparing the
Premises for the conduct of business thereon and not for the purposes of
conducting business thereon, Tenant's entry and/or occupancy of the Premises
shall be subject to all of the provisions of this Lease and the Work Letter with
the exception of the payment of Base Annual Rent and Additional Rent, which
obligations shall commence as of the Commencement Date. Tenant shall not be
charged for electrical consumption during any period prior to the Commencement
Date. If requested by Landlord, Tenant shall execute a hold harmless agreement
in a form prepared by Landlord. Early occupancy of the Premises shall not
advance the expiration date of this Lease.
3.5 OPTION TO EXTEND. Landlord hereby grants to Tenant two (2)
options (individually, an "Extension Option") to extend the term of this Lease
for one (1) period of two (2) years each (individually, an "Extension Term").
Tenant shall be required to give written notice of the exercise of each
Extension Option ("Notice of Intention to Extend") to Landlord not later than
nine (9) months eighteen (18) days prior to the expiration date of the Lease,
or, if applicable, prior to the expiration of the then effective Extension Term.
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3.5.1 In the event Tenant elects to exercise an Extension
Option, Tenant shall be subject to all the terms and conditions of this Lease
during the term of the Extension Term; provided, however, that Base Annual Rent
for the first year of each Extension Term shall be equal to ninety-five percent
(95%) of the fair market rental for a two (2) year lease. For purposes of this
Lease, fair market rental shall be the market rental for the Premises, taking
into account the quality of space leased to the Tenant, the length of the
Extension Term, the quality of the existing Tenant Improvements, the financial
strength of Tenant, the square footage of the Premises, the other amenities in
the Project and the other terms of this Lease ("Fair Market Rental").
3.5.2 Concurrently with the delivery of the Notice of
Intention to Extend, Tenant shall deliver to Landlord, Tenant's good faith
determination of Tenant's calculation of the Fair Market Rental ("Fair Market
Rental Calculation") based upon this Lease and the terms, covenants, and rights
provided for in the Lease. Such Fair Market Rental Calculation shall include a
narrative explanation of the reasons justifying Tenant's determination,
information regarding rental rates paid at other comparable projects in the
vicinity of the Project and any other information requested by Landlord.
3.5.3 Landlord shall have the right, exercised in good
faith, to accept or reject Tenant's calculation of Fair Market Rental, provided,
however, that Landlord may only reject Tenant's calculation if Landlord
reasonably determines that Tenant's calculation of Fair Market Rental does not
reflect at least ninety-five percent (95%) of the Fair Market Rental for the
Premises. Landlord shall deliver notice of acceptance or rejection within five
(5) Business Days of receipt of Tenant's calculation of the Fair Market Rental
("Landlord's Notice"). If Landlord delivers Landlord's Notice, Landlord and
Tenant shall meet to attempt to reach agreement on the Fair Market Rental. If
Landlord and Tenant are unable to reach agreement within ten (10) days of the
delivery of Landlord's Notice, Tenant may elect, by written notice to Landlord
within One (1) Business Day of the expiration of the Negotiation Period, to
elect to institute the arbitration procedure set forth in Subsection (c) below.
In the event Tenant fails to give such notice, Tenant shall be deemed to waive
its rights to institute the arbitration procedure and the Option to Extend shall
expire and be of no further force and effect.
a. Within five (5) days after delivery by Tenant of its
notice to institute the arbitration procedure, Landlord and Tenant shall meet
and appoint a mutually acceptable appraiser to determine the Fair Market Rental,
taking into account the quality of such Expansion Space, the quality and nature
of existing tenant improvements, the financial strength of Tenant, the square
footage of the Premises and the other amenities in the Project. The appraiser
shall be an appraiser with at least five (5) years experience in appraising
similar projects in San Diego County and an employee or principal of either
Lipman, Stevens & Marshall, Inc. (San Diego office) or D.F. Davis Real Estate,
Inc. (San Diego office). If Landlord and Tenant are unable to select a mutually
agreeable appraiser from either of such companies within such five (5) day
period, the President (or officer of similar stature) of Lipman, Stevens &
Marshall, Inc. (San Diego office) shall choose an appraiser from such company
who meets the above experience requirement and such appraiser appointed shall be
the appraiser for purposes of this subsection (c). If Lipman, Stevens &
Marshall, Inc. (San Diego office) is dissolved or not otherwise in business in
San Diego County at the time the appraisal procedure is implemented, the
President (or officer of similar stature) of D.F. Davis Real Estate, Inc. (San
Diego office) shall select an appraiser from such company. The appraiser shall
not have any financial or personal interest in the result of the appraisal and
shall disclose any circumstances likely to create a presumption of bias or
prevent a prompt meeting with the parties. After selection or appointment of the
appraiser, Landlord and Tenant shall submit information regarding the Fair
Market Rental to the appraiser. No evidence of negotiations between the parties
shall be submitted to the appraiser. Within fifteen (15) days after submission
of information by Landlord and Tenant to the appraiser, the appraiser shall
determine the Fair Market Rental for the Premises. The fees for the arbitrator
shall be paid by the party whose calculation of Fair Market Rental varied the
most from the Fair Market Rental, as determined by the arbitrator.
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3.5.4 In the event Landlord and Tenant reach agreement on
the Fair Market Rental, Landlord and Tenant shall execute an amendment to this
Lease within five (5) days thereafter extending the Lease Term for the period of
the Extension Term at ninety-five percent (95%) of the Fair Market Rental.
3.5.5 Notwithstanding the foregoing, if Tenant is in default
under this Lease Term, Tenant may not exercise the Extension Option. In addition
to the foregoing, all rights of Tenant to the Extension Option shall terminate
and be of no further force and effect, even after Tenant's due and timely
exercise thereof, if, after such exercise, but prior to the commencement date of
the Extension Term: (a) Tenant fails more than three (3) times during the Lease
Term to pay to Landlord a monetary obligation of Tenant for a period of ten (10)
days after such obligation has become due; (b) Tenant fails to cure a material
nonmonetary default in a timely fashion after receiving notice with respect
thereto from Landlord as set forth in Section 16.2.5; or (c) Landlord gives to
Tenant three (3) or more notices of default after defaults by Tenant, whether or
not such defaults are ultimately cured. Landlord's waiver of its right to
terminate this Lease due to Tenant's default in any instance shall not be deemed
a waiver of the foregoing conditions precedent and conditions subsequent to the
exercise of the Extension Option.
ARTICLE 4
RENTAL AND OTHER PAYMENTS
4.1 BASE MONTHLY RENT. Subject to Sections 2.5 and 3.3 hereof,
from and after the Commencement Date, Tenant shall pay to Landlord in advance,
on the first day of each and every calendar month during the Lease Term, the
Base Monthly Rent.
Subject to Sections 2.5 and 3.3 hereof, commencing as of the
first (1st) anniversary of the Commencement Date and continuing on every
subsequent anniversary of the Commencement Date, Base Monthly Rent shall be
increased in accordance with the following schedule:
Lease Year Base Monthly Rent Base Annual Rent
---------- ----------------- ----------------
2 $34,772.50 $417,270.00
3 $37,256.25 $447,075.00
4 $38,249.75 $458,997.00
5 $39,243.25 $470,919.00
The Base Monthly Rent for any fraction of a month at the
beginning of the Lease Term will be prorated and paid within three (3) days of
the Commencement Date. Payment of the Base Monthly Rent, Additional Rent and all
other charges deemed to be Rent under this Lease shall be without prior notice,
deduction, offset or demand, shall be in lawful money of the United States of
America and shall be made at the address set forth for Landlord in the Basic
Terms or at such other place as Landlord may direct. Base Monthly Rent payable
for any period of less than one (1) month shall be prorated based upon a thirty
(30) day month. Tenant shall pay to Landlord as prepaid Base Monthly Rent, upon
Landlord's acquisition of the Project (in addition to the security deposit
required), the amount specified in the Basic Terms, which sum shall be applied
to the first calendar month of the Lease Term for which payment of Base Monthly
Rent is due. Notwithstanding the provisions of this Section 4.1, (a) in the
event the area of the Premises has not been reduced pursuant to the terms of
Section 2.5 of this Lease, Base Monthly Rent shall be waived for the East Wing
until the later to occur of (i) Substantial Completion of the East Wing
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or (ii) December 1, 1995 and (b) Base Monthly Rate shall be waived for the
Second Phase of the West Wing until the later to occur of (i) Substantial
Completion of the Second Phase or (ii) July 1, 1995.
4.2 INTEREST ON PAST DUE OBLIGATIONS. Any amount owed by Tenant
to Landlord which is not paid when due shall bear interest from the due date at
the Lease Interest Rate but if such Lease Interest Rate exceeds the maximum
interest rate permitted by law, such Lease Interest Rate shall be reduced to the
highest rate allowed by law under the circumstances. Interest shall not be
payable on late charges to be paid by Tenant under this Lease. The payment of
interest on such amounts shall not excuse or cure any default by Tenant under
this Lease and the parties agree that such amounts are a reasonable estimate of
the costs Landlord will incur as a result of its loss of the use of its money
due to such late payment by Tenant.
4.3 LATE CHARGES. Tenant's failure to pay any Rent promptly may
cause Landlord to incur unanticipated costs. The exact amount of such costs are
impractical or extremely difficult to ascertain. Such costs may include, but are
not limited to, processing and accounting charges and late charges which may be
imposed on Landlord under any mortgage or trust deed encumbering the Premises.
Therefore, if Landlord does not receive any Rent payment within ten (10) days
after it becomes due, Tenant shall pay Landlord a late charge in the amount
specified in Item 9 of the Basic Terms. The parties agree that such late charge
represents a fair and reasonable estimate of the costs Landlord will incur by
reason of such late payment. Acceptance of such late charge by Landlord shall,
in no event, constitute a waiver of Tenant's default with respect to such
overdue amount. The late charge shall be deemed Rent and the rights to require
it shall be in addition to all of Landlord's rights and remedies hereunder or at
law and shall not be construed as liquidated damages or as limiting Landlord's
remedies in any manner.
4.4 SECURITY DEPOSIT.
4.4.1 DEPOSIT OF FUNDS. Upon Landlord's acquisition of the
Project as set in Section 3.2, Tenant shall deposit with Landlord a cash
security deposit ("Security Deposit") in the amount set forth in Item 11 of the
Basic Terms. Landlord may, but shall not be obligated to, apply all or part of
the Security Deposit to any unpaid Rent or other charges due from Tenant or to
cure any other defaults of Tenant. If Landlord uses any part of the Security
Deposit, Tenant shall restore the Security Deposit to its full amount within ten
(10) days after Landlord delivers a written request to Tenant. Tenant's failure
to do so shall be a default under this Lease. No interest shall be paid on the
Security Deposit. Landlord shall not be required to keep the Security Deposit
separate from its other accounts and no trust relationship is created with
respect to the Security Deposit.
4.4.2 TRANSFER OF SECURITY DEPOSIT. Landlord may deliver the
funds deposited hereunder by Tenant to a purchaser of Landlord's interest in the
Premises, in the event that such interest be sold; and thereupon Landlord shall
be discharged from any further liability with respect to such Security Deposit,
except as may otherwise be agreed upon in writing.
ARTICLE 5
OTHER CHARGES PAYABLE BY TENANT
5.1 ADDITIONAL RENT AND RENT. All Additional Rent and Rent under
this Lease, other than Base Monthly Rent, shall, unless this Lease expressly
provides otherwise, be paid with the next installment of Base Monthly Rent
falling due.
5.2 PROPERTY TAXES. Tenant agrees to pay to Landlord, as
Additional Rent, Tenant's Proportional Share of all Property Taxes. Tenant shall
pay said portion of Property Taxes in accordance
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with the requirements of Section 5.5 of this Lease. All Property Taxes for the
year in which this Lease commences shall be prorated by Landlord.
5.2.1 TENANT RIGHT TO CONTEST TAXES. Tenant may attempt to
have the assessed valuation of the Project or Building reduced or may initiate
proceedings to reasonably contest the Property Taxes. Landlord agrees to
cooperate with Tenant's reasonable requests in any proceedings brought by
Tenant. However, Tenant shall pay all costs of the proceedings, including any
reasonable costs or fees incurred by Landlord, and shall pay Tenant's
Proportional Share of any Property Taxes prior to delinquency which are the
subject of the proceedings. Landlord shall provide Tenant with an estimate of
such costs or fees to be incurred by Landlord at the time such proceeding is
commenced. Any increase to the Property Taxes which results from Tenant's
contest shall be paid by Tenant and Landlord shall have no responsibility for
the payment of such an increase.
5.2.2 CONSULTATION REGARDING TAXES. Upon the reasonable
request of Tenant, Landlord shall consult with Tenant or Tenant's tax advisor(s)
from time to time regarding the assessment or payment of Property Taxes.
5.2.3 LANDLORD RIGHT TO CONTEST TAXES; TAX CONSULTING
SERVICE. Tenant agrees to cooperate with Landlord's reasonable requests in any
proceedings brought by Landlord to contest the Property Taxes. Notwithstanding
any other provision in this Lease, Tenant shall not be liable for the
proportionate share of any costs incurred by Landlord for the use of a tax
consulting service when such costs are pursuant to a contingency or utility or
similar fee, unless Landlord obtains Tenant's written consent, which shall not
be unreasonably withheld, prior to entering into such an arrangement or
incurring such costs. Such costs, however, shall be deducted from any savings
obtained by the tax consulting service prior to including any such savings in
the calculation of Property Taxes.
5.2.4 LIABILITY FOR PENALTIES/INTEREST. Neither party shall
be liable for any penalties or interest which become due as a result of the
other party's failure to timely pay, file or otherwise comply with applicable
law regarding the payment of taxes.
5.3 INSURANCE CHARGES. Tenant agrees to pay to Landlord, as
Additional Rent, Tenant's Proportional Share of all premiums for liability,
property damage, fire and other types of casualty insurance maintained by
Landlord on the Project Common Area and all improvements within the Project,
Building and the Premises and any other insurance obtained by Landlord under
this Lease ("Project Insurance Charges").
5.4 COMMON AREA MAINTENANCE CHARGES.
5.4.1 TENANT TO BEAR PROPORTIONAL SHARE OF COMMON AREA
MAINTENANCE CHARGES. Tenant agrees to pay to Landlord, as further Additional
Rent, its Proportional Share of the Common Area Maintenance Charges.
5.4.2 LANDLORD'S COMMON AREA MAINTENANCE CHARGES. For the
purpose of this Lease the "Common Area Maintenance Charges" means the total cost
and expense incurred by Landlord in operating, maintaining, managing and
repairing the Project Common Area, including, without limitation, costs and
expenses for the following: gardening and landscaping; maintenance and repair of
the roof; pest extermination services; utilities, water and sewer charges (other
than with respect to utilities separately metered and paid directly by Tenant or
other tenants in the Project); maintenance of parking areas; fees, charges and
other costs (including, without limitation, consulting, accounting and legal
fees, but excluding legal and accounting fees directly attributable to other
tenants) reasonably necessary to manage the Building and Project (including a
fee to Landlord for management of the Project and Project Common
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Areas not to exceed four percent (4%) of the aggregate basic monthly rent
collected from tenants in the Project); costs of compliance with any and all
governmental laws, ordinances, and regulations applicable to the Building and
Project which were not imposed as of the Commencement Date; installation,
maintenance and replacement of signs identifying the Building and Project (other
than Tenant's signs); all personal property taxes levied on or attributable to
personal property used in connection with the Building and Project Common Area;
rental or lease payments paid by Landlord for rented or leased personal property
used in the operation or maintenance of the Building and Project Common Area;
fees for required licenses and permits; repairing, resurfacing, repaving,
maintaining, painting, lighting, cleaning, refuse removal, security, and similar
items; reserves; a fee to Landlord not to exceed ten percent (10%) of the total
of all other Common Area Maintenance Charges (exclusive of the 4% management
fee) for Landlord's supervision and administration of the Building and Project;
the amortized costs (as reasonably determined by Landlord over the appropriate
useful life) to repair, maintain or install capital improvements to comply with
governmental regulations or undertaken in good faith with a reasonable
expectation of reducing operating costs; and costs to repair or maintain other
buildings within the Building and Project leased to other tenants. Landlord may
cause any or all of such services to be provided by an independent contractor.
For purposes of this Lease, "Common Area Maintenance Charges" shall not include
items or services for which Tenant or any other tenant of the Building or
Project reimburses Landlord (other than its or their pro rata share of Common
Area Maintenance Charges) or which Landlord provides for the exclusive use of
one or more tenants (other than Tenant) without reimbursement. Landlord shall
reasonably allocate general Project expenses to the entire Project and building
specific expenses to each building in the Project. In addition, no deferred
maintenance charges shall be included in Common Area Maintenance Charges.
5.4.3 CHARGES UNDER DECLARATIONS. Tenant acknowledges that
certain aspects of the maintenance and repair of Project Common Area and payment
of Property Taxes may be controlled by the Declarations and Tenant agrees that
charges imposed for such items under the Declarations shall be included in
Common Area Maintenance Charges and Property Taxes for purposes of this Lease.
Tenant agrees to abide by the rules and requirements imposed under the
Declarations. Tenant shall also pay to Landlord as Additional Rent any special
assessments imposed under the Declarations due to Tenant's use or activities.
Tenant shall pay to Landlord all amounts under this Section at least ten (10)
days before such amounts are due under the Declarations.
5.5 PAYMENT OF COMMON AREA MAINTENANCE CHARGES, PROPERTY TAXES
AND PROJECT INSURANCE CHARGES. Tenant shall pay Tenant's annual Proportional
Share of all estimated Common Area Maintenance Charges, Property Taxes and
Project Insurance Charges, in advance, in monthly installments on the first day
of each month during the Lease Term (prorated for any fractional month).
Landlord shall provide to Tenant a written estimate of the Common Area
Maintenance Charges, Property Taxes and Project Insurance Charges, approximately
thirty (30) days prior to the commencement of each calendar year (which amount
may be re-estimated from time to time by Landlord during the calendar year) and
an estimate of Tenant's share thereof for the ensuing year or portion thereof.
Tenant shall pay to Landlord, monthly in advance, one-twelfth (1/12th) of the
estimate of each of such charges as Additional Rent, provided, however, that if
Tenant is not in default under this Lease, any installment of Property Taxes
shall be collected from Tenant no earlier than thirty (30) days prior to the
applicable due date for such installment of Property Taxes. Similarly, for any
partial calendar year at the commencement or the end of the Lease Term, Tenant
shall pay the Common Area Maintenance Charges, Property Taxes and Project
Insurance Charges, in equal monthly installments. If, for any reason, Landlord
is unable to provide to Tenant the estimate of any of such charges at least
thirty (30) days prior to the commencement of any calendar year during the Lease
Term, then Tenant shall continue to pay monthly the same amount of any of such
charges as was applicable for the most recent previous month ("Previous
Charges") until thirty (30) days after receipt of such estimate at which time
Tenant shall commence paying as of the first day of the
first calendar month after delivery of such new estimate, the new estimated
amounts. Tenant shall also
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pay, together with its next installment, the difference between the Previous
Charges and the amount of the new estimated Common Area Maintenance Charges,
Property Taxes and Project Insurance Charges for such preceding months. Any
delay by Landlord in delivering the new estimated charges shall not be deemed a
waiver of any such Common Area Maintenance Charges, Property Taxes and Project
Insurance Charges.
5.5.1 YEAR-END ADJUSTMENTS. Within one hundred twenty (120)
days after the end of each calendar year during the Lease Term, Landlord shall
provide Tenant with a written statement showing in reasonable detail the actual
Common Area Maintenance Charges, Property Taxes and Project Insurance Charges
incurred by Landlord for such year with a written statement of Tenant's
Proportional Share of each of such charges based thereon. Landlord and Tenant
shall, within thirty (30) days thereafter, make any payment or credit necessary
to bring Tenant's previously estimated Common Area Maintenance Charges, Property
Taxes and Project Insurance Charges, into conformance with the actual Common
Area Maintenance Charges, Property Taxes and Project Insurance Charges incurred
by Landlord, as reasonably determined by Landlord pursuant to this Lease. Any
amount due Tenant as a credit shall be credited against installments next coming
due from Tenant under the Lease and any amounts owed to Landlord shall be paid
with the next installment of Base Monthly Rent; provided, however, that if the
Lease Term has terminated and no other amounts are then owing to Landlord from
Tenant pursuant to this Lease, any such amount due Tenant or Landlord shall be
remitted to the party owed such amount within thirty (30) days of the date
Landlord calculates and notifies Tenant of the amount of such adjustment.
5.5.2 DISPUTES REGARDING CHARGES. In the event of any
dispute as to the amount of Property Taxes, Project Insurance Charges and Common
Area Maintenance Charges for any Lease Year (collectively, "Charges"), Tenant
shall have the right, after reasonable notice and at reasonable times (and in
any event no more than once in any Lease Year), to inspect at Landlord's office
Landlord's records which pertain to the amounts of any such Charges. If after
such inspection, Tenant still disputes the amount of the Charges, and such
dispute relates to the calculation of the amount of the Charge, a certification
as to the proper amount shall be made, at Tenant's expense, by an independent
certified public accountant reasonably acceptable to both Landlord and Tenant,
which certification shall be final, conclusive and binding as to the calculation
of the amount of such item. If such certification shows that Landlord's
calculation of the aggregate Charges was in error to the detriment of Tenant by
more than five percent (5%), Landlord shall pay the cost of the independent
certified public accountant. Disputes regarding any issue other than the amount
of the Charges shall not be decided by the independent certified public
accountant.
5.5.3 LIMITATION ON INCREASE IN CHARGES. Notwithstanding any
provision in this Lease, with respect to calendar years 1996 and beyond Tenant
shall not be liable for Tenant's annual Proportional Share of the aggregate of
Common Area Maintenance Charges, Property Taxes and Project Insurance Charges in
excess of one hundred four percent (104%) of Tenant's annual Proportional Share
of the aggregate of such items for the previous calendar year. For purposes of
this limitation, increases in Property Taxes due to a reassessment of the
Project or any portion thereof pursuant to a change of ownership of the Project
or any portion thereof shall not be included in the calculation of such
limitation. Tenant acknowledges that the limitation contained in this Section
5.5.3 shall not be applicable to any portion of the Expansion Space except to
the extent contained in any Offer (with respect to the Right of First Refusal)
or included as part of the Business Terms (with respect to the Option to
Expand).
5.6 PERSONAL PROPERTY TAXES.
5.6.1 PAYMENT PRIOR TO DELINQUENCY. Tenant shall pay prior
to delinquency all taxes charged against trade fixtures, furnishings, equipment
or any other personal property belonging to Tenant. Tenant shall use its best
efforts to have such personal property taxed separately from the
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Premises. If any of Tenant's personal property is taxed with the Premises or
Project, Tenant shall pay Landlord the taxes for the personal property within
fifteen (15) days after Tenant receives a written statement from Landlord for
such personal property taxes.
5.6.2 CONTEST OF PERSONAL PROPERTY TAXES. If any such taxes
on Tenant's personal property 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, then Landlord shall have the right to pay the taxes based upon such
increased assessments, regardless of the validity thereof and any amounts paid
by Landlord allocable to Tenant's personal property or trade fixtures shall be
reimbursed to Landlord as Additional Rent, within ten (10) days after delivery
of a statement therefor from Landlord. Tenant may request that Landlord protest
the assessment of such personal property taxes, which request Landlord may grant
or deny in Landlord's sole discretion. If Landlord shall agree to protest such
taxes, then Tenant shall, upon demand, repay to Landlord the taxes levied
against Landlord, or the proportion of such taxes resulting from such increase
in the assessment, together with the costs incurred by Landlord as a result of
any contest of taxes on behalf of Tenant. In any such event, however, Tenant, at
Tenant's sole cost and expense, shall have the right to bring suit in any court
of competent jurisdiction to recover the amount of any such taxes so paid under
protest. Any amount so recovered shall belong to Tenant.
ARTICLE 6
USE OF PROPERTY
6.1 PERMITTED USES. Tenant shall use the Premises only for the
Permitted Uses set forth in Item 10 of the Basic Terms and for no other use or
purpose without the prior written consent of Landlord, which consent may be
withheld in the sole, absolute and/or arbitrary discretion of Landlord.
6.2 MANNER OF USE.
6.2.1 INTERFERENCE WITH USE/NUISANCE. Tenant shall not do or
permit anything to be done in or about the Premises which will in any way
unreasonably obstruct or interfere with or infringe on the rights of other
occupants or customers of the Project, or injure or annoy them, or use or allow
the Premises to be used for any improper, immoral, or objectionable purposes;
nor shall Tenant cause, maintain or permit any nuisance in, on or about the
Premises or commit or suffer to be committed any waste in, on or about the
Premises. Tenant shall keep the Premises, and every part thereof, in a clean
condition, free from any noises, vibrations, music volumes, lighting (including,
without limitation, strobe lighting), speakers, videos, odors or nuisances
reasonably deemed objectionable by Landlord, and shall comply with all health
and police regulations in all respects. Tenant shall not display or sell
merchandise, or place carts, portable signs, devices or any other objects,
outside the defined exterior walls or roof and permanent doorways of the
Premises or in corridors, without the prior written consent of Landlord.
6.2.2 VIOLATION OF LAW/INSURANCE PROVISIONS. Tenant shall
not use or occupy the Premises in violation of any law, ordinance, regulation or
requirement or other directive of any federal, state or local governmental or
quasi-governmental authority having or exercising jurisdiction over the Project.
Tenant shall, at its sole cost and expense, fully comply with all laws,
ordinances, regulations, requirements and other directives of any federal,
local, governmental or quasi-governmental authority having jurisdiction over the
Premises and the Project, including, without limitation, operational and other
requirements imposed upon either owners or operators of any public accommodation
under the Americans with Disabilities Act 42 U.S.C. Section 12101 et. seq.
(subject to Landlord's obligations set forth in Section 10.3), and shall
immediately discontinue any use of the Premises which is declared by any
governmental authority having or exercising jurisdiction thereover to be a
violation of any law, ordinance, regulation or directive.
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If requested by Landlord, Tenant shall provide evidence satisfactory to Landlord
of Tenant's compliance. Tenant shall not do or permit to be done anything which
will (i) increase the premium of any insurance policy covering the Premises or
the Project and/or the property located therein; (ii) cause a cancellation of or
be in conflict with any such insurance policies; or (iii) result in a refusal by
insurance companies in good standing to issue or continue any such insurance in
amounts satisfactory to Landlord. Tenant shall, at Tenant's expense, comply with
all rules, orders, regulations and requirements of insurers and of the American
Insurance Association or any other organization performing a similar function.
Tenant shall promptly, upon demand, reimburse Landlord for any additional
premium charges for such policy or policies caused by reason of Tenant's failure
to comply with the provisions of this Section . Additionally, Tenant agrees at
its sole cost to install any improvements, changes or alterations in the
Premises authorized in writing by Landlord and required by any governmental
authority as a result of Tenant's proposed use of the Premises or its manner of
operation thereunder, and Tenant's failure to perform same shall constitute a
default by Tenant hereunder.
6.2.3 PERMITS. Tenant shall obtain and pay for all permits
required for Tenant's occupancy of the Premises and shall promptly take all
substantial and non-substantial actions necessary to comply with all applicable
statutes, ordinances, rules, regulations, orders and requirements regulating the
use by Tenant of the Premises, including the Occupational Health and Safety Act.
6.3 RULES AND REGULATIONS. Tenant shall comply with the Rules and
Regulations and any reasonable amendments, modifications and/or additions
thereto as may hereafter be adopted and published by Landlord which do not
unreasonably interfere with the Permitted Uses. Landlord shall not be liable to
Tenant for any violation of such Rules and Regulations or the breach in any
provision in any lease by any other tenant or other party however, Landlord
shall use reasonable efforts to enforce the Rules and Regulations. In the event
of any inconsistency between the Rules and Regulations and this Lease, this
Lease shall prevail.
6.4 LANDLORD'S ACCESS. Tenant holds a security clearance from the
United States Government. Landlord and its agents, independent contractors and
designated representatives, may enter the Premises at all reasonable times to
post notices of non-responsibility, to make repairs and/or to show the Premises
to holders of any encumbrances, potential buyers, mortgagees, investors or
tenants or other parties, or for any other purpose Landlord deems reasonably
necessary. Landlord shall give Tenant written notice of such entry at least
twenty-four (24) hours before such entry, except in the case of an emergency, in
which case no prior notice need be given. Tenant shall have the right to escort
any such entrant and to limit Landlord's access to the Premises as Tenant in
good faith determines is beneficial or necessary for national defense purposes.
Any entry to the Premises by Landlord in the event of an emergency shall not,
under any circumstances, be construed or deemed to be a forcible or unlawful
entry onto the Premises or to be an eviction of Tenant from the Premises or any
part thereof. Landlord may place customary "For Lease" signs on the exterior of
the Premises during the last one hundred eighty (180) days of the Lease Term.
6.5 QUIET POSSESSION. If Tenant pays the Rent and complies with
all other terms of this Lease, Tenant may occupy and enjoy the Premises for the
full Lease Term, subject to the provisions of this Lease and to any mortgages or
deeds of trust encumbering the Project. Landlord acknowledges and agrees that
Landlord's obligation to comply with applicable laws with respect to the Project
and Landlord's obligations under this Lease is an integral part of Tenant's
right of quiet enjoyment of the Premises.
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ARTICLE 7
HAZARDOUS MATERIALS
7.1 PROHIBITION OF STORAGE.
a. Tenant shall not cause or permit any Hazardous
Materials to be brought upon, kept, or used in connection with the Premises or
Project by Tenant, its agents, employees, contractors or invitees, in a manner
or for a purpose prohibited by or which reasonably would be expected to result
in liability under any applicable law, regulation, rule or ordinance, including
without limitation, the Hazardous Materials Laws. Tenant shall, at its own
expense, at all times and in all respects comply with all Hazardous Materials
Laws, including, without limitation, any Hazardous Materials Laws relating to
industrial hygiene, environmental protection or the use, analysis, generation,
manufacture, storage, disposal or transportation of any Hazardous Materials.
b. Tenant shall, at its own expense, procure, maintain
in effect and comply with all conditions of any and all permits, licenses and
other governmental and regulatory approvals relating to the presence of
Hazardous Materials within, on, under or about the Premises or required for
Tenant's use of any Hazardous Materials in or about the Premises in conformity
with all applicable Hazardous Materials Laws and prudent industry practices
regarding management of such Hazardous Materials.
c. Upon termination or expiration of the Lease, Tenant
shall, at its own expense, cause all Hazardous Materials placed in or about the
Premises by Tenant or at Tenant's direction to be removed from the Premises and
Project and transported for use, storage or disposal in accordance and
compliance with all applicable Hazardous Materials Laws.
d. Landlord recognizes and agrees that Tenant may use materials in
normal quantities that are applicable to Tenant's permitted use and that such
use by Tenant shall not be deemed a violation of this Section , so long as the
levels are not in violation of any Hazardous Materials Laws. Landlord
acknowledges that it is not the intent of this Article 7 to prohibit Tenant
from operating its business as described in Section 6.1 above. Tenant may
operate its business according to the custom of the industry so long as the use
or presence of Hazardous Materials is strictly and properly monitored according
to all applicable governmental requirements.
7.2 DISCLOSURE AND WARNING OBLIGATIONS. Tenant shall comply with
all laws, ordinances and regulations in the State where the Premises is located
regarding the disclosure of the presence or danger of Hazardous Materials.
Tenant acknowledges and agrees that all reporting and warning obligations
required under the Hazardous Materials Laws are the sole responsibility of
Tenant, whether or not such Hazardous Materials Laws permit or require Landlord
to provide such reporting or warnings, and Tenant shall be solely responsible
for complying with Hazardous Materials Laws regarding the disclosure of, the
presence or danger of Hazardous Materials, including, without limitation, all
notices or other requirements under California Health and Safety Code Section
25915 et. seq., and 25249.5 et. seq. and California Code of Regulations Section
12000 et. seq.
7.3 NOTICE OF ACTIONS; HAZARDOUS MATERIALS LIST. Tenant shall
immediately notify Landlord in writing of (a) any enforcement, cleanup, removal
or other governmental or regulatory action instituted, completed or threatened
pursuant to any Hazardous Materials Laws; (b) any claim made or threatened by
any person against Landlord, or the Premises, relating to damage, contribution,
cost recovery, compensation, loss or injury resulting from or claimed to result
from any Hazardous Materials; (c) any reports made to any environmental agency
arising out of or in connection with any Hazardous Materials in, on or about the
Premises or with respect to any Hazardous Materials removed from the Premises,
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including, any complaints, notices, warnings, reports or asserted violations in
connection therewith; and (d) any release of a Hazardous Material that Tenant
knows or has reason to believe has or will come to be released or located
within, on, under or about the Premises. Tenant shall also provide to Landlord,
as promptly as possible, and in any event within five (5) Business Days after
Tenant first receives or sends the same, copies of all claims, reports,
complaints, notices, warnings or asserted violations relating in any way to the
Premises or Tenant's use thereof. Upon written request of Landlord (to enable
Landlord to defend itself from any claim or charge related to any Hazardous
Materials Law), Tenant shall promptly deliver to Landlord notices of hazardous
waste manifests reflecting the legal and proper disposal of all such Hazardous
Materials removed or to be removed from the Premises. All such manifests shall
list the Tenant or its agent as a responsible party and in no way shall
attribute responsibility for any such Hazardous Materials to Landlord. As a
material inducement to Landlord to allow Tenant to use Hazardous Materials in
connection with its business, Tenant agrees to deliver to Landlord prior to the
Commencement Date, a list identifying each type of Hazardous Material to be
present on the Premises and setting forth any and all governmental approvals or
permits required in connection with the presence of Hazardous materials on the
Premises ("Hazardous Materials List"). Tenant shall deliver to Landlord an
updated Hazardous Materials List at least once a year and shall also deliver an
updated list before any new Hazardous Materials are brought onto the Premises or
on or before the date Tenant obtains any additional permits or approvals.
7.4 HAZARDOUS MATERIALS INDEMNITIES. Tenant shall indemnify,
defend (by counsel reasonably acceptable to Landlord), protect, and hold
Landlord and each of Landlord's Indemnitees free and harmless from and against
any and all claims, liabilities, penalties, forfeitures, losses and/or expenses,
attorneys' fees, consultant fees and expert fees, judgments, administrative
rulings or orders, fines, costs for death of or injury to any person or damage
to any property whatsoever (including, without limitation, water tables, sewer
systems and atmosphere), arising from, or caused or resulting, in whole or in
part, directly or indirectly, by the release, presence or discharge in, on,
under or about the Premises or Project of any Hazardous Materials caused by or
arising from the activities of Tenant, Tenant's agents, employees, licensees, or
invitees, or from the transportation or disposal of any Hazardous Materials to
or from the Premises or Project by Tenant, Tenant's agents, employees, licensees
or invitees or at Tenant's direction, or by Tenant's failure to comply with any
Hazardous Materials Laws, or from Tenant's failure to provide adequate
disclosures or warnings required by the Hazardous Materials Laws, or from any
breach by Tenant of the obligations in this Article 7 but only to the extent
that Landlord or Landlord's agents, employees or invitees did not materially
contribute to or exacerbate the harm created or caused by such Hazardous
Materials. Tenant's indemnification obligations hereunder shall include, without
limitation, and whether foreseeable or unforeseeable, all costs of any required
or necessary Hazardous Materials management plan, investigation, repairs,
cleanup or detoxification or decontamination of the Premises or Project, and the
presence and implementation of any closure, remedial action or other required
plans in connection therewith, and shall survive the expiration of or early
termination of the Lease Term. Tenant shall further be solely responsible for
and shall indemnify, protect, defend and hold the Landlord, and Landlord's
Indemnitees harmless from and against all claims, costs and liabilities
including actual attorneys' fees and costs, arising out of or in connection with
any removal, remediation, clean up, restoration and materials required hereunder
to return the Premises and any other property of whatever nature to their
condition existing prior to the appearance of the Hazardous Materials.
Notwithstanding the above, Tenant shall not be required to indemnify, defend,
protect and hold Landlord or Landlord's Indemnitees harmless for any Hazardous
Materials which were released or existed on the Premises or Project prior to the
Commencement Date or which did not arise out of or relate to the items set forth
in the first sentence of this Section 7.4. In addition, Landlord shall
indemnify, defend (by counsel reasonably acceptable to Tenant), protect, and
hold Tenant and each of Tenant's Indemnitees free and harmless from and against
any and all claims, liabilities, penalties, forfeitures, losses and/or expenses,
attorneys' fees, consultant fees and expert fees, judgments, administrative
rulings or orders, fines, costs for death of or injury to any
person or damage to any property whatsoever (including, without limitation,
water tables, sewer systems
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and atmosphere), arising from, or caused or resulting, in whole or in part,
directly or indirectly, by the release, presence or discharge in, on, or under
the Premises or Project of any Hazardous Materials which release, presence or
discharge occurred or existed prior to the Commencement Date and only to the
extent Tenant or Tenant's agents, employees or invitees did not materially
contribute to or exacerbate the harm created or caused by such Hazardous
Materials. Landlord's indemnification obligations hereunder shall include,
without limitation, and whether foreseeable or unforeseeable, all costs of any
required or necessary Hazardous Materials management plan, investigation,
repairs, cleanup or detoxification or decontamination of the Premises or
Project, and the presence and implementation of any closure, remedial action or
other required plans in connection therewith, and shall survive the expiration
of or early termination of the Lease Term.
7.5 ASSIGNMENT AND SUBLETTING. If (i) any anticipated use of the
Premises by any proposed assignee or sublessee involves the generation, storage,
use, treatment or disposal of Hazardous Materials in a manner or for a purpose
prohibited by any governmental agency or authority, (ii) the proposed assignee
or sublessee has been required by any prior landlord, lender or governmental
authority to take remedial action in connection with Hazardous Material
contaminating a property if the contamination resulted from such party's action
or use of the property in question or (iii) the proposed assignee or sublessee
is subject to an enforcement order issued by any governmental authority in
connection with the use, disposal or storage of a Hazardous Material, it shall
not be unreasonable for Landlord to withhold its consent to an assignment or
subletting to such proposed assignee or sublessee. Landlord may require a
written statement from the proposed assignee or sublessee attesting to such
matters.
7.6 ENVIRONMENTAL TESTS AND AUDITS. Tenant shall not perform or
cause to be performed any Hazardous Materials surveys, studies, reports or
inspections, relating to the Premises or Project, without obtaining Landlord's
prior written consent. At any time prior to the expiration of the Lease Term, if
Landlord has a reasonable basis to believe that Hazardous Materials are present
in, on or about the Premises in violation of any Hazardous Materials Laws,
Landlord shall have the right to enter upon the Premises in order to conduct
appropriate tests and to deliver to Tenant the results of such tests to
demonstrate that levels of any Hazardous Materials in excess of permissible
levels has occurred as a result of Tenant's use of the Premises. Such testing
shall be at Tenant's expense if Landlord has a reasonable basis for suspecting
and confirms the presence of Hazardous Materials in the soil or surface or
ground water in, on, under, or about the Premises, or the Project which has been
caused by or resulted from the activities of Tenant, its agents, employees,
contractors or invitees.
7.7 LEASE "AS IS". Tenant acknowledges that Tenant has reviewed
the Phase I Assessment provided by Landlord dated December 2, 1994 ("Phase I
Assessment") and is satisfied with the contents and conclusions of the Phase I
Assessment. Tenant, however, in entering into this Lease, is leasing the
Premises "As Is" and, except to the extent of Landlord's indemnification
obligation set forth in Section 7.4 and Landlord's representation and warranty
contained in Section 7.7, is relying solely upon its own inspections,
investigations and analyses of the Premises relating to Hazardous Materials and
further acknowledges Tenant is not relying in any way upon any representations,
statements, warranties, studies, reports, or other information of Landlord or
its representatives, whether oral or written, of any nature whatsoever regarding
any Hazardous Materials.
7.8 LANDLORD'S REPRESENTATION AND WARRANTY. To the best of
Landlord's knowledge, the Premises and Project do not contain Hazardous
Materials in violation of Hazardous Materials Laws except as disclosed in the
Phase I Assessment. For purposes of this Section 7.7, the phrase "to the best of
Landlord's knowledge" means the actual knowledge as of the Lease Date of
Landlord's Manager's management and professional officers actually involved in
the purchase or management of the Project, without the obligation to conduct
investigation or inquiries of any third parties. The parties acknowledge
that Landlord has done no independent investigation of whether Hazardous
Materials are present in, on or
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under the Premises or the Project other than reviewing the Phase I Assessment
prepared by a consultant chosen by Landlord's prospective lender on the Project,
Wells Fargo Bank.
7.9 SURVIVAL. The respective rights and obligations of Landlord
and Tenant under this Article 7 shall survive the expiration or termination of
this Lease. During any period of time employed by Tenant after the termination
of this Lease to complete the removal from the Premises or Project or
remediation of any such Hazardous Materials, Tenant shall continue to pay the
full rental in accordance with this Lease, which rental shall be prorated daily.
7.10 TENANT'S LIMITED RIGHT OF CANCELLATION. In the event that
(a) Hazardous Materials are discovered in, on or under the Premises or Project
which were released, present or discharged on the Premises or Project on or
before the Commencement Date, (b) Tenant did not contribute to or exacerbate the
harm created or caused by such Hazardous Materials, and (c) a qualified
environmental expert verifies by methods or means generally accepted as valid in
the scientific community that the presence of Hazardous Materials presents a
significant risk to the health and safety of persons on the Premises or Project
given the daily exposure and length of exposure of such persons to such
Hazardous Materials or the presence of Hazardous Materials on the Premises or
Project physically denies Tenant of the beneficial uses of the Premises or
Project (e.g., removal or remediation efforts block Tenant's access or
materially encroaches into the Premises), Tenant can give notice thereof to
Landlord. Within thirty (30) days of such notice, Landlord can elect to cure
such condition, or in the event that thirty (30) days are not satisfactory to
cure such condition, Landlord can elect to commence a cure within such thirty
(30) day period and diligently prosecute the cure to completion. In the event,
however, that such condition cannot be cured within a one hundred twenty (120)
day period of Tenant's notice, Tenant may cancel this Lease by written notice to
Landlord given within three (3) months of the expiration of such period. In the
event of any cancellation by Tenant pursuant to this Section 7.10, Landlord
shall not be liable under any circumstances for a loss of, injury to, or
interference with, Tenant's business, including, without limitation, loss of
profits however occurring through or in connection with such condition.
ARTICLE 8
SERVICES AND UTILITIES
8.1 PAYMENT AND ARRANGEMENT. Tenant shall arrange for and pay,
directly to the appropriate supplier, the cost of all natural gas, heat, light,
power, sewer service, telephone, water and other utilities and services supplied
to the Premises. If any services or utilities to the Premises are jointly
metered and such services are not otherwise included as a Common Area
Maintenance Charge, Landlord shall determine, and Tenant shall pay, Tenant's
share of the monthly costs of such utilities and services. Tenant's share shall
be determined by the ratio of the rentable square footage of the Premises as
compared to the rentable square footage of all the property within the Project
subject to the common metering. Landlord shall have the right to bill Tenant for
such amounts on an estimated basis, in which case, such estimated statements
shall be delivered to Tenant and Tenant shall pay such amounts to Landlord
concurrently with its payment of Base Monthly Rent. The Tenant shall pay such
charges, as Rent, within ten (10) days of notification of the amount by the
Landlord. Landlord reserves the right to require Tenant to install and maintain,
at Tenant's sole expense, separate meters for any public utility servicing the
Premises for which a separate meter is not presently installed.
8.2 INTERRUPTION OF SERVICES AND UTILITIES. Except as to the
extent specifically provided herein, Landlord shall not be liable for, and
Tenant shall not be entitled to any reduction of, the Base Monthly Rent,
Additional Rent or any other Rent payable hereunder by reason of Landlord's
failure to make available any of the services or utilities described in this
Lease, when such failure or interruption is caused by acts of God, accident,
breakage, repairs, strikes, lockouts or other labor disturbances or disputes,
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necessary repairs, installations, construction and expansion, non-payment of
utility charges due from Tenant, or by reason of governmental regulation,
statute, ordinance, restriction or decree or any other similar cause.
Furthermore, Landlord shall not be liable under any circumstances for a loss of,
or injury to, property or for injury to, or interference with, Tenant's
business, including, without limitation, loss of profits, however occurring,
through or in connection with or incidental to a failure to furnish any of the
foregoing services or utilities. Tenant, as a material part of the consideration
to be rendered to Landlord, hereby waives all claims against Landlord for the
foregoing damages from any cause arising at any time. The provisions of this
Section 8.3 shall not, however, exempt Landlord from liability for Landlord's
negligence or willful misconduct. Notwithstanding the above, in the event
services or utilities vital to the operation of Tenant's business are
discontinued for any continuous ninety-six (96) hour period during the Lease
Term, Rent shall be abated under this Lease commencing on the fifth (5th) day of
such interruption and continuing until such services or utilities are again
restored to Tenant. Furthermore, in the event services or utilities vital to the
operation of Tenant's business are discontinued for any continuous sixty (60)
day period, Tenant shall have the right to terminate this Lease by giving
written notice thereof to Landlord within three (3) months thereafter. In the
event of any Rent abatement or Tenant's election to terminate this Lease,
Landlord shall not be liable under any circumstances for a loss of, or injury
to, property or for injury to, or interference with, Tenant's business,
including, without limitation, loss of profits, however occurring, through or in
connection with or incidental to a failure to furnish any of the foregoing
services or utilities.
ARTICLE 9
PARKING AND CONTROL OF COMMON AREAS
9.1 CONTROL OF PROJECT COMMON AREAS BY LANDLORD. All Project
Common Area and all automobile parking areas, driveways, entrances and exits
thereto, and other facilities furnished by Landlord in or near the Project,
shall at all times be subject to the exclusive control and management of
Landlord, Landlord's designated agent. Landlord shall have the right to
construct, maintain and operate lighting facilities on all said areas and
improvements; to police the same; from time to time to change the area, level,
location and arrangement of parking areas and other facilities hereinabove
referred to; to restrict parking by tenants, their officers, agents and
employees to employee parking areas; to close all or any portion of said areas
or facilities to such extent as may, in the opinion of Landlord, be legally
sufficient to prevent a dedication thereof or the accrual of any rights to any
person or the public therein; to close temporarily all or any portion of the
parking areas or facilities; to discourage non-customer parking; to convert such
areas into leasable areas; to construct additional parking facilities and to do
and perform such other acts in and to said areas and improvements as, in the use
of good business judgment, the Landlord shall determine to be advisable with a
view to the improvement of the convenience and use thereof by tenants, their
officers, agents, employees and customers, provided that such changes shall not
reduce the number of parking spaces below the number required by law. No such
change shall entitle Tenant to an abatement of Rent. Landlord, or the
Association, will operate and maintain the Project Common Area and other
facilities referred to above in such manner as Landlord, in its sole discretion,
shall determine from time to time. Without limiting the scope of such
discretion, Landlord and the Association shall have the full right and authority
to employ all personnel and to make all rules and regulations pertaining to and
necessary for the proper operation and maintenance of the Project Common Area.
Notwithstanding the foregoing, Landlord shall not permanently (a) reduce the
parking spaces available to Tenant on a non-exclusive basis below four (4)
spaces per one thousand (1,000) rentable square feet in the Premises or (b)
materially impair Tenant's access to the Building or Premises.
9.2 LICENSE. All Project Common Area are to be used and occupied
under a license which may be revoked by Landlord in the event of a default by
Tenant and termination of the Lease, and if any such license be revoked, or if
the amount of such areas be diminished, Landlord shall not be subject to any
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liability nor shall Tenant be entitled to any compensation or diminution or
abatement of Rent, or shall such revocation or diminution of such areas be
deemed constructive or actual eviction.
9.3 PARCELIZATION OF THE PROJECT. Landlord reserves the right to
divide the Project into two or more separate parcels and to sell the other
buildings located at the Project. Upon such parcelization and/or sale, Landlord
shall have the right to make reasonable changes to the common area. Landlord
shall also have the right to alter the parking area and relocate the parking
spaces available to Tenant. Tenant acknowledges that the amount of Project
Common Area Maintenance Charges and/or Property Taxes may increase as a result
of any parcelization and that Tenant shall be responsible for Tenant's Building
Proportional Share and Tenant's Project Proportional Share, as the case may be,
of any such increased Common Area Maintenance Charges and Property Taxes.
9.4 UNDERGROUND LINE. In the event Tenant leases space in other
Buildings in the Project or in buildings on property contiguous to the Project,
Tenant shall have the right to install an underground line between the Building
and such other buildings on terms reasonably acceptable to Landlord. Tenant
acknowledges that terms acceptable to Landlord shall include, but shall not be
limited to, protections against mechanics' liens, the requirement that Tenant
obtain all necessary governmental approvals or approvals from any third parties,
the payment of all associated taxes, charges and utilities, indemnification by
Tenant for any damages or injuries caused by such installation and Landlord's
approval of plans and specifications relating to the underground line. At the
expiration or earlier termination of this Lease, Tenant shall cap to adequately
protect the safety of persons or property or remove the underground line or
lines and restore the Project to its original condition.
9.5 INSTALLATION OF SATELLITE DISH. During the Lease Term, Tenant
may install, operate and maintain, at Tenant's sole expense and risk, satellite
dishes in locations on the roof of the Building or in the parking lot near the
Building acceptable to Landlord and Tenant (collectively "Satellite Dishes").
Such Satellite Dishes shall be subject to Landlord's approval as to the location
and size, which approval may not be unreasonably withheld, but which may be
conditioned upon terms and conditions reasonably acceptable to Landlord. Any
Satellite Dishes located in the parking lot shall be considered Tenant's use of
such parking spaces. The Satellite Dishes shall be installed by vendors or
subcontractors approved by Landlord in accordance with plans and specifications
acceptable to Landlord. The plans and specifications shall include plans for
screens to mitigate the visual impact of the Satellite Dishes acceptable to
Landlord. Tenant shall keep the Project free from any mechanics', materialmens'
or other liens arising out of any work performed, materials furnished or
obligations incurred by or for Tenant or any person or entity claiming by,
through or under Tenant.
9.5.1 GOVERNMENTAL APPROVALS. Tenant shall have the
responsibility to secure all necessary approvals relating to installation and
operation of the Satellite Dishes from all applicable governmental authorities.
Tenant shall construct, operate and maintain the Satellite Dishes in accordance
with all applicable laws, ordinances, rules and regulations and in compliance
with the requirements of any insurers of the Project. Tenant and Landlord shall
give to each other notice of any notices which it receives from third parties
that any portion of the Satellite Dishes is or may be in violation of any law,
ordinance or regulation.
9.5.2 MAINTENANCE AND SURRENDER. Tenant shall be responsible
for repairs required to the Project, arising out of the construction, operation
or removal of the Satellite Dishes, made necessary by the acts, omissions or
negligence of Tenant. At the conclusion of the term, Tenant will remove the
Satellite Dishes, make all repairs necessary to the Project as a result of said
removal of property, and surrender the site to Landlord in substantially the
same order and condition as originally delivered to Tenant, excepting ordinary
wear and tear.
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9.5.3 TAXES. Tenant shall pay all taxes of any kind or
nature whatsoever levied upon the Satellite Dishes and all licensing fees,
franchise taxes and other charges, expenses and costs of any nature whatsoever
relating to the construction, ownership, maintenance and operation of the
Satellite Dishes.
9.5.4 UTILITIES. Tenant shall be responsible for the costs
and expenses of any and all utilities and services supplied to the Premises
which are consumed by Tenant in constructing and operating the Satellite Dishes,
whether by Landlord or directly by utility companies.
9.5.5 TERMS OF LEASE. In addition to the terms set forth
above, Tenant's use, operation and ownership of the Satellite Dishes shall be on
the other terms and provisions of this Lease.
ARTICLE 10
CONDITION OF PREMISES;
MAINTENANCE OF THE PREMISES
10.1 TENANT'S OBLIGATIONS.
10.1.1 MAINTENANCE OF THE PREMISES. Tenant shall keep the
Premises (including all nonstructural, interior and exterior portions, systems
and equipment, all glass, glazing, window moldings, windows, partitions, all
doors (exterior and interior), door hardware, ceilings, interior painting,
fixtures and appurtenances thereof including electrical, lighting, plumbing and
plumbing fixtures) in good order, condition and repair during the Lease Term.
Except to the extent provided in Section 10.3.1, Tenant shall be obligated to
pay to Landlord, as Rent under this Lease, with the next payment of Base Monthly
Rent, the reasonable costs for the reasonable servicing, maintenance and repair
of any heating/ventilation/air conditioning system ("HVAC System") servicing the
Premises. To the extent the HVAC System services more than one tenant, the costs
of maintenance, service and repair shall be allocated by Landlord among the
tenants using such HVAC System. Landlord may either (a) include such charges as
a Common Area Maintenance Charge (b) bill Tenant, directly therefor, in which
case, Tenant, upon presentation of a bill therefor, shall promptly pay Landlord,
or its agent or assigns, for such maintenance service or (c) if such maintenance
charges occur on a repeated basis, require Tenant to pay an estimated portion of
such charges in the same manner and on the same terms as set forth in Section
5.5 of this Lease. Tenant shall promptly replace any portion of the Premises or
system or equipment in the Premises which cannot be fully repaired, regardless
of whether the benefit of such replacement extends beyond the Lease Term. Tenant
shall be solely responsible and shall indemnify, protect, defend and hold
Landlord harmless as a result of any penetrations or perforations of the roof
caused by Tenant. It is the intention of Landlord and Tenant that, at all times
during the Lease Term, Tenant shall maintain the Premises in an attractive,
first-class and fully operative condition.
10.1.2 REPAIRS DUE TO MISUSE. Tenant shall be responsible
for all repairs to the Project which are made necessary by any misuse or neglect
by (a) Tenant or any of its agents, employees, contractors, or subtenants or (b)
any visitors, patrons, guests or invitees of Tenant while in or upon the
Premises.
10.2 REPAIR BY LANDLORD. All of Tenant's obligations to maintain
and repair shall be accomplished at Tenant's sole expense. If Tenant refuses or
neglects to repair properly as required hereunder and to the reasonable
satisfaction of Landlord, Landlord may, on ten (10) days prior notice (except
that no notice shall be required in case of emergency) enter the Premises and
perform such repair and maintenance on behalf of Tenant without liability to
Tenant for any loss or damage that may accrue to Tenant's merchandise, fixtures,
or other property or to Tenant's business by reason thereof, and upon
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completion thereof, Tenant shall pay Landlord's costs for making such repairs
plus ten percent (10%) for administrative and overhead expense, upon
presentation of a bill therefor, as Rent. Said bill shall include interest at
the Lease Interest Rate on said costs from the date of completion of repairs by
Landlord. Except as provided in Article 14, there shall be no abatement of Rent
and no liability of Landlord by reason of any injury to or interference with
Tenant's business arising from the making of any repairs, alterations or
improvements under this Lease.
10.3 LANDLORD'S OBLIGATIONS. Landlord shall be responsible for
the maintenance and repair of structural portions of the Building. As used
herein, structural portions of the Building shall only refer to the foundation
and slabs (including plumbing in the slab), exterior walls, and structural
portions of the roof of the Building. Landlord shall also maintain and repair
the HVAC System, the costs of which will be borne by Tenant pursuant to Section
10.1.1 above. Landlord shall be responsible for any modifications to the
Building exterior or Project Common Areas required under the Americans With
Disabilities Act, 42 U.S.C. Section 12101 et seq., except to the extent such
modifications arise because of Tenant's activities or use of the Premises, in
which event Tenant shall have the responsibility to make such modifications.
Landlord shall also be responsible for ensuring that the Premises (other than
the Tenant Improvements) are in compliance with the commercial facility
provisions of the Americans with Disabilities Act prior to constructing the
Tenant Improvements and delivering the Premises to Tenant. Tenant waives the
benefit of any present or future law which might give Tenant the right to repair
the Premises at Landlord's expense or to terminate the Lease due to the
condition of the Premises.
10.3.1 LANDLORD'S LIMITED WARRANTY. Notwithstanding the
provisions of Section 10.1, Landlord shall be responsible for maintaining and
repairing the HVAC System for the first Lease Year at Landlord's sole cost and
expense except to the extent such repair and maintenance arises from Tenant's
negligence or breach of this Lease.
ARTICLE 11
ALTERATIONS, IMPROVEMENTS AND SIGNAGE
11.1 CHANGES/ALTERATIONS. Tenant shall not make any alterations,
additions, or changes, including, without limitation, installation of any
permanently attached trade fixtures, exterior signs, exterior machinery, floor
coverings, interior or exterior lighting, plumbing fixtures, shades or awnings
(collectively "Alterations") in and to the Premises or any part thereof without
the prior written consent of Landlord which consent may not be unreasonably
withheld; provided, however, that Tenant may make nonstructural Alterations that
do not affect the electrical, plumbing, heating, ventilation, air conditioning
or other systems of the Premises and that cost less than $5,000 without
Landlord's consent. Any construction undertaken in or to the Premises shall be
performed in accordance with this Article and the other obligations of this
Lease.
11.2 MANNER OF CONSTRUCTION.
11.2.1 Landlord may impose, as a condition of its
consent to any Alterations or repairs on or about the Premises, such
requirements as Landlord in its reasonable discretion may deem desirable,
including, but not limited to, the requirements that Tenant obtain bonds and
that Tenant utilize for such purposes only contractors, materials, mechanics and
materialmen approved by Landlord, in its reasonable discretion. Tenant shall
construct such Alterations or repairs in strict conformance with any and all
applicable rules and regulations of any federal, state, county or municipal code
or ordinance and pursuant to a valid building permit, issued by the local
governing entity. All fixtures installed by Tenant shall be new or completely
reconditioned.
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11.2.2 In any event, a contractor approved by Landlord
shall perform all mechanical, electrical, plumbing, air conditioning, permanent
partition and ceiling tile work, and such work shall be performed at Tenant's
cost. If Landlord's consent is required, Landlord reserves the right to approve,
in Landlord's reasonable discretion, the contractor selected by Tenant for the
completion of any Alterations.
11.2.3 In the event Tenant orders any construction,
alteration, decorating or repair work and fails to pay amounts when due to the
contractor or contractors in connection with such items, Landlord, without any
obligation to do so, may pay any such amounts directly to such contractor or
contractors and the amounts paid by Landlord shall be deemed Rent under this
Lease, payable upon billing therefor, provided, however, that if Tenant posts a
proper bond within ten (10) days of the filing of any lien against the Premises
or Project, Landlord shall not make such payment.
11.2.4 All work with respect to any Alterations or
repairs must be done in a good and workmanlike manner and diligently prosecuted
to completion to the end that the Premises shall at all times be a complete unit
except during the period of work. Upon completion of any Alterations, Tenant
agrees to deliver to the Landlord's management office a copy of the "as built"
drawings of the Alterations, if the Alterations would customarily generate "as
builts" and record any necessary notices to evidence completion. In performing
the work of any such Alterations, Tenant shall have the work performed in such
manner as not interfere with or to obstruct the access to the Project Common
Area and to any other tenant of the Project.
11.3 INTENTIONALLY OMITTED.
11.4 CONSTRUCTION INSURANCE. Whether or not Landlord's consent is
required, Tenant agrees to obtain, carry and deliver to Landlord prior to the
commencement of any Alterations and maintain in effect until completion of all
Alterations "Builder's All Risk" insurance in an appropriate amount covering the
construction of such Alterations, and such other insurance as Landlord may
require, it being understood and agreed that all of such Alterations shall be
insured by Tenant pursuant to Section 12.2.2 of this Lease immediately upon
completion thereof.
11.5 LIENS. Tenant shall keep the Premises and the Project free
from any mechanics', materialmen's, designer's or other liens arising out of any
work performed, materials furnished or obligations incurred by or for Tenant or
any person or entity claiming by, through or under Tenant. If any such liens are
filed and are not released of record by payment or posting of a proper bond
within ten (10) days after such filing, Landlord may, without waiving its rights
and remedies based on such breach by Tenant and without releasing Tenant from
any obligations hereunder, cause such liens to be released by any means it shall
deem proper, including payment of the claim giving rise to such lien, in which
event all amounts paid by Landlord shall immediately be due and payable by
Tenant as Rent. Tenant hereby indemnifies, protects, defends (with legal counsel
acceptable to Landlord) and holds Landlord and Landlord's Indemnitees, the
Premises and the Project harmless from any liability, cost, obligation, expense
(including, without limitation, reasonable attorneys' fees and expenses), or
claim of any mechanics', materialmen's, design professional's or other liens in
any manner relating to any work performed, materials furnished or obligations
incurred by or for Tenant or any person or entity claiming by, through or under
Tenant. Whether or not Landlord's consent is required, Tenant shall notify
Landlord in writing within fifteen (15) days prior to commencing any Alterations
so that Landlord shall have the right to record and post notices of
non-responsibility or any other notices deemed necessary by Landlord on the
Premises.
11.6 SIGNAGE. Tenant shall have the right to have its name and
logo displayed on the face of the Building at a highly visible and prominent
location mutually chosen by Landlord and Tenant. In the event that the City of
Carlsbad or other government agency with jurisdiction over the Project does not
permit Tenant's building signage, Tenant shall have the right to construct a
monument sign at a highly
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visible and prominent location on the Project which is acceptable to Landlord,
in Landlord's reasonable discretion or to affix such signage to the existing
monument sign at the Project in a manner acceptable to Landlord in Landlord's
reasonable discretion. Any building or monument signage shall also be subject to
the requirements of the City of Carlsbad, or other government agencies with
jurisdiction over the Project, and the Declarations. Tenant shall pay all costs
of Landlord associated with installing such signage within ten (10) days of
receiving an invoice from Landlord setting forth such costs. Tenant may apply up
to Seven Thousand Five Hundred Dollars ($7,500.00) of the Tenant Improvement
Allowance which is not used in the fabrication and installation of the other
Tenant Improvements to the fabrication and installation of any such signage
designed, constructed and installed pursuant to this Section 11.5. All such
signage shall be subject to Landlord's specifications and approval as to size,
graphics and style, which approval may be withheld in Landlord's reasonable
discretion.
ARTICLE 12
INSURANCE AND INDEMNITY
12.1 FIRE AND CASUALTY INSURANCE. Landlord shall maintain during
the Lease Term a policy or policies of insurance insuring the Premises and, at
Landlord's election, other portions of the Project, against all direct physical
loss or damage, whether due to fire or other casualties covered within the
classification of fire and extended coverage, vandalism coverage and malicious
mischief, sprinkler leakage, water damage and special extended coverage. Such
coverage shall be for full replacement value, and may include, at the option of
Landlord, the risks of earthquakes and/or flood damage and additional hazards
(to the extent that coverage for earthquake or such additional hazards is
required by the holder of any mortgage or deed of trust encumbering the interest
of Landlord in all or any portion of the Project or is reasonably commercially
available in Landlord's sole and absolute discretion exercised in good faith), a
rental loss endorsement and one or more loss payee endorsements in favor of the
holders of any mortgages or deeds of trust encumbering the interest of Landlord
in all or any portion of the Project or the interest of any ground or underlying
lessors in the Project. The costs of such insurance shall be included as part of
the Project Insurance Charges or may, at the election of Landlord, be included
as a component of the Common Area Maintenance Charges.
12.2 INSURANCE TO BE OBTAINED BY TENANT.
12.2.1 LIABILITY INSURANCE. During the Lease Term, Tenant
shall, at Tenant's expense, maintain a commercial general liability insurance
policy, or an equivalent, written on an occurrence form that includes personal
injury coverage, bodily injury, death, property damage, advertising injury
coverage and contractual liability coverage including Tenant's indemnity
obligations under this Lease, insuring against liability arising out of the
ownership, use, occupancy or maintenance of the Premises, the sidewalks in front
of the Premises, and the business operated by Tenant and any subtenants or
licensees of Tenant in the Premises. The initial amount of such insurance shall
be One Million Dollars ($1,000,000.00) each occurrence/Two Million Dollars
($2,000,000.00) general aggregate on a per location basis and One Million
Dollars ($1,000,000.00) for personal injury and advertising injury coverage. If
alcohol will be served from or in the Premises, such coverage shall contain
endorsements deleting any liquor liability exclusion and adding a liquor
liability endorsement.
12.2.2 INSURANCE OF PERSONAL PROPERTY. Tenant shall at all
times during the Lease Term, and at its own expense, maintain a policy or
policies of standard fire, extended coverage and special extended coverage
insurance ("All Risks") with extended coverage in the name of the Tenant, and
naming Landlord as an additional insured, in an amount adequate to cover the
cost of replacement of all trade fixtures, alterations, decorations, inventory
additions or improvements, and all plate and tempered glass in or covering the
Premises, made to the Premises by Tenant or by Landlord on Tenant's behalf in
the event
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of fire or extended coverage loss in an amount equal to the full replacement
value. Notwithstanding such insurance coverage by Tenant for plate glass,
Landlord may replace, at the expense of Tenant, any and all plate and other
glass, frames or glazing damaged or broken from any cause whatsoever in and
about the Premises.
12.2.3 ADDITIONAL INSURANCE OBLIGATIONS. Landlord may
require Tenant to increase the amounts of coverage and/or to maintain additional
coverage based on insurance coverages and amounts maintained by lessees of
similar space in San Diego County, provided that Landlord may not require such
changes more often than one (1) time every two (2) years.
12.3 WAIVER OF SUBROGATION. Landlord and Tenant each hereby waive
any and all rights of recovery against the other or against the officers,
employees, agents and representatives of the other, on account of loss or damage
occasioned to such waiving party or its property or the property of others under
its control, to the extent that such loss or damage is insured against under any
fire and extended coverage insurance policy which either may have in force at
the time of such loss or damage or under the insurance policies required to be
maintained under this Article. Landlord and Tenant shall, if required, for each
of the policies of insurance required under this Lease, give notice to the
insurance carrier or carriers that the foregoing mutual waiver of subrogation is
contained in this Lease.
12.4 FORM OF POLICIES. The minimum limits of policies of
insurance required of Tenant under this Lease shall in no event limit the
liability of Tenant under this Lease. Such insurance shall: (i) be an occurrence
policy (or policies); (ii) name Landlord, the Project or Building manager or
managers, and any other party having an interest in the Project as an additional
insured; (iii) be issued by an insurance company having a General Policyholders
Rating of B+ or better and a financial size of "VI" or better, as set forth in
the most current issue of Best's Rating Guide, or which is otherwise acceptable
to Landlord and licensed to do business in California; (iv) be primary insurance
as to all claims thereunder and provide that any insurance carried by Landlord
is excess and noncontributing with any insurance required of Tenant; (v) provide
that said insurance shall not be canceled or coverage changed unless thirty (30)
days prior written notice shall have been given to Landlord and any mortgagee of
Landlord's; and (vi) with respect to the liability insurance described in
Section 12.2.1, contain a cross-liability endorsement or severability of
interest clause acceptable to Landlord. Any insurance policies required
hereunder may be part of a blanket policy with a "per project, per location"
endorsement so long as such blanket policy contains all provisions required
hereby and does not reduce the coverage, impair the rights of either party or
negate the requirements of this Lease. Tenant shall deliver said policy or
policies or certificates thereof, together with any endorsements reflecting the
changes to the policy required to comply with the requirements of this Lease, to
Landlord on or before the Commencement Date and at least thirty (30) days before
the expiration date of such policies. In the event Tenant shall fail to procure
such insurance, or to deliver such policies or certificates and appropriate
endorsements, Landlord may, at its option, procure such policies for the account
of Tenant, and the cost thereof plus a ten percent (10%) handling charge shall
be paid by Tenant to Landlord as Additional Rent within five (5) days after
delivery to Tenant of bills therefor.
12.5 INDEMNIFICATION.
12.5.1 INDEMNIFICATION OF LANDLORD. To the fullest extent
permitted by law, Tenant shall indemnify, protect, defend (with legal counsel
acceptable to Landlord) and save Landlord and Landlord's Indemnitees harmless
from and against any and all claims, actions, damages, liabilities and expenses,
including attorneys' fees, in connection with loss of life, personal injury,
bodily injury and/or damage to property arising from or out of any occurrence
in, upon or about the Premises, or the occupancy or use by Tenant of the
Premises or any part thereof, or occasioned wholly or in part by any act or
omission of Tenant, its agents, contractors, employees, servants, tenants or
concessionaires, except to the extent caused
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by Landlord's negligence or willful misconduct. Tenant shall further indemnify,
defend, protect and hold Landlord and Landlord's Indemnitees harmless from and
against any and all claims arising from any breach or default in performance of
any obligation on Tenant's part to be performed under the terms of this Lease,
or arising from any act, neglect, fault or omission of Tenant or its agents,
contractors, employees, servants, tenants or concessionaires, and from and
against all costs, attorneys' fees, expenses and liabilities incurred in
connection with such claim or any action or proceeding brought thereon. In case
any action or proceeding shall 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 approved in writing by Landlord. Tenant, as a material part
of the consideration to Landlord, hereby assumes all risk of (and waives all its
claims in respect thereof against Landlord for) damage to property or injury to
persons in, upon or about the Premises from any cause whatsoever except
Landlord's negligence or intentional misconduct.
12.5.2 LANDLORD'S NONLIABILITY. Landlord shall not be
liable for injury or damage which may be sustained by a person, goods, wares,
merchandise, or other property of Tenant, or Tenant's employees, invitees,
customers, or of any other person in or about the Premises caused by or
resulting from any peril which may affect the Premises, including, without
limitation, fire, steam, electricity, gas, water, or rain which may leak or flow
from or into any part of the Premises, or from the breakage, leakage,
obstruction, or other defects of the pipes, sprinklers, wires, appliances,
plumbing, air conditioning, or lighting fixtures of the Premises, whether such
damage or injury results from conditions arising upon the Premises or upon other
portions of the Project or from other sources. Landlord shall not be liable for
any damages arising from any act or neglect of: (a) any other tenant or occupant
of the Project; or (b) any officer, employee, agent, representative, customer,
business visitor, or invitee of any such tenant. Notwithstanding the foregoing,
nothing contained in this Lease shall operate to relieve Landlord of the
consequences of its own negligence or willful misconduct or the negligence or
willful misconduct of its agents or employees.
12.5.3 INDEMNIFICATION OF TENANT. To the fullest extent
permitted by law and except as expressly provided elsewhere in this Lease,
Landlord shall indemnify, protect, defend (with legal counsel reasonably
acceptable to Tenant) and save Tenant and Tenant's agents, partners, members,
managers, shareholders, officers, directors, employees, successor and/or assigns
("Tenant's Indemnitees") harmless from and against any and all claims, actions,
damages, liabilities and expenses, including attorneys' fees, in connection with
loss of life, personal injury, bodily injury and/or damage to property arising
from or out of any occurrence in, upon or about the Project occasioned wholly or
in part by any act or omission of Landlord, its agents, contractors, employees,
servants, tenants or concessionaires, except to the extent caused by Tenant's
negligence or willful misconduct. Landlord shall further indemnify, defend,
protect and hold Tenant and Tenant's Indemnitees harmless from and against any
and all claims arising from any breach or default in performance of any
obligation on Landlord's part to be performed under the terms of this Lease, or
arising from any act, neglect, fault or omission of Landlord or its agents,
contractors, employees, servants, tenants or concessionaires, and from and
against all costs, attorneys' fees, expenses and liabilities incurred in
connection with such claim or any action or proceeding brought thereon. In case
any action or proceeding shall be brought against Tenant by reason of any such
claim, Landlord, upon notice from Tenant, shall defend the same at Landlord's
expense by counsel reasonably approved in writing by Tenant.
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ARTICLE 13
ASSIGNMENT AND SUBLETTING
13.1 LANDLORD'S CONSENT REQUIRED.
13.1.1 Tenant shall not either voluntarily or by operation
of law, assign, mortgage, pledge, hypothecate or encumber this Lease or the
leasehold interest created hereby or any interest herein, or sublet the Premises
or any portion thereof, or license the use of all or any portion of the Premises
or permit any other person to occupy or use the Premises or any portion thereof
(collectively referred to herein as a "Transfer"), without the prior written
consent of Landlord, which consent shall not be unreasonably withheld,
conditioned or delayed and is subject to the following conditions: (i) the
proposed transferee's use of the Premises must be consistent with Article 6
hereof; (ii) the transferee is of a character and engaged in a business which is
in keeping with the Landlord's standards for the Project; (iii) the proposed
Transfer must not breach any financing agreement or any other agreement relating
to the Project; and (iv) the net worth of the proposed transferee must not be
less than One Million Five Hundred Thousand Dollars ($1,500,000.00).
13.1.2 Prior to a Transfer, Tenant shall request Landlord's
consent in writing, and shall include with such request a copy of all proposed
contracts, agreements, subleases, or other documents describing the Transfer or
between Tenant and the proposed transferee. Landlord shall respond to Tenant's
request for consent to a proposed Transfer within ten (10) days after receipt of
all information described above and reasonably necessary to allow Landlord to
evaluate all the conditions set forth in Section 13.1.1 above.
13.2 INTENTIONALLY OMITTED.
13.3 TRANSFER WITHOUT CONSENT. Any Transfer without Landlord's
prior written consent shall, at the option of the Landlord, constitute a
non-curable breach of this Lease.
13.4 NO RELEASE OF TENANT. No Transfer shall release Tenant or
any guarantor or change Tenant's primary liability to pay the Rent and to
perform all other obligations of Tenant under this Lease. Landlord's acceptance
of Rent from any other person is not a waiver of any provision of this Article
13. Consent to one Transfer is not a consent to any subsequent Transfer. If
Tenant's transferee defaults under this Lease, Landlord may proceed directly
against Tenant without pursuing remedies against the transferee and without
releasing such transferee from its obligations under this Lease. Landlord may
consent to subsequent assignments or modifications of this Lease by Tenant's
transferee, without notifying Tenant or obtaining its consent. Such action shall
not relieve Tenant's liability under this Lease.
13.5 EFFECT OF A TRANSFER. Whether or not Landlord's consent is
required, the transferee shall agree to comply with and be bound by all of the
terms, covenants, conditions, provisions and agreements of this Lease to the
extent of the space transferred, assigned or sublet; and Tenant shall deliver to
Landlord promptly after execution an executed copy of each such Transfer
document between Tenant and the transferee. In addition, any sublease shall
provide that it shall be subject and subordinate to this Lease and to all
mortgages; that Landlord may enforce the provisions of the sublease, including
collection of rents; and that in the event of termination of this Lease for any
reason, including without limitation a voluntary surrender by Tenant, or in the
event of any reentry or repossession of the Premises by Landlord, Landlord may,
at its option, either (i) terminate the sublease, or (ii) take over all of the
right, title and interest of Tenant, as sublessor, under such sublease, in which
case such sublessee shall attorn to Landlord but in such event Landlord shall
not (a) be liable for any previous act or omission of Tenant under such
sublease, (b) be subject to any defense or offset previously accrued in favor of
the sublessee against
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Tenant, or (c) be bound by any previous modification of any sublease made
without Landlord's written consent, or by any previous prepayment by sublessee
of more than one month's rent.
13.6 EVENT OF BANKRUPTCY. If this Lease is assigned to any person
or entity pursuant to the provisions of the United States Bankruptcy Code, 11
U.S.C. Section 101 et seq. (the "Bankruptcy Code"), any and all monies or other
consideration payable or otherwise to be delivered in connection with such
assignment shall be paid or delivered to Landlord, shall be and remain the
exclusive property of Landlord, and shall not constitute the property of Tenant
or of the estate of Tenant within the meaning of the Bankruptcy Code. Any and
all monies or other considerations constituting Landlord's property under this
Section not paid or delivered to Landlord shall be held in trust for the benefit
of Landlord and shall be promptly paid or delivered to Landlord. Any person or
entity to which this Lease is assigned pursuant to the provisions of the
Bankruptcy Code shall be deemed without further act or deed to have assumed all
of the obligations arising under this Lease on and after the date of such
assignment.
13.7 NO MERGER. No merger shall result from Tenant's sublease of
the Premises under this Article 13, Tenant's surrender of this Lease or the
termination of this Lease in any other manner.
13.8 ASSIGNMENT FEES AND PROCEDURES. In the event Landlord shall
be requested to consent to a Transfer, Tenant shall pay Landlord a reasonable
fee not to exceed Two Thousand Dollars ($2,000.00) to reimburse Landlord for
costs and expenses, including attorneys' fees, incurred in connection with
reviewing Tenant's request for consent.
ARTICLE 14
DAMAGE OR DESTRUCTION
14.1 REPAIR OF DAMAGE BY LANDLORD. Tenant agrees to promptly
notify Landlord in writing of any damage to the Premises resulting from fire,
earthquake or any other casualty (such events referred to collectively as
"Casualty"). If the Premises, or any common areas of the Building providing
access to the Premises (such that Tenant does not have reasonable access to the
Premises) shall be damaged by a Casualty, Landlord shall, within sixty (60) days
after the date of the Casualty, provide written notice to Tenant indicating the
anticipated time period for repairing the Casualty (the "Repair Period Notice").
In the event the Repair Period Notice indicates that the time period for
repairing the Casualty is estimated to exceed two hundred twenty-five (225) days
from the date of the Repair Period Notice, Landlord (pursuant to the provisions
of Section 14.3 below) or Tenant may elect to terminate this Lease ("Tenant's
Termination Election"). Such election must be made by Tenant within thirty (30)
days after the receipt of the Repair Period Notice or will be deemed waived by
Tenant. If Tenant elects to terminate the Lease, the termination shall be
effective thirty (30) days after Landlord's receipt of Tenant's Termination
Election. If the Repair Period Notice indicates that the time period for
repairing the Casualty is estimated to not exceed two hundred twenty-five (225)
days from the date of the Repair Period Notice, or if Tenant does not exercise
Tenant's Termination Election as provided above, then subject to the other
provisions of this Article, Landlord will repair the damage pursuant to the
provisions hereof. If Landlord is obligated to or elects to repair the Casualty
as provided herein, Landlord agrees to promptly and diligently, subject to
reasonable delays for insurance adjustment and other matters beyond Landlord's
reasonable control, and subject to the other provisions of this Article, restore
the Premises and the Tenant Improvements originally constructed by Landlord to
substantially the same condition as existed prior to the Casualty, except for
modifications required by building codes and other laws, and any other
modifications to the common areas deemed desirable by Landlord provided that
access to the Premises shall not thereby be materially impaired. If Tenant
requests that Landlord make any modifications to the Tenant Improvements in
connection with the rebuilding, Landlord may condition its consent to such
modifications on (i) Tenant's payment to Landlord prior to commencement of
construction of any sums necessary to
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complete the Tenant Improvements in excess of the amount of insurance proceeds
received by Landlord and (ii) confirmation by Landlord's architect that the
modifications will not increase the scope of work or time period necessary to
complete the Tenant Improvements.
14.2 RENT ABATEMENT DUE TO CASUALTY. Landlord and Tenant agree
and acknowledge that Tenant shall be provided with full abatement of Rent during
the time period commencing on the last to occur of (i) the date of the Casualty
or (ii) the date Tenant ceases to enjoy the substantial benefit of the Premises,
and continuing until Substantial Completion of Landlord's restoration
obligations as provided herein ("Abatement Period"), provided that if Tenant is
only able to occupy a portion of the Premises and receive the substantial
benefit of such portion for Tenant's uses of the Premises, Rent shall be abated
during the Abatement Period for the portion of the Premises not occupied by
Tenant. Landlord and Tenant acknowledge and agree that the Rent abatement as
provided in this Section is Tenant's sole remedy due to the occurrence of the
Casualty and that Landlord shall not be liable to Tenant or any other person for
any indirect or consequential damage (including, but not limited to, lost
profits of Tenant or loss of or interference with Tenant's business, or
otherwise), whether or not caused by the negligence of Landlord or Landlord's
employees, contractors, licensees, or invitees, due to or arising out of or as a
result of the Casualty (including but not limited to the termination of the
Lease in connection therewith) but Landlord shall be liable for Tenant's direct
damages as a result of the Casualty arising from Landlord's negligence or wilful
misconduct. Tenant acknowledges and agrees that Tenant shall maintain adequate
business interruption insurance to provide coverage as to such indirect or
consequential damages.
14.3 LANDLORD'S OPTION TO REPAIR. Notwithstanding the terms of
Section 14.1 of this Lease, Landlord may elect not to rebuild and/or restore the
Premises and/or Building and to instead terminate this Lease by notifying Tenant
in writing of such termination within sixty (60) days after the date of the
Casualty in the event the Building shall be damaged by Casualty (whether or not
the Premises are affected) and one or more of the following conditions exists:
(i) Landlord determines that the time period for repair will exceed two hundred
twenty-five (225) days as provided in Section 14.1 above; (ii) the damage is not
fully covered, except for deductible amounts, by insurance required to be
carried by Landlord under the terms of this Lease; (iii) the holder of the
mortgage on the Building or ground lessor with respect to the Project requires
that the insurance proceeds or a portion thereof be used to retire the mortgage
debt, or terminates the ground Lease, as the case may be; or (iv) Landlord
elects not to rebuild the Building for any reason, provided that in connection
with such election Landlord also terminates all other leases in the Building.
14.4 DAMAGE NEAR END OF TERM. In the event that the Premises or
the Building is destroyed or damaged by a Casualty during the last twenty-four
(24) months of the Lease Term, notwithstanding anything else contained in this
Article, either party shall have the option to terminate this Lease by giving
written notice to the other party of the exercise of such option within thirty
(30) days after such damage or destruction, in which event this Lease shall
cease and terminate as of the date of the notice. In such event or in the event
of a termination pursuant to the other provisions of this Article, Tenant shall
pay Rent, properly apportioned up to the date of the Casualty, and both parties
shall thereafter be freed and discharged of all future obligations hereunder,
except for any provisions of this Lease which by their terms survive the
expiration or earlier termination of the Lease Term.
14.5 WAIVER OF STATUTORY PROVISIONS. The provisions of this
Lease, including this Article 14, constitute an express agreement between
Landlord and Tenant with respect to the occurrence of any Casualty to the
Premises and/or Building or any other portion of the Project and Tenant
therefore fully waives the provisions of any statute or regulation, including,
without limitation, Sections 1932(2) and 1933(4) of the California Civil Code,
with respect to any rights or obligations concerning a Casualty.
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ARTICLE 15
CONDEMNATION
15.1 TOTAL CONDEMNATION. If the whole of the Premises shall be
acquired or condemned by eminent domain for any public or quasi-public use or
purpose, then the Lease Term shall cease and terminate as of the date of title
vesting in such proceeding and all rentals shall be paid up to that date.
15.2 PARTIAL CONDEMNATION. If any part of the Premises shall be
acquired or condemned by eminent domain for any public or quasi-public use or
purpose, and if such partial taking or condemnation renders the Premises
unsuitable for the business of the Tenant in Tenant's reasonable business
judgment, then Tenant shall have the right to terminate the Lease Term as of the
date of title vesting in such proceeding by delivering written notice thereof to
Landlord within thirty (30) days after Tenant becomes aware of the proposed
condemnation. In the event of a partial taking or condemnation which is not
extensive enough to render the Premises unsuitable for the business of the
Tenant then this Lease shall continue in full force and effect.
15.3 CONDEMNATION OF PARKING AREA. If the whole or any part of
the parking area in the Project shall be acquired or condemned by eminent domain
for any public or quasi-public use or purpose and if, as the result of such
partial taking, the ratio of square feet of parking area does not conform to the
parking requirements of the Specific Plan, zoning ordinances or any deed
restrictions or covenants, conditions and restrictions encumbering the Premises,
if any ("Parking Restrictions"), in effect at the time that title to such
parking area is acquired through such condemnation process, then the Lease Term
shall cease and terminate from the date of title vesting in such proceeding
unless Landlord provides substantially equal parking facilities in the vicinity
of the Project within sixty (60) days after the date of acquisition and such
alternative parking satisfies the requirements of the Parking Restrictions and
this Lease.
15.4 DISTRIBUTION OF CONDEMNATION AWARD. Any condemnation award
or payment shall be distributed in the following order: (a) first, to any ground
lessor, mortgagee or beneficiary under a deed of trust encumbering the Premises,
the amount of its interest in the Premises; (b) second, to Tenant, only the
amount, if any, of any award specifically designated for loss of or damage to
Tenant's movable trade fixtures or removable personal property, and the Tenant
hereby assigns any other rights which the Tenant may have now or in the future
to any other award to the Landlord; and (c) third, to Landlord, the remainder of
such award, whether as compensation for reduction in the value of the leasehold,
the taking of the fee, or otherwise. In no event shall Tenant have any claim
against Landlord for the value of any unexpired term of this Lease. If this
Lease is not terminated, Landlord shall repair any damage to the Premises caused
by the condemnation, except that Landlord shall not be obligated to repair any
damage for which Tenant has been reimbursed by the condemning authority.
15.5 WAIVER. Tenant hereby waives any statutory rights of
termination which may arise by reason of any taking of the Premises under the
power of eminent domain, including, without limitation, the provisions of
Section 1265.130 of the California Code of Civil Procedure.
ARTICLE 16
DEFAULTS; REMEDIES
16.1 COVENANTS AND CONDITIONS. Tenant's performance of each of
Tenant's obligations under this Lease is a condition as well as a covenant.
Tenant's right to continue in possession of the Premises is
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conditioned upon such performance. Time is of the essence in the performance of
all covenants and conditions.
16.2 DEFAULTS BY TENANT. Tenant shall be in default under this
Lease:
16.2.1 If Tenant abandons or vacates the Premises for a
period greater than ninety (90) days;
16.2.2 If Tenant fails to pay Base Monthly Rent, Additional
Rent or any Rent required to be paid by Tenant, as and when due after the
expiration of any applicable grace periods provided in this Lease;
16.2.3 If Tenant fails or refuses to occupy and operate the
Premises in accordance with Article 6;
16.2.4 If (i) Tenant's use of the Premises involves the
generation or storage, use, treatment or disposal of Hazardous Material in a
manner or for a purpose prohibited by any Hazardous Materials Law; (ii) Tenant
has been required by any lender or governmental authority to take remedial
action in connection with Hazardous Material contaminating the Premises if the
contamination resulted from Tenant's action or use of the Premises; or (iii)
Tenant is subject to an enforcement order issued by any governmental authority
in connection with the use, disposal or storage of a Hazardous Material on the
Premises.
16.2.5 If Tenant fails to perform any of Tenant's
nonmonetary obligations under this Lease (other than Tenant's obligations under
Sections 16.2.3, 16.2.4, 16.2.5 and 16.2.6 for which there will be no additional
cure periods) for a period of ten (10) days after written notice from Landlord;
provided that if such cure is not reasonably susceptible of being cured within
such ten (10) day period, Tenant shall not be in default if Tenant commences
such performance within the ten (10) day period and uses its best efforts and
due diligence to promptly cure the default. However, Landlord shall not be
required to give such notice if Tenant's failure to perform constitutes a
non-curable breach of this Lease. The notice required by this Section is
intended to satisfy any and all notice requirements imposed by law on Landlord
prior to the commencement of an unlawful detainer action and is not in addition
to any such requirement;
16.2.6 (i) If Tenant makes a general assignment or general
arrangement for the benefit of creditors; (ii) if Tenant files a petition for
adjudication of bankruptcy or for reorganization or rearrangement or any similar
proceeding; (iii) if a petition for adjudication of bankruptcy or for
reorganization or rearrangement is filed against Tenant and is not dismissed
within forty-five (45) days; (iv) if a trustee or receiver is appointed to take
possession of substantially all of Tenant's assets located at the Premises or of
Tenant's interest in this Lease and possession is not restored to Tenant within
forty-five (45) days; or (v) if substantially all of Tenant's assets located at
the Premises or of Tenant's interest in this Lease is subjected to attachment,
execution or other judicial seizure which is not discharged within forty-five
(45) days. If a court of competent jurisdiction determines that any of the acts
described in this subsection is not a default under this Lease, and a trustee is
appointed to take possession (or if Tenant remains a debtor in possession) and
such trustee or Tenant transfers Tenant's interest hereunder, then Landlord
shall receive, as Additional Rent, the difference between the Rent (or any other
consideration) paid in connection with such assignment or sublease and the Rent
payable by Tenant hereunder.
16.3 REMEDIES. On the occurrence of any default by Tenant,
Landlord may, at any time thereafter, with or without notice or demand and
without limiting Landlord in the exercise of any right or remedy which Landlord
may have:
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16.3.1 Terminate Tenant's right to possession of the
Premises by any lawful means, in which case this Lease shall terminate and
Tenant shall immediately surrender possession of the Premises to Landlord. In
such event Landlord shall have the immediate right to re-enter the Premises and
remove all persons and property and such property may be removed and stored in a
public warehouse or elsewhere at the cost of, and for the account of Tenant, all
without service of notice or resort to legal process and without being deemed
guilty of trespass, or becoming liable for any loss or damage which may be
occasioned thereby; and Landlord shall be entitled to recover from Tenant all
damages incurred by Landlord by reason of Tenant's default, including (i) the
worth at the time of the award of all Base Monthly Rent, Additional Rent and
other charges which were earned or were payable at the time of the termination;
(ii) the worth at the time of the award of the amount by which the unpaid Base
Monthly Rent, Additional Rent and other charges which would have been earned or
were payable after termination until the time of the award exceeds the amount of
such rental loss that Tenant proves could have been reasonably avoided; (iii)
the worth at the time of the award of the amount by which the unpaid Base
Monthly Rent, Additional Rent and other charges which would have been payable
for the balance of the term after the time of award exceeds the amount of such
rental loss that Tenant proves could have been reasonably avoided; and (iv) any
other amount necessary to compensate Landlord for all the detriment proximately
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, including,
but not limited to, any costs or expenses incurred by Landlord in maintaining or
preserving the Premises after such default, the cost of recovering possession of
the Premises, expenses of reletting, including, without limitation, necessary
renovation or alteration of the Premises, Landlord's reasonable attorneys' fees,
and any real estate commissions or other such fees paid or payable. Any such
sums which are based on percentages of income, increased costs or other data
shall be reasonable estimates or projections computed by Landlord on the basis
of the amounts thereof accruing during the twenty-four (24) month period
immediately prior to the default, except that if it becomes necessary to compute
such sums before a twenty-four (24) month period has expired, then the
computation shall be made on the basis of the amounts accruing during such
shorter period. As used in subsections (i) and (ii) above, the "worth at the
time of the award" is computed by allowing interest on unpaid amounts at the
rate of ten percent (10%) per annum, but if such rate exceeds the maximum
interest rate permitted by law, such rate shall be reduced to the highest rate
allowed by law under the circumstances. As used in subsection (iii) above, the
"worth at the time of the award" is computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of the
award, plus two percent (2%). If Tenant shall have abandoned the Premises,
Landlord shall have the option of (a) retaking possession of the Premises and
recovering from Tenant the amount specified in this Section 16.3.1, or (b)
proceeding under Section 16.3.2 below;
16.3.2 Maintain Tenant's right to possession, in which case
this Lease shall continue in effect whether or not Tenant shall have abandoned
the Premises. In such event, Landlord shall be entitled to enforce all of
Landlord's rights and remedies under this Lease, including the right to recover
the Rent as it becomes due hereunder; and/or
16.3.3 Whether or not Landlord elects to terminate this
Lease on account of any default by Tenant, Landlord shall have all rights and
remedies at law or in equity including, but not limited to, the right to
re-enter the Premises, and Landlord shall have the right to terminate any and
all subleases, licenses, concessions or other arrangements for possession
entered into by Tenant and affecting the Premises or may, in Landlord's sole
discretion, succeed to Tenant's interest in such subleases, licenses,
concessions or arrangements. In the event of Landlord's election to succeed to
Tenant's interest in any such subleases, licenses, concessions or arrangements,
Tenant shall, as of the date of notice by Landlord of such election, have no
further right to or interest in the Rent or other consideration receivable
thereunder.
16.4 THE RIGHT TO RELET THE PREMISES. Should Landlord elect to
re-enter, as herein provided, or should it take possession pursuant to legal
proceedings or pursuant to any notice provided for by law, it
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may either terminate this Lease or it may from time to time without terminating
this Lease, make such alterations and repairs as may be necessary in order to
relet the Premises, and relet said Premises or any part thereof for such term or
terms (which may be for a term extending beyond the Lease Term) and at such
rental or rentals and upon such other terms and conditions as Landlord in its
sole discretion may deem advisable; upon each such reletting all rentals
received by the Landlord from such reletting shall be applied, first, to the
repayment of any indebtedness other than Rent due hereunder from Tenant to
Landlord; second, to the payment of any costs and expenses of such reletting,
including brokerage fees and attorneys' fees and of costs of such alterations
and repairs; third, to the payment of Rent due and unpaid hereunder, and the
residue, if any, shall be held by Landlord and applied in payment of future Rent
as the same may become due and payable hereunder. If such rentals received from
such reletting during any month are less than that to be paid during that month
by Tenant hereunder, Tenant shall pay any such deficiency to Landlord. Such
deficiency shall be calculated and paid monthly. No such re-entry or taking
possession of said Premises by Landlord shall be construed as an election on its
part 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.
16.5 WAIVER OF RIGHTS OF REDEMPTION. Tenant hereby expressly
waives any and all rights of redemption granted by or under any present or
future laws in the event of Tenant being evicted or dispossessed for any cause,
or in the event of Landlord obtaining possession of the Premises, by reason of
the violation by Tenant of any of the covenants or conditions of this Lease, or
otherwise.
16.6 CUMULATIVE REMEDIES. Landlord's exercise of any right or
remedy shall not prevent it from exercising any other right or remedy which may
be provided by law or this Lease, whether or not stated in this Lease. The
termination of this Lease under this Article 16 shall not release Tenant from
obligations arising as a result of any acts or omissions occurring prior to such
expiration or termination, including, without limitation, any indemnity
obligations of Tenant and any obligations of Tenant under Article 7 of this
Lease and all such obligations shall survive such termination.
16.7 ADDITIONAL REMEDIES UPON DEFAULT. In addition to any rights
or remedies hereinbefore or hereinafter conferred upon Landlord under the terms
of this Lease, the following remedies and provisions shall specifically apply in
the event Tenant engages in any one or more of the acts contemplated by the
provisions of Section 16.2.8 of this Lease:
16.7.1 In all events, any receiver or trustee in bankruptcy
shall either expressly assume or reject this Lease within sixty (60) days
following the entry of an "Order for Relief" or within such earlier time as may
be provided by applicable law;
16.7.2 In the event of an assumption of this Lease by a
debtor or by a trustee, such debtor or trustee shall within fifteen (15) days
after such assumption (i) cure any default or provide adequate assurance that
defaults will be promptly cured; (ii) compensate Landlord for actual monetary
loss or provide adequate assurance that compensation will be made for actual
monetary loss, including, but not limited to, all attorneys' fees and costs
incurred by Landlord resulting from any such proceedings; and (iii) provide
adequate assurance of future performance;
16.7.3 Where a default exists under this Lease, the trustee
or debtor assuming this Lease may not require Landlord to provide services or
supplies incidental to this Lease before its assumption by such trustee or
debtor, unless Landlord is compensated under the terms of this Lease for such
services and supplies provided before the assumption of such Lease;
16.7.4 The debtor or trustee may only assign this Lease if
(i) it is assumed and assignee agrees to be bound by this Lease, (ii) adequate
assurance of future performance by the assignee is
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provided, whether or not there has been a default under this Lease, and (iii)
the debtor or trustee has received Landlord's prior written consent pursuant to
the provisions of Section 13.1 of this Lease. Any consideration paid by any
assignee in excess of the rental reserved in this Lease shall be the sole
property of, and paid to, Landlord;
16.7.5 Landlord shall be entitled to the fair market value
for the Premises and the services provided by Landlord (but in no event less
than the Rent reserved in this Lease) subsequent to the commencement of a
bankruptcy event;
16.7.6 Any Security Deposit given by Tenant to Landlord to
secure the future performance by Tenant of all or any of the terms and
conditions of this Lease shall be automatically transferred to Landlord upon the
entry of an "Order of Relief"; and
16.7.7 The parties agree that Landlord is entitled to
adequate assurance of future performance of the terms and provisions of this
Lease in the event of an assignment under the provisions of the Bankruptcy Code.
For purposes of any such assumption or assignment of this Lease, the parties
agree that the term "adequate assurance" shall include, without limitation, at
least the following:
a. Any proposed assignee must have, as demonstrated to
Landlord's satisfaction, a net worth (as defined in accordance with generally
accepted accounting principles consistently applied) in an amount sufficient to
assure that the proposed assignee will have the resources to meet the financial
responsibilities under this Lease, including the payment of all Rent. The
financial condition and resources of Tenant are material inducements to Landlord
entering into this Lease.
b. Any proposed assignee must not be engaged in any
business or activity which it will conduct on the Premises and which will
subject the Premises to contamination by any Hazardous Materials.
c. Any proposed assignee must agree in writing to be
bound by all the terms and provisions of this Lease.
16.8 DEFAULT BY LANDLORD. Landlord shall not be in default unless
Landlord fails to perform obligations required of Landlord within a reasonable
time, but in no event later than thirty (30) days after written notice by Tenant
to Landlord and to the holder of any first mortgage or deed of trust covering
the Premises whose name and address shall have theretofore been furnished to
Tenant in writing, specifying wherein Landlord has failed to perform such
obligation; provided, however, that if the nature of Landlord's obligation is
such that more than thirty (30) days are required for performance, then Landlord
shall not be in default if Landlord commences performance within such thirty
(30) day period and thereafter diligently prosecutes the same to completion.
16.9 LANDLORD'S CURE. All covenants and agreements to be kept or
performed by Tenant under this Lease shall be performed by Tenant at Tenant's
sole cost and expense and without any reduction or abatement of Base Monthly
Rent, Additional Rent or any other Rent payable under the Lease except for any
abatement specifically permitted under Article 14 of this Lease. If Tenant shall
default in the performance of its obligations under this Lease, Landlord may,
but shall not be obligated to, make any such payment or perform any such act on
Tenant's part without waiving its right based upon any default of Tenant and
without releasing Tenant from any obligations hereunder and Tenant shall, within
fifteen (15) days after delivery by Landlord to Tenant of statements therefor
reimburse Landlord for all such expenditures, losses, costs, liabilities,
damages and expenses. All sums so paid by Landlord and all necessary incidental
costs, and interest thereon at the Lease Interest Rate accruing from the date
paid or incurred by Landlord until reimbursed to Landlord by Tenant, shall be
payable to Landlord by Tenant
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as Rent on demand and Tenant covenants to pay all such sums. Tenant's
obligations under this Section shall survive the expiration or sooner
termination of the Lease Term.
ARTICLE 17
PROTECTION OF CREDITORS
17.1 SUBORDINATION. Landlord shall have the right to require
Tenant to subordinate this Lease to any ground lease, deed of trust, mortgage or
the Declarations encumbering the Premises, any advances made on the security
thereof and any renewals, modifications, consolidations, replacements or
extensions thereof, whenever made or recorded. Landlord may, by written notice
to Tenant, subordinate this Lease to any new Declarations. If any beneficiary
under a deed of trust or mortgagee under a mortgage elects to have this Lease
prior to the lien of its deed of trust or mortgage and gives written notice
thereof to Tenant, this Lease shall be deemed prior to such deed of trust or
mortgage whether this Lease is dated prior or subsequent to the date of said
deed of trust or mortgage or the date of recording thereof. As a condition to
any such subordination, Landlord's lender shall provide to Tenant a commercially
reasonable nondisturbance agreement (which may be part of a subordination and
attornment agreement) recognizing Tenant's right to possession of the Premises
so long as Tenant is not in default under this Lease beyond any applicable cure
period.
17.2 ATTORNMENT. If Landlord's interest in the Premises is
acquired by any ground lessor, beneficiary under a deed of trust, mortgagee, or
purchaser at a foreclosure sale, or by any other person or entity, as a result
of any other transfer by Landlord, Tenant shall attorn to the transferee of or
successor to Landlord's interest in the Premises and recognize such transferee
or successor as Landlord under this Lease. Tenant waives the protection of any
statute or rule of law which gives or purports to give Tenant any right to
terminate this Lease or surrender possession of the Premises upon the transfer
of Landlord's interest.
17.3 SIGNING OF DOCUMENTS. Tenant shall sign and deliver any
instrument or documents necessary or appropriate to effectuate or evidence any
such attornment or subordination or agreement to do so. If Tenant fails to do so
within ten (10) days after written request, such failure shall constitute a
default under this Lease entitling Landlord to terminate this Lease.
17.4 ESTOPPEL CERTIFICATES.
17.4.1 Upon either party's written request ("Requesting
Party"), the other party ("Responding Party") shall execute, acknowledge and
deliver to the Requesting Party a written statement certifying: (i) that none of
the terms or provisions of this Lease have been changed (or if they have been
changed, stating how they have been changed); (ii) that this Lease has not been
canceled or terminated and is in full force and effect; (iii) the last date of
payment of the Base Monthly Rent, and other charges and the time period covered
by such payment; (iv) that the Requesting Party is not in default under this
Lease (or, if the Requesting Party is claimed to be in default, stating why) and
(v) such other statements as reasonably required by the Requesting Party, or any
lender or prospective lender, investor or purchaser. The Responding Party shall
deliver such statement to the Requesting Party within ten (10) days after the
Requesting Party's request. Any such statement by the Responding Party may be
given by the Requesting Party to any prospective purchaser or encumbrancer of
the Premises. Such purchaser or encumbrancer may rely conclusively upon such
statement as true and correct.
17.4.2 If the Responding Party does not deliver such
statement to the Requesting Party within such ten (10) day period and the
Requesting Party's written request specifically states "The failure to respond
to the request within ten (10) days might cause a default under the Lease" then
such failure
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shall constitute a default under this Lease. Further, the Requesting Party and
any prospective purchaser or encumbrancer, may conclusively presume and rely
upon the following facts: (i) that the terms and provisions of this Lease have
not been changed except as otherwise represented by the Requesting Party; (ii)
that this Lease has not been canceled or terminated except as otherwise
represented by the Requesting Party; (iii) that not more than one month's Base
Monthly Rent or other charges have been paid in advance; and (iv) that Landlord
is not in default under this Lease. In such event, the Requesting Party shall be
estopped from denying the truth of such facts.
17.5 TENANT'S FINANCIAL CONDITION. Within ten (10) days after
written request from Landlord, Tenant shall deliver to Landlord such financial
statements as are reasonably required by Landlord to verify the net worth of
Tenant, or any assignee, subtenant, or guarantor of Tenant. In addition, Tenant
shall deliver to any lender or proposed purchaser of the Premises or any portion
of the Project designated by Landlord any financial statements required by such
lender or purchaser to facilitate the sale, financing or refinancing of the
Premises or any portion of the Project. Tenant represents and warrants to
Landlord that each such financial statement is a true and accurate statement as
of the date of such statement. All financial statements shall be confidential
and shall be used only for the purposes set forth herein. Each such financial
statement shall be executed by Tenant and shall be certified by Tenant to be
true and correct.
17.6 MORTGAGEE PROTECTION CLAUSE. Tenant agrees to give any
mortgagees and/or trust deed holders, by registered mail, a copy of any notice
of default served upon the Landlord, provided that prior to such notice Tenant
has been notified in writing of the addresses of such mortgagees and/or trust
deed holders. Tenant further agrees that if Landlord shall have failed to cure
such default within the time provided for in this Lease, then the mortgagees
and/or trust deed holders shall have an additional thirty (30) days within which
to cure such default or if such default cannot be cured within that time, then
such additional time as may be necessary if within such thirty (30) days any
mortgagee and/or trust deed holder has commenced and is diligently pursuing the
remedies necessary to cure such default (including but not limited to
commencement of foreclosure proceedings if necessary to effect such cure), in
which event this Lease shall not be terminated while such remedies are being so
diligently pursued.
ARTICLE 18
TERMINATION OF LEASE
18.1 CONDITION UPON TERMINATION. Upon the termination of this
Lease, Tenant shall surrender the Premises to Landlord, broom clean and in the
same condition as received except for ordinary wear and tear which Tenant was
not otherwise obligated to remedy under any provision of this Lease. However,
Tenant shall not be obligated to repair any damage which Landlord is required to
repair under Article 14 of this Lease. No act done by Landlord or any agent or
employee of Landlord during the Lease Term shall be deemed to constitute an
acceptance by Landlord of a surrender of the Premises unless such intent is
specifically acknowledged in writing and signed by Landlord. The delivery of
keys to the Premises to Landlord or any agent or employee of Landlord shall not
constitute a surrender of the Premises or effect a termination of this Lease,
whether or not the keys are thereafter retained by Landlord and, notwithstanding
such delivery, Tenant shall be entitled to the return of such keys at any
reasonable time upon request until this Lease shall have been properly
terminated. The voluntary or other surrender of this Lease by Tenant, whether
accepted by Landlord or not, or a mutual termination hereof, shall not work a
merger, and, at the option of Landlord, shall operate as an assignment to
Landlord of all subleases or subtenancies affecting the Premises.
18.2 NON-REMOVAL BY TENANT. All permanently attached Alterations,
including signs and sign cases, made by Tenant, or made by the Landlord on the
Tenant's behalf and for which Tenant has paid
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Landlord in accordance with this Lease, shall remain the property of the Tenant
for the Lease Term. Such permanently attached Alterations shall not be removed
from the Premises. At the expiration or termination of this Lease Term, all such
permanently attached Alterations become the property of the Landlord; provided,
however, Landlord may require that Tenant, at Tenant's sole cost, remove any
such Alterations (but not including the Tenant Improvements constructed by
Landlord or Tenant Work (as defined in the Work Letter)) or utility
installations at the expiration of the Lease Term and to restore the Premises to
their prior condition. In removing any such Alterations as may be required by
the Landlord, the Tenant shall remove any of its personal property and shall
repair any damage to the Premises caused by such removal and, prior to such
removal, Tenant shall post a bond or other security as may be required by the
Landlord in order to insure the Landlord that the Premises will be repaired in a
prompt and workmanlike manner. If Tenant fails promptly to commence and
diligently pursue to completion such removal and restoration required by the
provisions of this Article 18, Tenant shall pay to Landlord the cost of such
removal and restoration, such cost to include a reasonable charge for Landlord's
overhead. Tenant shall continue to pay Rent for the portion of the Premises not
completely vacated during such time together with all costs and expenses
incurred by Landlord in removing, storing and disposing of such property
together with all costs and expenses of repair to and clean up of the Premises.
Thereafter, Landlord may retain or dispose of in any manner the personal
property not so removed, without liability to Tenant.
18.3 ABANDONED PROPERTY. Any property of Tenant not removed by
Tenant upon the expiration of the Lease Term or any period of holding over (or
within ten (10) days after a termination by reason of Tenant's default) shall be
considered abandoned, and Landlord may remove any or all such items and dispose
of the same in any manner or store the same in a public warehouse or elsewhere
for the account of and at the expense and risk of Tenant. If Tenant shall fail
to pay the cost of storing any such property after it has been stored for a
period of thirty (30) days or more, Landlord may sell any or all of such
property at public or private sale, in such manner and at such times and places
as Landlord, in its sole discretion, may deem proper, without notice to or
demand upon Tenant. Landlord shall apply the proceeds of such sale (a) first, to
the costs and expenses of such sale, including reasonable attorneys' fees
actually incurred; (b) second, to the payment of the expense of or charges for
removing and storing any such property; and (c) the balance to Landlord.
18.4 LANDLORD'S ACTIONS ON PREMISES. Tenant hereby waives all
claims for damages or other liability in connection with Landlord's re-entering
and taking possession of the Premises or removing, retaining, storing or selling
the property of Tenant as herein provided, and Tenant hereby indemnifies and
holds Landlord and Landlord's Indemnitees harmless from any such damages or
other liability, and no such re-entry shall be considered or construed to be a
forcible entry.
18.5 HOLDING OVER. Tenant shall vacate the Premises upon the
expiration or earlier termination of this Lease. Tenant shall reimburse Landlord
for and indemnify Landlord and Landlord's Indemnitees against all damages
incurred by Landlord from any delay by Tenant in vacating the Premises. If
Tenant remains in possession of all or any part of the Premises after the
expiration of the Lease Term with or without the express or implied consent of
Landlord, such tenancy shall be from month-to-month only and not a renewal
hereof or an extension for any further term, and in such case, Base Monthly Rent
then in effect shall be increased by thirty percent (30%) and other monetary
sums due hereunder shall be payable in the amount and at the time specified in
this Lease, and such month-to-month tenancy shall be subject to every other
term, covenant and agreement contained herein, except that the month-to-month
tenancy will be terminable on thirty (30) days notice given at any time by
either party.
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ARTICLE 19
MISCELLANEOUS PROVISIONS
19.1 OBLIGATION TO REFRAIN FROM DISCRIMINATION. The Tenant herein
covenants by and for itself, its successors and assigns, and all persons
claiming under or through them, and this Lease is made and accepted upon and
subject to the following conditions:
That there shall be no discrimination against or segregation of
any person or group of persons, on account of sex, race, color, creed, religion,
national origin, or ancestry, in the leasing, subleasing, transferring, use,
occupancy, tenure or enjoyment of the land herein leased nor shall the Tenant
itself, or any person claiming under or through it, establish or permit such
practice or practices of discrimination or segregation with reference to the
selection, location, number, use or occupancy of tenants, lessees, sublessees,
subtenants or vendees in the land herein leased.
19.2 SUCCESSORS. Subject to limitations expressed elsewhere in
this Lease, all rights and liabilities herein given to, or imposed upon, the
respective parties hereto shall extend to and bind the several respective heirs,
executors, administrators, successors, and assigns of the said parties; and if
there shall be more than one Tenant, they shall all be bound jointly and
severally by the terms, covenants and agreements herein. No rights, however,
shall inure to the benefit of any assignee of Tenant unless the assignment to
such assignee has been approved by Landlord in writing as provided in Article 13
hereof.
19.3 SEVERABILITY. A determination by a court of competent
jurisdiction that any provision of this Lease or any part thereof is illegal or
unenforceable shall not cancel or invalidate the remainder of such provision or
this Lease, which shall remain in full force and effect.
19.4 INTERPRETATION. The captions of the Articles or Sections of
this Lease are to assist the parties in reading this Lease and are not a part of
the terms or provisions of this Lease. Whenever required by the context of this
Lease, the singular shall include the plural and the plural shall include the
singular. The masculine, feminine and neuter genders shall each include the
other. In any provision relating to the conduct, acts or omissions of Tenant,
the term "Tenant" shall include Tenant's agents, employees, contractors,
invitees, successors or others using the Premises with Tenant's expressed or
implied permission.
19.5 OTHER TENANCIES. Landlord reserves the absolute right to
effect such other tenancies in the Project as Landlord, in the exercise of its
sole business judgment, shall determine to best promote the interest of the
Project. Tenant does not rely on the fact, nor does Landlord represent, that any
specific tenant or type or number of tenants shall, during the term of this
Lease, either (i) enter into a lease for any space in the Project or (ii)
continue to lease any space in the Project under any lease which is in effect as
of the date of this Lease, or that any tenant under any lease in effect as of
the date of this Lease will not assign or transfer its interest under its lease
or change the use of the premises under such lease. By executing this Lease,
Tenant acknowledges that Landlord has not made any representations, warranties
or statements as to any of the foregoing and agrees that the occurrence of any
of the foregoing or any similar event shall not affect Tenant's obligations
under this Lease.
19.6 ENTIRE AGREEMENT. Any Exhibits, Addenda and schedules
attached hereto shall be incorporated herein as though fully set forth herein.
This Lease and the Exhibits, Addenda and schedules, if any, attached hereto and
forming a part hereof, set forth all the covenants, promises, agreements,
conditions and understandings, either oral or written, between Landlord and
Tenant concerning the Premises and there are no covenants, promises, agreements,
conditions or understandings, either oral, or
written, between them other than are herein set forth. Except as herein
otherwise provided, no subsequent
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alteration, amendment, change or addition to this Lease shall be binding upon
Landlord or Tenant unless reduced to writing and signed by the party to be
charged with their performance.
19.7 LANDLORD'S LIABILITY. As used in this Lease, the term
"Landlord" means only the current owner or owners of the fee title to the
Premises or the leasehold estate under a ground lease of the Premises at the
time in question. Each Landlord is obligated to perform the obligations of
Landlord under this Lease only during the time such Landlord owns such interest
or title. Any Landlord who transfers its title or interest is relieved of all
liability with respect to the obligations of Landlord under this Lease to be
performed on or after the date of transfer. However, each Landlord shall deliver
to its transferee all funds previously paid by Tenant if such funds have not yet
been applied under the terms of this Lease. The obligations of Landlord under
this Lease do not constitute personal obligations of Landlord, or its partners,
directors, employees, officers, members, managers or shareholders and Tenant
shall look solely to the Project and to no other assets of Landlord for
satisfaction of any liability with respect to this Lease and will not seek
recourse against the partners, directors, officers, members, managers or
shareholders of Landlord herein, nor against any of their personal assets for
such satisfaction.
19.8 NOTICES. All notices required or permitted under this Lease
shall be in writing and shall be personally delivered or sent by certified mail,
return receipt requested, postage prepaid or by overnight courier marked for
delivery next Business Day. Notices to Tenant shall be delivered to the address
specified in Item 5 of the Basic Terms, except that upon Tenant's taking
possession of the Premises, the Premises shall be Tenant's address for notice
purposes. Notices to Landlord shall be delivered to the address specified in
Item 3 of the Basic Terms or such other address as may be instructed by
Landlord. All notices shall be effective upon personal delivery or three (3)
Business Days after deposit in the U.S.
Mail or one (1) Business Day after deposit with an overnight courier.
19.9 WAIVERS. All waivers must be in writing and signed by the
waiving party. Landlord's failure to enforce any provision of this Lease or its
acceptance of Rent shall not be a waiver and shall not prevent Landlord from
enforcing that provision or any other provision of this Lease in the future. No
statement on a payment check from Tenant or in a letter accompanying a payment
check shall be binding on Landlord. Landlord may, with or without notice to
Tenant, negotiate such check without being bound to the conditions of such
statement.
19.10 NO RECORDATION. Tenant shall not record this Lease or a
memorandum hereof without prior written consent from Landlord. However, Landlord
may require that a "Short Form" memorandum of this Lease be executed by both
parties and recorded.
19.11 CHOICE OF LAW. The internal laws without regard to choice
of law rules of the State of California shall govern this Lease.
19.12 CORPORATE AUTHORITY; PARTNERSHIP AUTHORITY. If Tenant is a
corporation, each person signing this Lease on behalf of Tenant represents and
warrants that he or she has full authority to do so and that this Lease binds
the corporation. Concurrently with execution of this Lease, Tenant shall deliver
to Landlord a certified copy of a resolution of Tenant's Board of Directors
authorizing the execution of this Lease or other evidence of such authority
reasonably acceptable to Landlord. If Tenant is a partnership, each person
signing this Lease for Tenant represents and warrants that he or she is a
general partner of the partnership, that he or she has full authority to sign
for the partnership and that this Lease binds the partnership and all general
partners of the partnership. Tenant shall give written notice to Landlord of any
general partner's withdrawal or addition. Concurrently with execution of this
Lease, Tenant shall deliver to Landlord a copy of Tenant's recorded statement of
partnership or certificate of limited partnership.
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19.13 NO PARTNERSHIP. Landlord shall not by virtue of this Lease,
in any way or for any purpose, be deemed to have become a partner of Tenant in
the conduct of its business, or otherwise, or joint venturer or a merger of a
joint enterprise with Tenant, nor is Tenant an agent of Landlord for any reason
whatsoever.
19.14 JOINT AND SEVERAL LIABILITY. All parties signing this Lease
as Tenant shall be jointly and severally liable for all obligations of Tenant.
19.15 ATTORNEYS' FEES. If either party commences litigation
against the other for the specific performance of this Lease, the interpretation
of this Lease, for damages for the breach hereof or otherwise for enforcement of
any remedy hereunder, the parties hereto agree to and hereby do waive any right
to a trial by jury and, in the event of any such commencement of litigation, the
prevailing party shall be entitled to recover from the other party such costs
and reasonable attorneys' fees as may have been incurred. Further, if Landlord
is named as a defendant in any suit brought against Tenant in connection with or
arising out of Tenant's occupancy hereunder, Tenant shall be obligated to pay to
Landlord, in addition to all other amounts for which Tenant is obligated
hereunder, all of Landlord's reasonable costs and expenses incurred in
connection with any such acts, including reasonable attorneys' fees.
19.16 LENDER MODIFICATION. If, in connection with obtaining any
loans including but not limited to a construction loan, permanent financing or
refinancing for the Project, a lender shall request reasonable modifications to
this Lease as a condition to such financing, Tenant will not unreasonably
withhold, delay or defer its consent thereto, provided that such modifications
do not increase the obligations of Tenant hereunder or materially adversely
affect the leasehold interest hereby created or Tenant's rights hereunder.
19.17 BROKERS. Landlord shall pay Tenant's Broker a commission
pursuant to a separate agreement between Landlord and Tenant's Broker. Landlord
and Tenant hereby warrant to each other that they have had no dealings with any
real estate broker or agent in connection with the negotiation of this Lease,
excepting only the real estate brokers or agents specified in Item 12 of the
Basic Terms, and that they know of no other real estate broker or agent who may
be entitled to a commission in connection with this Lease. Each party agrees to
indemnify and defend the other party against and hold the other party harmless
from any and all claims, demands, losses, liabilities, lawsuits, judgments, and
costs and expenses (including, without limitation, reasonable attorneys' fees)
with respect to any leasing commission or equivalent compensation alleged to be
owing on account of the indemnifying party's dealings with any real estate
broker or agent other than that specified herein.
19.18 FORCE MAJEURE. If Landlord cannot perform any of its
obligations due to events beyond Landlord's control, the time provided for
performing such obligations shall be extended by a period of time equal to the
duration of such events. Events beyond Landlord's control include, but are not
limited to, acts of God, war, civil commotion, labor disputes, strikes, fire,
flood or other casualty, shortages of labor or material, government regulation
or restriction and weather conditions.
19.19 TENANT OBLIGATIONS SURVIVE TERMINATION. All obligations of
Tenant hereunder not fully performed as of the expiration or earlier termination
of the Lease Term shall, survive the expiration or earlier termination of the
Lease Term, including, without limitation, all payment obligations and all
obligations concerning the condition of the Premises.
19.20 TENANT'S WAIVER. Any claim which Tenant may have against
Landlord for default in performance of any of the obligations herein contained
to be kept and performed by Landlord shall be deemed waived unless such claim is
asserted by written notice thereof to Lessor within ten (10) days of
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commencement of the alleged default or of accrual of the cause of action and
unless suit be brought thereon within six (6) months subsequent to the accrual
of such cause of action.
19.21 SUBMISSION OF LEASE. Submission of this instrument for
examination or signature by Tenant does not constitute a reservation of or an
option for lease, and it is not effective as a lease or otherwise until
execution and delivery by both Landlord and Tenant.
ADDITIONAL PROVISIONS ARE SET FORTH IN THE EXHIBITS AND ADDENDA
ATTACHED HERETO.
Landlord and Tenant have signed this Lease at the place and on
the dates specified adjacent to their signatures below and have initialled all
Exhibits and Addenda which are attached to or incorporated by reference in this
Lease.
LANDLORD:
Dated:12/9/94 The Campus, LLC,
_____________ a California limited liability company
By: Newport National Corporation,
a California corporation
Its: Manager
By: /s/ Scott R. Brusseau
----------------------------------
Name: Scott R. Brusseau
Title: President
By:_______________________________________
Name:_____________________________________
Title:____________________________________
By:_______________________________________
Name:_____________________________________
Title:____________________________________
TENANT:
Dated:__12/9/94______ ViaSat, Inc., a California corporation
By:____/s/ Greg Monahan___________________
Name: Greg Monahan
Title: Vice president
By:_______________________________________
Name:_____________________________________
Title:____________________________________
12/8/94 Landlord Initials: __/s/__
Tenant Initials: __/s/__
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EXHIBIT "A"
Site Plan
[To be Attached]
12/8/94 Landlord's Initials:__/s/__
Tenant's Initials:__/s/__
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EXHIBIT "B"
THE CAMPUS
RULES AND REGULATIONS
1. WALKWAYS. The sidewalks, roadways, and other public portions
in the Project shall be used by the Tenant for the purpose solely of ingress and
egress to and from the Premises of the Tenant. Tenant, its employees and agents,
shall not loiter in the entrances or corridors, nor in any way obstruct the
sidewalks, halls, stairways or elevators, and shall use the same only as a means
of ingress and egress for the Premises.
2. CONDITIONS OF PREMISES. The Tenant shall keep the exterior and
interior portion of the Premises, to include all windows, doors, and all other
glass, plate fixtures, and trim in a clean condition. No improvements,
additions, or materials of any kind are permitted to be placed on the outside of
any of the Premises by Tenant.
3. STORAGE OF REFUSE. All waste paper, garbage and refuse shall
be kept in the kind of container specified by Landlord, and shall be placed
outside of the Premises in specified trash containers prepared for collection in
the manner and at the times and places specified by Landlord. Landlord may
implement a recycling program and in such case, Tenant shall deposit refuse in
accordance with any requirements of such recycling program. If Landlord shall
provide or designate a service for picking up refuse and garbage, Tenant shall
use same at Tenant's cost whether billed directly or as part of Common Area
Maintenance Charges.
4. AERIALS. Except as set forth in the Lease, no aerial shall be
erected on the roof or exterior walls of the Premises, or within the Project,
without in each instance, the written consent of the Landlord, which may be
withheld in Landlord's sole discretion. Any aerial so installed without such
written consent shall be subject to removal without notice at any time.
5. CONDUCT. Tenant shall conduct its business in an orderly
manner in the best interests of the Project. No loudspeakers, televisions,
phonographs, radios, or other devices shall be used in a manner so as to be
heard or seen outside of the Premises without the prior written consent of the
Landlord, which may be withheld in Landlord's sole discretion.
6. OUTSIDE AREAS. The outside areas immediately adjoining the
Premises shall be kept clean and free from dirt and rubbish by the Tenant to the
satisfaction of the Landlord and Tenant shall not place or permit any
obstruction or materials in such areas, including, without limitation,
inventory, costs or signage of any type or kind. No exterior storage shall be
allowed without permission in writing from Landlord.
7. PARKING. Tenant and Tenant's employees shall park only in
those portions of the parking area designated for that purpose by Landlord.
Landlord has the right to make changes in the parking procedures and guidelines
from time-to-time, to benefit the Project, in Landlord's sole opinion.
8. PLUMBING. The plumbing facilities shall not be used for any
purpose other than that for which they are constructed, and no foreign substance
of any kind shall be thrown therein, and the expense
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of any breakage, stoppage, or damage resulting from a violation of this
provision shall be borne by Tenant, who shall, or whose employees, agents or
invitees shall have caused it.
9. PEST EXTERMINATORS. Tenant shall use, at Tenant's cost, such
pest extermination contractor as Landlord may direct and at such intervals as
Landlord may require.
10. FLAMMABLE MATERIALS. The Tenant shall not keep or permit to
be kept on the Premises any flammable or combustible fluid, chemical, or
explosive material of any kind. Tenant shall not burn any trash or garbage of
any kind in or about the Premises, or the Project.
11. AUCTIONS. Tenant shall not hold any auction, fire, or
bankruptcy sale in the Premises.
12. NO ANIMALS. Tenant shall not bring into the Premises at the
Project any animals of any type or kind, except animals necessary to assist
persons with disabilities.
13. SAFES. Landlord shall have the right to prescribe the weight,
size and position of all safes and other heavy property brought into the Project
to be located at any location other than the first floor of the Building and
also the times and manner of moving the same in and out of the Project. Safes
and other heavy objects shall, if considered necessary by Landlord, stand on
supports of such thickness as is necessary to properly distribute the weight.
Landlord will not be responsible for loss of or damage to any such safe or
property in any case. All damage done to any part of the Project, its contents,
occupants or visitors by moving or maintaining any such safe or other property
shall be the sole responsibility of Tenant and any expense of said damage or
injury shall be borne by Tenant.
14. SAFETY PROCEDURES. Tenant shall comply with all safety, fire
protection and evacuation procedures and regulations established by Landlord or
any governmental agency.
15. PROTECTION FROM THEFT. Tenant shall assume any and all
responsibility for protecting the Premises from theft, robbery and pilferage,
which includes keeping doors locked and other means of entry to the Premises
closed.
16. WAIVER BY LANDLORD. Landlord may waive any one or more of
these Rules and Regulations for the benefit of any particular tenant or tenants,
but no such waiver by Landlord shall (i) be effective unless in writing, or (ii)
be construed as a waiver of such Rules and Regulations in favor of any other
tenant or tenants, or (iii) prevent Landlord from thereafter enforcing any such
Rules and Regulations against any or all tenants of the Project.
17. CHANGES TO RULES. Landlord reserves the right from time to
time to reasonably amend or supplement the foregoing rules and regulations, and
to adopt and promulgate reasonable additional rules and regulations applicable
to the Premises. Notice of such rules and regulations and amendments and
supplements thereto, if any, shall be given to the Tenant and Tenant agrees to
comply with all such rules and regulations upon receipt of notice. Landlord
shall not be liable in any way to Tenant for any damage or inconvenience caused
by any other tenant's non-compliance with these rules and regulations.
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POOL & SPA RULES AND REGULATIONS
PERSONS USING POOL AND SPA FACILITIES DO SO AT THEIR OWN RISK. MANAGEMENT
ASSUMES NO RESPONSIBILITY FOR ACCIDENT OR INJURY. MANAGEMENT IS NOT
RESPONSIBLE FOR ARTICLES LOST, DAMAGED OR STOLEN.
1. Pool and Spa hours are 6AM to 9PM, Monday through Friday.
2. Pool and Spa are reserved exclusively for use by the Tenants.
3. No children under the age of 14 will be allowed in the Pool at any time,
unless accompanied and supervised by a responsible adult.
4. The use of the Spa is strictly reserved for adults.
5. No glass containers are allowed at any time.
6. No alcoholic beverages shall be consumed or allowed in or around the Pool
or Spa area at any time. No person(s) under the influence of alcohol
is(are) permitted in or near the Pool.
7. No running, jumping, "horseplay," fighting, boisterous or dangerous
conduct, radios, record players, or other musical instruments, and/or any
noisy behavior disturbing to the other Tenants is allowed in the Pool area.
8. Showering is required prior to using the Pool.
9. The use of personal towels over Pool furniture is required when using
suntan oil or other lotions.
10. No toys, innertubes or any other objects whatsoever will be allowed in the
Pool area at any time.
11. Safety equipment is not to be used except in cases of emergency.
12. Pets are not permitted in the Pool area by order of the Health Department.
13. Furniture other than provided by the management shall not be used in the
Pool area. Pool furniture and any other equipment belonging to the premises
shall not be removed at any time.
14. Diving is not allowed at any time.
15. NO LIFEGUARD WILL BE ON DUTY.
16. Remaining in the Spa for longer than thirty (30) minutes is prohibited.
17. Persons using the Pool area are advised to discuss with their physicians
the appropriate use of hats, sunscreen and other protective devises.
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EXHIBIT "C"
THE CAMPUS
WORK LETTER AGREEMENT
[TENANT ALLOWANCE]
The Campus, LLC, a California limited liability company
("Landlord"), and ViaSat, Inc., a California corporation "Tenant", as of this
8th day of December, 1994, are executing simultaneously with this Work Letter
Agreement ("Work Letter"), a written lease (the "Lease") covering the Premises
described in the Lease.
This Work Letter defines the scope of Tenant Improvements (as
defined below) which Landlord shall be obligated to construct or install on the
Premises. If there is a conflict between the terms and provisions of this Work
Letter and the Lease, this Work Letter shall control. Terms which have initial
capital letters and are not otherwise defined in this Letter shall have the
meaning set forth in the Lease.
The parties recognize and acknowledge that this Work Letter will
be applicable for the East Wing and the West Wing at two (2) separate stages.
Upon execution of this Lease, the provisions of this Work Letter shall be
triggered for the West Wing (except as set forth in the next paragraph). Upon
the provision of reasonable assurances by Landlord on or before March 15, 1995,
that the Existing Tenant will abandon the East Wing on or before October 1, 1995
as set forth in Section 2.5 of the Lease, the provisions of this Work Letter
shall be triggered for the East Wing.
The parties also recognize and acknowledge that this Work Letter
will be applicable for the West Wing at two (2) separate stages. With respect to
Phase 1 of the West Wing, the provisions of Section 1 of this Work Letter shall
be triggered immediately. With respect to Phase 2 of the West Wing, the
Construction Drawings for Phase 2 must be completed by Tenant on or before the
date set forth herein.
This Work Letter is a part of the Lease and shall be subject to
all of its terms and conditions, including all definitions contained therein. In
consideration of the mutual covenants hereinafter contained, Landlord and Tenant
mutually agree as set forth below.
SECTION 1
PLANNING AND CONSTRUCTION DOCUMENTS
1.1 SPACE PLAN. If not already approved, a space planner selected
by Tenant and approved by Landlord in Landlord's reasonable discretion, will
prepare a preliminary space plan for the Premises within ten (10) days of the
date of the execution of the Lease. Tenant will cooperate with and submit to
Landlord or the Space Planner information required by the Space Planner
necessary for the Space Planner to prepare a space plan for the Premises which
shall include, without limitation, a layout designation of all counters,
fixtures, and partitioning and their intended use, and the equipment to be
contained therein ("Space Plan"). The Space Plan shall be subject to the
approval of Landlord which approval shall not be unreasonably withheld or
delayed.
Tenant Allowance
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1.2 CONSTRUCTION DOCUMENTS. Based on the approved Space Plan,
Tenant shall cause the preparation of all drawings, plans and specifications
necessary to construct the Tenant Improvements (the "Construction Documents").
The Construction Documents shall be prepared by consultants selected by Tenant
and reasonably approved by Landlord. Tenant shall be responsible for ensuring
that (a) the Construction Drawings for Phase 1 of the West Wing are completed on
or before February 1, 1995, (b) the Construction Drawings for Phase 2 of the
West Wing are completed on or before April 1, 1995, and (c) the Construction
Drawings for the East Wing are completed on or before August 1, 1995.
1.3 TENANT APPROVAL. After Tenant's approval, no significant
changes, modifications or alterations may be made without the prior written
consent of both Landlord and Tenant; provided, however, if any changes are
required (i) by any governmental agency with jurisdiction over the Project (ii)
as a result of field conditions, or (iii) to substitute reasonably equivalent
materials to avoid unanticipated delays, strikes or shortages, then Landlord
shall be authorized to make such changes. The costs of any such changes are to
be included within the Total Cost (as hereinafter defined). Any changes to the
Construction Documents after approval thereof, other than any changes required
under Subsections (i), (ii) and (iii) above, shall constitute a Change Order (as
hereinafter defined).
1.4 SPACE PLAN AND CONSTRUCTION DOCUMENT COSTS. All costs and
fees associated with the preparation of the Space Plan and Construction
Documents, including, without limitation, all consultant or subcontractor design
fees, shall be deducted from the Tenant Improvement Allowance (as hereafter
defined).
SECTION 2
TENANT IMPROVEMENTS
2.1 TENANT IMPROVEMENTS. All improvements for the Premises to be
constructed by Landlord before Landlord delivers possession of the Premises to
Tenant, in substantial conformance with the Construction Documents, shall
constitute the "Tenant Improvements." The Tenant Improvements are and shall
remain Landlord's property and shall be surrendered to Landlord upon expiration
or earlier termination of the Lease in accordance with the provisions of the
Lease.
2.2 PREMISES FURNISHINGS. It is expressly understood that
Landlord's obligation to construct Tenant Improvements in the Premises is
limited to construction of the Tenant Improvements specifically contemplated by
the Construction Documents. Tenant shall be solely responsible for the
performance and expense of the design, layout, provision, delivery and
installation of any furniture, furnishings, equipment, and any other personal
property Tenant will use at the Premises. In arranging for the performance of
any of the work referred to in the preceding sentence, Tenant shall be permitted
to enter the Premises only upon the prior consent of Landlord and shall adopt a
schedule in conformance with the schedule(s) of Landlord's Contractor (as
hereinafter defined) and conduct its work in such a manner as to maintain
harmonious labor relations so as not to interfere unreasonably with or delay the
work of Landlord's contractors in substantially completing the Tenant
Improvements.
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SECTION 3
TENANT IMPROVEMENT ALLOWANCE
3.1 TENANT IMPROVEMENT ALLOWANCE. Landlord has agreed to contribute a
one-time tenant improvement allowance for the cost of preparing the Space
Plan and Construction Documents and toward the cost of constructing the Tenant
Improvements, including any necessary demolition work ("Tenant Improvement
Allowance"), in the amount specified in Item 14 of the Basic Terms of the
Lease, subject to adjustment as set forth in Section 3.2.2 below. The parties
recognize and agree that the Tenant Improvement Allowance will be applied
separately to the East Wing and the West Wing. Tenant shall be solely
responsible for any and all costs of constructing the Tenant Improvements in
excess of the Tenant Improvement Allowance pursuant to the provisions of
Section 3.2.2 below. The total of all costs incurred by Landlord in connection
with the design and construction of the Tenant Improvements shall be referred
to as the "Total Costs." Tenant may, at its option, use any portion of the
Tenant Improvement Allowance in excess of the Total Costs to pay or reimburse
Tenant for the costs of any Tenant Work or costs of moving expenses, including,
but not limited to, labor, material, and equipment required to relocate and/or
install all furnishings, communication equipment and office effects, upon
presentation of bills to Landlord evidencing the cost thereof.
3.2 COST OF TENANT IMPROVEMENT WORK.
3.2.1 OBTAINING COST QUOTATION. At the election of Tenant,
in Tenant's sole discretion, Landlord shall obtain a cost quotation ("Cost
Quotation") to construct the Tenant Improvements based upon the approved
Construction Documents from each of the following general contractors: R.G.
Petty, Si-Mac, Kevin Grant Construction and Newport National Construction Co.
("NNC") to the extent that each of these entities is willing and able to give a
Cost Quotation within a reasonable time period after request by Landlord.
Landlord shall use reasonable efforts to obtain a Cost Quotation from each of
these entities within a reasonable time period. The Cost Quotations shall
include a complete cost breakdown by line item, including without limitation,
architectural and engineering fees, permit fees and other government fees, sales
and use taxes and all other costs to be expended by or on behalf of the Landlord
in connection with the construction and installation of the Tenant Improvements.
Landlord agrees to meet with Tenant, at Tenant's request, to discuss the Cost
Quotations. Within five (5) days after Tenant's receipt of the Cost Quotations,
Tenant shall select the general contractor to construct the Tenant Improvements
("General Contractor") based upon the Cost Quotations and shall give notice
thereof to Landlord. Notwithstanding the above, Tenant shall be required to
select NNC if NNC agrees to match the Cost Quotation given by the General
Contractor selected by Tenant within five (5) days after receipt of such notice
from Tenant.
3.2.2 APPROVAL OF COST QUOTATION BY TENANT. If the Cost
Quotation exceeds the Tenant Improvement Allowance, Tenant shall, within five
(5) Business Days of receipt thereof, either: (i) agree in writing to pay the
cost by which the Cost Quotation exceeds the Tenant Improvement Allowance
("Excess Cost"), or (ii) in cooperation with the Space Planner and Landlord
revise the Construction Documents or Space Plan so that the Cost Quotation is
either (a) no more than the Tenant Improvement Allowance, or (b) in excess of
the Tenant Improvement Allowance by the amount of Excess Cost which Tenant
agrees to pay. If Tenant elects to revise the Construction Documents or Space
Plan in order to reduce the Cost Quotation, the period of time between Tenant's
election to revise the Construction Documents or Space Plan and the approval of
the revised Construction Documents by
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Tenant shall constitute a Tenant Delay (as defined below). If the Cost Quotation
is less than the Tenant Improvement Allowance, the Tenant Improvement Allowance
shall be deemed to be an amount equal to the Cost Quotation. The failure of
Tenant to respond within the five (5) Business Day period shall be a Tenant
Delay. Upon approval by Tenant, Landlord shall be authorized to proceed with the
Tenant Improvements in accordance with the approved Construction Documents. All
costs of revising the Construction Documents, including, without limitation,
re-engineering, estimating, printing of drawings, costs of any space planner,
architect, engineering consultants and other consultants and any other
incidental expenses, shall be chargeable against the Tenant Improvement
Allowance and the Total Cost.
3.3 LANDLORD COSTS FOR TENANT IMPROVEMENTS. All costs incurred by
Landlord in connection with (a) the design, construction and installation of the
Tenant Improvements, (b) any demolition or modification of any existing
improvements as may be necessary to accomplish construction of the Tenant
Improvements in conformance with the Space Plan and the Construction Documents,
or (c) any other measures taken by Landlord which may be reasonably required to
accomplish Landlord's construction of the Tenant Improvements, including but not
limited to Landlord's procurement of bonds, insurance policies and governmental
permits, and Landlord's construction management and/or on-site supervision shall
be charged against the Tenant Improvement Allowance.
3.4 TENANT COSTS FOR TENANT IMPROVEMENTS. Tenant shall deliver to
Landlord at least twenty (20) days prior to the commencement of construction of
the Tenant Improvements cash equal to fifty percent (50%) of the amount of the
Excess Costs. Forty percent (40%) of the Excess Costs shall be paid in cash to
Landlord within ten (10) days after Substantial Completion (as defined below) of
the Tenant Improvements with the remaining ten percent (10%) paid in cash within
ten (10) days after punchlist items are completed. Tenant shall be solely
responsible for all Excess Costs.
SECTION 4
CONSTRUCTION OF TENANT IMPROVEMENTS
4.1 CONSTRUCTION OF TENANT IMPROVEMENTS. After approval of the
Construction Documents, Landlord's Contractor shall use its diligent efforts to
Substantially Complete (as defined below) the Tenant Improvements on or before
the Estimated Lease Commencement Date set forth in the Lease.
4.2 COMPLETION OF TENANT'S IMPROVEMENTS. Landlord shall be
responsible for the construction of the Tenant Improvements in substantial
conformance with the approved Construction Documents. Landlord shall be
authorized to use its discretion and judgment, which discretion and judgment
shall be exercised reasonably, in entering into a construction contract with the
Contractor to construct the Tenant Improvements authorized hereunder. Upon
Substantial Completion (as defined below) of the Tenant Improvements, Landlord
and Tenant shall provide a "punchlist" identifying the corrective work of the
type commonly found on an architectural punchlist with respect to the Tenant
Improvements, which list shall be in Landlord's reasonable discretion based on
whether such items were required by the approved Construction Documents. Within
ten (10) Business Days after delivery of the punchlist, Landlord shall commence
the correction of punchlist items and diligently pursue such work to completion.
The punchlist procedure to be followed by Landlord and Tenant shall in no way
limit Tenant's obligation to occupy the Premises under the Lease nor shall it in
any way excuse Tenant's
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obligation to pay Rent as provided under the Lease, unless such punchlist items
reasonably precludes Tenant from occupying the Premises, as reasonably
determined by Landlord and Tenant.
4.3 SUBSTANTIAL COMPLETION. "Substantial Completion" or
"Substantially Completed" as used herein shall mean both (a) delivery of written
a certificate of Landlord to Tenant certifying the completion of construction of
the Tenant Improvements in the Premises pursuant to the approved Construction
Documents with the exception of minor details of construction installation,
decoration, or mechanical adjustments and punchlist items as certified to by
Landlord and (b) the issuance by the City of Carlsbad of a certificate of
occupancy, a temporary certificate of occupancy or some other authorization
necessary to permit Tenant to occupy and receive the beneficial use of the
Premises. Substantial Completion shall be deemed to have occurred, and
completion of the Tenant Improvements shall be deemed to have occurred,
notwithstanding the requirement to complete "punchlist" items or similar
corrective work. Tenant agrees that if Landlord shall be delayed in causing such
work to be Substantially Completed as a result of any of the events as defined
below (referred to herein as a "Tenant Delay"), then such delay shall be the
responsibility of Tenant, and will result in the Commencement Date of the Term
or, as applicable, the commencement of any portion of Tenant's Base Monthly Rent
obligations hereunder being the earlier of: (i) Tenant's opening of the Premises
for business; (ii) the date of Substantial Completion or (iii) the date when
Substantial Completion would have occurred if there had been no
Tenant Delay, providing that Landlord shall not be required to work on an
overtime basis in order to bring the Premises to Substantial Completion. For the
purposes of this Work Letter, a Tenant Delay is defined as follows: (a) Tenant's
failure to comply with any time frames set forth herein or in the Lease, (b) any
changes in the Construction Documents after the dates set forth in Section 1.2
of Exhibit C requested by Tenant after Landlord's and Tenant's approval of the
Construction Documents, including, without limitation, any changes made to
reduce the Cost Quotation pursuant to Section 3.2.2 of this Work Letter, (c)
Tenant's failure to furnish any documents required herein or approve any item or
any cost estimates as required herein, (d) Tenant's request for materials,
finishes, or installations other than Landlord's Building Standard items, (e)
Tenant's failure to perform any act or obligation imposed on Tenant by the Lease
or this Work Letter as and when requested thereunder or hereunder, or (f) any
other delay otherwise caused by Tenant, its agents, employees or contractors
which operates to delay Landlord's Substantial Completion of the Tenant
Improvements, as reasonably determined by Landlord.
SECTION 5
TENANT WORK
5.1 FINISH WORK. All finish work and decoration and other work
desired by Tenant and not included within the Tenant Improvements as set forth
in the approved Construction Documents, including specifically, without
limitation, all computer systems, telephone systems, telecommunications systems
and other items (the "Tenant Work") shall be furnished and installed by Tenant
at Tenant's sole expense and shall not be chargeable against the Tenant
Improvement Allowance.
5.1.1 CONSENT OF LANDLORD. If any Tenant Work is not set
forth on the approved Construction Documents, Tenant shall secure Landlord's
prior consent for such Tenant Work in the same manner and following the same
procedures provided for in the Lease. Tenant shall not commence the construction
or installation of any improvements on the Premises, including, specifically,
the Tenant Work, without Landlord's prior written approval (which shall not be
unreasonably withheld)
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of: (i) Tenant's contractor, (ii) detailed plans and specifications for the
Tenant Work, and (iii) a certificate(s) of insurance accurately showing that
Tenant's contractor maintains insurance coverage in amounts, types, form and
with companies reasonably acceptable to Landlord. All such certificates or
policies shall be endorsed to show Landlord as an additional insured and
insurance shall be maintained by Tenant or Tenant's contractor at all times
during the performance of the Tenant Work.
5.2 LANDLORD'S OBLIGATIONS. Landlord is under no obligation to
construct or supervise construction of any of the Tenant Work and any inspection
by Landlord shall not be construed as a representation that the Tenant Work is
in compliance with the final plans and specifications therefor or that the
construction will be free from faulty material or workmanship or that the Tenant
Work is in conformance with any building codes or other applicable regulations.
All of the Tenant Work shall be undertaken and performed in strict accordance
with the provisions of the Lease and this Work Letter.
SECTION 6
CHANGE ORDERS
Tenant may authorize changes in the work during construction only
by written instructions to Landlord, or its designated representative, on a form
approved by Landlord. All such changes will be subject to Landlord's prior
written approval, which shall be approved or disapproved by Landlord in its
discretion, which discretion shall be exercised reasonably, within three (3)
Business Days of receipt. Prior to commencing any change, Landlord will prepare
and deliver to Tenant, for Tenant's approval, a change order (the "Change
Order") setting forth the total costs of such change which will include
associated architectural, engineering and construction contractor's fees. Within
two (2) Business Days after delivery to Tenant of the total costs of the Change
Order, Tenant shall deliver notice of approval, together with a cash payment
equal to fifty percent (50%) of the cost of the Change Order to the extent such
cost exceeds any uncommitted balance of the Tenant Improvement Allowance ("First
Payment"). If Tenant fails to deliver written notice of Tenant's approval of
such Change Order and deliver the First Payment within five (5) days after
delivery by Landlord, then Tenant will be deemed to have withdrawn the proposed
Change Order and Landlord will not proceed to perform the change. Upon
Landlord's receipt of Tenant's approval and First Payment, Contractor will
proceed to perform the change. To the extent such cost exceeds any uncommitted
balance of the Tenant Improvement Allowance, forty percent (40%) of the balance
shall be paid to Landlord in cash within ten (10) days after Substantial
Completion and the remaining ten percent (10%) shall be paid in cash within ten
(10) days after the punchlist items are completed.
SECTION 7
RESPONSIBILITY FOR FUNCTION AND MAINTENANCE
Tenant will be responsible for the function and maintenance of
all Tenant Improvements whether or not approved by Landlord or installed by
Landlord at Tenant's request. Landlord's preparation and/or approval of any
design or construction documents will not constitute any representation or
warranty as to the adequacy, efficiency, performance or desirability of the
Tenant Improvements in the Premises.
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SECTION 8
TENANT AND LANDLORD OBLIGATIONS
8.1 ACCESS AND ENTRY. During Landlord's construction of the
Premises, Landlord agrees to provide reasonable access as described herein to
the Premises to Tenant and its agents, for the purpose of installing Tenant's
fixtures, Tenant Work and furniture, so long as such access does not interfere
with the conduct of Landlord's construction activities or affect Landlord's
ability to diligently bring the Premises to Substantial Completion. Landlord
acknowledges that access during the construction of the Tenant Improvements for
purpose of performing Tenant Work is important to Tenant. If Landlord, in its
reasonable discretion, determines that the providing of such access may affect
its ability to bring the Premises to Substantial Completion on the estimated
Commencement Date as set forth in this Lease, Landlord shall have the right to
deny or otherwise restrict such access to Tenant and its agents until
Substantial Completion of the Tenant Improvements. The terms of such access may
require that Tenant and Tenant's agents perform work at times and in the manner
designated by Landlord, including nights, weekends, and holidays. Also, Tenant
and its agents may be required to utilize only certain access areas at certain
times, designated by Landlord. With respect to any approved Tenant Work, Tenant
shall adopt a schedule in conformance with the schedule of Landlord's Contractor
and conduct its work in such a manner as to maintain harmonious labor relations
so as not to interfere unreasonably with or delay the work of Landlord's
Contractor. Tenant's contractors and agents shall be subject to the supervision
of Landlord's construction supervisor.
8.2 RISK OF LOSS. All materials, work, installations and
decorations of any nature brought upon or installed in the Premises before the
Commencement Date shall be at the risk of the party who brought such materials
or items onto the Premises. Neither Landlord nor any party acting on Landlord's
behalf shall be responsible for any damage or loss or destruction of such items
brought to or installed in the Premises by Tenant prior to such date, except in
the event of negligence or willful misconduct on the part of Landlord or any
party acting on Landlord's behalf. As a condition to such early entry, Landlord
may require Tenant to execute a hold harmless agreement, in a form acceptable to
Landlord. Such early occupancy shall be subject to the terms and provisions of
Section 3.4 of the Lease.
8.3 CONFORMANCE WITH LAWS. Tenant shall cause all Tenant Work and
Landlord shall cause all Tenant Improvements to be constructed or installed in
conformity with applicable codes and regulations of governmental authorities
having jurisdiction over the Project and the Premises and valid building permits
and other necessary authorizations from appropriate governmental agencies when
required, which in the case of the Tenant Work, shall be obtained by Tenant at
Tenant's expense. Any Tenant Work not acceptable to the applicable governmental
authority or not reasonably satisfactory to Landlord in accordance with the
standard listed above (unless previously approved by Landlord), shall be
promptly corrected, replaced, or brought into compliance with such applicable
codes and regulations at Tenant's expense. Notwithstanding any failure by
Landlord to object to any such Tenant Work, Landlord shall have no
responsibility therefor.
8.4 LIENS. Tenant shall keep the Premises and Project free from
any mechanics', materialmen's or other liens arising out of (1) any work
performed upon or materials or furniture, fixtures or improvements delivered to
the Premises including but not limited to any Tenant Work performed by or for
Tenant or any person or entity claiming by, through or under Tenant, or (2)
materials furnished or obligations incurred by or for Tenant or any person or
entity claiming by, through or under Tenant.
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Landlord shall have the right at all times to post and keep posted on the
Premises any notices which it deems necessary for its protection from such
liens. If any such liens are filed and are not released of record by payment or
posting of a proper bond within ten (10) days after such filing, Landlord, may,
without waiving its rights and remedies based on such breach by Tenant and
without releasing Tenant from any obligations hereunder or under the Lease,
cause such liens to be released by any means it shall deem proper, including
payment of the claim giving rise to such lien in which event all amounts paid by
Landlord shall immediately be due and payable by Tenant.
SECTION 9
TENANT'S REPRESENTATIVE
Tenant has designated Mr. Gregory D. Monahan as its sole
representative with respect to the matters set forth in this Work Letter, who
shall have full authority and responsibility to act on behalf of Tenant as
required in this Work Letter. Tenant may change its representative under this
Work Letter at any time by providing five (5) days prior written notice to
Landlord. All inquiries, requests, instructions, authorizations and other
communications with respect to matters covered by this Work Letter from Landlord
will be made to Tenant's Representative. Landlord will communicate fully with
Tenant's Representative and will not make any inquiries of or to, and will not
give any instructions or authorizations to, any other employee or agent of
Tenant with regard to matters covered by this Work Letter except to the extent
necessary to preserve the safety of the Premises or Project or persons thereon.
SECTION 10
LANDLORD'S REPRESENTATIVE
Landlord has designated Mr. Scott R. Brusseau as its sole
representative with respect to the matters set forth in this Work Letter, who
shall have full authority and responsibility to act on behalf of Landlord as
required in this Work Letter. Landlord may change its representative under this
Work Letter at any time by providing five (5) days prior written notice to
Tenant. All inquiries, requests, instructions, authorizations and other
communications with respect to the matters covered by this Work Letter from
Landlord will be made to Tenant's representative. Tenant will communicate solely
with Landlord's Representative and will not make any inquiries of or requests
to, and will not give any instructions or authorizations to, any other employee
or agent of Landlord, including Landlord's architect, engineers, and contractors
or any of their agents or employees, with regard to matters covered by this Work
Letter.
SECTION 11
MISCELLANEOUS
11.1 SOLE OBLIGATIONS. Except as herein expressly set forth with
respect to the Tenant Improvements or in the Lease, Landlord has no agreement
with Tenant and has no obligation to do any work with respect to the Premises.
Any other work in the Premises which may be permitted by Landlord pursuant to
the terms and conditions of the Lease, including any alterations or improvements
as contemplated in the Lease, shall be done at Tenant's sole cost and expense
and in accordance with the terms and conditions of the Lease.
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11.2 APPLICABILITY. This Work Letter shall not be deemed
applicable to: (a) any additional space added to the original Premises at any
time, whether by the exercise of any options under the Lease or otherwise, or
(b) any portion of the original Premises or any additions thereto in the event
of a renewal or extension of the original Lease Term, whether by the exercise of
any options under the Lease or any amendment or supplement thereto. The
construction of any additions or improvements to the Premises not contemplated
by this Work Letter shall be effected pursuant to a separate work letter
agreement, in the form then being used by Landlord and specifically addressed to
the allocation of costs relating to such construction.
11.3 AUTHORITY; COUNTERPARTS. Any person signing this Work Letter
on behalf of Tenant warrants and represents that such person has authority to do
so. This Work Letter may be executed in counterparts, each of which shall be
deemed an original, but all of which together constitute one instrument.
11.4 BINDING ON SUCCESSORS. Subject to the limitations on
assignment and subletting contained in the Lease, this Work Letter shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors and assigns.
11.5 LANDLORD'S APPROVAL RIGHTS. Landlord may withhold its
approval of the Space Plan, including any revisions requested by Tenant, the
Construction Documents, Change Orders or other work requested by Tenant which
require work which: (i) exceeds or affects the structural integrity of the
Project, or any part of the heating, ventilating, air conditioning, plumbing,
mechanical, electrical, communication or other systems of the Project; (ii) is
not approved by the holder of any mortgage or deed of trust encumbering the
Project at the time the work is proposed; (iii) would not be approved by a
prudent owner of property similar to the Project; (iv) violates any agreement
which affects the Project or binds Landlord; (v) Landlord reasonably believes
will increase the cost of operation or maintenance of the common areas within or
any of the systems of the Project; (vi) Landlord reasonably believes will reduce
the market value of the Premises or Project at the end of the Lease Term; (vii)
does not conform to applicable building codes or is not approved by any
governmental authority with jurisdiction over the Premises; (viii) is not a
Building Standard item or an item of equal or higher quality; (ix) in Landlord's
determination detrimentally affects the uniform exterior appearance of the
Project; or (x) is reasonably disapproved by Landlord for any other reason not
set forth herein.
11.6 TIME OF THE ESSENCE. Time is of the essence as to each and
every term and provision of this Work Letter. In all instances where Tenant is
required to approve an item, if no written notice of disapproval is given within
the stated time period at the end of said period the item shall automatically be
deemed approved and the next succeeding time period shall commence. Except as
otherwise provided, all references herein to a "number of days" shall mean and
refer to calendar days.
11.7 ATTORNEYS' FEES. In any action to enforce or interpret the
terms of this Work Letter, the party prevailing in that action shall be entitled
to recover its reasonable attorneys' fees and costs of suit, both at trial and
on appeal.
11.8 INCORPORATION. This Work Letter is and shall be incorporated
by reference in the Lease and all of the terms and provisions of the Lease are
incorporated herein for all purposes. Any default by Tenant hereunder also
constitutes a default under the Lease.
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IN WITNESS WHEREOF, the Work Letter has been made and executed as
of the date set forth below.
LANDLORD:
The Campus, LLC,
a California limited liability company
By: Newport National Corporation,
a California corporation
Its: Manager
By:/s/ Scott R. Brusseau
-------------------------------
Name: Scott R. Brusseau
Title: President
TENANT:
Dated:__12/9/94______ ViaSat, Inc., a California corporation
By: /s/ Greg Monahan
---------------------------------------
Name: Greg Monahan
Title: V.P.
By:________________________________________
Name:______________________________________
Title:_____________________________________
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EXHIBIT "D"
TENANT ACCEPTANCE LETTER
[DATE]
[TENANT'S NAME]
[ADDRESS]
Re: [ADDRESS AND SPACE LEASED]
Dear [TENANT'S NAME]:
Please sign below to confirm that you accept the Premises under that certain
Lease Agreement dated _________, by and between The Campus, LLC, and
_________________, [AS AMENDED BY ______________________,] and that the
Commencement Date is ________________________ and the expiration date is
____________________.
Sincerely,
____________________________________
By: ________________________________
Acknowledged and Agreed:
Tenant: _______________________ Date:_________________________
By:__________________________
Name:________________________
Title:_______________________
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EXHIBIT "E"
CADD Diagram
[Building One First Floor]
[To Be Attached]
83
EXHIBIT "E"
CADD Diagram
[Building One Mezzanine]
[To Be Attached]
Page 2 of 2
1
EXHIBIT 10.21
LEASE
Lease made this 21 day of March, 1995 by and between NAGOG
DEVELOPMENT COMPANY, a Massachusetts limited partnership hereinafter referred
to as "Landlord", which expression shall include its successors and assigns
where the context so admits of the one part, and ViaSat, Inc., a California
corporation with a principal place of business at 2290 Cosmos Court, Carlsbad,
California, 92009, hereinafter referred to as "Tenant", which expression shall
include its successors and assigns where the context so admits of the other
part.
WITNESSETH
1. PREMISES. Landlord hereby leases and demises to the Tenant and the
Tenant does hereby hire and take from the Landlord those premises consisting of
2,240 square feet of leasable area, more or less, on the third floor of the
building at 125 Nagog Park, Acton, Massachusetts, 01720, shown outlined in red
on a sketch attached hereto and marked Exhibit A, together with all rights and
appurtenances thereto belonging, herein "Demised Premises". This lease is made
subject to all rights, easements, restrictions and agreements of record, if
any, insofar as now in force and applicable, and local zoning and building laws.
Tenant shall have the right to use in common with Landlord and others
lawfully entitled thereto, the lobby, rest rooms, loading areas, stairways,
sidewalks, parking areas and access ways to the building, herein referred to as
"Common Areas". Included within Tenant's rights to use the Common Areas shall
be its right to use its pro rata share of parking spaces. Landlord reserves the
right to assign particular spaces in the parking areas to particular tenants.
However, should Tenant's ability to part per the allocated spaces be impacted,
then Landlord shall assign to Tenant no less than eight (8) spaces as reserved
for its exclusive use.
2. TERM. To have and to hold the Demised Premises for a term of three
years. Said term shall commence on substantial completion of the tenant
improvements listed on Exhibit B attached hereto or on April 3, 1995, whichever
last occurs, and shall terminate three years thereafter.
3. RENT. Yielding and paying therefor as rent $13.50 per annum per
square foot of rentable area ("Base Rent"). Included in this Base Rent are Base
Real Estate Taxes, Base Common Area Maintenance, and Base Utility charges as
described below. For the Demised Premises consisting of 2,240 square feet of
leasable area, the Base Rent shall be Thirty Thousand, Two Hundred and Forty
and 00/100 ($30,240.00) Dollars per annum payable in equal monthly installments
of Two Thousand, Five Hundred and Twenty and 00/100 ($2,520.00) Dollars due in
each case on the first day of each month in advance, the first such payment to
be made herewith. If the said term commences or terminates on a day other than
the first day of any month, said
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rent shall be equitably apportioned.
The Landlord may collect a "late charge" not to exceed three percent
(3%) of any installment unpaid for ten (10) days after the due date. This right
is in addition to and not in lieu of any other remedies the Landlord may have
by law or as provided in this Lease.
4. TAXES AND COMMON AREA CHARGES. Included in the Base Rent are Base
Real Taxes of $1.00 per annum per square foot and Base Common Area Maintenance
charges of $0.85 per annum per square foot.
Tenant agrees to pay as additional rent its pro rata share of any and
all increases over the Base Real Estate Taxes of such taxes, including any
charges hereafter levied in lieu of, in substitution for or in addition to
such real estate taxes as now constituted and all assessments, including
betterments, levied or assessed against the property of which the Demised
Premises are a part. Said tax payments shall be equitably apportioned for any
portion of a year at the beginning or end of the term hereof. The same shall be
additional rent. Tenant shall make equal monthly payments on account of such
taxes to be held by Landlord equal to one-twelfth of the taxes imposed upon the
property of which the Demised Premises are a part for the prior tax year. Upon
determination of the actual taxes, Tenant shall within ten (10) days after
presentation of a bill therefor from Landlord pay its pro rata share of any
excess required and conversely if Tenant shall have paid on account in monthly
installments more than its share such excess shall be credited against tax
payments then or thereafter accruing.
Tenant shall pay as additional rent its pro rata share of increases in
any and all reasonable charges incurred by the Landlord over the Base Common
Area Maintenance cost in connection with the Common Areas, including, but
without limitation, maintenance and repairs, landscaping, snow removal and
plowing, cleaning, lighting and rubbish removal to which shall be added fifteen
percent (15%) for Landlord's supervision, record keeping and related overhead.
Tenant shall pay all common area maintenance costs solely attributable to it.
Tenant shall make equal monthly payments on account of Common Area charges
based upon Landlord's good faith estimate of such amount and at the expiration
of each calendar year during the term hereof Landlord shall advise Tenant of
the actual Common Area Maintenance costs. Upon determination of the actual
costs, Tenant shall within ten (10) days after presentation of a bill therefor
from Landlord pay its pro rata share of any excess required and conversely if
Tenant shall have paid on account in monthly installments more than its share
such excess shall be credited against rent payments then or thereafter
accruing.
Tenant's pro rata share for all purposes during the term of this Lease,
calculated as the ratio of the leasable area of the Demised Premises to the
gross
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leasable area of the entire building, will be three percent (3%).
5. RULES AND REGULATIONS. The Tenant shall, at its own cost and
expense, promptly comply with all laws, ordinances, orders, regulations and
rules of any duly constituted governmental authority and/or Board of Fire
Underwriters or similar organization having jurisdiction thereof relating to
the Demised Premises or their use, provided, however, that Tenant shall not be
required to make structural alterations to the premises unless the same are due
specifically to its use.
6. TENANT IMPROVEMENTS. Landlord, at an expense entirely incorporated
in Base Rent, and at no cost to Tenant, shall do that work set forth on the
Work Letter, attached hereto as Exhibit B, in a good and workmanlike manner in
full compliance with plans and specifications therefor. Upon completion of
Landlord's work, Tenant shall cause the same to be inspected and any item of
defective workmanship or material observed by Tenant shall be reported to
landlord within thirty (30) days after the Commencement Date which defect shall
be repaired within 30 days.
Except for the work to be done by Landlord contained in the Work
Letter, if any, Tenant accepts the Demised Premises in their present condition
and acknowledges that no representations or warranties have been made by or on
behalf of the Landlord with respect to said premises, their fitness or
availability for any particular purpose or otherwise.
If leased premises fail to be ready for occupancy at the time of the
Commencement Date, this lease shall not become void or voidable unless such
failure continues for six months, in which case Tenant may terminate this Lease
upon five (5) days written notice to the Landlord.
7. ASSIGNMENT AND SUBLETTING. Tenant shall have no right to assign this
Lease, or sublet or license the whole or any part of the Demised Premises
without the express written consent of the Landlord having been obtained in
each instance, which consent shall not be unreasonably withheld. A transfer of
any controlling share of the capital stock of a corporate tenant, alone, or on
the aggregate shall be deemed to be an assignment of this Lease. In the event
the Landlord consents to an assignment or sublet, the Tenant shall not be
released from its obligations under this Lease and shall remain primarily
liable hereunder. Consent by Landlord to any assignment or sublet does not
relieve Tenant from obtaining Landlord's consent to any further assignment
or sublet.
8. REPAIRS. Except as provided in the next paragraph, during the term
of this Lease, the Tenant shall keep and maintain the Demised Premises and the
appurtenances thereto in good order and repair in all respects, reasonable wear
and use, based upon good maintenance practices, damage by fire or other
unavoidable
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casualty only excepted.
It is understood and agreed that the Landlord is not responsible for
making any repairs whatsoever to the Demised Premises, except that Landlord
shall make necessary repairs to the roof, exterior walls and mechanical systems
(but not glass, doors or windows), unless such repairs are required because of
any act, neglect or default of Tenant, or anyone claiming by, through or under
Tenant or for whom Tenant is responsible.
Landlord furthermore shall make all necessary repairs to the Common
Areas and shall maintain all landscaping in a reasonably neat and attractive
manner, plow snow and generally keep the improved portion of the land upon which
the Demised Premises are located in a reasonably neat condition, and provide
lighting as and when required.
9. UTILITIES. Included in the Base Rent are Base Utilities of $2.00 per
annum per square foot. Base Utilities consist of separately metered
electricity for lighting and wall outlets in the Demised Premises, Tenant's pro
rata share of water and sewer charges, and Tenant's pro rata share of the
electricity for Heating, Ventilation, and Air Conditioning, not separately
metered for the Demised Premises.
Tenant agrees to pay as additional rent its pro rata share of all
increases over the Base Utilities. Tenant shall make equal monthly payments on
account of Base Utilities charges based upon Landlord's good faith estimate of
such amount and at the expiration of each calendar year during the term hereof
Landlord shall advise Tenant of the actual Utilities costs. Upon determination
of the actual costs, Tenant shall within ten (10) days after presentation of a
bill therefor from Landlord pay its pro rata share of any excess required and
conversely if Tenant shall have paid on account in monthly installments more
than its share such excess shall be credited against rent payments then or
thereafter accruing.
In the event of an interruption of any or all such services, this lease
shall not become void or voidable unless such failure continues for thirty (30)
days, in which case Tenant may terminate this Lease upon five (5) days written
notice to the Landlord. Landlord shall not be liable to Tenant for the
interruption of any such services, unless the interruption is a result of
Landlord's negligence.
10. ALTERATIONS, ADDITIONS AND SIGNS. The Tenant shall have the right
to make non-structural alterations, additions and improvements to the Demised
Premises as it may deem necessary or desirable for its business, but shall have
no right to make structural alterations, additions and improvements to the
Demised Premises (with the exception of the satellite dish installation)
without prior written consent of the Landlord in each instance, which consent
shall not be unreasonably withheld. Any such improvements shall remain upon
and be
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surrendered with the Demised Premises upon the expiration or other termination
of the Lease, unless Landlord elects otherwise. Should Landlord elect to
relinquish Landlord's right to the improvements, Tenant shall remove such
improvements and repair any damage caused by said removal.
All such structural alterations, additions and improvements to the
Demised Premises made by the Tenant and all signs erected by Tenant shall be
made or erected only after plans and specifications therefor have been
submitted to the Landlord and approved by the Landlord, and provided further
that all such alterations, additions and improvements and all such signs shall
be made in a good and workmanlike manner in all respects and in full compliance
with all laws, rules, regulations and ordinances of any duly constituted
governmental authority and in compliance with the recommendations of any Board
of Fire Underwriters or any similar organization having jurisdiction of the
premises.
All such additions and improvements (with the exception of the
improvements in Exhibit B) shall be at the sole cost and expense of the Tenant
and no part thereof shall be borne by the Landlord.
11. INDEMNIFICATION. The Tenant shall hold harmless and indemnify the
Landlord of and from any and all claims for injury to person and damage to
property by reason of any accident or happening on or about the Demised
Premises. The Tenant shall carry public liability insurance in limits of at
least $1,000,000 for injury or death to person and $100,000 for damage to
property. Tenant shall furnish Landlord with certificates showing the existence
of said insurance prior to possession by Tenant. Landlord shall be named as an
insured on such insurance policies. Each policy must furthermore provide that
insurance may not be canceled without 15 days written notice to Landlord.
12. EXPIRATION OF TERM. Upon the expiration of the term hereof, or at
any prior termination hereof as herein provided, the Tenant shall peaceably
yield up the Demised Premises and all additions, improvements and alterations
made thereto or thereupon broom clean, free of all rubbish, debris and personal
property and in good order, condition and repair in all respects, reasonable
wear and use, based upon good maintenance practices, and damage by fire and
unavoidable casualty only excepted.
The Tenant shall have the right at the expiration of the term hereof,
if it shall not be in default hereunder, to remove its trade fixtures from the
Demised Premises, provided that such removal may be accomplished without any
damage to the Demised Premises and, provided further that Tenant shall pay rent
at the Base Rent rate for the period of time extending from the expiration of
the lease to the removal of said property, plus a penalty fee equal to the
amount of five (5) days' rent
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at the Base Rent rate. Any such property which shall not be removed within
thirty (30) days after the expiration of termination of this lease shall, at
the express written election of Landlord, be deemed to have become Landlord's
property.
13. CARE OF PREMISES. Tenant shall keep the Demised Premises clean and
regularly remove its waste and debris from the Demised Premises and not allow
the same to accumulate thereon. Tenant agrees that it will not permit any
caustic or corrosive or otherwise detrimental or hazardous fluids or materials
to be disposed of into the drainage or sewer systems serving the building of
which the Demised Premises are a part, nor shall Tenant store any hazardous
materials or chemicals on site without having first obtained all necessary
licenses, permits and approvals.
14. TENANT'S RISK. The Landlord shall not be responsible for any damage
to property in the Demised Premises, all of which shall be at the sole risk of
Tenant, nor for injury to person, whether caused by water, steam, gas or
electricity, or by any breakage, leakage or obstruction of oil pipes, conduits
or plumbing, nor from any other source, nor for loss of property by theft or
otherwise, unless caused by Landlord's negligence.
15. LANDLORD'S ACCESS. A. Tenant agrees that Landlord may come upon the
Demised Premises at reasonable hours upon reasonable notice, for the purpose of
inspecting the same; making repairs, without any obligation to do so; and for
any other purpose necessary or desired to enforce the Landlord's rights
hereunder or to protect the Landlord's interest hereunder and during the last
six (6) months of the term hereof to show the same to prospective purchasers
and tenants.
B. Landlord shall have the right during the last three (3) months of
the term hereof to place the usual "For Rent" or "For Sale" signs upon the
Demised Premises, provided, however, that it shall not have the right to place
them in any display windows or upon any doors of the Demised Premises.
C. Landlord may from time to time introduce, maintain, locate and
relocate conduits, pipes, wires and other matters necessary or desirable in
connection with the operation of the building and/or any other tenant therein,
provided that Landlord shall not thereby unreasonably interfere with the use of
the Demised Premises by Tenant.
D. For each of the aforesaid purposes, Landlord shall provide Tenant
with a twenty-four hours notice prior to entering premises at which time an
escort may be required in designated areas. Landlord has the right to use any
and all means which Landlord may deem proper to come upon the Demised Premises
in an emergency.
16. HOLDING OVER. In the event that the Tenant or anyone claiming by,
through or under the Tenant shall remain on the Demised Premises after the
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termination of this Lease, or any renewals, extensions or modifications
thereof, it shall be deemed to be a tenancy from month to month, subject to all
the terms and conditions hereof as may be applicable, except that the rent
shall be at one and one half times the rate herein stipulated.
17. MECHANIC'S LIEN. Notice is hereby given that the Landlord shall not
be liable for any labor or materials furnished to the Tenant upon credit and
that no mechanic's lien or other lien for any such labor or materials shall
attach to or affect the reversionary or other estate or interest of the
Landlord in and to the Demised Premises. The Tenant further agrees to indemnify
the Landlord against any and all costs, damages and expenses it may suffer on
account of the same. Tenant shall cause the same to be removed or dissolved by
bond.
18. INSURANCE RATE. Tenant agrees that it will bring nothing upon the
Demised Premises, nor use the Demised Premises in such a way as to cause to be
void or voidable any policy of insurance affecting the Demised Premises, and
further agrees that it will pay to the Landlord the increased cost of any of
Landlord's insurance which may be due to the use of the Demised Premises other
than for the purpose herein demised.
19. FIRE, DAMAGE AND TAKING. If the Demised Premises or the building of
which they are a part, shall be destroyed or damaged by fire or other casualty,
or taken by eminent domain, Landlord shall have the right to terminate this
Lease by notice to that effect to the Tenant within thirty (30) days after such
damage, destruction or taking.
If all or substantially all of the Demised Premises shall be destroyed
or damaged by fire or other casualty such that in the Landlord's opinion the
building cannot be restored within 90 days, Tenant shall have the right to
terminate this lease by notice to that effect to the Landlord within 30 days of
notice from Landlord of such damage or destruction.
If this Lease be not so terminated, Landlord shall restore the said
building and the Demised Premises as soon as reasonably possible, taking into
account the time necessary to settle and obtain insurance proceeds, to the same
condition as the Demised Premises, or what may remain thereof, were in
immediately prior to such damage, destruction or taking.
Landlord shall in no event be obligated to restore any improvements
made to the premises by Tenant. Upon notification from Landlord to Tenant that
Landlord has restored the Demised Premises to the condition aforesaid, Tenant
shall promptly undertake to resume occupancy and use the Demised Premises if
the same shall have been interrupted. Tenant shall make such restorations of
its own improvements as Tenant may elect to do.
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Any and all awards made for any taking or any injury resulting in
direct or consequential damages are the sole and exclusive property of Landlord
and no part thereof shall be paid to Tenant. Tenant may, however, apply for and
retain any award made especially for moving expenses or personal property.
In the event of any such damage, destruction or taking there shall be
an abatement of rent according to the nature and extent of the injury suffered
until the premises shall have been restored.
20. BANKRUPTCY OR INSOLVENCY. If the Tenant shall neglect or fail to
perform or observe any of the covenants, conditions or obligations on the part
of the Tenant herein contained or observed; or if any petition shall be filed
by or against Tenant under any Bankruptcy or Insolvency Law, now or hereinafter
enacted, State or Federal; or if the estate hereby created shall be attached or
taken by legal process; or if the Tenant shall make an assignment for the
benefit of its creditors by way of trust mortgage, judicial proceedings, or
otherwise; or if a receiver, trustee or similar officer shall be appointed to
take charge of any part of the Tenant's property; then and in any of such
events notwithstanding any waiver or license of any former breach and without
prejudice to any other remedy which the Landlord may have for arrears of rent
or otherwise, Landlord may, without demand or notice, enter into and upon the
Demised Premises, or any part thereof, in the name of the whole, and repossess
the same as of its former estate, and expel the Tenant and those claiming by,
through or under it, and remove its or their goods and effects, forcibly if
necessary, and may store the same in the name and at the expense of the Tenant,
and upon entry as aforesaid this Lease shall terminate. Such entry may be
effected by written notice to Tenant to the same effect as actual entry for
breach of condition. In the event of such termination, the Tenant covenants and
agrees to indemnify and hold harmless the Landlord from and against any and all
loss of rent, damages and other expenses, including reasonable attorneys' fees,
brokerage, and costs of reletting incurred by the Landlord by reason of such
termination, from time to time, upon demand of the Landlord. The Tenant further
agrees that it will, upon demand, pay to the Landlord in the event of such
termination a sum equal to the amount by which the rent and other charges
herein reserved for the balance of the term hereinabove specified exceeds the
fair market rental value of the premises for the balance of said term. Credit
shall be given to the liability of Tenant to indemnify Landlord under this
paragraph 20 for any payments made under the preceding sentence.
Prior to termination of this Lease by Landlord by reason of Tenant's
default, Landlord shall give Tenant ten (10) days written notice with respect
to any payment of money and fifteen (15) days written notice in all other
events, provided that if by reason of the nature of the default the same cannot
be reasonably cured within said fifteen (15) day period, Tenant shall not be
deemed in default, if Tenant shall
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commence the cure within said fifteen (15) day period and proceed diligently
thereafter to completion.
21. FIRE INSURANCE. The Landlord shall throughout the term of this
Lease provide and maintain fire insurance in an amount of not less than the
full replacement value of the building of which the Demised Premises are a
part. Said policies shall contain a so-called rent insurance endorsement
providing Landlord with not less than twelve (12) months rent in the event of
damage, destruction or taking. Tenant shall pay its pro rata share of all
insurance carried by Landlord with respect to the premises of which the Demised
Premises are a part. This cost is included in the Base CAM cost.
22. USE. The Demised Premises are to be used and occupied only for
conduct therein of Tenant's business, which consists of corporate offices and
related facilities, and for no other purpose or purposes whatsoever.
23. RELEASE OF SUBROGATION. Each of Landlord and Tenant hereby
releases the other from any and all liability or responsibility to the other
(or anyone claiming through or under them by way of subrogation or otherwise)
for any loss or damage to property caused by fire or any of the extended
coverage of supplementary contract casualty or casualties insured against by
said party, even if such fire or other casualty shall have been caused by
default or negligence of the other party, or anyone for whom such party shall
be responsible, provided, however, that this release shall be applicable and in
force and effect only with respect to loss or damage occurring during such time
as the releasor's policies shall contain a clause or endorsement to the effect
that any such release shall not adversely affect or impair said policies or
prejudice the right of the releasor to recover thereunder. Each of Landlord and
Tenant agree that their policies shall include such a clause or endorsement so
long as the same shall be obtainable without extra cost, and if extra cost
shall be charged therefor, so long as the other party pays such extra cost. If
extra cost shall be chargeable therefor, each party shall advise the other
thereof of the amount of the extra cost and the other party, at its election,
shall pay the same but shall not be obligated so to do.
24. NOTICE CLAUSE. Any notices required to be given under the terms
hereof shall be given by mailing said notice by certified mail, return receipt
requested, postage paid, if to the Landlord, at the last address at which rent
was paid, and if to the Tenant, "Attention: Gerard Tanksley, ViaSat, Inc., 2290
Cosmos Court, Carlsbad, California, 92009," or such other place as either may
designate from time to time in writing. Concurrent with any and all such
notices sent by the Landlord to the principal office of the Tenant, Landlord
shall further send a copy, via first class mail, of such notices of the Tenant
at the Demised Premises.
25. WAIVER. One or more waivers of the breach of any covenant or
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condition by either party shall not be construed as a waiver of a further
breach of the same covenant or condition.
26. ENTIRE AGREEMENT. This instrument contains the entire and only
agreement between the parties, and no oral statements or representations or
prior written matter not contained in this instrument shall have any force and
effect.
27. PARAGRAPH HEADINGS. The paragraph headings used herein are used
only as a matter of convenience for reference and are not to be considered part
of this Lease, or to be used in determining the intent of the parties of this
Lease.
28. STATUS OF LANDLORD. The Landlord shall be liable hereunder only
so long as it shall be seized of the property hereby demised. No fiduciary or
beneficiary or Partner, general or limited, of the Landlord named herein shall
ever be personally or individually liable for the obligations of the Landlord.
Tenant agrees to look solely to the real estate of which the Demised Premises
are a part for satisfaction of any claim; provided that the Landlord named
herein may be named as a defendant in order to obtain jurisdiction.
29. NO BROKER. The Tenant warrants and represents that no broker or
agent other than C.B. Commercial, Inc. and The Leggat Company Inc., was
instrumental in connection with this lease transaction and covenants to hold
the Landlord harmless and indemnified from and against any claim made by any
broker other than C.B. Commercial, Inc. and The Leggat Company Inc., in
connection herewith.
30. SUBORDINATION. At the election of Landlord, which election may be
changed from time to time, this Lease shall be subject and subordinate, or
prior and superior to any mortgage now or hereafter placed upon the real estate
of which the Demised Premises are a part; provided that with respect to each
subsequent mortgage to which this Lease shall be made subject and subordinate,
the mortgagee must agree that, in the event of foreclosure, Tenant shall not be
disturbed in its possession except in accordance with the terms of this Lease.
Tenant agrees at the request of such mortgagee or any purchaser at foreclosure
sale, to attorn.
31. SELF HELP. If Tenant shall fail to perform of observe any of its
obligations under this Lease, fifteen (15) days after written notice of the
requirement therefor by Landlord, Landlord may, at its election, without any
obligation to do so perform such obligation for the account of the Tenant, and
Tenant shall forthwith upon demand reimburse Landlord for the cost of such
performance, together with interest at the rate of 12% per annum until paid. In
the event of emergency, Landlord may undertake such action without written
notice but after using reasonable efforts to notify Tenant by telephone or
otherwise.
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32. SECURITY DEPOSIT. Tenant shall deposit with Landlord upon the
execution of this Lease, the sum of Two Thousand, Five Hundred and Twenty and
00/100 ($2,520.00) Dollars as security deposit hereunder. Landlord shall not be
obligated to pay interest on said sum or to segregate the same, nor shall
Landlord be obligated to use said sum, or any part thereof, to cure any default
of Tenant. At the expiration or prior termination of this Lease upon Tenant
vacating the Demised Premises in the condition required under this Lease, and
fully performing its obligations herein, Landlord shall, within thirty (30)
days thereafter, return said security deposit, or such part thereof as may
remain, to Tenant. In the event that during the term of this Lease Landlord
shall use all or any part of said security deposit to cure any default on the
part of Tenant, Tenant shall forthwith, upon demand, replenish said security
deposit so that the same is always kept at the required amount.
33. SATELLITE DISH. Tenant shall have the right to install a five
meter satellite dish on the loading dock roof. Prior to installation, Tenant
shall review with the Landlord or its agent the proposed satellite dish
installation. Tenant will provide to the Landlord the following information:
- Weight and size of satellite dish;
- Diagram of proposed location on loading dock roof;
- Description of proposed manner of installation;
Tenant shall be entitled to install such satellite dish, contingent upon
the following terms:
- Tenant will assume all costs associated with the installation;
- Tenant will obtain all necessary permits from the Town of Acton;
- Tenant will secure adequate liability insurance;
- Tenant will enter into agreements as necessary with Landlord or
Landlord's roofer to protect Landlord's roof warranty.
- Landlord shall not withhold access to the satellite dish
unreasonably.
At the expiration of the Lease, Tenant shall have the right to remove
said satellite dish and shall return the roof of the loading dock as close to
its original condition as reasonably possible.
34. AUDIT RIGHTS. Landlord shall at all times keep proper books of
record and account in accordance with generally accepted accounting principles
and practices, applied on a consistent basis, in which full, true and accurate
entries shall be made of all Operating Costs for each base year. Landlord shall
permit Tenant and Tenant's agent, at Tenant's expense, by appointment and
during normal business hours, to review Landlord's records, books and accounts
of the Building and any audited statements thereof relating to the Operating
costs for such base year for the
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purpose of verifying Operating Costs and any accounting which Landlord is
required to provide hereunder. Any such audit by Tenant shall occur no more
frequently than one time per year, shall be limited to a review of the then
pertinent base year, and shall be requested within thirty (30) days of the
Tenant's receipt of an invoice requesting payment of Tenant's pro rata share of
Operating Costs.
Audit rights raised after such thirty (30) day period shall be deemed
waived. Books of record shall be retained by Landlord for one year after
Landlord delivers the accounting for the applicable base year. If the result of
such audit demonstrates that the Tenant has been unfairly charged in accordance
with generally accepted accounting principles, then Landlord shall make the
appropriate credit adjustment.
35. HAZARDOUS MATERIALS. Neither Landlord nor Tenant shall at any time
use, generate, store or dispose of on, under or about the Demised Premises, the
Building or parking areas or transport to of from the same any hazardous
wastes, toxic substances or related material ("Hazardous Materials") or permit
or allow any third party to do so, without compliance with all Regulations.
Hazardous Materials shall include, but shall not be limited to, substances
defined as "hazardous substances" or "toxic substances" in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C.A. Section 1802; the Resource Conservation Recovery Act, 42 U.S.C.A.
Section 6901, et. seq.; or those substances defined as "hazardous wastes" in
applicable codes in the Commonwealth of Massachusetts and in the regulations
adopted and publications promulgated to such codes.
36. OPTION TO EXTEND. Tenant at its option may extend the term of this
Lease for an additional two year period upon the same terms and conditions as
herein contained except as hereinafter provided by serving notice thereof upon
the Landlord at least 180 days before the expiration of the term and upon the
notice of said service, this Lease shall be extended upon all its terms and
conditions for the extended term without the necessity of the execution of any
further instrument or documents; provided however, that if at either the date
of expiration of the original term of this Lease, or the date upon which Tenant
exercises such option of renewal, Tenant is in default beyond any grace period
herein provided in the performance of any of the terms or provisions of this
Lease, the extension of the term shall become null and void at the election of
the Landlord. Said extended term shall be upon the same terms, provisions and
conditions herein contained, except that there shall be no further right of
extension, and the annual rent during the extended term shall be at the then
fair market rental to be agreed on by the parties.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
this 22nd day of March 1995.
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NAGOG DEVELOPMENT COMPANY
BY:
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Kirk Ware
Managing General Partner
VIASAT, INC.
BY: /s/ Gregory Monahan
--------------------------------
Gregory Monahan
Chief Financial Officer
Hereunto Duly Authorized
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EXHIBIT B
VIASAT, INC.
TENANT IMPROVEMENT SPECIFICATIONS
Landlord shall provide, at its expense, the walls, doors, floor coverings and
entrance system all as shown on the attached Exhibit C, according to the
specifications listed below. Landlord will work with Tenant's representations
to relocate the glass system in the existing conference room wall to the
proposed conference room wall.
Floor Covering:
VCT shall be provided in lab area, 26 oz. commercial grade carpet all
other areas; 4" high vinyl wall base shall be provided.
Ceiling:
Acoustical ceilings will be provided throughout the premises. Ceilings
will be lay-in units of 24" x 48" x 5/8" mineral/acoustical tile, set
in a standard, exposed "T-bar" mechanical suspension system (color:
white). Ceiling height shall be 9'-0" throughout.
Doors and Hardware:
Standard interior doors shall be 1-3/4" thick birch veneer, solid core
flush wood doors, 3'-0" x 7'-0" nominal size, set in 19-gauge factory
primed interior hollow metal door frames.
Standard interior door hardware package shall consist of standard duty,
latchset, 1 1/2 pair butts and doorstop.
Interior Public Lobby doors to be red oak with clear finish.
Painting:
All public wall surfaces within the Premises will receive two coats
of paint.
Building Standard interior doors will receive two coats of clear
polyurethane finish or paint; door frames to receive two coats of alkyd
semi-gloss enamel paint.
Electrical:
Standard lighting fixtures shall be 2' x 4' recessed fluorescent
fixtures (277 volt) compatible with and mounted in the building
standard ceiling system with three fluorescent tubes. Fixtures shall
be completely installed and circuited with an average load of 2,900
watts per circuit. Tenant shall be allowed one standard lighting
fixture per 80 square feet of premises.
Duplex receptacles will be 120 volt, 20-amp grounding type, completely
installed and circuited with a total of 6 duplex receptacles per
circuit.
15
Exhibit B continued
Telephone:
Scheduling and installation of all telephone and computer wiring and
equipment shall be the responsibility of Tenant's subcontractor.
16
EXHIBIT C
(CHART)
1
EXHIBIT 10.22
DOWNTOWN OFFICE CENTER
This lease is made this ____8th______________ day of March_________, 1996, by
and between Harry and Wendy Brandon (landlord or lessor) and _______ViaSat,
Incorporated __________________(tenant or lessee).
In consideration of the rents, covenants and agreements hereinafter reserved
and contained on the part of Tenant to be observed and performed Landlord
hereby leases to Tenant and Tenant hereby rents from Landlord, those certain
premises consisting of office space #318_________ in the office complex known
as The Downtown Office Center, located at The 1900 Building, 1900 South Harbor
City Boulevard, Melbourne, Florida, 32901, for the term and upon the conditions
and agreements hereinafter set forth.
1. RENT AND TERM
1. a. The commencement date of this lease shall be March 8th, 1996 and shall
continue through and including March 7, 1997. Tenant agrees to pay Landlord,
Harry and Wendy Brandon, at Landlord's office, 1900 South Harbor City
Boulevard, Melbourne, Florida, 32901, or to such person or to such other place
as directed from time to time by written notice to Tenant from Landlord, the
following rent, plus applicable Florida State sales tax: $395.00 rent
23.70 sales tax
-----
$418.70 total
1. b. In the event Tenant wishes to extend the terms of his original lease he
shall notify Landlord in writing 30 days prior to the expiration of said lease,
so that a negotiated rate and terms can be agreed upon. In the event Tenant
does not so notify Landlord, the Tenant will be occupying such space on a
month-to-month basis with either party required to give the other 30 days
written notice to terminate the tenancy.
2. USE OF THE PREMISES
2. a. Tenant shall use and occupy the Premises for the purpose of a
professional office. Tenant shall not use or occupy the Premises or permit the
same to be used for any other purpose. Tenant further agrees it will use the
Premise in such a matter so as not to interfere with or infringe upon the
rights of other Tenants in the Center. Tenant shall not use or occupy the
Premises in violation of any law, ordinance, regulation or other governmental
directives having jurisdiction thereof. During the term hereof, Tenant shall be
in continuous use and occupancy of the Premises and shall not vacate or abandon
the same.
2
2. b. Alterations and Modifications
Tenant shall not make any additions, alterations, changes or improvements
without the prior written approval of Landlord, which approval shall not be
unreasonably withheld. Any such additions, alterations, changes or improvements
which may be made, upon the completion thereof, shall become the property of the
Landlord, unless otherwise agreed upon. Tenant hereby indemnifies Landlord
against and shall keep the Premises and Center free from any and all mechanics
liens or other such liens arising from any work performed, material furnished,
or obligations incurred by the Tenant in connection with the Premises. Landlord
acknowledges that Tenant shall have the right to install a satellite dish and/or
antenna on building roof or grounds as required to conduct business and
shall be granted installation and maintenance access to same. Tenant shall
notify Landlord of such installation in advance and shall insure compliance with
all applicable local building codes governing such installation. Landlord will
cooperate with Tenant to locate an adequate position for the satellite dish
and/or antenna on the roof of said building and shall be reasonable in
designating same.
2. c. Repair By Landlord and Tenant
Landlord agrees to keep in good order the roof, air-conditioning units,
exterior walls and plumbing.
Tenant shall at once report in writing to Landlord any defective condition
known to Tenant which landlord is required to repair; and failure to so report
shall make Tenant responsible to Landlord for any liability incurred by Landlord
by reason of such default.
Tenant shall, at Tenant's own cost and expense, keep and maintain the
Premises and appurtenances thereto and every part thereof, in good order and
repair except portions of the Premises to be repaired by Landlord pursuant to
2.c. hereof.
2. d. Rubbish Removal
Tenant shall keep the Premises clean, and will remove all refuse from the
Premises under Tenant's control. Landlord shall employ a rubbish removal service
for the Office Center Complex use, and will provide reasonable janitorial
services as needed.
3. SERVICES AND ACCOMMODATIONS PROVIDED
3. a. Landlord will provide:
1) __one____________phone set(s).
2) Receptionist to answer the phones during normal business hours.
3) A copier centrally located (charges to be on a per-copy basis).
4) A secretary available to type (charges to be on a per page basis).
5) A conference room to be shared by all of the Office Center tenants.
6) Dictating equipment available on site. Charges to be established.
7) Facsimile equipment (charges to be on a per page basis, plus cost of
long distance calls).
All charges incurred by Tenant for copier charges, secretarial charges, and
facsimile equipment charges shall be due and payable within fifteen (15) days of
being billed.
3
4. DAMAGE OR DESTRUCTION
In the event the Premises shall be destroyed or so damaged or injured by
fire or other casualty during the lifetime of this agreement whereby the same
shall be rendered untenantable, then the Landlord shall have the right to render
the Premises tenantable by repairs within ninety (90) days therefrom. If said
Premises are not rendered tenantable within said time, it shall be optional with
either party to hereto to cancel this lease, and in the event of such
cancellation the rent shall be paid only to the date of such fire or casualty.
The cancellation herein mentioned shall be evidenced in writing.
5. UTILITIES
Landlord shall pay the cost of electricity and all other utilities
furnished to the Premises. In no event, however, shall Landlord be liable for
any interruption or failure in the supply of utilities for which he is obligated
to pay, unless caused by the negligence of the Landlord, his employees or
agents.
6. INDEMNIFICATION
Tenant hereby agrees to indemnify and hold harmless Landlord against and
from any and all claims of damage or injury arising out of or with respect to
Tenant's use of the Premises or the building 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 on Tenant's
part to be performed under the terms of this Lease, or arising from any act of
negligence of the Tenant, its agents or employees and from and against all
costs, attorneys' fees, expenses and liabilities incurred in or about such claim
or action or proceeding brought thereon. Landlord shall not be liable for any
damage to or loss of Tenant's personal property or inventory from casualty theft
or whatsoever cause except the affirmative acts of negligence of Landlord, its
agents or employees. Landlord shall also agree to hold Tenant harmless against
and from any and all claims arising from any breach or default in the
performance of any obligation on Landlord's part or from any act of negligence
of the Landlord, its agents and from all costs, attorney fees, expenses and
liabilities in or about such claim or action or proceeding brought thereon.
7. INSURANCE
7. a. Increase In Fire Insurance Premium
Tenant agrees it will not keep, use, or offer for sale in or upon the
Premises any item which may be prohibited by the standard form of fire insurance
policy.
In the event Tenant's occupancy causes any increase of premium for any
insurance policy on the Premises or the building above the minimum rate for the
use set forth herein, Tenant shall pay the additional premium on such insurance
policies by reason thereof.
3
4
If Tenant defaults in the payment of rent, additional rent, or any other
item to be paid by Tenant hereunder, including but not limited to fax,
secretarial and copier charges, and such default shall not be cured within
fifteen (15) days after written notice thereof by Landlord to Tenant; or in the
performance of any other term, covenant or condition of this lease, and such
default shall not have been cured within 15 days after written notice thereof by
Landlord to tenant; Landlord may re-enter and take possession of the Premises
and remove all persons and property therefrom. Further, Landlord may at its
option, forthwith cancel this lease and thereupon be entitled to recover from
Tenant the worth, at the time of such termination, of the excess, if any, of the
amount of rent and charges equivalent to rent reserved in this lease for the
balance of the term hereof over the reasonable rental value of the Premises for
the same period. If landlord elects to re-enter and take possession of the
Premises without terminating this lease, Landlord may at its sole option relet
the Premises or any part thereof for such term or terms (which may be for a term
extending beyond the term of this lease), at such rental or rentals and upon
such other terms and conditions as Landlord at its sole discretion may deem
advisable with the right to make alterations and repairs to the Premises. Upon
any such reletting, Landlord shall receive and collect the rents therefor,
applying the same first to the payment of such expenses as Landlord may have
paid, assumed or incurred in recovering possession of the Premises, including
costs, expenses and attorneys' fees, and for placing the same in good order and
condition, or repairing or altering the same for reletting and all other
expenses, incurred by Landlord for the purpose of reletting the Premises, and
then to the fulfillment of the agreements of Tenant. Tenant shall pay any and
all deficiency, but shall have no rights in and to any excess rent collected by
Landlord.
9. ASSIGNMENT AND SUBLETTING
Tenant shall not, either voluntarily or by operation of law, sell, assign,
hypothecate or transfer this lease, or sublet the Premises or any part thereof
without the prior written consent of the Landlord.
10. ACCESS BY LANDLORD
Landlord and its agents shall have the right to enter the Premises at all
reasonable times for the purpose of examining or inspecting the same, showing
the same to prospective purchasers or Tenants of the Downtown Office Center, and
making such alterations, repairs, improvements or additions to the Premises as
may be necessary or desirable. For each of the aforesaid purposes, Landlord
shall provide Tenant with a twenty-four (24) hour notice prior to entering the
Premises at which time an escort may be required in designated areas. Landlord
has the right to use any and all means which Landlord may deem proper to come
upon the demised Premises in an emergency.
11. SIGNS, AWNING AND CANOPIES
11. 1. The Tenant hereby agrees that it will not place or maintain on any
exterior door, wall or window of the leased Premises any signs, awning or
canopy, or advertising matter or other things of any kind, and will not place
or maintain any decorations, lettering or advertising matter on the glass of
any window or door of the leased Premises without first obtaining the
Landlord's written approval.
4
5
11. 2. Further, Landlord shall have built and shall install at Tenant's expense
a company designation sign for the front door of Tenant's suite. The cost of
said sign shall be paid to Landlord within 10 days of monthly billing.
12. COMMON AREAS
The use and occupancy by Tenant of the Premises shall include the use in
common with others entitled thereto of the common areas, employee parking areas,
service roads, loading facilities, sidewalks and customer parking areas,
together with such other facilities as may be designated from time to time by
Landlord all of the foregoing being referred to as the common areas; provided,
however, that the use of the common areas by Tenant shall be subject to the
terms and conditions contained herein and to reasonable rules and regulations
for the use thereof as may be prescribed by Landlord from time to time during
the term hereof.
13. QUITE ENJOYMENT
Upon Tenant's paying the rent reserved hereunder and observing and
performing all of the covenants, conditions and provisions on Tenant's part to
be observed and performed hereunder, Tenant shall have quiet possession of the
Premises for the entire term hereof, subject all of the provision of this
lease.
14. MISCELLANEOUS
14. 1. Attorneys Fees
--------------
Tenant shall pay reasonable attorney's fees to Landlord in the event
Landlord is required to sue for the enforcement against Tenant of any of the
terms, covenants or provisions hereof.
14. 2. Successors and Assigns
----------------------
Except as otherwise provided in this lease, all of the covenants,
conditions and provisions of this lease shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, personal
representatives, executors, administrators, successors and assigns.
14. 3. Headings: Landlord and Tenant
-----------------------------
The Article and section captions contained in this lease are for
convenience only and do not in any way limit or amplify any term or provision
hereof. The terms "Landlord" and "Tenant" as well as Lessor and Lessee as used
herein shall include the plural as well as the singular, the neuter shall
include the masculine and feminine genders, and if there be more than one
tenant, the obligations herein imposed upon Tenant shall be joint and several.
14. 4. Notices
-------
It is understood and agreed between the parties hereto that written notice
mailed or delivered to the Premises leased hereunder shall constitute sufficient
notice to the Lessee and written notice mailed or delivered to the office of the
Lessor shall constitute sufficient notice to the Lessor, to comply with the
terms of this contract.
5
6
14. 5. Interest on Delinquent Rent
---------------------------
Failure of Tenant to pay any rent payment within ten (10) days of its due
date shall, at the option of the Landlord, cause this lease to be in default.
The Tenant agrees to pay a late fee of 5% plus interest at the rate of 1.5% per
month on the outstanding balance until fully paid.
14. 6. Security Deposit
----------------
A Security Deposit of $418.70 shall be tendered upon execution of the lease
or occupancy of the Building, whichever comes first, and shall be used to secure
the performance of the terms of this lease.
14. 7. Randon Disclosure
-----------------
The following statement is required to be included in all leases after
December 31, 1988, by the State of Florida and is therefore included herein.
"Radon is a naturally occurring radioactive gas that, when it has accumulated in
a building in sufficient quantities, may present health risks to persons who are
exposed to it over time. Levels of radon that exceed federal and state
guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public health
unit".
HAZARDOUS MATERIALS:
Neither Landlord nor Tenant shall at any time use, generate, store or
dispose of on, under or about the Demised Premises, the building or parking
areas or transport to or from the same any hazardous wastes, toxic substances or
related materials ("Hazardous Materials") or permit or allow any third party to
do so, without compliance with all regulations. Hazardous materials shall
include, but shall not be limited to, substances defined as "hazardous
substances" or "toxic substances" in the Comprehensive Environmental Responses,
compensation and Liability Act of 1980, as amended, 42 U.S.C.A. 6901, et.seq.;
or those substances defined as "hazardous wastes" in applicable codes in the
Commonwealth of Massachusetts and in the regulations adopted and publications
promulgated to such codes.
14. 8. Cost of Living Index Escalator
------------------------------
Commencing year 2, i.e.,___________N/A_______________________, Tenant shall
pay the foregoing rent plus the cost of living increase, if any, as determined
by the U.S. Department of Labor Cost of Living Index published annually, which
increase has occurred since the preceding year. Each year thereafter, the base
rental will be the preceding year's total rental rate which includes the base
rate and the cost of living increase, if any, of each preceding year.
6
7
NOTICE CLAUSE
Any notices required to be given under the terms hereof shall be given by
mailing said notice, by certified mail, return receipt requested, postage paid,
if to the Landlord, at the last address at which rent was paid, and if to the
Tenant, "Attention: Gerard Tanksley, ViaSat,Inc., 2290 Cosmos Court, Carlsbad,
Ca, 92009," or such other place as either may designate from time to time in
writing. Concurrent with any and all such notices sent by the Landlord to the
principal office of the Tenant, Landlord shall further send a copy, via first
class mail, of such notices of the Tenant at the Demised Premises.
All bills, statements, invoices shall be mailed to above address, except to the
attention of Janis Gingery and/or accounts payable.
March 8, 1996 /s/ Harry Brandon
- -------------------------- ----------------------------------
Dated Landlord
- -------------------------- ----------------------------------
Dated Tenant (As Individual)
March 27, 1996 /s/ (sig illegible)
- -------------------------- ----------------------------------
Dated Tenant (As Corporation)
7
1
EXHIBIT 10.23
BASIC ORDERING AGREEMENT
THIS AGREEMENT, made and entered into this 8th day of November, 1994, by
ViaSat, Inc. a corporation organized and existing under the laws of the State of
California and having its principal offices at 2290 Cosmos Court, Carlsbad,
California 92009-1585 (hereinafter referred to as ViaSat) and AT&T a corporation
organized and existing under the laws of the State of Georgia, acting through
its Tridom division, and having its principal offices at 840 Franklin Court
Marietta, Georgia, 30067 (hereinafter referred to as AT&T Tridom)
Whereas, ViaSat and AT&T Tridom desire to establish a basic set of terms and
conditions for the ordering of equipment from ViaSat that are to become
effective upon ViaSat's acceptance of the first order from AT&T Tridom.
NOW, THEREFORE, ViaSat and AT&T Tridom agree as follows:
1. ViaSat will sell to AT&T Tridom the product specified in Exhibit A for
the Commitment Quantity Prices delineated in Exhibit B in accordance with the
terms of this agreement. These Commitment Quantity Prices are predicated on AT&T
Tridom placing cumulative orders for the Commitment Quantities delineated in
Exhibit B during the 2 year period of this agreement.
2. The following exhibits are incorporated herein and made part of this
Basic Ordering Agreement:
Exhibit A DAMA Hardware Specification
Exhibit B Pricing
Exhibit C ViaSat, Incorporated Terms and Conditions
Exhibit D ViaSat, Incorporated Licensed Programs License Agreement
3. This agreement will be valid for a 2 year period beginning upon the
written acceptance by ViaSat of the first order placed by AT&T Tridom.
4. Product will be ordered by AT&T Tridom through individual purchase
orders.
5. After the delivery of the first product ordered by AT&T Tridom under
this contract, delivery of product ordered will be 60 days after receipt of
order (ARO) for the VFT-106, VMM-101 and TIM-201 and 9O days ARO for the NCT and
the NCC. Based on the quantity of product ordered in the individual purchase
order ViaSat reserves the right to spread out deliveries over more than one
month.
6. Individual orders once placed by AT&T Tridom can be canceled however
they will be subject to cancellation charges delineated in Exhibit B.
1
2
7. It is understood and agreed that the individual purchase orders placed
under this Basic Ordering Agreement will be governed exclusively by the terms
and conditions of this agreement notwithstanding any contrary or additional
provisions contained in any purchase orders issued by AT&T Tridom unless
otherwise agreed to by the parties in writing.
8. Except for material breach by ViaSat, in the event that AT&T Tridom
does not place orders for product during the 2 year validity period of this
agreement that equal or exceed the Commitment Quantities for the individual
products then the parties agree that the following adjustments will be made.
a. ViaSat will be reimbursed for the unamortized portion of the $75,000
of Non-Recurring Engineering (NRE) to develop the AT&T Tridom-specific IF card
and RF combiner/splitters. The unit prices were based on the NRE being amortized
over a total of 451 units. The 451 figure is the sum of the 200 RF
combiner/splitters and IF cards in the committed quantity of 100 VFT-106 units
(each VFT-106 contains both a RF combiner/splitter and an IF card) and the 251
IF cards contained in the 251 committed quantify of VMM-101 units (each VMM-101
contains one IF card). The reimbursement will be calculated by using the formula
$75,000*(451-N)/451 where N is equal to the total number of IF cards and RF
combiner/splitters ordered.
b. ViaSat will be reimbursed for any parts or raw materials which were
purchased for the AT&T Tridom specific IF cards and RF combiner/splitters and
which cannot be returned to the vendor or reused in other ViaSat products and
shall include the cost to ViaSat to return or have vendors restock any such AT&T
Tridom specific parts or raw materials, including but not limited to restocking
charges and ViaSat administrative time. If such parts cannot be returned to
vendor and ViaSat charges AT&T Tridom according to this paragraph, then at AT&T
Tridom's request, ViaSat will provide such parts to AT&T Tridom. AT&T Tridom
shall not be liable for any costs associated with parts used by ViaSat in other
ViaSat products. The total price to AT&T Tridom shall be the total actual
reasonable cost plus 7%.
c. ViaSat will be reimbursed a "bill-back" amount to reflect the higher
unit prices associated with lower quantity of product actually ordered. The
"bill-back" amount will be determined for each unit of product delivered by
subtracting from the quantity prices in Exhibit B for the units ordered, on an
order by order basis, the Commitment Quantity Unit Price.
d. In the event AT&T Tridom places purchase orders during the 2 year
period for cumulative quantities of individual products that exceed the
commitment quantities for the individual product then the prices for those units
that exceed the commitment quantities shall be the prices contained in the
Exhibit B pricing schedule corresponding to the cumulative quantity at the time
of the order.
After expiration of the 2 year period ViaSat will invoice for any adjustments.
ViaSat will notify AT&T Tridom in writing of the cumulative quantity of the
product ordered sixty days prior to the expiration of this Basic Ordering
Agreement.
2
3
9. ViaSat will proceed to acquire the following certifications and keep
AT&T Tridom informed as to progress of the certification process.
Safety: UL, CSA and TUV
Emissions: FCC Part 15, Class A, VDE
Telephone Interface: FCC Part 6810. process.
10. ViaSat will support AT&T Tridom's desire to have the AT&T Tridom logo
on the products. ViaSat and AT&T Tridom will determine the appropriate location
for the AT&T Tridom logo.
11. This Agreement may be canceled by either party without liability up to
the time that ViaSat accepts the first delivery order issued by AT&T Tridom at
which point this agreement becomes a contract binding both parties to the terms
contained herein.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
in duplicate originals by their duly authorized representatives.
ViaSat, Incorporated AT&T Tridom
By:/s/Andrew M. Paul By:/s/Eugene Hammond
----------------- ------------------
Name: Andrew M. Paul Name: Eugene Hammond
--------------- ----------------
Title: Vice President, Commercial Title: Product Line Director
-------------------------- ---------------------
Date: 11/8/94 Date: 11/7/94
--------------------------- ----------------------
3
1
EXHIBIT 10.34
CONTRACT
CONTRACT CONTRACT # ACE/GDM/01
between PRIME CONTRACT: DAAB07-94-D-AO10
VIASAT, INCORPORATED PRIORITY RATING DO-A7
2290 Cosmos Court
Carlsbad, CA. 92009-1585 SECURITY CLASSIFICATION UNCLASSIFIED
CONTRACT DATE OCT 18TH 1995
and
TERMS SEE EXHIBITS
SPECTRAGRAPHICS CORP RESALE TAX PERMIT # SRFBB 25 - 818208
9707 Waples St. X FOR RESALE NOT FOR RESALE
San Diego, CA 92121 --- ---
QUALITY REQUIREMENTS See exhibits
TYPE OF INSPECTION _______________________
X VIASAT GOV'T OTHER
Source Source Source
VICE-PRESIDENT ADMINISTRATION
/s/ Gregory Monahan
-------------------------------------------
2
VIASAT INC.
FIXED PRICE CONTRACT
This FIXED PRICE CONTRACT is entered into as of October 18th 1995, between
ViaSat Incorporated, a California corporation having its principal offices at
2290 Cosmos Ct, Carlsbad, California 92009-1585 (hereinafter referred to as "the
Buyer" or "ViaSat") and SPECTRAGRAPHICS with its principal offices located at
9707 Waples Street, San Diego CA 92121, (hereinafter referred to as "the Seller"
or "SPECTRAGRAPHICS").
WITNESSETH THAT
In consideration of the mutual promises, covenants, and agreements herein set
forth, the Parties agree that the Seller shall furnish and deliver to the Buyer
all the supplies, and perform all the services set forth in this contract, for
the consideration stated herein. The rights and obligations of the Parties to
this contract shall be subject to, and governed by, the following Schedule, and
the General Provisions of Purchase and other documents or specifications
attached hereto or referenced herein.
SCHEDULE
ARTICLE I - SCOPE OF WORK
A. The Seller, as an independent contractor and not as an agent of the Buyer,
shall, in the necessary personnel, material, and facilities, do all things
necessary or incidental to the furnishing and delivery to the Buyer of the goods
and services set forth in EXHIBIT A, attached hereto and incorporated by
reference herein, all in accordance with the specifications and other
requirements applicable thereto and referred to in EXHIBITS B, C, D and E,
attached hereto and incorporated by reference herein. Buyer also reserves the
right to exercise options as specified in EXHIBIT C.
B. ViaSat Inc. has been issued a contract by Magnavox, which is in support of
their prime contract with the U.S. Government, contract number DAAB07-94-D-A010
(hereinafter referred to as the "Prime Contract") which carries a DPAS rating:
DO-A7. ViaSat is relying on the Seller's agreement as set forth in this
contract, and on Seller's performance of same by timely delivery and performance
as part of the basis on which ViaSat intends to fulfill it's obligations. It is
understood that the Seller's goods and services will be utilized by ViaSat in
performance of it's obligations, and that ViaSat will be unable to meet its
obligation to Magnavox, and ultimately the Prime Contract, unless Seller
performs its agreement in a timely manner, as set forth in this contract.
ARTICLE II - PERFORMANCE AND DELIVERY SCHEDULE
A. Time is of the essence in the Seller's performance of this contract. The
Seller shall deliver the goods and services required to be delivered to the
Buyer in accordance with the delivery schedule referenced in EXHIBIT D. In order
to assist Seller with the production start-up, Buyer shall provide Seller with
all material needed by Seller to support the initial deliveries. This comprises
200 sets of material, plus some additional quantities of passive components on
tape and reel. Upon award of this contract, all of this material shall be
acquired by SPECTRAGRAPHICS, at a price not to exceed SPECTRAGRAPHICS' budgeted
cost of that material, as defined in the SPECTRAGRAPHICS detailed quotation
3
dated May 11th 1995 and later revised on July 18th 1995. At the time of contract
signing, Seller shall issue a purchase order to Buyer for this material at the
prices stated, and Buyer shall deliver said material promptly to Seller.
B. Seller shall, as a material part of this contract, install at Seller's place
of business, and at Seller's expense, either a GenRad 228X or an HP 3070 testing
device for the purpose of performing In-Circuit Test (ICT) operations as
described in Exhibits A and C, within 120 days of contract signing. Until that
test device is in place and operational, and upon contract signing, Seller shall
use Seller's existing Fairchild 333 testing device (Fairchild) and procure ICT
fixtures and software for use with that device, at Seller's expense.
ARTICLE III - PLACE OF INSPECTION AND ACCEPTANCE
Notwithstanding any prior preliminary inspection and/or acceptance, final
inspection and Acceptance of all goods and services shall be made at ViaSat's
place of business, as part of a complete system test and inspection program.
Acceptance of goods will incorporate Source Inspection activities by ViaSat QA
representatives, which will occur at SPECTRAGRAPHICS' place of business, using
SPECTRAGRAPHICS' inspection devices, equipment and services, as required by
ViaSat. SPECTRAGRAPHICS will promptly develop and publish an In-circuit Test
Procedure (ITP), which will outline SPECTRAGRAPHICS' testing procedures for the
goods referenced in Exhibit A. This ITP will be used by SPECTRAGRAPHICS
personnel in performance of this contract, and may be used for source inspection
activities.
Acceptance of any goods or services shall not be deemed a waiver of any
subsequent acceptance rights or warranties, express of implied, or any other
rights under this contract. Acceptance of the fixtures and ICT software
described in Exhibit A shall take place at Spectragraphics' place of business
when the fixtures are complete. At that time, ownership of the fixtures and the
software shall transfer to Buyer but remain in Seller's possession until further
notice.
ARTICLE IV - CONSIDERATION AND PAYMENT
The Buyer shall, upon submission of proper invoices or vouchers and subject to
any funding limitation, withholding, or set-off provisions contained herein, pay
the Seller a fixed price of $1,116.16 PER SET OF CCAs, according to the pricing
schedules and payment terms set out in EXHIBIT C. Payments shall only be made
upon delivery and acceptance of COMPLETE SETS of CCAs. In computing discount
time, if any, such time shall commence upon Buyer's receipt of proper invoice or
acceptance of items delivered, whichever is later.
ARTICLE V - SUBMISSION OF INVOICES
Original invoices for payments hereunder shall be submitted to the following
address:
ViaSat, Inc.
2290 Cosmos Court
Carlsbad, CA 92009-1585
Attention: Andrew Eccles, Purchasing Manager
4
ARTICLE VI - PACKAGING AND DELIVERY
Unless otherwise specified in the applicable Specification(s) or Statement of
Work, packaging and packing of all items for delivery shall be in accordance
with good commercial practice and adequate to assure safe arrival at
destination. In addition, any and all packaging materials used must not be made
from or contain any Class I Ozone Depleting Chemicals. Buyer retains the right
to disallow the use of certain other packaging materials, if such materials
cause an unacceptable environmental hazard.
The delivery point of all items to be delivered by Seller hereunder shall be FOB
destination and, unless the Seller is notified to the contrary, shall be marked
for delivery to:
ViaSat, Inc.
2290 Cosmos Court
Carlsbad, CA 92009-1585
ARTICLE VII - CONFIDENTIALITY OF BUYER'S DESIGN
Seller recognizes that the Buyer will provide proprietary design information to
the Seller prior to and during the performance of this contract. The Seller
agrees to protect and hold confidential all such information in the manner
specified herein, and treat all CCAs developed from this proprietary design
information as ViaSat proprietary. Inclusion of this article shall not
invalidate any Non-Disclosure Agreement (NDA) already executed and in force
between Buyer and Seller.
ARTICLE VIII - REPORTS
The Seller shall furnish Reports, Data and other Documentation as set forth in
Article XXVIII and referenced in exhibits A and B. Seller shall also furnish to
Buyer reports received from suppliers.
ARTICLE IX - DIRECTED SOURCES
In developing this design, Buyer has worked closely with the supplier referenced
below and incurred significant NRE costs during the design phase. In order to
offset these costs and avoid further NRE charges, Buyer directs Seller to
purchase the following part numbers from this supplier, providing that
supplier's pricing is less than or equal to Spectragraphics budgeted cost:
PART NUMBERS SUPPLIER:
PWB-002553-0000 Cirtech, Inc.
PWB-002555-0000 250 E. Emerson Ave.
PWB-002557-0000 Orange, CA 92665
ARTICLE X - PRIORITY RATING
This is a rated Contract certified for national defense use. THE DPAS RATING IS
DO-A7 Seller shall comply with the provisions of the Defense Priorities and
Allocations System (DPAS) regulation (15 CFR 700), including providing written
notice of acceptance or rejection of this Contract within 10 workdays after
receipt of Contract.
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ARTICLE XI - CONTRACT MANAGEMENT
A. The Buyer's Vice President of Administration is designated on the cover sheet
hereof. The Buyer may, by written notice to Seller, change such designation.
B. No provision of this Contract may be waived or changed, except in writing
signed by Buyer's Vice President of Administration. No request, notice,
authorization, direction or order received by the Seller shall be binding upon
either the Seller or Buyer, or serve as the basis for a change in the Contract
cost, fixed fee or any other provision of this Subcontract, unless it was issued
in writing by the Buyer's Vice President of Administration. Designations of
authorized representatives shall be in writing and signed by the Vice President
of Administration. A copy of each such designation, and of each modification or
cancellation thereof, shall be furnished to the Seller. The Seller shall
immediately notify, in writing, the Vice President of Administration whenever a
change request has been received from a representative of Buyer other than the
Vice President of Administration that would affect the terms and conditions,
cost and performances schedule of this Contract.
C. The Buyer's Vice President of Administration may designate a representative
to act as administrative representative under this Contract. Such
representative, if appointed, shall be designated elsewhere in this Contract or
in a letter from the Vice President of Administration to the Seller. The
administrative representative shall represent the Vice President of
Administration in certain phases of the work; however, such representative shall
not be authorized to change any of the terms and conditions or cost or fee of
this Contract and is not an authorized representative within the meaning of
paragraph B of this Article.
ARTICLE XII - FIXED PRICE CONTRACT
This is a Fixed Price Contract. Prices for each deliverable item will remain
fixed at the amounts shown in EXHIBIT C, unless both parties agree to a price
change for some substantial reason. Provisions for initiating changes to pricing
are set out in Article XXVIII.
ARTICLE XIII - RELEASE OF NEWS INFORMATION
No news releases, including photographs and films, public announcements, or
confirmation of same, on any part of the subject matter of this contract or any
phase of any program hereunder shall be made by Seller or Seller's
subcontractors without the prior written consent of the Buyer.
ARTICLE XIV - ORDER OF PRECEDENCE
Any inconsistency in this contract shall be resolved by giving precedence in the
following order: (a) the Schedule; (b) the General Provisions; (c) other
attachments to the Schedule.
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ARTICLE XV - RESIDENT REPRESENTATIVES AND VISITS BY GOVERNMENT PERSONNEL
A. Buyer reserves the right to assign Representatives on an itinerant or
resident basis at Seller's facilities or those of lower-tier subcontractors, for
the purpose of maintaining surveillance activities, including the right to
witness any or all tests performed as part of the requirements of this contract.
Seller shall provide Buyer's Representatives with reasonable facilities and
equipment, and unescorted free access to all areas essential to the proper
conduct of the aforementioned activity throughout all phases of engineering,
manufacturing, testing, packaging, and shipping. In addition, the Seller agrees
to make available to Buyer's Representatives pertinent planning, status, and
forecast information and such other technical and management reporting
information as may be necessary for the Representatives to carry out their
responsibilities.
B. Seller agrees, upon request of Buyer, to allow Buyer's customer or the
Government's Contracting Officer under the Prime Contract, or his/her authorized
representatives, to visit Seller's facilities to review progress and witness
testing pertaining to the requirements of this Subcontract.
C. Seller further agrees to insert and require its Subcontractor to insert, the
substance of this Article, including this paragraph, in each lower-tier
subcontract hereunder.
ARTICLE XVI - PLACE OF PERFORMANCE
The Seller shall perform the work under this contract at its facilities located
at 9707 Waples Street, California 92121 and at such other locations as may be
approved in writing by Buyer in advance of starting performance.
ARTICLE XVII - WARRANTY
Seller shall warrant the goods referenced in Exhibit A in accordance with the
provisions in Exhibit E, Section 15.
ARTICLE XVIII - SPECIAL TEST EQUIPMENT/SPECIAL TOOLING
This Article is not applicable to this contract iteration and is intentionally
left blank at this time.
ARTICLE XIX - GENERAL PROVISIONS
The Buyer's Terms and Conditions of Purchase, contract clauses (FFP Type), dated
1/1/93, and referenced in EXHIBIT E, attached hereto and incorporated herein by
reference, apply to this contract.
ARTICLE XX - CERTIFICATIONS AND REPRESENTATIONS
All written certifications, proposals and representations which Seller has
submitted to Buyer in connection with the award of this contract have been
relied upon by Buyer in issuing this contract. Seller agrees to advise Buyer
promptly, and in writing, should there
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be any change in Seller's status with respect to the matters covered by such
representations and certifications.
ARTICLE XXI - KEY PERSONNEL
The following personnel are identified as key personnel, important to the
successful performance of the work under this contract:
Boann Garry Account Manager
Mark Whellan Director, Quality
John Crankshaw Test Engineer.
The Seller agrees to assign these employees to the performance of the work.
Whenever, for any reason, one or more of the aforementioned employees is
unavailable for assignment for work under this contract, the Seller shall
replace such employee with a person of comparable ability acceptable to Buyer.
The Seller shall inform the Buyer in writing, in advance, whenever such a change
is necessary.
ARTICLE XXII - COST ACCOUNTING STANDARDS
Seller certifies that Seller is exempt from the Cost Accounting Standards
provision referenced in the FAR.
ARTICLE XXIII - NOTICE OF DELAY, OBSOLESCENCE OR RECALL
In addition to its obligations herein with respect to notice of labor disputes,
whenever any other actual or potential event is delaying or threatening to delay
delivery of goods or performance of the services under this contract, Seller
shall give Buyer immediate written notice thereof. In the event of a component
becoming obsolete, or a component production lot being recalled by a
manufacturer, Seller shall give Buyer immediate written notice thereof. In
either of these cases, Buyer and Seller shall determine a timely course of
action and make a change to the contract as provided for in Article XXVIII.
ARTICLE XXIV - PRODUCTION RELEASES AND RELEASE OF SELLER'S
FINANCIAL RECORDS
A. Buyer will authorize Seller to proceed with this contract in three separate
releases. Each release will cover 1,000 sets of EMUT CCAs, and will be dependant
upon Seller's continued good performance in terms of product quality and timely
deliveries. In addition, each release will be governed by Seller's financial
condition during the preceding period. The first release will be automatically
authorized upon signing of this contract. Releases 2 and 3 will be authorized no
later than 30 days prior to the expiration of the previous release, depending
upon the performance factors mentioned in this paragraph. The form of releases 2
and 3 will be a letter written in accordance with Article XXV and issued by
Buyer's authorized representative as defined in Article XI.
B. Seller will provide to Buyer, the following monthly financial reports for the
entire Spectragraphics Corporation, each month for the duration of the
contract.
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Current month's balance sheet
Current month's Income statement
Current month's Cash Flow statement
If this data is normally contained within a standard shareholder's financial
report, such a report is acceptable in lieu. In addition, Seller will provide to
Buyer, Seller's audited quarterly financial reports as they are issued for the
same duration.
C. Seller will inform Buyer of each significant event, management decision or
other factor which will have a significant effect on the financial condition of
the company as such event, decision or factor becomes known. At a minimum,
Seller will disclose to buyer all extraordinary items in the aforementioned
financial data as if Buyer were a shareholder of Spectragraphics Corporation.
D. If, in Buyer's sole opinion, Seller does not perform adequately in any of the
provisions mentioned in paragraph A, Buyer retains the right to terminate this
contract as provided for in FAR 52.249-2 and as referenced in the subcontract
clauses attached to this contract.
ARTICLE XXV - NOTICES
Any notice, consent, demand, or request required or permitted by this contract
shall be in writing and shall be deemed to have been sufficiently given when
personally delivered, properly sent by FAX or Email, or deposited in the United
States mail postage prepaid, addressed as follows:
If to SPECTRAGRAPHICS: SPECTRAGRAPHICS
9707 Waples Street
San Diego, CA 92121
If to ViaSat: ViaSat Incorporated
2290 Cosmos Court
Carlsbad, CA 92009-1585
ARTICLE XXVI - FUNDS ALLOCATED TO SUBCONTRACT
The Prime contract has been fully funded and this Article is therefore not
applicable.
ARTICLE XXVII - NOT TO EXCEED COST AGREEMENT
Prior to the issuance of a change order under this contract, the Buyer may
solicit from the Seller written agreement as to the maximum (in the case of an
increase) adjustments to be made in-the estimated cost and fixed fee, or in the
delivery schedule (or time of performance), by reason of the change. The Buyer
may also solicit such agreement on limitations on the adjustments, to any other
provisions of the contract which may be subject to equitable adjustments by
reason of the change. Any such written agreement shall then be cited in the
change order, and upon its issuance shall be a binding part of the contract. In
no event shall the definitive equitable adjustment exceed the delivery schedule
(or time of performance, or cost or fixed fee) adjustments so established, nor
otherwise be inconsistent with other adjustment limitations so established.
Except with respect thereto, nothing contained herein shall affect the rights of
the parties to an equitable adjustment by reason of the change, pursuant to the
Changes clause of the General Provisions hereof.
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ARTICLE XXVIII - CHANGES
Due to the nature of the final product, and the way in which it is likely to be
used by the end customer, design, schedule and other changes are likely to occur
on multiple occasions throughout the life of the contract. In the event of any
such changes, ViaSat will authorize SPECTRAGRAPHICS to collect information on
change implementation in writing and, relying on this information, ViaSat will
determine the effectivity of all such changes. Such changes will require
SPECTRAGRAPHICS to provide assistance to ViaSat:
A) By using its best efforts to cancel component orders for
discontinued components, and
B) By suggesting implementation methods which will result in
least-cost conformance, and
C) By using its best efforts to implement the change within the
timeframe stated in every such instance.
If a change is proposed by either party, SPECTRAGRAPHICS will provide ViaSat
with a written report, hereinafter referred to as the Implementation Cost
Report, (or ICR) showing the implementation cost of such change, breaking out
all material, labor and overhead charges, and certifying the accuracy of such
report. ViaSat retains the right to audit any such reports at any time during
the execution of the contract. No statement or requirement in this article shall
waive or supersede any other rights of the Buyer. In the event of any conflicts
with FAR or DFAR, those regulations shall have precedence over any requirement
in this article.
In the event that a change results in a change in price, Seller shall provide a
written report to Buyer, stating the reasons for the change in price. This
report shall be different and separate from the ICR, and shall be confined to
the unit costs and subsequent unit prices of ongoing production. Seller shall
adhere to the provisions contained in Articles XIX, and XXXVII. If and when
Seller and Buyer agree on the details of any proposed change, Buyer shall notify
Seller of this agreement in writing, and the record of this change shall become
a permanent part of this contract.
ARTICLE XXIX - DESIGN ACCEPTANCE
Buyer and Seller agree that the production schedule referenced in Exhibit D is
dependent upon Buyer's customer accepting, in a timely manner, Buyer's design
concurrent with the production start-up. In the event that Buyer's customer
requires design or schedule changes during the design acceptance period, Buyer
shall inform Seller in writing that production has been halted or the schedule
changed. Upon receipt of this information, Seller shall stop production and
await further instructions from Buyer. Unless otherwise agreed to in writing,
Seller shall continue to procure material at the rate required by Exhibit D, and
charge Buyer a monthly inventory-carrying charge equal to one and one-half
percent of the Seller's material cost of the cumulative number of undelivered
CCAs affected by the production stoppage.
In the event that design changes must be initiated, these will be performed as
defined in Article XXVIII.
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ARTICLE XXX - ENTIRE AGREEMENT
This contract supersedes any other contract or purchase order awarded by ViaSat
to SPECTRAGRAPHICS in performance of the items referenced in Exhibits A, B, C,
D and E and constitutes the entire agreement between the two parties. This
contract shall not be varied in its terms or conditions by any oral agreement
or representation, or otherwise, than by an instrument in writing of even or
subsequent date thereto, executed by both Seller and Buyer.
The Article and Exhibit titles used herein are for convenience only and shall
in no way be construed as part of this contract or as an indication of the
meaning of the particular Article or Exhibit.
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have executed this contract to be
effective as of the day and year first written. This contract consists of:
1. A Title Page
2. A Schedule consisting of nine (9) pages including this Signature page.
3. Exhibits A, B, C, D and E
SELLER BUYER
- ------ -----
SPECTRAGRAPHICS, INCORPORATED. VIASAT, INCORPORATED
BY: /s/ Joe Lynch BY: /s/ Gregory Monahan
TITLED: V.P. Gen. Mgr. TITLE: V. P.
DATE: 10-18-95 DATE: 10/18/95
*** THIS CONCLUDES THE CONTRACT ***
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EXHIBIT 11.1
VIASAT, INC.
CALCULATION OF PRO FORMA NET INCOME PER SHARE
THREE MONTHS
YEAR ENDED ENDED
MARCH 31, JUNE 30,
1996 1996
---------- ------------
Pro Forma Net Income Per Share Calculation:
Net Income ................................... $1,633,000 $ 478,000
========== ==========
Weighted average common shares outstanding ... 3,341,184 3,386,396
Assumed conversion of preferred shares ....... 2,365,538 2,365,538
Other common stock equivalents ............... 76,021 76,021
Effect of shares issued and options granted
at less than the offering price ............ 218,151 175,155
---------- ----------
Pro forma shares outstanding ................. 6,000,894 6,003,110
========== ==========
Pro forma net income per share ............... $0.27 $0.08
========== ==========
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EXHIBIT 21.1
VIASAT, INC.
SUBSIDIARIES
NAME JURISDICTION OF INCORPORATION
---- -----------------------------
ViaSat Foreign Sales Corporation Barbados
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EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated June 11, 1996, relating
to the financial statements of ViaSat, Inc., which appears in such Prospectus.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
PRICE WATERHOUSE LLP
San Diego, California
September 30, 1996
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1,000
YEAR 3-MOS
MAR-31-1996 MAR-31-1996
APR-01-1996 APR-01-1996
MAR-31-1996 JUN-30-1996
2,297 1,733
0 0
6,171 5,923
0 0
1,223 1,476
10,345 10,135
4,906 5,293
2,117 2,416
13,262 13,248
5,694 5,285
0 0
0 0
32 32
46 46
0 0
5,217 5,712
0 0
29,017 9,732
20,983 6,862
27,203 8,960
0 0
0 0
260 62
1,583 740
(50) 262
1,633 478
0 0
0 0
0 0
1,633 478
.27 .08
.27 .08
