Document:

exv10w1

 

Exhibit
10.1

Subcontract
No. 70-10135l4l-05

DPAS Rating: DOA7

COST-PLUS-FIXED-FEE/COMPLETION SUBCONTRACT

This
Cost-Plus-Fixed-Fee (“CPFF”)/Completion Subcontract (“Subcontract”), effective this
twenty third day of February, 2006, is by and between General Dynamics Advanced Information
Systems, Inc., a Delaware corporation, having offices at 8800 Queen Avenue South Bloomington, MN
55431 (“GDAIS” or “Buyer”), and, JSI Microelectronics a California corporation, having offices at
4235 Forcum Ave., Suite 500, McClellan CA 95652 (“Subcontractor”) for the goods and services
described herein (“Program”). Hereinafter, Buyer and Subcontractor may be collectively referred to
as the “Parties” or individually referred to as a “Party.”

This Subcontract constitutes the entire agreement, including all documents incorporated herein by
reference, between the parties and supersedes all, whether written or oral, communications,
representations, negotiations or agreements pertaining to the subject matter hereof.

IN WITNESS WHEREOF, the Parties have caused this Subcontract to be executed by their duly
authorized representatives as of the day and year first above written.

	 	 	 
	GENERAL DYNAMICS ADVANCED

	 	JSI MICROELECTIONICS INC.
	INFORMATION SYSTEMS, INC.
	 	 
	 
	 	 
	BY:
/s/ Steven A. Deal

	 	BY: /s/ Larry R. Johnson
	 
	 	 
	NAME: Steve Deal

	 	NAME: Larry Johnson
	 
	 	 
	TITLE: Manager of Subcontracts

	 	TITLE: President
	 
	 	 
	DATE: 27 February 2006

	 	DATE 2/28/06

END OF COVER/SIGNATURE PAGE

GDAIS PROPRIETARY INFORMATION

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Subcontract
No. 70-10135l4l-05

DPAS Rating: DOA7

SECTION A- SPECIAL AGREEMENTS AND OTHER IMPORTANT PROVISIONS AND
NOTIFICATIONS

	A.1 ORDER OF PRECEDENCE

In the event of an inconsistency between any of the provisions of this Subcontract, the
inconsistency shall be resolved by giving precedence to the provisions of the Subcontract in the
following order:

	 	1.	 	Sections A through H (Schedule Provisions)
	 
	 	2.	 	Contract Security Classification Specification (DD Form 254), (if applicable)
	 
	 	3.	 	Section I -1.1 (Standard Subcontract Terms and Conditions)
	 
	 	4.	 	Section I -1.2 (Additional Provisions)
	 
	 	5.	 	Section I -1.3 (Government Provisions)
	 
	 	4.	 	Non-Disclosure Agreement (NDA PI-04252 and PI-04252 Mod. 01)
	 
	 	5.	 	Statement of Work
	 
	 	6.	 	Cover/Signature Page
	 
	 	7.	 	All Other Attachments, Exhibits and Documents listed in Section J.

Sections A through H comprise the “Schedule” of this Subcontract.

	A.2 SUBCONTRACT MODIFICATIONS (AND LIVING CONTRACT)

Modifications to this Subcontract shall be made through the issuance of a Change Notice that will
delineate the stated modification and identify the changed Subcontract page(s). Changed portions of
the Subcontract language will be marked with a vertical line in the right margin. For
Subcontractor’s convenience, replacement pages containing the Subcontract modifications will be
provided, so that at all times, the Subcontractor will possess a complete, corrected and coherent
text of the Subcontract. Each replacement page shall be marked with the Subcontract number,
modification number, and date.

END OF SECTION A

GDAIS PROPRIETARY INFORMATION

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Subcontract
No. 70-10135141-05

DPAS Rating: DOA7

SECTION B
- GOODS/SERVICES AND PRICES/COSTS

	B.1 TYPE OF SUBCONTRACT

The Subcontract awarded hereunder is a Cost-Plus-Fixed Fee (CPFF)/Completion type contract. Under a
CPFF/Completion contract, Subcontractor is responsible for using its best efforts to complete the
work in accordance with the technical requirements, within the time (delivery schedule) agreed
upon, and within the negotiated estimated cost, subject to the Limitation of Cost provision or, if
applicable, the Limitation of Funds provision of this Subcontract. Buyer will pay all allowable and
allocable costs subject to the Allowable Cost and Payment provisions
of this Subcontract.

B.2 STATEMENT OF REQUIREMENTS

In accordance with the Subcontract, Subcontractor shall provide all materials, labor, equipment and
facilities, except as specified herein to be furnished by the Buyer, and shall do all that is
necessary or incident to the satisfactory and timely performance of the Subcontract Line Item
Numbers (SCLINs) listed below.

B-3 SUBCONTRACT LINE ITEM NUMBERS (SCLINs) 

The estimated cost and fixed fee for the goods/services to be provided by the subcontractor are as
follows:

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	EST.	 	 	 	 
	SCLIN	 	GOODS/SERVICES 	 	QTY	 	UNIT	 	AMOUNT
	0001
	 	ARMS Foundry and SEGIT Facility Upgrades and Enhancements	 	1	 	LOT	 	 	 	 
	 
	 	in accordance with the Statement of Work (SOW),	 	 	 	 	 	 	 	 
	 
	 	Attachment 2, Section J hereof.	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	Estimated Cost 	 	 	 	 	 	$	3,929,785.00	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	Fixed Fee	 	 	 	 	 	$	293,775.00	 
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	Cost Plus Fixed Fee 	 	 	 	 	 	$	4,223,560.00	 
	 
	 	 	 	 	 	 	 	 	 	 
	0002
	 	Data Requirements in accordance with Appendix 1	 	 	 	LOT	 	The cost & fee
	 
	 	of the SOW, Attachment 2, Section J hereof.	 	 	 	 	 	for this item are
	 
	 	 	 	 	 	 	 	included in the
	 
	 	 	 	 	 	 	 	cost & fee in SCLIN 0001

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Subcontract
No. 70-10135141-05

DPAS Rating: DOA7

	B-4 ESTIMATED COST, FIXED FEE AND TOTAL AMOUNT (ALL SCLINS)

	 	(a)	 	The reimbursement of costs and the payment of fee will be in accordance with the
“Allowable Cost and Payment” clause in the General Provisions of this Subcontract.
	 
	 	(b)	 	The estimated cost contemplated by the “Allowable Cost and Payment” clause in the General
Provisions of this Subcontract and the fixed fee as contemplated by this Subcontract are as
follows:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	SCLIN	 	Estimated Cost	 	Fixed Fee	 	Total Cost Plus Fixed Fee
	0001
	 	$	3,929,785.00	 	 	$	293,775.00	 	 	$	4,223,560.00	 
	0002
	 	 	 	 	 	not separately priced	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	TOTALS
	 	$	3,929,785.00	 	 	$	293,775.00	 	 	$	4,223,560.00	 

	B.5 RESERVED

END OF SECTION B

GDAIS PROPRIETARY INFORMATION

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Subcontract
No. 70-10135141-05

DPAS Rating: DOA7

SECTION C — STATEMENT OF WORK/SPECIFICATIONS

			
	C.1	 	STATEMENT OF WORK

The goods/services that the Subcontractor is to provide are stated in Section B, and
shall be furnished in accordance with the Subcontract schedule provisions and any referenced
Statement of Work documents set forth in Section J, which are incorporated herein by this
reference.

			
	C.2	 	RESERVED

END OF SECTION C

GDAIS PROPRIETARY INFORMATION

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Subcontract No. 70-10135141-05

DPAS Rating: DOA7

SECTION D
PRESERVATION, PACKAGING, MARKING AND SHIPPING

			
	D.1	 	COMMERCIAL PRACTICES

Unless otherwise specified in this Subcontract, goods and data shall be preserved,
packaged, packed and marked in accordance with best standard commercial practices which are
adequate to ensure against damage/deterioration during transit and storage pending usage.
All shipments and mailings shall meet the requirements of the carrier for safe delivery at
destination.

			
	D.2	 	DATA, REPORTS AND CERTIFICATIONS

All data, reports and certifications required under this Subcontract shall be:

	 	•	 	marked with the subcontract number
	 
	 	•	 	mailed first-class (fax copies are acceptable provided they are followed up by
mailed originals)
	 
	 	•	 	provided in triplicate (one original and two copies)
	 
	 	•	 	directed to the attention of the Buyer’s designated Subcontract Representative.

In the event the applicable SOW includes a Subcontractor Data Requirements List (SDRL) or other
similar list of required data, the Subcontractor’s transmittal letter for the transmitted data
shall reference the data item number, title, and data item description.

			
	D.3	 	RESERVED

			
	D.4	 	SHIPMENTS OF GOODS (ROUTING/CARRIER, SHIPPING ADDRESS,
F.O.B. POINT,
MARKING & NOTIFICATION INSTRUCTIONS, ADVANCE SHIPPING NOTICE)

	 	 	The Subcontractor shall ship all deliverable goods under the Subcontract in accordance with
the following:
	 
	(a)	 	Routing/Carrier:
	 
	 	 	All shipments of goods shall be shipped Federal Express Overnight
	 
	 	 	SUBCONTRACTOR SHALL REFERENCE BUYER’S SUBCONTRACT NUMBER ON ALL SHIPPING/FREIGHT DOCUMENTS.

	 	 	 	 	 
	(b)	 	Shipping Address:	 	F.O.B. Point:
	 

	 	General Dynamics AIS
	 	Destination
	 

	 	8800 Queen Ave. S.	 	 
	 

	 	Bloomington, MN 55431	 	 

	(c)	 	Mark each crate, container and shipping document with the following minimum
information:

Subcontract Number

SCLIN per Subcontract Section B

Quantity: (As applicable)

Subcontractor Name

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Subcontract No. 70-10135141-05

DPAS Rating: DOA7

	 	 	Prime Contract Number, as applicable
	 
	(d)	 	Reserved
	 
	(e)	 	Advance Shipping Notice:
	 
	 	 	Prior to shipment of supplies, Subcontractor shall notify the following GDAIS
personnel by separate telefax of the forthcoming shipment:
	 
	 	 	The faxed notice of shipment shall include the following: Subcontract number, item
description, quantity, approximate weight of shipment, method of shipment, carrier name,
bill of lading number, time of departure, and estimated time to arrival.
SUCH NOTIFICATION SHALL BE GIVEN AT LEAST 24 HOURS PRIOR TO SHIPMENT.
	 
	 	 	When shipment is made, Subcontractor shall mail a copy of the packing sheet (or equivalent)
with applicable test report, inspection sheets, certifications, etc., to the Buyer’s designated Subcontract
Representative.

END OF SECTION D

GDAIS PROPRIETARY INFORMATION

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Subcontract No. 70-10135141-05

DPAS Rating: DOA7

SECTION E — INSPECTION AND ACCEPTANCE/QUALITY ASSURANCE

			
	E-1	 	INSPECTION AND ACCEPTANCE

	(a)	 	The Buyer has the right to inspect and evaluate the work performed or being performed
under the Subcontract, and the premises where the work is being performed, at all reasonable
times and in a manner that will not unduly delay the work. If the Buyer performs inspection or
evaluation on the premises of the Subcontractor or its subcontractor(s), the Subcontractor
shall furnish and require its subcontractor(s) to furnish, without additional charge, all
reasonable facilities and assistance for the safe and convenient performance of these duties.
	 
	(b)	 	Final inspection and acceptance of goods and data shall occur at Buyer’s facility upon the
Buyer’s acceptance of same in accordance with the inspection, test and acceptance criteria of
the Subcontract Statement of Work.
	 
	(c)	 	Data requirements and inspection and acceptance thereof shall be as indicated in the
Subcontract Data Requirements of the Statement of Work.
	 
	(d)	 	Quality assurance requirements shall be as indicated in the Subcontract Product Assurance
Requirements of the Statement of Work.
	 
	(e)	 	The provisions of Section E are in addition to any other inspection and acceptance provisions
of the Subcontract. In the event of a conflict between Section E and any other inspection and
acceptance provisions of the Subcontract, including the inspection and acceptance provisions
set forth by the Subcontract Statement of Work and the Subcontract General Provisions, the
full text provisions of Section E shall prevail.

END OF SECTION E

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	 	Subcontract No. 70-10135141-05

DPAS Rating: DOA7

SECTION F — DELIVERY/PERFORMANCE

	F.l	 	   PERIOD OF PERFORMANCE

	(a)	 	SCLINs 0001 — 0002: The Subcontractor shall accomplish the work required in Section B
commencing 02/01/05 (effective date of Subcontract) through the performance period end date of
01/31/07. The parties agree that the Subcontractor shall perform reasonable and necessary closeout
duties after the performance period end date noted herein. Any extension of this performance period
requires Buyer’s written approval.
	 
	(b)	 	The Buyer shall not be obligated to reimburse the Subcontractor for any work performed
or charges incurred before or after this time period, unless agreed to in writing by the Buyer’s
designated Subcontract Representative.
	 
	F.2	 	 SUBCONTRACT DELIVERABLE
	 
	 	 	The goods, data and reports to be furnished hereunder shall be delivered to the Buyer as specified
in the Statement of Work.
	 
	F.3	 	 SUBCONTRACT MILESTONES/EVENTS
	 
	(a)	 	Subcontractor shall be fully prepared to meet and/or support the program schedule as set
forth in SOW.

END OF SECTION F

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	 	Subcontract
No. 70-10135141-05

DPAS Rating: DOA7

SECTION
G — SUBCONTRACT ADMINISTRATION DATA

	G.1	 	 TECHNICAL AND ADMINISTRATIVE REPRESENTATIVES
	 
	(a)	 The following technical and administrative representatives of the Buyer and
Subcontractor are hereby designated for this Subcontract:

	 	 	 
	Subcontractor’s Representatives are:

	 	Buyer’s Representatives are:
	 
	 	 
	Larry
Johnson — Technical Representative

	 	Nan Hauser — Technical Representative
	 
	 	 
	Larry Johnson — Contract Representative

	 	Lowell Barie — Subcontract Representative

	 	 	In the event Lowell Barie is not available, Steve Deal or their duly authorized representatives
shall serve as Buyer’s Subcontract Representative. In the event Larry Johnson is not available, his
duly authorized representative shall serve as Subcontractor’s Contract Representative.
	 
	(b)	 	The Buyer’s Technical Representative is responsible for day-to-day clarifications,
guidance and technical direction as may be required within the scope of the technical work
requirements. “Technical direction” shall be in accordance
with the “Technical Direction” provision of the
General  Provisions of the Subcontract.
	 
	(c)	 	Contact with the Buyer regarding prices, terms, quantities, deliveries, and financial
adjustments shall be made only between the Buyer’s Subcontract Representative and the
Subcontractor’s contract Representative. Actions taken by the Subcontractor, which by their nature
effect a change to this Subcontract, shall only be binding upon the Buyer when such action is
specifically authorized in writing by the Buyer’s Subcontract Representative. Unless specified
otherwise in this Subcontract, all written communications between Subcontractor and Buyer shall be
addressed and directed to the Buyer’s Subcontract Representative and Subcontractor’s Contract
Representative.
	 
	(d)	 	The Buyer shall be responsible for all liaison and communications with the Buyer’s
customer as well as the Buyer’s other subcontractors for the term of this Subcontract. The
Subcontractor shall not communicate with the Buyer’s customer nor the Buyer’s other subcontractors
regarding this Subcontract except with the prior consent of the Buyer.
	 
	(e)	 	No request, notice, authorization, direction or order received by the Subcontractor
shall be binding upon the Buyer, or serve as the basis for a change in the Subcontract, unless
issued (or confirmed) in writing by the Buyer’s Subcontract Representative.
	 
	(f)	 	The Subcontractor shall immediately notify the Buyer’s Subcontract Representative
whenever a verbal or written change notification has been received from an employee of the Buyer
(other than the Subcontract Representative), which would affect any of the terms, conditions, cost,
schedules, etc., or this Subcontract, and the Subcontractor is to perform no work or make any
changes in response to any such notification or make any claim on Buyer unless the Buyer’s
Subcontract Representative directs the Subcontractor, in writing, to implement such change
notification.

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	 	Subcontract No. 70-10135141-05

DPAS Rating: DOA7

	G.2	 	 COMMUNICATIONS
	 
	(a)	 	All notices and other binding communications shall be in writing and sent by
cable, telex, U.S mail, telefax, or other customary means, addressed as follows:

	 	 	 
	Subcontractor:

	 	Buyer:
	 
	 	 
	JSI Microelectronics Inc.

	 	General Dynamics Advanced Information
	 

	 	Systems, Inc
	4235 Forcum Ave., Suite 500

	 	8800 Queen Ave S.
	 
	 	 
	McClellan, CA 95652

	 	Bloomington, MN 55431
	 
	 	 
	Attn. Larry Johnson

	 	Attn. Lowell Barie

	 	 	or to such other address as the Subcontractor’s Contract Representative or Buyer’s Subcontract
Representative shall designate by written notice.
	 
	(b)	 	All correspondence and data submitted by Subcontractor under this Subcontract shall
reference the Subcontract number.
	 
	G.3	 	 SUBMISSION OF INVOICES
	 
	(a)	 	Subcontractor’s invoices shall be submitted no more than once a month, in triplicate
(one original and two copies) and addressed as follows for Buyer’s review and provisional approval:

	 	(1)	 	Original and one (1) copy to:

General Dynamics Advanced Information Systems, Inc. 

Accounts Payable — Attn: Suleman Bagha

3021 American Blvd. East

Bloomington, MN 55425
	 
	 	(2)	 	Fax one (1) copy to: (952) 921-6869

General Dynamics Advanced Information Systems, Inc.

8800 Queen Ave. S.

Bloomington, MN 55431

Attention: Lowell Barie

	(b)	 	Invoices submitted shall reflect incurred costs at the SCLIN level of performance. Final
payment shall be made in accordance with the “Allowable Cost and Payment” clause in the General
Provisions of this Subcontract.
	 
	(c)	 	Subcontractor’s invoices and attachments thereto shall include the following minimum
information, as applicable: Subcontractor’s name and business address, remittance address, date
of invoice, Subcontract number, Buyer’s internal accounting numbers or Cost Charge Numbers (CCNs),
prime contract number, name of Buyer’s designated Subcontract Representative, Subcontract Line Item
Numbers (SCLINs), description of goods and/or services with corresponding sizes, quantities and
unit prices, separately itemized taxes, extended totals, Subcontractor’s signature and payment
terms.
	 
	(d)	 	Reserved

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	 	Subcontract No. 70-10135141-05

DPAS Rating: DOA7

	(e)	 	Invoices submitted without the above information may be returned to the
Subcontractor for correction.
	 
	(f)	 	If a tax exemption applies to this Subcontract, the following is the tax exemption
number: CA SR OH 100-171968
	 
	(g)	 	Submit on an annual basis (or at the end of performance whichever is sooner), a
reconciliation of invoices billed and paid.
	 
	(h)	 	Notify the Buyer immediately upon receipt of an overpayment for farther direction.
	 
	G.4	 	 PAYMENT TERMS
	 
	(a)	 	Payment terms are 30 days after receipt of an acceptable invoice.
	 
	 	 	For SCLINS 0001/0002, payment to the Subcontractor shall be in accordance with the General
Provisions, entitled “Payment.”
	 
	G.5	 	 CALIFORNIA SALES — USB TAX
	 
	 	 	All goods and services purchased under this Subcontract are for resale.
	 
	G.6	 	 RESERVED

END OF SECTION G

GDAIS PROPRIETARY INFORMATION

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	 	Subcontract No. 70-10135141-05

DPAS Rating: DOA7

SECTION H — SPECIAL PROVISIONS 

	H.1	 	 RESERVED
	 
	H.2	 	 PLACE OF PERFORMANCE
	 
	 	 	The work under this Subcontract shall be performed at the DMEA Foundry located at 4234 54th
Street McClellan, CA 95652-2100.
	 
	H.3	 	 BUYER/CUSTOMER-FURNISHED SPECIAL TOOLING (ST), SPECIAL TEST EQUIPMENT (STE), PLANT EQUIPMENT (PE), MATERIAL AND/OR FACILITIES.
	 
	(a)	 	Pursuant to the Property Clause of this Subcontract, the Buyer shall furnish for use in
the performance of this Subcontract, the following Buyer and/or Customer-furnished ST, STE, PE,
material and/or facilities identified in paragraph(s) (b) and (c) below on or before the date(s)
specified.
	 
	(b)	 	Buyer-Furnished ST, STE, PE, material and/or facilities:

N/A

	 	 	    Customer-Furnished ST, STE, PE, material and/or facilities:

N/A

	H.4	 	 BUYER-FURNISHED INFORMATION
	 
	 	 	The Buyer may provide to the Subcontractor various reports, documents and other data to assist the
Subcontractor in performing the work defined in the Subcontract. The Buyer does not warrant
Buyer-furnished information to be free from error or to be complete and accurate in all instances.
The information is provided with the understanding that, to the best of Buyer’s ability to so
determine, it is pertinent and useful in the fulfillment of the Subcontract work; however, the
Subcontractor has no right, either actual or implied, to an adjustment of price or indemnification
for cost associated with any data or information obtained from the Buyer.
	 
	H.5	 	 DPAS PRIORITY RATING
	 
	 	 	The priority rating of this Subcontract is DOAZ. This is a rated Subcontract certified for
national defense use, and you are required to follow all the provisions of the Defense Priorities
and Allocations System Regulation (15 CFR Part 700).
	 
	H.6	 	 NONDISCLOSURE AGREEMENT
	 
	 	 	The parties shall exchange proprietary information in accordance with the NONDISCLOSURE AGREEMENT
set forth in Section J, which is incorporated herein by this reference.
	 
	H.7	 	 IDENTIFICATION OF RESTRICTIONS ON RIGHTS IN TECHNICAL DATA AND
COMPUTER SOFTWARE
	 
	 	 	None

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	 	Subcontract No. 70-10135141-05

DPAS Rating: DOA7

	H.8	 	 RESERVED
	 
	H.9	 	 RESERVED

END OF SECTION H

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Subcontract No. 70-10135141-05

DPAS Rating: DOA7

SECTION I — GENERAL PROVISIONS

The below-noted terms and conditions, full text clauses, provisions, and modifications thereto, are
applicable to this Subcontract.

	I.1	 	STANDARD SUBCONTRACT TERMS AND CONDITIONS
	 
	 	 	This Subcontract incorporates Attachment 4 GDAIS Standard Subcontract Terms and Conditions.

	I.2	 	ADDITIONAL PROVISIONS (Full Text)
	 
	(a)	 	The following Special Requirements and Conditions are applicable to this subcontract:
	 
	 	 	None

	I.3	 	GOVERNMENT PROVISIONS
	 
	(a)	 	The term FAR, when used in the following clauses, means the cited portion of the
Federal Acquisition Regulation including, when appropriate, the Department of Defense
(“DoD”) FAR Supplement (DFARS), in effect on the date of this Subcontract. Where appropriate to accomplish the purpose of the FAR or to protect the Buyer’s interest, the word “Buyer”
shall be substituted for the word “Government” or “Contracting Officer” and the word
“Subcontractor” shall be considered the “Contractor” hereunder in the reading of these
regulations, thereby creating a legal relationship between the Buyer and Subcontractor
identical to, but not dependent upon, the legal relationship intended to be created by
said regulations between the Government and a contractor.
	 
	 	 	Any references to the “Disputes” clause or “Changes clause shall refer to the GDAIS Standard Terms
and Conditions incorporated herein.
	 
	 	 	The terms “Government” or “Contracting Officer” do not change: (i) when a right, act, authorization
or obligation can be granted or performed only by the Government, (ii) when access to proprietary
financial information or other proprietary data is required, (iii) when title to property is to be
transferred directly to Government.
	 
	 	 	The word “Buyer,” as it appears in the Subcontract, means General Dynamics Advanced Information
Systems acting through its duly authorized Procurement representative. No other persons may make
commitments or changes under the Subcontract on behalf of the Buyer.
	 
	 	 	Copies of the FAR/DFARS may be obtained by Federal Acquisition Regulation Internet websites
available at http://www.acqnet.gov/far/ or
http://www.acq.osd.mil/dp/dars/dfars.html or by contacting GDAIS’ subcontract
administrator.
	 
	(b)	 	COST OR PRICING DATA — Defective Cost of Pricing  Data - Subcontractor agrees
to comply with the applicable provisions (without dollar limitation, however) of FAR
15,408 and the applicable regulations of the Cost Accounting Standards Board and to
indemnify and hold harmless GDAIS for any claims, loss, damage or expense (including
without limitation attorneys’ fees), resulting from any defective, non-current,
incomplete, or inaccurate data supplied by Subcontractor in pricing of this Subcontract,
or any other violation of the provisions of FAR 15,408 and the Cost Accounting Standard
regulations.
	 
	(c)	 	OTHER THAN COST OR PRICING DATA — GDAIS or GDAIS, Customer may at their discretion require
Subcontractor to submit information other than cost or pricing data to determine whether
Subcontractor’s price is fair and reasonable. The requested information may include sales data for

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	 	 	the same or similar Work for the relevant period, such as the information set forth in FAR
52.215-20 or FAR 52.215-21, in the form regularly maintained by Subcontractor as part of its
commercial operations.
	 
	(d)	 	COPYRIGHT, DATA AND PATENT RIGHTS – (i) Government Rights: Notwithstanding any other
provisions in this Subcontract, if this Subcontract is placed under a prime contract which
grants copyright, data, or patent rights to the Government, Subcontractor agrees to comply
with the requirements of such grant insofar as they are applicable to the subject matter
of this Subcontract and with all pertinent provisions of Part 27 of the FAR or
corresponding regulations of the Government Agency supporting the work of this
subcontract. (ii) Authorization and Consent: To the extent that the prime contract under
which this Subcontract is being performed includes Government Authorization and Consent to
use patented inventions without indemnification and to the extent that clause applies, the
provisions of paragraph 14(a) of the General Terms and Conditions do not apply.
	 
	(e)	 	OTHER OBLIGATIONS OF SUBCONTRACTOR – Subcontractor will provide whatever reasonable assistance
GDAIS may require to maintain compliance between this Subcontract and any contract under which this
Subcontract is issued, including, but not limited to, complying with the following FAR clauses and, to
the extent the Subcontract is issued in support of a contract with a Department of Defense (DoD)
agency or contractor of a DoD agency, the following DFARS clauses, which are incorporated herein by
reference. Subcontractor shall include in its subcontracts under this Subcontract any provisions
required to be flowed-down to “lower-tier” subcontractors by the incorporated FAR or DFARS
provisions. If Subcontractor believes that one or more of the following clauses do not apply to
this Subcontract, Subcontractor must advise GDAIS in writing of said clause(s). GDAIS may, in its
sole discretion and in writing, acknowledge its agreement with Subcontractor at which time such
clause(s) will be deemed deleted from this Subcontract. If GDAIS affirmatively rejects
Subcontractor’s assertion in writing or does not respond to Subcontractor’s assertion, the
clause(s) shall apply.

GDAIS PROPRIETARY INFORMATION

18exv10w2

 

Exhibit 10.2

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO JMAR TECHNOLOGIES, INC.
THAT SUCH REGISTRATION IS NOT REQUIRED.

SECURED NON-CONVERTIBLE REVOLVING NOTE

          FOR VALUE RECEIVED, each of JMAR Technologies, Inc., a Delaware (the “Parent”), and the other
companies listed on Exhibit A attached hereto (such other companies together with the
Parent, each a “Company” and collectively, the “Companies”), jointly and severally, promises to pay
to LAURUS MASTER FUND, LTD., c/o M&C Corporate Services Limited, P.O. Box 309 GT, Ugland House,
South Church Street, George Town, Grand Cayman, Cayman Islands, Fax: 345-949-8080 (the “Holder”) or
its registered assigns or successors in interest, the sum of Three Million Dollars ($3,000,000),
or, if different, the aggregate principal amount of all Loans (as defined in the Security Agreement
referred to below), together with any accrued and unpaid interest hereon, on March 27, 2008 (the
“Maturity Date”) if not sooner indefeasibly paid in full.

          Capitalized terms used herein without definition shall have the meanings ascribed to such
terms in the Security Agreement among the Companies and the Holder dated as of the date hereof (as
amended, modified and/or supplemented from time to time, the “Security Agreement”).

          The following terms shall apply to this Secured Non-Convertible Revolving Note (this “Note”):

ARTICLE I

CONTRACT RATE

          1.1 Contract Rate. Subject to Sections 3.2 and 4.9, interest payable on the
outstanding principal amount of this Note (the “Principal Amount”) shall accrue at a rate per annum
equal to (A)(x) the “prime rate” published in The Wall Street Journal from time to time
(the “Prime Rate”), plus (y) two percent (2.0%) (the interest rate referred to in the immediately
preceding clauses (x) and (y), collectively, the “Cash Interest Rate”) plus (B) eight percent
(8.0%) (the interest rate referred in this clause (B), the “Advance Interest Rate”) (the Cash
Interest Rate plus the Advance Interest Rate are collectively referred to herein as the “Contract
Rate”). The Cash Interest Rate shall be increased or decreased as the case may be
for each increase or decrease in the Prime Rate in an amount equal to such increase or
decrease in the Prime Rate; each change to be effective as of the day of the change in the Prime
Rate. Interest shall be calculated on the basis of a 360 day year.

 

 

          1.2 Cash Portion of the Contract Rate. The interest accruing and payable on the
Principal Amount of the Note at the Cash Interest Rate shall hereinafter be referred to as the
“Cash Interest Portion”. The Cash Interest Portion shall be payable monthly, in arrears,
commencing on April 1, 2006 and on the first business day of each consecutive calendar month
thereafter (each, a “Repayment Date”) until and on the Maturity Date, whether by acceleration or
otherwise.

ARTICLE II

ADVANCE INTEREST

          2.1 Advance Interest Portion of the Contract Rate. The interest accruing and payable
on the Principal Amount of the Note at the Advance Interest Rate shall hereinafter be referred to
as the “Advance Interest Portion.” The Advance Interest Portion shall (i) be nonrefundable and
payable annually in advance (x) on the date hereof for the period from the date hereof to and
including the date immediately preceding the date that is first anniversary of this and (y) on
March 27, 2007 for the period from the date that is the first anniversary of this Note to and
including the Maturity Date (each date referred to in the immediately preceding clauses (x) and
(y), an “Advance Interest Portion Payment Date”) and be payable in warrants, as set forth below:

                                   (a) On the date hereof, the Company
shall issue a ten year par value exercise price warrant
to the Holder to purchase 218,181 shares of the Company’s Common Stock; and

                                   (b) On the date hereof, the
Company shall also issue a ten year par value exercise price
warrant to the Holder to purchase up to 240,000 shares of the Company’s Common Stock with the
warrant being unvested on issuance and vesting on the first anniversary of this Note for a number
of shares equal to (i) eight percent (8.0%) of the average daily balance outstanding under this
Note for the twelve months period ending on the first anniversary of this Note divided by (ii)
the greater of (x) $1.00 and (y) the average closing price of the Common Stock for the three
trading days prior to the first anniversary of this Note.

ARTICLE III

EVENTS OF DEFAULT AND DEFAULT RELATED PROVISIONS

          3.1 Events of Default. The occurrence of an Event of Default under the Security
Agreement shall constitute an event of default (“Event of Default”) hereunder.

          3.2 Default Interest. Following the occurrence and during the continuance of an Event
of Default, the Companies shall, jointly and severally, pay additional interest on the outstanding
principal balance of this Note in an amount equal to two percent (2%) per month, and all
outstanding Obligations, including unpaid interest, shall continue to accrue interest at such
additional interest rate from the date of such Event of Default until the date such Event of
Default is cured or waived.

2

 

          3.3 Default Payment. If an Event of Default occurs and is continuing, the Holder, at
its option, may elect, in addition to all rights and remedies of the Holder under the Security
Agreement and the other Ancillary Agreements and all obligations and liabilities of each Company
under the Security Agreement and the other Ancillary Agreements, to require the Companies, jointly
and severally, to make a Default Payment (“Default Payment”) due and payable within ten days after
written notice from the Holder to the Company (“Default Notice Period”) of an Event of Default. If
during the Default Notice Period, the Company cures the Event of Default, the Event of Default will
no longer exist and any rights the Holder had pertaining to the Event of Default will no longer
exist. If after the Default Notice Period, the Event of Default has not been cured, the Default
Payment shall be immediately due and payable in an amount equal to one hundred ten percent (110%)
of the outstanding principal amount of the Note, plus accrued but unpaid interest, all other fees
then remaining unpaid, and all other amounts payable hereunder. The Default Payment shall be
applied first to any fees due and payable to the Holder pursuant to the Notes, the Security
Agreement and/or the Ancillary Agreements, then to accrued and unpaid interest due on the Notes and
then to the outstanding principal balance of the Notes.

ARTICLE IV

MISCELLANEOUS

          4.1 Cumulative Remedies. The remedies under this Note shall be cumulative.

          4.2 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder
hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and
not exclusive of, any rights or remedies otherwise available.

          4.3 Notices. Any notice herein required or permitted to be given shall be in writing
and shall be deemed effective given (a) upon personal delivery to the party notified, (b) when sent
by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then
on the next business day, (c) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written verification of receipt.
All communications shall be sent to the respective Company at the address provided for such Company
in the Security Agreement executed in connection herewith, and to the Holder at the address
provided in the Security Agreement for the Holder, with a copy to John E. Tucker, Esq., 825 Third
Avenue, 14th Floor, New York, New York 10022, facsimile number (212) 541-4434, or at
such other address as the respective Company or the Holder may designate by ten days advance
written notice to the other parties hereto.

          4.4 Amendment Provision. The term “Note” and all references thereto, as used
throughout this instrument, shall mean this instrument as originally executed, or if later amended
or supplemented, then as so amended or supplemented, and any successor instrument as such successor
instrument may be amended or supplemented.

3

 

          4.5 Assignability. This Note shall be binding upon each Company and its successors
and assigns, and shall inure to the benefit of the Holder and its successors and assigns, and may
be assigned by the Holder in accordance with the requirements of the Security Agreement. No
Company may not assign any of its obligations under this Note without the prior written consent of
the Holder, any such purported assignment without such consent being null and void.

          4.6 Cost of Collection. In case of any Event of Default under this Note, the
Companies shall, jointly and severally, pay the Holder the Holder’s reasonable costs of collection,
including reasonable attorneys’ fees.

          4.7 Governing Law, Jurisdiction and Waiver of Jury Trial.

                         (a) THIS NOTE SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

                         (b) EACH COMPANY HEREBY
CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN THE
COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY COMPANY, ON THE ONE
HAND, AND THE HOLDER, ON THE OTHER HAND, PERTAINING TO THIS NOTE, THE SECURITY AGREEMENT OR ANY
OF THE OTHER ANCILLARY AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS NOTE, THE
SECURITY AGREEMENT OR ANY OF THE OTHER ANCILLARY AGREEMENTS; PROVIDED, THAT, EACH
COMPANY ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED
OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHER PROVIDED,
THAT, NOTHING IN THIS NOTE SHALL BE DEEMED OR OPERATE TO PRECLUDE THE HOLDER FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS,
TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT
OR OTHER COURT ORDER IN FAVOR OF THE HOLDER. EACH COMPANY EXPRESSLY SUBMITS AND CONSENTS IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH COMPANY
HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER
VENUE OR FORUM NON CONVENIENS. EACH COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF
SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED
TO THE COMPANY AT THE ADDRESS SET FORTH IN THE SECURITY AGREEMENT AND THAT SERVICE SO MADE SHALL
BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS
AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID

4

 

                         (c) EACH COMPANY
DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE
LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, EACH COMPANY HERETO WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE
BETWEEN THE HOLDER, AND/OR ANY COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO
THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, THE SECURITY AGREEMENT,
ANY OTHER ANCILLARY AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.

          4.8 Severability. In the event that any provision of this Note is invalid or
unenforceable under any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other provision of this Note.

          4.9 Maximum Payments. Nothing contained herein shall be deemed to establish or
require the payment of a rate of interest or other charges in excess of the maximum permitted by
applicable law. In the event that the rate of interest required to be paid or other charges
hereunder exceed the maximum rate permitted by such law, any payments in excess of such maximum
rate shall be credited against amounts owed by the Companies to the Holder and thus refunded to the
Companies.

          4.10 Security Interest and Guarantee. The Holder has been granted a security interest
(i) in certain assets of the Companies as more fully described in the Security Agreement and (ii)
pursuant to the Stock Pledge Agreement dated as of the date hereof. The obligations of the
Companies under this Note are guaranteed by certain Subsidiaries of the Companies pursuant to the
Subsidiary Guaranty dated as of the date hereof.

          4.11 Construction. Each party acknowledges that its legal counsel participated in the
preparation of this Note and, therefore, stipulates that the rule of construction that ambiguities
are to be resolved against the drafting party shall not be applied in the interpretation of this
Note to favor any party against the other.

          4.13 Registered Obligation. This Note is intended to be a registered obligation within
the meaning of Treasury Regulation Section
1.871-14(c)(1)(i) and the Company (or its agent) shall
register the Note (and thereafter shall maintain such registration) as to both principal and any
stated interest. Notwithstanding any document, instrument or agreement relating to this Note to
the contrary, transfer of this Note (or the right to any payments of principal or stated interest
thereunder) may only be effected by (i) surrender of this Note and either the reissuance by the
Company of this Note to the new holder or the issuance by the Company of a new instrument to the
new holder, or (ii) transfer through a book entry system maintained by the Company (or its agent),
within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)(B).

[Balance of page intentionally left blank; signature page follows]

5

 

     IN WITNESS WHEREOF, each Company has caused this Secured Non-Convertible Revolving Note to be
signed in its name effective as of this 28th day of March 2006.

	 	 	 	 	 	 	 
	 	 	JMAR TECHNOLOGIES, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Dennis E. Valentine
	 	 
	 

	 	 	 	Name: Dennis E. Valentine	 	 
	 

	 	 	 	Title: Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	WITNESS:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	/s/ Gary Klement
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	JMAR/SAL NANOLITHOGRAPHY, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Dennis E. Valentine	 	 
	 

	 	 	 	Name: Dennis E. Valentine	 	 
	 

	 	 	 	Title: Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	WITNESS:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	/s/ Gary Klement
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	JSI MICROELECTRONICS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Dennis E. Valentine	 	 
	 

	 	 	 	Name: Dennis E. Valentine	 	 
	 

	 	 	 	Title: Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	WITNESS:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	/s/ Gary Klement
	 	 	 	 	 	 

6

 

	 	 	 	 	 	 	 
	 	 	JMAR RESEARCH, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Dennis E. Valentine	 	 
	 

	 	 	 	Name: Dennis E. Valentine	 	 
	 

	 	 	 	Title: Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	WITNESS:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	/s/ Gary Klement
	 	 	 	 	 	 

7

 

EXHIBIT A

OTHER COMPANIES

JMAR/SAL NanoLithography, Inc.

JMAR Research, Inc.

JSI Microelectronics, Inc.

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