EXECUTIVE RETENTION AGREEMENT
-----------------------------
THIS IS AN AGREEMENT made on this 16th day of September, 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 "Executive").
WHEREAS, the Company recently 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 executive employment with
the Company; and
WHEREAS, the Executive 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 Executive continue his employment with the Company in order
that the Company can benefit from the continued availability of the Executive's
services, for a period continuing until after the Board has completed its
evaluation of strategic alternatives and, should the Board cause the Company to
engage in, or recommend to the shareholders that the Company engage in, any
form of transaction to increase shareholder value, continuing for a period of
time after such transaction has been consummated; and consequently, the Board
intends to provide the incentives set forth herein for the Executive to remain
in the Company's employ during such period; and
WHEREAS, as an additional inducement for the Executive to remain in
the employ of the Company both before and after a change in control
transaction, this agreement (the "Agreement") provides that certain severance
benefits will be paid to the Executive in the event the Executive's employment
is terminated by the Company without cause or by the Executive for good reason
within two years following the execution of this Agreement;
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 Executive agree as follows:
1. Retention Bonus.
A. The Company agrees to pay to the Executive a retention bonus
under either of the following circumstances:
(i) In the absence of a change in status, as defined in Section
4 hereof, during the period of one (1) year following the
Date of this
Agreement, the Executive shall have remained employed by
the Company continuously throughout that period; or
(ii) In the event a change in status does occur within one (1)
year after the Date of this Agreement, the Executive shall
have remained employed by the Company or its successor
continuously throughout the period of six (6) consecutive
months from the date of the change in status.
B. The amount of the retention bonus payable under this Section 1
shall be equal to twenty-five percent (25%) of the Executive's annual base
salary in effect upon the Date of this Agreement. The retention bonus shall be
paid to the Executive in cash within thirty (30) days after the date on which
the Executive satisfies the requirements of either A(i) or A(ii) above,
whichever is applicable (such date hereinafter referred to as the "Bonus
Date").
2. Payment of Severance Benefits. No severance benefits shall be
payable hereunder unless the Executive's employment by the Company shall have
been terminated for one of the reasons set forth in Section 5 hereof during the
period commencing on the Date of this Agreement and ending on the second
anniversary of that date (the "Change in Status Period").
3. Termination During the Change in Status Period. The Executive shall
be entitled to the benefits provided in Section 5 hereof upon the termination
of the Executive's employment at any time during the Change in Status Period
unless such termination is (a) because of the Executive's death or Retirement,
(b) by the Company for Cause or Disability or (c) by the Executive other than
for Good Reason. If the Executive's termination of employment is because of one
of the reasons described in (a), (b) or (c) in the preceding sentence, the
Executive'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 Executive's
employment based on "Disability" shall mean
termination because of the Executive's absence from
his duties with the Company on a full-time basis for
ninety (90) consecutive business days, as a result of
the Executive'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 Executive shall have
returned to the full-time performance of his duties.
If the Company terminates the Executive's employment
by reason of Disability, the Executive 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.
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(B) Termination by the Executive 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 Executive's
employment for "Cause" shall mean termination upon:
(A) the Executive's willful and continued failure to
substantially perform his duties with the Company
(other than any such failure resulting from the
Executive's incapacity due to physical or mental
illness), after a demand for substantial performance
is delivered to the Executive by the Board, which
specifically identifies the manner in which the Board
believes that the Executive has not substantially
performed his duties; or
(B) the Executive'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 Executive's ability to carry out his
obligations as an officer of the Company; or
(C) the Executive'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 Executive's part shall be
considered "willful" unless done, or omitted to be
done, by the Executive not in good faith and without
reasonable belief that the Executive's action or
omission was in the best interest of the Company.
Notwithstanding the foregoing, the Executive shall not
be deemed to have been terminated for Cause unless and
until there shall have been delivered to the Executive
a copy of a Notice of Termination from the Board,
after reasonable notice to the Executive and an
opportunity for the Executive 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 Executive was guilty of conduct set forth above in
clauses (A), (B) or (C) of the first sentence of this
paragraph and specifying the particulars thereof in
detail.
(iii) Good Reason. The Executive's termination of his employment
for "Good Reason" shall mean a termination on account of:
(A) the assignment, without the Executive's express written
consent, to the Executive 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 Executive's reporting
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responsibilities, titles or offices as in effect
immediately prior to a change in status, or any
removal of the Executive from or any failure to
re-elect the Executive to any of such positions,
except in connection with the termination of the
Executive's employment for Cause, Disability or
Retirement or as a result of the Executive's death or
by the Executive other than for Good Reason;
(B) a reduction by the Company in the Executive'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 executives 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 Executive 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 Executive as a participant in the
Bonus Plans on at least the same basis as the
Executive presently participates in accordance with
the Bonus Plans;
(D) the Company's requiring the Executive, without his
express written consent, to be based anywhere other
than within twenty-five (25) miles of the Executive's
present office location, except for required travel on
the Company's business to an extent substantially
consistent with the Executive'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 Executive is participating at the time of a change
in status (or plans providing the Executive with
substantially similar benefits), the taking of any
action by the Company which would adversely affect the
Executive's participation in or materially reduce the
Executive's benefits under any of such plans or
deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the change in
status, or the failure by the Company to provide the
Executive with the number of paid vacation days to
which the Executive 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 Executive with substantially similar benefits);
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(F) the failure by the Company to obtain the assumption of
the obligation to perform this Agreement by any
successor as contemplated in Section 10A hereof; or
(G) any purported termination of the Executive'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
Executive 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 Executive's
employment under the provision so indicated.
(v) Date of Termination. "Date of Termination" shall mean (A)
if the Executive's employment is terminated for Disability,
thirty (30) days after Notice of Termination is given
(provided that the Executive shall not have returned to the
performance of his duties on a full-time basis during such
thirty (30) day period), (B) if the Executive's employment
is terminated pursuant to paragraph (ii) above, the date
specified in the Notice of Termination, and (C) if the
Executive'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).
4. 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:
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(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
(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).
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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 (other than the Displays Division) 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 Executive 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 4C hereof.
5. Severance Benefits Upon Termination. If during the Change in Status
Period, the Executive's employment by the Company shall be terminated (a) by
the Company other than for Cause, Disability or Retirement or (b) by the
Executive for Good Reason, then the Executive shall be entitled to the benefits
provided below:
(i) the Company shall pay the Executive 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 any, of
any bonus for a past performance period which has been
earned, but not yet paid to the Executive;
(ii) the Executive shall continue to receive as severance pay
during the one year period subsequent to the Date of
Termination payments of the Executive'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 executive
employees of the Company;
(iii) all options to purchase shares of the Company's common
stock granted to the Executive by the Company shall
immediately become fully exercisable
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and shall remain exercisable in accordance with their
terms for at least one year, regardless of any
provision in the option grants to the contrary; and
(iv) the Company shall maintain in full force and effect, for
the Executive's continued benefit until the earlier of (A)
one (1) year after the Date of Termination or (B) the
Executive'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
Executive was entitled to participate immediately prior to
the Date of Termination, provided that the Executive's
continued participation is possible under the general terms
and provisions of such plans and programs. In the event
that the Executive's participation in any such plan or
program is barred, the Company shall arrange to provide the
Executive with benefits substantially similar to those
which the Executive is entitled to receive under such plans
and programs.
6. Mitigation. The Executive shall not be required to mitigate the
amount of any payment provided for in Section 5 hereof by seeking other
employment or otherwise, nor shall the amount of any payment provided for in
Section 5 hereof be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.
7. 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 Executive 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.
8. Certain Obligations.
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(i) Confidential Information. In consideration of the mutual
terms and agreements set forth herein the Executive 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 Executive
during his employment by the Company or its subsidiaries
and which shall not be or become public knowledge (other
than by acts by the Executive or his representatives in
violation of this Agreement). After termination of the
Executive's employment with the Company or its
subsidiaries, the Executive 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 Executive's undertakings set forth in this
subsection (i) hereof are in addition to, and not in
substitution of, any other obligation the Executive 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 Executive hereby agrees
that while employed by the Company, the Executive 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
Executive 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 Executive also agrees that following the Executive's
termination of employment and until the first anniversary
of the Executive's Date of Termination, the Executive 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 Executive 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 Executive
while employed by the Company or its subsidiaries.
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(iii) Remedies. The Company and the Executive confirm that the
restrictions contained in Sections 8(i) and 8(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 8(i) or 8(ii) will result in
irreparable injury to the Company. The Executive hereby
agrees that, in the event of the Executive's breach or
threatened breach of the terms or conditions of Section
8(i) or 8(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 8
is adjudicated to exceed the time, geographic, service or
other limitations permitted by applicable law in any
jurisdiction, the Executive 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.
9. Term of Agreement. This Agreement shall terminate at the end of the
Change in Status Period, provided that if, at the end of the Change in Status
Period, the Executive is still receiving salary continuation payments in
accordance with Section 5(ii) hereof, the term of this Agreement shall be
extended until the last payment due under such section has been made.
10. 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 Executive to compensation from the Company in the same amount
and on the same terms as the Executive would be entitled hereunder if the
Executive 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 10 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 Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die after a Notice of Termination has
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been delivered by the Executive or while any amount would still be payable to
the Executive hereunder if the Executive had continued to live, all amounts due
to the Executive under this Agreement, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to the Executive's
devisee, legatee or other designee or, if there be no such designee, to the
Executive's estate.
11. 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 Executive Officer
If to the Executive:
[ADDRESS]
The Executive 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.
12. 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 Executive 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 Executive 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 Executive 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
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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.
13. 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.
14. 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.
15. Arbitration. Except with respect to relief sought by the Company
pursuant to Section 8(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 Executive Officer Executive
