RETENTION AGREEMENT
THIS IS AN AGREEMENT made on this 20th day of November, 1998 (the
"Date of this Agreement"), by and between Aydin Corporation, a Delaware
corporation (the "Company"), and [name] , who is the [title] of the Company
(the "Employee").
WHEREAS, the Company has announced publicly that it has engaged
PricewaterhouseCoopers Securities, L.L.C. to assist the Company in evaluating
potential strategic alternatives to enhance shareholder value; and
WHEREAS, such announcement has led to uncertainty regarding the future
path of the Company and the long-term prospects for employment with the
Company; and
WHEREAS, the Employee is an "employee at will," and as such the
Company is not legally obligated to continue his employment for any fixed
period of time; and
WHEREAS, the Company's Board of Directors (the "Board") believes it is
important to the enhancement of shareholder value that, notwithstanding such
uncertainty, the Employee continue his employment with the Company in order
that the Company can benefit from the continued availability of the Employee's
services, and consequently, the Board intends to provide the incentives set
forth herein for the Employee to remain in the Company's employ during such
period;
NOW, THEREFORE, in consideration of the above premises and of other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and the Employee agree as follows:
1. Termination During the Severance Protection Period. The Employee
shall be entitled to the benefits provided in Section 4 hereof upon the
termination of the Employee's employment at any time during the period
commencing on the Date of this Agreement and ending on the second anniversary
of that date (the "Severance Protection Period"), unless such termination is
(a) because of the Employee's death or Retirement, (b) by the Company for Cause
or Disability or (c) by the Employee other than for Good Reason. If the
Employee's termination of employment is because of one of the reasons described
in (a), (b) or (c) in the preceding sentence, the Employee's rights under this
Agreement shall cease as of the date of such termination. For purposes of this
Agreement, the following definitions shall apply:
(i) Disability; Retirement.
(A) Termination by the Company of the Employee's employment
based on "Disability" shall mean termination because of the
Employee's absence from his duties with the Company on a
full-time basis for ninety (90) consecutive business days,
as a result of the Employee's incapacity due to physical or
mental illness, unless within thirty
(30) days after a Notice of Termination (as hereinafter
defined) is given following such absence the Employee shall
have returned to the full-time performance of his duties. If
the Company terminates the Employee's employment by reason
of Disability, the Employee shall be entitled to the
benefits determined in accordance with the Company's
retirement and welfare benefit programs then in effect,
provided that in no event shall such retirement and welfare
benefits be materially less than those in effect immediately
prior to the change in status.
(B) Termination by the Employee of his employment based on
"Retirement" shall mean termination in accordance with the
Company's retirement policy, including early retirement,
generally applicable to its salaried employees.
(ii) Cause. Termination by the Company of the Employee's employment
for "Cause" shall mean termination upon:
(A) the Employee's willful and continued failure to
substantially perform his duties with the Company (other
than any such failure resulting from the Employee's
incapacity due to physical or mental illness), after a
demand for substantial performance is delivered to the
Employee by the Board, which specifically identifies the
manner in which the Board believes that the Employee has not
substantially performed his duties; or
(B) the Employee's admission or conviction of, or plea of nolo
contendere to, any felony that, in the judgement of the
Board, adversely affects the Company's reputation or the
Employee's ability to carry out his obligations as an
officer of the Company; or
(C) the Employee's willful engaging in misconduct which is
materially injurious to the Company, monetarily or
otherwise. For purposes of this paragraph, no act, or
failure to act, on the Employee's part shall be considered
"willful" unless done, or omitted to be done, by the
Employee not in good faith and without reasonable belief
that the Employee's action or omission was in the best
interest of the Company.
Notwithstanding the foregoing, the Employee shall not be deemed
to have been terminated for Cause unless and until there shall
have been delivered to the Employee a copy of a Notice of
Termination from the Board, after reasonable notice to the
Employee and an opportunity for the Employee to be heard before
the Compensation Committee of the Board (or, if there be no
such Committee or such Committee delivers the Notice of
Termination, the Board), finding that in the good faith opinion
of such Committee (or the Board) the Employee was guilty of
conduct set forth above in clauses
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(A), (B) or (C) of the first sentence of this paragraph and
specifying the particulars thereof in detail.
(iii) Good Reason. The Employee's termination of his employment for
"Good Reason" shall mean a termination on account of:
(A) the assignment, without the Employee's express written
consent, to the Employee of any duties inconsistent with
his positions, duties, responsibilities and status with the
Company immediately prior to a change in status, or a
change in the Employee's reporting responsibilities, titles
or offices as in effect immediately prior to a change in
status, or any removal of the Employee from or any failure
to re-elect the Employee to any of such positions, except
in connection with the termination of the Employee's
employment for Cause, Disability or Retirement or as a
result of the Employee's death or by the Employee other
than for Good Reason;
(B) a reduction by the Company in the Employee's annual base
salary as in effect on the date hereof or as the same may
be increased from time to time, except for across-the-board
salary reductions similarly affecting all employees of the
Company and all executives of any Person in control of the
Company;
(C) a failure by the Company to continue any bonus plans in
which the Employee is presently entitled to participate
(the "Bonus Plans") as the same may be modified from time
to time, but substantially in the forms currently in
effect, or a failure by the Company to continue the
Employee as a participant in the Bonus Plans on at least
the same basis as the Employee presently participates in
accordance with the Bonus Plans;
(D) the Company's requiring the Employee, without his express
written consent, to be based anywhere other than within
twenty-five (25) miles of the Employee's present office
location, except for required travel on the Company's
business to an extent substantially consistent with the
Employee's present business travel obligations;
(E) the failure by the Company to continue in effect any benefit
or compensation plan, life insurance plan,
health-and-accident plan or disability plan in which the
Employee is participating at the time of a change in status
(or plans providing the Employee with substantially similar
benefits), the taking of any action by the Company which
would adversely affect the Employee's participation in or
materially reduce the Employee's benefits under any of such
plans or deprive the Employee of any material fringe benefit
enjoyed by the Employee at the time of the change in status,
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or the failure by the Company to provide the Employee with
the number of paid vacation days to which the Employee is
then entitled in accordance with the Company's normal
vacation policy in effect on the date hereof; provided,
however, that none of the foregoing provisions of this
subparagraph (E) shall apply to any stock ownership plan,
stock option plan or stock appreciation rights plan (or
plans providing the Employee with substantially similar
benefits);
(F) the failure by the Company to obtain the assumption of the
obligation to perform this Agreement by any successor as
contemplated in Section 9A hereof; or
(G) any purported termination of the Employee's employment which
is not effected pursuant to a Notice of Termination
satisfying the requirements of paragraph (iv) below (and, if
applicable, paragraph (ii) above); and for purposes of this
Agreement, no such purported termination shall be effective.
(iv) Notice of Termination. Any purported termination by the
Company pursuant to paragraph (i) or (ii) above or by the
Employee pursuant to subparagraph (B) of paragraph (i) or
paragraph (iii) above shall be communicated by written Notice
of Termination to the other party hereto. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of the Employee's employment under the provision so
indicated.
(v) Date of Termination. "Date of Termination" shall mean (A) if
the Employee's employment is terminated for Disability, thirty
(30) days after Notice of Termination is given (provided that
the Employee shall not have returned to the performance of his
duties on a full-time basis during such thirty (30) day
period), (B) if the Employee's employment is terminated
pursuant to paragraph (ii) above, the date specified in the
Notice of Termination, and (C) if the Employee's employment is
terminated for any other reason, the date on which a Notice of
Termination is given; provided that if within thirty (30) days
after any Notice of Termination is given the party receiving
such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties,
by a binding and final arbitration award or by a final
judgment, order or decree of a court of competent jurisdiction
entered upon such arbitration award (the time for appeal
therefrom having expired and no appeal having been perfected).
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2. Payment of Severance Benefits. No severance benefits shall be
payable hereunder unless the Employee's employment by the Company shall have
been terminated for a reason other than one of the reasons described in clauses
(a), (b) or (c) of the first sentence of Section 1 hereof during the Severance
Protection Period.
3. Definition of Change in Status. The term "change in status" shall
hereinafter be used to refer to either a change in control of the Company or a
workforce adjustment, as each is defined below. For purposes of this Agreement,
a transaction constituting a change in status shall be deemed to have occurred
upon the closing of such transaction.
A. For purposes of this Agreement, a "change in control of the
Company" shall mean the occurrence of any one of the following events:
(i) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by
any "Person" (as the term person is used for purposes of
Section 13(d) or 14(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), immediately after which such
Person has "Beneficial Ownership" (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of more than fifty
percent (50%) of the combined voting power of the Company's
then outstanding Voting Securities; provided, however, in
determining whether a change in control has occurred, Voting
Securities which are acquired in a "Non-Control Acquisition"
(as hereinafter defined) shall not constitute an acquisition
which would cause a change in control. A "Non-Control
Acquisition" shall mean an acquisition by (A) an employee
benefit plan (or a trust forming a part thereof) maintained by
(1) the Company or (2) any corporation or other Person of which
a majority of its voting power or its voting equity securities
or equity interest is owned, directly or indirectly, by the
Company (for purposes of this definition, a "Subsidiary"), (B)
the Company or its Subsidiaries, or (C) any Person in
connection with a "Non-Control Transaction" (as hereinafter
defined);
(ii) A merger, consolidation or reorganization involving the
Company, unless such merger, consolidation or reorganization is
a "Non-Control Transaction." A "Non-Control Transaction" shall
mean a merger, consolidation or reorganization of the Company
where:
(1) the stockholders of the Company, immediately before such
merger, consolidation or reorganization, own directly or
indirectly immediately following such merger,
consolidation or reorganization, at least fifty percent
(50%) of the combined voting power of the outstanding
voting securities of the corporation resulting from such
merger or consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as
their ownership of the Voting Securities immediately
before such merger, consolidation or reorganization, or
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(2) no Person other than (i) the Company, (ii) any Subsidiary,
(iii) any employee benefit plan (or any trust forming a
party thereof) maintained by the Company, the Surviving
Corporation, or any Subsidiary, or (iv) any Person who,
immediately prior to such merger, consolidation or
reorganization had Beneficial Ownership of more than fifty
percent (50%) or more of the then outstanding Voting
Securities), has Beneficial Ownership of more than fifty
percent (50%) or more of the combined voting power of the
Surviving Corporation's then outstanding voting
securities; or
(iii) The sale or other disposition of all or substantially all of
the assets of the Company to any Person (other than a
transfer to a Subsidiary).
B. Notwithstanding the foregoing, a change in control of the
Company shall not be deemed to occur solely because any Person (the "Subject
Person") acquired Beneficial Ownership of more than the permitted amount of the
then outstanding Voting Securities as a result of the acquisition of Voting
Securities by the Company which, by reducing the number of Voting Securities
then outstanding, increases the proportional number of shares Beneficially
Owned by the Subject Person, provided that if a change in control would occur
(but for the operation of this sentence) as a result of the acquisition of
Voting Securities by the Company, and after such share acquisition by the
Company, the Subject Person becomes the Beneficial Owner of any additional
Voting Securities which increases the percentage of the then outstanding Voting
Securities Beneficially Owned by the Subject Person, then a change in control
shall occur.
C. For purposes of this Agreement, a "workforce adjustment"
shall mean the sale or other disposition of all or substantially all of the
assets of the Aydin Telemetry Division or any other division of the Company
that accounts for at least fifteen percent (15%) of the Company's gross
revenues to any Person (other than a transfer to a Subsidiary).
D. Notwithstanding the foregoing, a change in status will not be
deemed to have occurred with respect to the Employee if he, either directly or
indirectly, is financially involved as a principal or otherwise (1) of any
successor to the Company or of any Person who purchases all or substantially
all of the Company's assets, or (2) in the event of a workforce adjustment, of
any Person who purchases all or substantially all of the business or assets of
a division identified in Section 3C hereof.
4. Severance Benefits Upon Termination. If during the Severance
Protection Period, the Employee's employment by the Company shall be
terminated (a) by the Company other than for Cause, Disability or Retirement
or (b) by the Employee for Good Reason, then the Employee shall be entitled to
the benefits provided below:
(i) the Company shall pay the Employee his full base salary through
the Date of Termination at the rate in effect at the time
Notice of Termination is given plus credit for any vacation
earned but not taken and the amount, if
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any, of any bonus for a past performance period which has
been earned, but not yet paid to the Employee;
(ii) the Employee shall continue to receive as severance pay for the
six month period subsequent to the Date of Termination
payments of the Employee's base salary at the highest rate in
effect during the twelve (12) months immediately preceding
the Date of Termination, payable in the same manner as
salaries paid to other active employees of the Company;
(iii) any options to purchase shares of the Company's common stock
theretofore granted to the Employee by the Company shall
immediately become fully exercisable and shall remain
exercisable in accordance with their terms for at least six
months, regardless of any provision in the option grants to
the contrary; and
(iv) the Company shall maintain in full force and effect, for the
Employee's continued benefit until the earlier of (A) six
months after the Date of Termination or (B) the Employee's
commencement of full time employment with a new employer, all
life insurance, medical, health, dental and disability plans,
programs or arrangements in which the Employee was entitled
to participate immediately prior to the Date of Termination,
provided that the Employee's continued participation is
possible under the general terms and provisions of such plans
and programs. In the event that the Employee's participation
in any such plan or program is barred, the Company shall
arrange to provide the Employee with benefits substantially
similar to those which the Employee is entitled to receive
under such plans and programs.
5. Mitigation. The Employee shall not be required to mitigate the
amount of any payment provided for in Section 4 hereof by seeking other
employment or otherwise, nor shall the amount of any payment provided for in
Section 4 hereof be reduced by any compensation earned by the Employee as the
result of employment by another employer after the Date of Termination, or
otherwise.
6. Options. If as the result of a change in status or in anticipation
of a change in status, the Board determines that all options issued by the
Company to purchase shares of common stock of the Company are to be
terminated, then all of the options granted to the Employee by the Company
shall become fully exercisable, regardless of vesting, not less than thirty
(30) days prior to the date such options are to be terminated.
7. Certain Obligations.
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(i) Confidential Information. In consideration of the mutual terms
and agreements set forth herein the Employee hereby agrees to
hold in a fiduciary capacity for the benefit of the Company
and its subsidiaries all proprietary, secret or confidential
information, knowledge or data relating to the Company or its
subsidiaries, and their respective businesses, which shall
have been obtained by the Employee during his employment by
the Company or its subsidiaries and which shall not be or
become public knowledge (other than by acts by the Employee
or his representatives in violation of this Agreement). After
termination of the Employee's employment with the Company or
its subsidiaries, the Employee agrees that he will not,
without the prior written consent of the Company, communicate
or divulge any such information, knowledge or data to anyone
other than the Company and those designated by it. The
Employee's undertakings set forth in this subsection (i)
hereof are in addition to, and not in substitution of, any
other obligation the Employee may have, whether by other
agreement or imposed by law, regarding confidentiality and
disclosure of information, knowledge or data relating to the
Company and its subsidiaries.
(ii) Non-Compete. In consideration of the mutual terms and
agreements set forth herein the Employee hereby agrees that
while employed by the Company, the Employee will not, unless
authorized in writing to do so by the Company, directly or
indirectly own, manage, operate, join, control or participate
in the ownership, management, operation or control of, or be
employed or otherwise connected in any substantial manner
with, any business in North America which directly or
indirectly competes with any line of business of the Company
or its subsidiaries; provided, that nothing in this
subsection (ii) shall prohibit the Employee from acquiring up
to five percent (5%) of any class of outstanding equity
securities of any corporation whose equity securities are
regularly traded on a national securities exchange or in the
"over-the-counter market." The Employee also agrees that
following the Employee's termination of employment and until
the first anniversary of the Employee's Date of Termination,
the Employee will not (x) recruit any employee of the Company
or its subsidiaries or solicit or induce, or attempt to
solicit or induce, any employee of the Company or its
subsidiaries to terminate his or her employment with, or
otherwise cease his or her relationship with, the Company or
its subsidiaries, provided that this will not preclude hiring
any person who contacts the Employee for employment and who
has not been employed by the Company or its subsidiaries at
any time during the preceding six months; or (y) solicit,
divert or take away, or attempt to solicit, divert or take
away, the business or patronage of any of the clients,
customers or accounts, or prospective clients, customers or
accounts, of the Company or its subsidiaries that were
contacted, solicited or served by the Employee while employed
by the Company or its subsidiaries.
8
(iii) Remedies. The Company and the Employee confirm that the
restrictions contained in Sections 7(i) and 7(ii) hereof are,
in view of the nature of the business of the Company,
reasonable and necessary to protect the legitimate interests
of the Company and that any violation of any provision of
Section 7(i) or 7(ii) will result in irreparable injury to
the Company. The Employee hereby agrees that, in the event of
the Employee's breach or threatened breach of the terms or
conditions of Section 7(i) or 7(ii) of this Agreement, the
Company's remedies at law will be inadequate and, in any such
event, the Company shall be entitled to commence an action
for preliminary and permanent injunctive relief and other
equitable relief in any court of competent jurisdiction.
(iv) Modification of Terms. If any restriction in this Section 7 is
adjudicated to exceed the time, geographic, service or other
limitations permitted by applicable law in any jurisdiction,
the Employee agrees that such may be modified and narrowed,
either by a court or the Company, to the maximum time,
geographic, service or other limitations permitted by
applicable law so as to preserve and protect the Company's
legitimate business interest, without negating or impairing
any other restriction or undertaking set forth in this
Agreement.
8. Term of Agreement. This Agreement shall terminate at the end of
the Severance Protection Period, provided that if, at the end of the Severance
Protection Period, the Employee is still receiving salary continuation
payments in accordance with Section 4(ii) hereof, the term of this Agreement
shall be extended until the last payment due under such section has been made.
9. Successors; Binding Agreement.
A. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Employee to compensation from the Company in the same amount
and on the same terms as the Employee would be entitled hereunder if the
Employee terminated his employment for Good Reason, except that for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any successor to
its business and/or assets as aforesaid which executes and delivers the
agreement provided for in this Section 9 or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
B. This Agreement shall inure to the benefit of and be enforceable
by the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Employee should die after a Notice of Termination has
9
been delivered by the Employee or while any amount would still be payable to
the Employee hereunder if the Employee had continued to live, all amounts due
to the Employee under this Agreement, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to the Employee's
devisee, legatee or other designee or, if there be no such designee, to the
Employee's estate.
10. Notice. For the purposes of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered personally, when sent
by a nationally recognized overnight delivery service, when mailed by
certified or registered mail, return receipt requested, postage prepaid, or
when sent by telegram, fax or telecopy (confirmed by U.S. Mail), receipt
acknowledged, addressed as follows:
If to the Company:
Aydin Corporation
000 Xxxxxxx Xxxx
Xxxxxxx, XX 00000
Attention: Chief Operating Officer
If to the Employee:
[ADDRESS]
The Employee or the Company may change the person or address to
which notices or other communications are to be sent by giving written notice
of such change to the other party in the manner provided herein for giving
notice.
11. Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing signed by the Employee and such officer as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set forth in
this Agreement; provided, however, that this Agreement shall not supersede or
in any way limit the rights, duties or obligations the Employee may have under
any other written agreement with the Company. Moreover, the severance payments
provided herein following a change in status shall be in place of, and shall
not be in addition to, any and all other severance benefits to which the
Employee may be entitled. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania without giving effect to otherwise applicable
principles of conflicts of law. Finally, the Company shall withhold
10
from all amounts payable under this Agreement such Federal, state and local
taxes as shall be required to be withheld pursuant to any applicable law or
regulation.
12. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. Counterparts; Headings. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original but all
of which together will constitute one and the same instrument. The headings of
the Sections of this Agreement are for convenience of reference only and shall
not control or affect the meaning or construction or limit the scope or intent
of any of the provisions of this Agreement.
14. Arbitration. Except with respect to relief sought by the
Company pursuant to Section 7(iii) hereof, any dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration in Philadelphia, Pennsylvania in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on
the arbitrator's award in any court having jurisdiction.
IN WITNESS WHEREOF, the undersigned have signed this Agreement on the
date indicated above.
AYDIN CORPORATION
By:
--------------------------- ------------------------------------
Chief Operating Officer Employee
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