<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
{X} QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1996
{ }TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ____to____
____________________
Commission File Number 1-14198
DIGITAL TRANSMISSION SYSTEMS, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 58-2037949
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3000 NORTHWOODS PARKWAY, BUILDING 330, NORCROSS, GA 30071
(Address of principal executive office) (Zip Code)
(770) 798-1300
(Issuer's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
proceeding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes { } No {x}
The number of shares outstanding of the registrant's common stock as of April
30, 1996 was 3,920,700
Transitional Small Business Disclosure Format (check one): Yes { } No {x}
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<PAGE> 2
DIGITAL TRANSMISSION SYSTEMS INC.
FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 1996
INDEX
PAGE
PART 1. FINANCIAL INFORMATION NUMBER
Item 1 Financial Statements:
Balance Sheets at March 31, 1996 and June 30, 1995 3
Statement of Operations for the Three and Nine Months
ended March 31, 1996 and 1995 4
Statement of Cash Flows for the Nine Months Ended
March 31, 1996 and 1995 5
Notes to Financial Statements 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
2
<PAGE> 3
PART 1. FINANCIAL INFORMATION
DIGITAL TRANSMISSION SYSTEMS, INC.
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, 1996 June 30, 1995
-------------- -------------
<S> <C> <C>
ASSETS (Unaudited) (Audited)
Current Assets:
Cash and cash equivalents $ 3,254 $1,357
Short-term investments 3,000 -
Accounts receivable, less allowance for doubtful
accounts of $0 and $0 2,498 1,882
Income tax refund receivable - 141
Inventories 1,745 1,393
Prepaid expenses and other assets 212 168
Deferred tax asset 226 226
-------- ------
Total current assets 10,935 5,167
Property and equipment, less accumulated
depreciation of $827 and $559 267 335
Deferred tax asset 59 59
Intangible assets, less accumulated amortization of $22 178 -
Other assets 17 36
-------- ------
$ 11,456 $5,597
======== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,697 $ 606
Accrued liabilities 931 384
Accrued dividends 465
Line of credit - 450
-------- ------
Total current liabilities 2,628 1,905
-------- ------
Redeemable preferred stock, at liquidation value, par
value $.01 per share; 6,735,003 shares authorized; 0
and 1,813,289 shares issued and outstanding - 3,385
-------- ------
Stockholders' equity (deficit)
Common stock -- $.01 par value; 15,000,000 shares
authorized; 3,770,000 and 772,001 shares issued
and outstanding 38 88
Additional paid-in capital 8,806 299
Common stock warrants 1,402 -
Unearned compensation (204) -
Accumulated earnings (deficit) (1,214) -
-------- ------
8,828 307
-------- ------
Commitments and contingencies - -
-------- ------
$ 11,456 $5,597
======== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
DIGITAL TRANSMISSION SYSTEMS, INC.
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
---------------------- ------------------------
1996 1995 1996 1995
------- ------- --------- ------
<S> <C> <C> <C> <C>
Net sales 3,210 2,976 7,851 7,264
Cost of sales 1,879 1,349 4,467 3,378
------- ------- --------- ------
Gross profit 1,331 1,627 3,384 3,886
Selling, general and administrative expenses 909 826 2,812 2,201
Product development costs 642 504 1,791 1,387
------- ------- --------- ------
Operating Profit (Loss) (220) 297 (1,219) 298
Amortization of goodwill 17 45 40 156
Interest income (38) (16) (100) (47)
Interest expense 18 12 55 15
Other income - - - (19)
------- -------- --------- ------
Income (loss) before income taxes (217) 256 (1,214) 193
Income tax expense (benefit) - - - -
------- -------- --------- ------
Net income (loss) (217) 256 (1,214) 193
Accretion of redemption value and dividends
accrued on redeemable preferred stock - 80 169 237
------- -------- --------- ------
Net income (loss) attributable to common
stockholders $ (217) $ 176 $ (1,383) $ (44)
======= ======== ========= ======
Pro forma weighted average number of
common and common share equivalents
outstanding 2,723 2,955 2,790 2,935
Pro forma unaudited net income (loss)
per share:
Net income (loss) $ (217) $ 256 $ (1,214) $ 193
======= ======== ========= ======
Net income (loss) per common share $ (0.08) $ .09 $ (0.44) $ .07
======= ======== ========= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
DIGITAL TRANSMISSION SYSTEMS, INC.
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
---------------------------------
1996 1995
------ -------
<S> <C> <C>
Cash flows from operating activities $ (1,214) $ 193
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Depreciation and amortization of property and equipment 268 135
Amortization of goodwill 22 201
Compensation expense on shares granted under stock
incentive plan 65 -
Cancellation of shares granted under stock incentive plan _ (45)
Changes in assets and liabilities
Accounts receivable (616) 732
Income tax refund receivable 141 218
Inventories (352) (625)
Prepaid expenses and other assets (25) (106)
Accounts payable 891 176
Accrued liabilities 547 (78)
-------- -------
Net cash provided by (used in) operating activities (273) 801
-------- -------
Cash flows from investing activities
Purchases of property and equipment (200) (299)
Purchases of short-term investments (3,000) -
-------- -------
Net cash used by investing activities (3,200) (299)
-------- -------
Cash flows from financing activities
Borrowings under line of credit agreement - (50)
Repayments under line of credit agreement (450) 0
Issuance of common stock 2 47
Issuance of common stock and warrant units 6,018 -
Payment of preferred stock dividends (200) -
-------- -------
Net cash provided by (used in)
financing activities 5,370 (3)
-------- -------
Increase (decrease) in cash and cash equivalents 1,897 499
Cash and cash equivalents, beginning of period 1,357 1,192
-------- -------
Cash and cash equivalents, end of period $ 3,254 $ 1,691
======== =======
Supplemental disclosures of cash flow information
Cash paid during the period for interest 55 15
Cash paid during the period for income taxes - 10
Supplemental disclosure of non-cash investing and
financing activities
Note issued for purchase of SKYPLEX 200 -
Preferred stock converted into common stock 3,496 -
Common stock exchanged for preferred stock dividends 323 -
Shares granted under stock incentive plan 269 -
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
DIGITAL TRANSMISSION SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Digital Transmission Systems, Inc. (the "Company") designs, manufactures,
markets and services a broad range of products for the telecommunications
industry. The Company's primary customers are long distance carriers and
wireless service providers. The Company's products, consisting of proprietary
software and hardware modules, facilitate the control, monitoring and efficient
transmission of high-speed digital information through public or private
telecommunications networks.
The accompanying financial statements are unaudited; however in the
opinion of management, such interim financial statements include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results for the interim period. These statements
should be read in conjunction with the Company's Registration Statement on Form
SB-2.
There have been no changes to the accounting policies of the Company
during the periods presented. For a description of these policies, see Note 1
of the Notes to Financial Statements in the Company's Registration Statement on
Form SB-2.
2. INCOME/(LOSS) PER COMMON SHARE
Net income/(loss) per share is computed using the weighted average number
of outstanding shares of common stock and common stock equivalents (when
dilutive). Common stock equivalents consist of the Company's common stock
issuable upon the exercise of stock options and warrants using the treasury
stock method.
Pro forma weighted average shares outstanding gives effect to (i) the
conversion of all outstanding shares of Preferred Stock into an equal number of
shares of common stock, (ii) the conversion of $327,000 of accrued dividends
into approximately 69,000 shares of common stock, and (iii) the weighted
average of 1,070,000 shares sold in the initial public offering.
3. SUBSEQUENT EVENT
On April 17, 1996 the Company sold 150,700 units, each of which included
one share of common stock and one warrant to purchase one share of common
stock, pursuant to an exercise of the underwriter's over-allotment option. The
proceeds from the exercise of the over-allotment option, net of underwriting
discounts and commissions and after deducting expenses related to the exercise,
were approximately $1.0 million.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Digital Transmission Systems, Inc. (DTS) designs, manufactures, markets and
services a broad range of telecommunications products worldwide. The Company's
primary customers are long distance carriers and wireless service providers.
The Company's products, consisting of proprietary software and hardware
modules, facilitate the control, monitoring and efficient transmission of
high-speed digital information through public or private telecommunications
networks.
DTS has been and currently is a major supplier for T1 and T3 network control
systems to MCI and T1 network control systems to Sprint. Sales to MCI have been
significant in each of the last four fiscal years, accounting for 84% for the
year ended June 30, 1995, down from 90% in the previous year. The Company's
strategy for the past two years, while maintaining its established
relationships with MCI and Sprint, has been to leverage its technology and
develop new network access products and sales channels for domestic and
international markets. As part of that strategy, the Company has focused its
direct sales force on the wireless infrastructure market in the US and has
engaged resellers for the telecommunications markets of developing countries in
Latin America, Asia and Eastern Europe. The result of this marketing strategy
is reflected in the growth in sales of the newer network access products -
FlexT1/E1 and FlexAir/SKYPLEX.
During the third quarter of fiscal 1996, DTS entered into a multi-year contract
with a major PCS (Personal Communications Services) service provider to supply
equipment for several of its largest MTA's (Major Trading Areas) in the United
States. The contract provides for cell site network access and interconnect
equipment including FlexT1/E1, as well as the Company's CNCS (Communications
Network Control System) for the provider's local and nationwide network control
and surveillance. The Company also benefited from the signing of several Latin
American and Asian reseller agreements and from a sizable order with a cellular
provider in Latin America for the FlexAir and SKYPLEX product lines.
Also during the third quarter, the Company completed an initial public offering
of its securities which was declared effective on March 4, 1996. The offering
consisted of 1,070,000 units at $7.50 per unit, each of which included one
share of common stock and one warrant to purchase one share of common stock at
$9.00 per share (120% of the offering price.) Additionally, on April 17, 1996
the Underwriter exercised its overallotment option for the purchase of another
150,700 units. The net proceeds of the offering, approximately $7 million, will
be used primarily to fund product development and expand sales and marketing
efforts.
7
<PAGE> 8
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
The following table sets forth certain financial data derived from the
Company's statement of operations for the three months ended March 31, 1996 and
March 31, 1995.
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1996 March 31, 1995
------------------ --------------------
$ % of Sales $ % of Sales
(In thousands)
<S> <C> <C> <C> <C>
Net Sales $3,210 100% $2,976 100%
Gross Profit 1,331 41 1,627 55
Product Development 642 20 504 17
Selling, General and Administrative 909 28 826 28
Net Profit (Loss) (217) (7) 256 9
</TABLE>
Net Sales. Net sales increased by 8%, to $3,210,000, the Company's new
historic high for quarterly sales, for the three months ended March 31, 1996
from $2,976,000 for the three months ended March 31, 1995. The sales mix, and
the corresponding percentage of total sales of the Company's products, is set
forth in the chart below:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1996 March 31, 1995
------------------ ------------------
$ % of Sales $ % of Sales
(In thousands)
<S> <C> <C> <C> <C>
MCI Network Control $1,975 62% 2,682 90%
Other Network Control 97 3 66 2
FlexT1/E1 789 24 172 6
FlexAir/SKYPLEX 287 9 0 0
DIV Modem 30 1 42 1
Other Products 30 1 14 1
------ --- ------ ---
$3,210 100% $2,976 100%
====== === ====== ===
</TABLE>
For the three months ended March 31, 1996 and 1995, MCI accounted for 62% and
90% of net sales, respectively. Results for the three months ended March 31,
1996 reflect a shift in product mix to the Company's newer products-FlexT1/E1
and FlexAir/SKYPLEX. The Company's recently developed FlexT1/E1 product
accounted for 24% of sales for the three months ended March 31, 1996, as
compared to 6% for the three months ended March 31, 1995. The FlexAir/SKYPLEX
product sales were augmented by the addition of the SKYPLEX product line in
December 1995. The FlexAir/SKYPLEX line accounted for 9% of sales for the three
months ended March 31, 1996 reflecting sales to markets in Latin America and
Asia. There were no FlexAir/SKYPLEX product sales for the three months ended
March 31, 1995.
8
<PAGE> 9
GROSS PROFIT. Cost of sales consists of component costs, compensation
costs and the overhead costs related to the production and shipping of the
Company's products, along with the support and warranty expense associated with
such products. Gross profit decreased by 18%, to $1,331,000 for the three
months ended March 31, 1996 from $1,627,000 for the three months ended March
31, 1995. As a percentage of sales, gross profit decreased to 41% for the
three months ended March 31, 1996, from 55% for the three months ended March
31, 1995. This decrease was primarily due to the lower margin FlexT1/E1 and
FlexAir/SKYPLEX products comprising a larger percentage of total sales. In the
telecommunications industry, economies of scale are generally realized as a
product line grows. For the SKYPLEX product line, the Company purchases modules
for this product from other companies and repackages it under the DTS name. As
a result, the Company expects to continue to experience lower margins on the
SKYPLEX products than on its internally engineered and manufactured products.
PRODUCT DEVELOPMENT. Product development expenses consist of personnel
costs, consulting, prototyping, supplies and depreciation expenses. Product
development expenses increased by 27%, to $642,000 for the three months ended
March 31, 1996 from $504,000 for the three months ended March 31, 1995. This
increase resulted from increased engineering investment in new products for the
FlexT1/E1 and FlexAir product lines. Management expects that this trend of
increasing product development expense will continue as the Company further
develops its product lines.
SELLING, GENERAL AND ADMINISTRATIVE. Selling expenses consist primarily of
compensation costs for sales and marketing personnel, travel, consulting, trade
show and advertising expenses. General and administrative expenses consist
primarily of compensation expenses for administrative and finance personnel, as
well as accounting, legal and consulting fees. Selling, general and
administrative expenses increased by 10%, to $909,000 for the three months
ended March 31, 1996 from $826,000 for the three months ended March 31, 1995.
Selling expenses increased by 19%, to $725,000 for the three months ended March
31, 1996 from $609,000 for the three months ended March 31, 1995. This increase
was due primarily to the hiring of international sales staff and expansion of
the Company's international sales and marketing efforts. Management expects to
continue to expand the Company's international and domestic sales and marketing
effort and intends to increase the Company's sales and marketing expenditures.
General and administrative expenses decreased by 15%, to $184,000 for the three
months ended March 31, 1996 from $217,000 for the three months ended March 31,
1996. This decrease primarily reflects reduced salary expenses.
NET LOSS. Net loss increased to $217,000 for the three months ended March
31, 1996 from a net profit of $256,000 for the three months ended March 31,
1995. This increase was caused primarily by changes in product sales mix and
planned increases in product development and sales and marketing expenses.
9
<PAGE> 10
NINE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
The following table sets forth certain financial data derived from the
Company's statement of operations for the nine months ended March 31, 1996 and
March 31, 1995.
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
March 31, 1996 March 31, 1995
---------------------- ---------------------
$ % of Sales $ % of Sales
(In thousands)
<S> <C> <C> <C> <C>
Net Sales $ 7,851 100% $7,264 100%
Gross Profit 3,384 43 3,886 53
Product Development 1, 791 23 1,387 19
Selling, General and Administrative 2,812 35 2,201 30
Net Profit (Loss) (1,214) (15) 193 3
</TABLE>
Net Sales. Net sales increased by 8%, to $7,851,000 for the nine months
ended March 31, 1996 from $7,264,000 for the nine months ended March 31, 1995.
The sales mix, and the corresponding percentage of total sales of the Company's
products, is set forth in the chart below:
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
March 31, 1996 March 31, 1995
--------------------- -------------------
$ % of sales $ % of sales
(In thousands)
<S> <C> <C> <C> <C>
MCI Network Control $5,268 67% 6,082 84%
Other Network Control 482 6 167 2
FlexT1/E1 1,294 17 332 4
FlexAir/SKYPLEX 423 5 0 0
DIV Modem 271 3 628 9
Other Products 113 2 55 1
------ --- ------ ---
$7,851 100% $7,264 100%
====== === ====== ===
</TABLE>
For the nine months ended March 31, 1996 and 1995, MCI accounted for 67% and
84% of net sales, respectively. Sales to Wiltron Company, an OEM account
selling the Company's Other Network Control equipment, accounted for 6% of
sales for the nine months ended March 31, 1996 and 2% for the nine months ended
March 31, 1995. The Company's recently developed FlexT1/E1 product accounted
for 17% of sales for the nine months ended March 31, 1996, as compared to 4%
for the nine months ended March 31, 1996. The FlexAir/SKYPLEX product sales
were augmented by the addition of the SKYPLEX product line in December 1995.
The FlexAir/SKYPLEX line accounted for 5% of sales for the nine months ended
March 31, 1996. There were no FlexAir/SKYPLEX product sales for the nine
months ended March 31, 1995.
10
<PAGE> 11
GROSS PROFIT. Gross profit decreased by 13%, to $3,384,000 for the nine
months ended March 31, 1996 from $3,886,000 for the nine months ended March 31,
1995. As a percentage of sales, gross profit decreased to 43% for the nine
months ended March 31, 1996, from 53% for the nine months ended March 31, 1995.
This decrease was primarily due to lower margin FlexT1/E1 and FlexAir/SKYPLEX
products comprising a larger percentage of total sales. In the
telecommunications industry, economies of scale are generally realized as a
product line grows. For the SKYPLEX product line, the Company purchases modules
for this product from other companies and repackages it under the DTS name. As
a result, the Company expects to continue to experience lower margins on the
SKYPLEX products than on its internally engineered and manufactured products.
PRODUCT DEVELOPMENT. Product development expenses increased by 29%, to
$1,791,000 for the nine months ended March 31, 1996 from $1,387,000 for the
nine months ended March 31, 1995. This increase resulted from increased
engineering investment in new products for the FlexT1/E1 and FlexAir product
lines. Management expects that this trend of increasing Product Development
expense will continue as the Company further develops its product lines.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased by 28%, to $2,812,000 for the nine months ended March 31,
1996 from $2,201,000 for the nine months ended March 31, 1995. Selling
expenses increased by 36%, to $2,238,000 for the nine months ended March 31,
1996 from $1,642,000 for the nine months ended March 31, 1995. This increase
was due primarily to the addition of sales and marketing personnel as the
Company focused on penetrating new markets and obtaining new customers, and
began to expand its sales and marketing coverage of the international
marketplace. Management expects to continue to expand the Company's sales and
marketing effort and intends to increase the Company's sales and marketing
expenditures. General and administrative expenses increased by 3%, to $574,000
for the nine months ended March 31, 1996 from $559,000 for the nine months
ended March 31, 1996. This increase primarily reflects increased compensation
expense.
Net Loss. Net loss increased to $1,214,000 for the nine months ended March
31, 1996 from a net profit of $193,000 for the nine months ended March 31,
1995. This increase was caused primarily by changes in product sales mix and
planned increases in product development and sales and marketing expenses.
LIQUIDITY AND CAPITAL RESOURCES
The Company recently raised approximately $7.0 million in its initial public
offering. The proceeds will be used primarily to fund product development and
expand sales and marketing efforts. At March 31, 1996, the Company had
approximately $6.3 million in cash and short-term investments.
The Company has a bank line of credit in place with SunTrust Bank, Atlanta
which makes available $1,200,000 in borrowings secured by the Company's
accounts receivable and other assets. At March 31, 1996, there were no
outstanding borrowings on the line of credit. A commitment fee of one quarter
of one percent is due on the unused portion of the facility. The line of credit
agreement expires on October 31, 1996.
11
<PAGE> 12
For the nine months ended March 31, 1996, the Company used $273,000 in cash
from operating activities as compared to generating $801,000 for the same
period the previous year. This change of $1,074,000 was primarily due to the
decreased earnings ($1,407,000) for the nine months ended March 31, 1996 as
compared to the nine months ended March 31, 1995. The decrease in earnings was
partially offset by $269,000 generated from the reduction of working capital
requirements.
The Company purchased $200,000 and $299,000 of property, plant and equipment
during the nine months ended March 31, 1996 and 1995, respectively. The Company
expects to significantly increase its level of capital spending in the near
term as its prepares for additional product development expenditures. The
Company also purchased $3,000,000 of short-term investments using proceeds from
the public offering during the period ended March 31, 1996. There were no such
purchases of investments during the same period of the previous year.
The Company expects its cash balances will be sufficient to fund its currently
anticipated level of losses and capital expenditures for the next twelve
months.
12
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Effective March, 1996, prior to the Company's initial public offering of its
units, the stockholders of the Company, acting by consent in lieu of a
special meeting of stockholders, approved the following:
1. Amendment and Restatement of the Company's Certificate of Incorporation
2. The Company's 1996 Incentive Compensation Plan
3. Amendment of the Company's Stockholders Agreement
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
10.1 Employment agreement with Andres C. Salazar
10.2 Employment agreement with Thomas C. Mock
10.3 Employment agreement with Marlin H. Nelson
10.4 Employment agreement with Bobby G. Boykin
27 Financial Data Schedule (for SEC use only)
(B) REPORTS ON FROM 8-K
The registrant did not file any reports on Form 8-K during the three months
ended March 31, 1996.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Digital Transmission Systems, Inc.
Date: May 9, 1996 By: /s/ Andres C. Salazar
-----------------------------------
Andres C. Salazar, President and
Chief Executive Officer
Date: May 9, 1996
By: /s/ Donald L. Aldridge
-----------------------------------
Donald L. Aldridge, Chief Financial
Officer, Vice President of Finance
and Administration (Principal
Financial Officer and Principal
Accounting Officer)
14
<PAGE> 1
EXHIBIT 10.1
DTS/EMPLOYEE
EMPLOYMENT AGREEMENT
THIS IS AN EMPLOYMENT AGREEMENT ("this Agreement") by and between
Digital Transmission Systems, Inc., the "Company," a Delaware corporation
("DTS"), and Andres C. Salazar ("Employee"), and dated as of March 5, 1996 (the
"Effective Date"), and by which DTS and Employee, in consideration of the
mutual promises set forth below and other good and valuable consideration (the
mutuality, adequacy, sufficiency and receipt of which are hereby acknowledged),
hereby agree as follows:
1. EMPLOYMENT. DTS hereby employs Employee as President and CEO and
Employee agrees to perform the duties of such position as requested by the
Board of Directors, to devote his entire time and business efforts to DTS's
business, to perform his duties to the best of his ability, to promote the
success of DTS's business, and to comply with all of DTS's policies and
procedures, all pursuant to the terms of this Agreement. Employee shall not,
during his employment pursuant to this Agreement, engage in any other business
activity or occupation for gain, profit, or other pecuniary advantage without
the prior consent of the Board of Directors of DTS; provided, however, that
such prohibition shall not prohibit Employee from investing or trading for his
own benefit in stocks, bonds, securities or other forms of investment.
2. TERM. The term of employment under this Agreement shall be from
March 5, 1996 through March 5, 1999 and for successive one-year periods
thereafter, with either party required to provide written notice of nonrenewal
at least one hundred eighty (180) days prior to the end of the applicable
period, unless sooner terminated as follows:
(a) Termination by Employee:
(I) Employee may terminate his employment pursuant to this Agreement
at any time upon ninety (90) days' prior notice to DTS, provided that the
provisions of Section 4(b) shall apply; or (ii) Employee may terminate his
employment pursuant to this Agreement for "Good Reason" (as defined below) upon
ninety (90) days' prior notice to DTS, provided that the provisions of Sections
4(a) shall apply. For purposes of this Agreement, for Good Reason shall mean
any of the following: (i) the assignment of the Employee has changed without
his written consent to any position of materially lesser status with fewer
duties or responsibilities than the assignment held at the effective date of
this Agreement; or (ii) the assignment of the Employee has materially changed
without his written consent to any position with greater range of
responsibilities and duties than those held at the effective date of this
Agreement, unless such assignment is accompanied by a commensurate increase in
compensation agreed to in writing by the Employee.
<PAGE> 2
(b) Termination by Company:
DTS may terminate Employee's employment pursuant to this Agreement
either (i) upon ninety (90) days' prior notice to Employee for any reason (or
for no reason), i.e. "without cause," (ii) or upon total disability of
Employee, "total disability" meaning for purposes of this Agreement, the
inability of Employee to perform assigned duties for ninety (90) consecutive
days or for thirty (30) days in any three (3)-month period, (iii) or upon death
of Employee, (iv) or upon notice at any time "for cause." For purposes of this
Agreement: "for cause" means any reason materially and adversely affecting DTS
or any reason for which, under the circumstances, it would be unreasonable to
expect DTS to continue to employ the Employee, such as the conviction of any
felony or crime of moral turpitude, the commission or attempted commission of
any act of willful misconduct or dishonesty, malfeasance, gross negligence, or
the material breach of any provision of this Agreement or the general policies
as listed in the Policy Manual of DTS, as amended from time to time. The
provisions of Section 4(a) or 4(b), as applicable, shall apply.
3. COMPENSATION.
(a) General:
For all the services rendered to DTS by Employee in
any capacity pursuant to this Agreement: (i) DTS shall pay to
Employee a base salary at the rate of $12,500 per month,
payable in accordance with DTS's payroll practices during
Employee's employment pursuant to this Agreement. DTS shall
review Employee's base salary annually to determine whether
any increase is appropriate, (ii) Employee shall be entitled
to participate in any annual Management Bonus or supplementary
compensation program available to other senior managers in DTS
as approved by the Board of Directors, (iii) Employee shall be
entitled to participate with other employees of DTS in any
employee benefit plans (including retirement or pension plans)
as may be maintained from time to time by DTS in accordance
with their terms, (iv) shall be entitled to twenty (20) days
of vacation with pay (or such greater length of time as may be
approved from time to time by the Board of Directors of DTS)
during each fiscal year during the term of this Agreement
(such vacation to be taken by Employee at such time or times
as shall be approved by the Board of Directors), and shall be
entitled to holidays, sick and other leave days in accordance
with DTS's standard policy for employees. Employee agrees that
the compensation and fringe benefits provided to him under
this Agreement shall be the only compensation to which
Employee shall be entitled for his services as an employee of
DTS, except for any special bonuses approved
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<PAGE> 3
by the Board of Directors and sales commission plans; (v)
Employee shall be entitled to a car allowance in the amount of
$500 monthly and shall not otherwise be entitled to any other
reimbursement for personal car use.
(b) Stock Options. At the discretion of the DTS Board of
Directors, the Employee may be granted stock options in accordance with an
approved Stock Option Plan. Conditions for the vesting of those options will be
stipulated in that Plan or modified in the Stock Option Agreement. However, if
Employee (i) is terminated by the Company for other than cause the Employee's
options will continue to vest through the notice and any severance period, or
(ii) terminates his employment for Good Reason, the Employee's options will
continue to vest as though he were terminated for other than cause. However, if
Employee (i) is terminated by the Company for other than cause, or (ii)
terminates his employment for "Good Reason," in either case, during the 365
days following a "Change in Control," all of the Employee's options will become
fully vested. If a Change in Control occurs and the Employee's employment with
the Company is terminated by the Company without cause prior to the date on
which the Change in Control occurs, and if it is reasonably demonstrated by the
Employee that such termination of employment (a) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control
or (b) otherwise arose in connection with or anticipation of the Change of
Control, then for purposes of this section the termination will have deemed to
have taken place within the 365 day period following the Change of Control. A
Change in Control shall mean:
(i) Approval by the shareholders of the Company of a reorganization,
merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation more than 50% of the then
outstanding common stock of the corporation resulting from such
reorganization, merger or consolidation and the combined voting power
of the then outstanding voting securities of such corporation entitled
to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners of the
outstanding Company common stock immediately prior to such
reorganization, merger or consolidation.
(ii) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended ("the Exchange Act") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 50% or more of either the then outstanding shares of common stock
of the Company or the combined voting power of the then outstanding
securities of the Company then entitled to vote generally in the
election of directors; provided, however, that any acquisition by or
from the Company shall not constitute a Change in Control.
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<PAGE> 4
(iii) Approval by the shareholders of the Company of (aa) a complete
liquidation of the Company or (bb) the sale or other disposition of
all or substantially all of the assets of the Company, other than to a
corporation, with respect to which following such sale or other
disposition, more than 50% of the then outstanding shares of common
stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
or entities who were the beneficial owners of the Company's
outstanding common stock immediately prior to such sale or other
disposition.
4. TERMINATION PAYMENTS.
(a) By DTS without Cause, for disability or upon death or by
Employee for Good Reason:
If Employee's employment pursuant to this Agreement is
terminated by DTS without cause, for disability, or upon Employee's
death or by Employee for Good Reason, then DTS shall with appropriate
notice period specified in 2(b):
(i) pay the Employee's salary through only the remainder, if any, of
the month in which termination is effective and for TWELVE (12) months
thereafter on the normal Company payroll dates (severance period);
(ii) and pay the Employee's unpaid pro rata share of any Management
Bonus Program and earned sales commissions through the notice period.
These payments shall be made during the normal payment periods for
such compensation.
(b) By DTS for Cause or if Employee voluntarily terminates employment.
If Employee's employment pursuant to this Agreement is
terminated at any time by DTS for cause or if the Employee voluntarily
terminates his employment with DTS, then DTS shall pay him his salary,
pro rata share of any Management Bonus Program and earned sales
commissions through only the date of termination; Employee's accrual
of, or participation in plans providing for, his fringe benefits shall
cease upon termination of employment for any reason, and Employee
shall be entitled to benefits pursuant to such plans only as provided
in such plans. Employee shall also be subject to the noncompetition
provisions of Section 6 for twelve (12) months.
5. WORKING FACILITIES; EXPENSES.
Employee shall be furnished with working facilities in Norcross,
Georgia and services suitable to his position and adequate for the performance
of his duties.
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<PAGE> 5
Employee is authorized to incur reasonable expenses in accordance with DTS's
policies and practices guidelines for promoting the business of DTS, including
expenses for entertainment, travel and similar items. DTS shall reimburse
Employee for all such reasonable and approved expenses upon the submission by
Employee, from time to time, of an itemized account of such expenditures, in
accordance with normal Employer's policies and practices regarding the
timeliness of expense reports, standards of reasonableness and documentation of
expenses. All reimbursable expenses due employee shall be paid by DTS to
employee upon termination of employment as soon as is practicable.
6. NONCOMPETITION AND NONDISCLOSURE
(a) Background. This Agreement is being entered into by the Employee
in consideration of the Employee's employment pursuant to this Agreement. The
Employee expressly acknowledges that he has special knowledge, expertise,
contacts and other information with respect to the Restricted Business (as
defined below), and that DTS would not employ him, or make the expenditures
necessary to enable the Employee to perform the duties incident to his
employment by DTS, without obtaining the agreement of the Employee set forth in
this Section, which the Employee acknowledges and agrees are reasonable
restrictions necessary and appropriate to protect the interests of DTS.
(b) Certain Defined Terms. For purposes of this Agreement, the
following words and phrases shall have the meaning set forth below:
(i) Employer. For purposes of this Section, the term
"Employer" shall mean DTS as defined in the introductory language of
this Agreement and its subsidiaries and affiliates.
(ii) Restricted Business. The phrase "Restricted Business"
shall mean the telecommunications equipment sales and service business
engaged in by DTS.
(iii) Territory. The word "Territory" shall mean any country
in the world that DTS is "actively" marketing its products with sales
representatives whether direct or indirect, with sales or proposals of
sales in the last 12 months defining "activity," and with the United
States being partitioned into states wherever DTS customers are doing
business. The Employee acknowledges that as President and CEO, he will
work with DTS's operations throughout such territory and that DTS must
protect itself on such basis. The Employee recognizes and acknowledges
that DTS, either directly or through its subsidiaries or affiliates,
is engaged in the Restricted Business throughout the Territory and
that it is reasonable and necessary for DTS to protect its interest on
such basis.
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<PAGE> 6
The Employee acknowledges that from time to time the Employee and DTS
may agree to change the definition of Restricted Business or Territory, but any
such changes shall be binding upon the Employee only if set forth in a written
instrument signed by the Employee.
(iv) Restricted Customer. For purposes of this Section, the
term "Restricted Customer" means (I) any actual customer to
whom goods or services were provided during the 12 month
period prior to the termination of employment pursuant to this
Agreement and (II) any potential customer whom DTS solicited
(or actively considered soliciting or had made plans to
solicit) during the 12 month period prior to the termination
of employment pursuant to this Agreement.
(c) Non-competition. The Employee hereby agrees that he will not (i)
during the period of his employment with DTS and, (ii) if this Agreement is
terminated (aa) by the Employee other than for Good Reason, or (bb) by DTS for
cause, for a period of one year from notice of termination: (I) have any
ownership interest (whether as proprietor, partner, stockholder or otherwise)
in or, (II) be an officer, director or general or managing partner of, or hold
a similar position in, or (III) act as agent, broker or distributor for, or
advisor or consultant to, or (IV) be employed in any business (without regard
to the form in which conducted) which is engaged, or which he/she reasonably
knows is undertaking to become engaged, in the Territory in the Restricted
Business. The ownership by the Employee of less than five percent (5%) of the
shares of capital stock of a publicly held corporation shall in no event be
deemed a violation of the foregoing.
(d) No Interference with Restricted Customers. The Employee hereby
agrees that during the period of his employment by DTS his primary business
activity shall be as an employee of DTS, and without limiting the foregoing, he
shall solicit customers during such period only for products and services of
DTS. The Employee hereby agrees that, should this Agreement be terminated (a)
by the Employee other than for Good Reason, or (b) by DTS for cause, for a
period of one year following his notice of termination of employment with DTS
and in the Territory, he will not, in any way directly or indirectly: (I)
solicit, divert or take away or accept, or attempt to solicit, divert, take
away or accept, from DTS the business of any Restricted Customer for any
product or service of DTS sold (or offered for sale or planned or proposed to
be offered for sale) to such Restricted Customer during the 12 month period
prior to the date of termination; or (II) attempt or seek to cause any
Restricted Customer to refrain, in any respect, from acquiring from or through
DTS any product or service of DTS sold (or offered for sale or planned or
proposed to be offered for sale) to such Restricted Customer during the 12
month period prior to the date of termination. The Employee agrees that
telephonic or written communication by him to any of the Restricted Customers
shall constitute an activity prohibited by the foregoing.
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<PAGE> 7
(e) No Interference with Employees. The Employee agrees that during
his employment pursuant to this Agreement and for a period of one year
following the end of employment hereunder, the Employee will not in any way,
directly or indirectly, request or induce any other employee of DTS to
terminate his employment with DTS.
(f) No Interference with Customers under contract or undergoing
contract negotiations with DTS. The Employee agrees that for a period of one
year following the end of employment hereunder, the Employee will not in any
way, directly or indirectly, interfere with the relationship of DTS and a
customer under contract to purchase equipment and/or services from DTS, or with
contract negotiations between DTS and a prospective Customer to purchase
equipment and/or services from DTS ongoing at the time of employment
termination.
(g) Independent. The agreements set forth in the foregoing Subsections
(a), (b), (c), (d),(e) and (f) (or any part of them) are, shall be deemed and
shall be construed as separate and independent agreements. If any such
agreement or any part of such agreement is held invalid, void or unenforceable
by any court of competent jurisdiction, such invalidity, voidness or
unenforceability shall in no way render invalid, void or unenforceable any
other part or provision thereof or any separate agreement not declared invalid,
void or unenforceable; and this Agreement shall in that case be construed as if
the void, invalid or unenforceable provisions were omitted.
7. Miscellaneous.
(a) Notices. Each notice under this Agreement shall be in writing and
given either in person or by telecopier, a nationally recognized next business
day delivery service or first class mail, postage and any other costs prepaid,
to the address of the party being given notice set forth below his or its
signature or to such other address as a party may furnish to the other as
provided in this sentence; and if notice is given pursuant to the foregoing of
a permitted successor or assign, then notice shall thereafter be given pursuant
to the foregoing to such permitted successor or assign.
(b) Assignment; Binding Nature. No assignment, transfer or
delegation, whether by merger or other operation of law or otherwise, of any
rights or obligations under this Agreement by a party shall be made without the
prior written consent of the other party (which shall not be unreasonably
withheld) (but given the personal nature of the services to be provided by
Employee to DTS pursuant to this Agreement, it is not expected that consent to
assignment, transfer or delegation by Employee will be granted); and no
transfer, whether by merger or other operation of law or otherwise, by DTS of
all or a substantial part of its business shall be made unless DTS's
obligations under this Agreement are assumed in connection with such transfer,
either by merger or other operation of law or by specific assumption executed
by the transferee. This Agreement is binding upon the parties and their
respective legal representatives, heirs, devisees,
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<PAGE> 8
legatees or other successors and assigns and inures to the benefit of the
parties and their respective permitted legal representatives, heirs, devisees,
legatees or other permitted successors and assigns.
(c) Rules of Construction & Certain Definitions. Whenever the context
so requires, the singular includes the plural, the plural includes the
singular, and the gender of any pronoun includes the other genders. Titles and
captions of or in this Agreement are inserted only as a matter of this
Agreement or the intent of its provisions. The parties agree (i) that
"applicable law" means each provision of any constitution, statute, law, rule,
regulation, decision, order, decree, judgment, release, license, permit,
stipulation or other official pronouncement enacted, promulgated or issued by
any governmental authority or arbitrator or arbitration panel; (ii) that
"governmental authority" means any legislative, executive, judicial,
quasi-judicial or other public authority, agency, department, bureau, division,
unit, court or other public body, person or entity; (iii) that "including" and
other words or phrases of inclusion, if any, shall not be construed as terms of
limitation, so that references to "included" matters shall be regarded as non-
exclusive, non-characterizing illustrations; (iv) that "party," "parties,"
"parties to this Agreement" and variations of such means each or all, as
appropriate, of the persons who have executed and delivered this Agreement,
each permitted successor or assign of such a party, and when appropriate to
effect the binding nature of this Agreement for the benefit of another party,
any other successor or assign of such a party; and (v) that "this Agreement"
includes any amendments or other modifications and supplements, and all
exhibits, schedules and other attachments, to it.
(d) Severability. Any determination by any court of competent
jurisdiction of the invalidity of any provision of this Agreement that is not
essential to accomplishing the purposes of this Agreement shall not affect the
validity of any other provision of this Agreement, which shall remain in full
force and effect and which shall be construed as to be valid under applicable
law.
(e) Remedies. The remedies of a party provided in this Agreement are
cumulative and do not exclude any other remedies to which any party may be
lawfully entitled, under this Agreement or applicable law, and the exercise of
a remedy is not an election excluding any other remedy (any such claim by the
other party being hereby waived).
(f) Indemnification. DTS shall indemnify Employee against judgments,
fines, amounts paid in settlement and reasonable expenses, including attorneys'
fees actually and necessarily incurred, in any action or proceeding to which
Employee is made a party by reason of the fact that he is or was an officer or
director of DTS, to the fullest extent permitted by applicable law, the By-laws
of DTS and the Articles of Incorporation of DTS.
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<PAGE> 9
(g) Integration; Amendment; Waiver. This Amendment constitutes the
entire agreement of the parties to its with respect to its subject matter,
supersedes all prior agreements, if any, of the parties with respect to its
subject matter, and may not be amended except in writing signed by the party
against whom the change is being asserted. The failure of any party at any
time or times to require the performance of any provisions of this Agreement
shall in no manner affect the right to enforce the same and no waiver by any
party of any provision (or of a breach of any provision) of this Agreement,
whether by conduct or otherwise, in any one or more instances, shall be deemed
or construed either as a further or continuing waiver of any such provision or
breach or as a waiver of any other provision (or of a breach of any other
provision) of this Agreement.
(h) Controlling Law. This Agreement is governed by, and shall be
construed and enforced in accordance with the internal laws of the State of
Georgia.
(i) Copies and Counterparts. This Agreement may be executed in two or
more copies, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement or its terms to produce or account
for more than one of such copies. This Agreement may be executed by each party
upon a separate copy, and in such case one counterpart of this Agreement
consists of enough of such copies to reflect the signature of all of the
parties. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, and it is not necessary in making proof of
this Agreement or its terms to produce or account for more than one of such
counterparts.
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<PAGE> 10
DULY EXECUTED and delivered by the parties, under seal, effective as of
March 5, 1996.
Employee: (L.S.)
--------------------------------
Andres C. Salazar
DTS: DIGITAL TRANSMISSION SYSTEMS, INC.
Corporate Seal
----------------------------------------
Donald L. Aldridge, CFO
Attest:
- - -------------------------------------
Dan Seitam, Corporate Secretary
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<PAGE> 1
EXHIBIT 10.2
DTS/EMPLOYEE
EMPLOYMENT AGREEMENT
THIS IS AN EMPLOYMENT AGREEMENT ("this Agreement") by and between
Digital Transmission Systems, Inc., the "Company," a Delaware corporation
("DTS"), and Thomas C. Mock ("Employee"), and dated as of March 5, 1996 (the
"Effective Date"), and by which DTS and Employee, in consideration of the
mutual promises set forth below and other good and valuable consideration (the
mutuality, adequacy, sufficiency and receipt of which are hereby acknowledged),
hereby agree as follows:
1. EMPLOYMENT. DTS hereby employs Employee as Assistant Vice President
of Engineering and Employee agrees to perform the duties of such position as
requested by the employee's supervisor, Andres C. Salazar, DTS President and
CEO, to devote his entire time and business efforts to DTS's business, to
perform his duties to the best of his ability, to promote the success of DTS's
business, and to comply with all of DTS's policies and procedures, all pursuant
to the terms of this Agreement. Employee shall not, during his employment
pursuant to this Agreement, engage in any other business activity or occupation
for gain, profit, or other pecuniary advantage without the prior consent of the
Board of Directors of DTS; provided, however, that such prohibition shall not
prohibit Employee from investing or trading for his own benefit in stocks,
bonds, securities or other forms of investment.
2. TERM. The term of employment under this Agreement shall be from
March 5, 1996 through March 5, 1998 and for successive one-year periods
thereafter, with either party required to provide written notice of nonrenewal
at least ninety (90) days prior to the end of the applicable period, unless
sooner terminated as follows:
(a) Termination by Employee:
(I) Employee may terminate his employment pursuant to this Agreement
at any time upon ninety (90) days' prior notice to DTS, provided that the
provisions of Section 4(b) shall apply; or (ii) Employee may terminate his
employment pursuant to this Agreement for "Good Reason" (as defined below) upon
ninety (90) days' prior notice to DTS, provided that the provisions of Sections
4(a) shall apply. For purposes of this Agreement, for Good Reason shall mean
any of the following: (i) the assignment of the Employee has changed without
his written consent to any position of materially lesser status with fewer
duties or responsibilities than the assignment held at the effective date of
this Agreement; or (ii) the assignment of the Employee has materially changed
without his written consent to any position with greater range of
responsibilities and duties than those held at the effective date of this
Agreement, unless such assignment is accompanied by a commensurate increase in
compensation agreed to in writing by
<PAGE> 2
the Employee.
(b) Termination by Company:
DTS may terminate Employee's employment pursuant to this Agreement
either (i) upon ninety (90) days' prior notice to Employee for any reason (or
for no reason), i.e. "without cause," (ii) or upon total disability of
Employee, "total disability" meaning for purposes of this Agreement, the
inability of Employee to perform assigned duties for ninety (90) consecutive
days or for thirty (30) days in any three (3)-month period, (iii) or upon death
of Employee, (iv) or upon notice at any time "for cause." For purposes of this
Agreement: "for cause" means any reason materially and adversely affecting DTS
or any reason for which, under the circumstances, it would be unreasonable to
expect DTS to continue to employ the Employee, such as the conviction of any
felony or crime of moral turpitude, the commission or attempted commission of
any act of willful misconduct or dishonesty, malfeasance, gross negligence, or
the material breach of any provision of this Agreement or the general policies
as listed in the Policy Manual of DTS, as amended from time to time. The
provisions of Section 4(a) or 4(b), as applicable, shall apply.
3. COMPENSATION.
(a) General:
For all the services rendered to DTS by Employee in
any capacity pursuant to this Agreement: (i) DTS shall pay to
Employee a base salary at the rate of $7,500 per month,
payable in accordance with DTS's payroll practices during
Employee's employment pursuant to this Agreement. DTS shall
review Employee's base salary annually to determine whether
any increase is appropriate, (ii) Employee shall be entitled
to participate in any annual Management Bonus or supplementary
compensation program available to other senior managers in DTS
as approved by the Board of Directors, (iii) Employee shall be
entitled to participate with other employees of DTS in any
employee benefit plans (including retirement or pension plans)
as may be maintained from time to time by DTS in accordance
with their terms, (iv) shall be entitled to twenty (20) days
of vacation with pay (or such greater length of time as may be
approved from time to time by the Board of Directors of DTS)
during each fiscal year during the term of this Agreement
(such vacation to be taken by Employee at such time or times
as shall be approved by his supervisor at DTS), and shall be
entitled to holidays, sick and other leave days in accordance
with DTS's standard policy for employees. Employee agrees that
the compensation and fringe benefits provided to him under
this Agreement
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<PAGE> 3
shall be the only compensation to which Employee shall be
entitled for his services as an employee of DTS, except for
any special bonuses approved by the Board of Directors and
sales commission plans.
(b) Stock Options. At the discretion of the DTS Board of
Directors, the Employee may be granted stock options in accordance with an
approved Stock Option Plan. Conditions for the vesting of those options will be
stipulated in that Plan or modified in the Stock Option Agreement. However, if
Employee (i) is terminated by the Company for other than cause the Employee's
options will continue to vest through the notice and any severance period, or
(ii) terminates his employment for Good Reason, the Employee's options will
continue to vest as though he were terminated for other than cause. However, if
Employee (i) is terminated by the Company for other than cause, or (ii)
terminates his employment for "Good Reason," in either case, during the 365
days following a "Change in Control," all of the Employee's options will become
fully vested. If a Change in Control occurs and the Employee's employment with
the Company is terminated by the Company without cause prior to the date on
which the Change in Control occurs, and if it is reasonably demonstrated by the
Employee that such termination of employment (a) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control
or (b) otherwise arose in connection with or anticipation of the Change of
Control, then for purposes of this section the termination will have deemed to
have taken place within the 365 day period following the Change of Control. A
Change in Control shall mean:
(i) Approval by the shareholders of the Company of a reorganization,
merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation more than 50% of the then
outstanding common stock of the corporation resulting from such
reorganization, merger or consolidation and the combined voting power
of the then outstanding voting securities of such corporation entitled
to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners of the
outstanding Company common stock immediately prior to such
reorganization, merger or consolidation.
(ii) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended ("the Exchange Act") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 50% or more of either the then outstanding shares of common stock
of the Company or the combined voting power of the then outstanding
securities of the Company then entitled to vote generally in the
election of directors; provided, however, that any acquisition by or
from the Company shall not constitute a Change in Control.
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<PAGE> 4
(iii) Approval by the shareholders of the Company of (aa) a complete
liquidation of the Company or (bb) the sale or other disposition of
all or substantially all of the assets of the Company, other than to a
corporation, with respect to which following such sale or other
disposition, more than 50% of the then outstanding shares of common
stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
or entities who were the beneficial owners of the Company's
outstanding common stock immediately prior to such sale or other
disposition.
4. TERMINATION PAYMENTS.
(a) By DTS without Cause, for disability or upon death or by
Employee for Good Reason:
If Employee's employment pursuant to this Agreement is
terminated by DTS without cause, for disability, or upon Employee's
death or by Employee for Good Reason, then DTS shall with appropriate
notice period specified in 2(b):
(i) pay the Employee's salary through only the remainder, if any, of
the month in which termination is effective and for SIX (6) months
thereafter on the normal Company payroll dates (severance period);
(ii) and pay the Employee's unpaid pro rata share of any Management
Bonus Program and earned sales commissions through the notice period.
These payments shall be made during the normal payment periods for
such compensation.
(b) By DTS for Cause or if Employee voluntarily terminates employment.
If Employee's employment pursuant to this Agreement is
terminated at any time by DTS for cause or if the Employee voluntarily
terminates his employment with DTS, then DTS shall pay him his salary,
pro rata share of any Management Bonus Program and earned sales
commissions through only the date of termination; Employee's accrual
of, or participation in plans providing for, his fringe benefits shall
cease upon termination of employment for any reason, and Employee
shall be entitled to benefits pursuant to such plans only as provided
in such plans. Employee shall also be subject to the noncompetition
provisions of Section 6 for twelve (12) months.
5. WORKING FACILITIES; EXPENSES.
Employee shall be furnished with working facilities in Norcross,
Georgia and services suitable to his position and adequate for the performance
of his duties.
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<PAGE> 5
Employee is authorized to incur reasonable expenses in accordance with DTS's
policies and practices guidelines for promoting the business of DTS, including
expenses for entertainment, travel and similar items. DTS shall reimburse
Employee for all such reasonable and approved expenses upon the submission by
Employee, from time to time, of an itemized account of such expenditures, in
accordance with normal Employer's policies and practices regarding the
timeliness of expense reports, standards of reasonableness and documentation of
expenses. All reimbursable expenses due employee shall be paid by DTS to
employee upon termination of employment as soon as is practicable.
6. NONCOMPETITION AND NONDISCLOSURE
(a) Background. This Agreement is being entered into by the Employee
in consideration of the Employee's employment pursuant to this Agreement. The
Employee expressly acknowledges that he has special knowledge, expertise,
contacts and other information with respect to the Restricted Business (as
defined below), and that DTS would not employ him, or make the expenditures
necessary to enable the Employee to perform the duties incident to his
employment by DTS, without obtaining the agreement of the Employee set forth in
this Section, which the Employee acknowledges and agrees are reasonable
restrictions necessary and appropriate to protect the interests of DTS.
(b) Certain Defined Terms. For purposes of this Agreement, the
following words and phrases shall have the meaning set forth below:
(i) Employer. For purposes of this Section, the term
"Employer" shall mean DTS as defined in the introductory language of
this Agreement and its subsidiaries and affiliates.
(ii) Restricted Business. The phrase "Restricted Business"
shall mean the telecommunications equipment sales and service business
engaged in by DTS.
(iii) Territory. The word "Territory" shall mean any country
in the world that DTS is "actively" marketing its products with sales
representatives whether direct or indirect, with sales or proposals of
sales in the last 12 months defining "activity," and with the United
States being partitioned into states wherever DTS customers are doing
business. The Employee acknowledges that as Assistant Vice President
of Engineering, he will work with DTS's operations throughout such
territory and that DTS must protect itself on such basis. The Employee
recognizes and acknowledges that DTS, either directly or through its
subsidiaries or affiliates, is engaged in the Restricted Business
throughout the Territory and that it is reasonable and necessary for
DTS to protect its interest on such basis.
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The Employee acknowledges that from time to time the Employee and DTS
may agree to change the definition of Restricted Business or Territory, but any
such changes shall be binding upon the Employee only if set forth in a written
instrument signed by the Employee.
(iv) Restricted Customer. For purposes of this Section, the
term "Restricted Customer" means (I) any actual customer to
whom goods or services were provided during the 12 month
period prior to the termination of employment pursuant to this
Agreement and (II) any potential customer whom DTS solicited
(or actively considered soliciting or had made plans to
solicit) during the 12 month period prior to the termination
of employment pursuant to this Agreement.
(c) Non-competition. The Employee hereby agrees that he will not (i)
during the period of his employment with DTS and, (ii) if this Agreement is
terminated (aa) by the Employee other than for Good Reason, or (bb) by DTS for
cause, for a period of one year from notice of termination: (I) have any
ownership interest (whether as proprietor, partner, stockholder or otherwise)
in or, (II) be an officer, director or general or managing partner of, or hold
a similar position in, or (III) act as agent, broker or distributor for, or
advisor or consultant to, or (IV) be employed in any business (without regard
to the form in which conducted) which is engaged, or which he/she reasonably
knows is undertaking to become engaged, in the Territory in the Restricted
Business. The ownership by the Employee of less than five percent (5%) of the
shares of capital stock of a publicly held corporation shall in no event be
deemed a violation of the foregoing.
(d) No Interference with Restricted Customers. The Employee hereby
agrees that during the period of his employment by DTS his primary business
activity shall be as an employee of DTS, and without limiting the foregoing, he
shall solicit customers during such period only for products and services of
DTS. The Employee hereby agrees that, should this Agreement be terminated (a)
by the Employee for other than Good Reason, or (b) by DTS for cause, for a
period of one year following his notice of termination of employment with DTS
and in the Territory, he will not, in any way directly or indirectly: (I)
solicit, divert or take away or accept, or attempt to solicit, divert, take
away or accept, from DTS the business of any Restricted Customer for any
product or service of DTS sold (or offered for sale or planned or proposed to
be offered for sale) to such Restricted Customer during the 12 month period
prior to the date of termination; or (II) attempt or seek to cause any
Restricted Customer to refrain, in any respect, from acquiring from or through
DTS any product or service of DTS sold (or offered for sale or planned or
proposed to be offered for sale) to such Restricted Customer during the 12
month period prior to the date of termination. The Employee agrees that
telephonic or written communication by him to any of the Restricted Customers
shall constitute an activity prohibited by the foregoing.
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<PAGE> 7
(e) No Interference with Employees. The Employee agrees that during
his employment pursuant to this Agreement and for a period of one year
following the end of employment hereunder the Employee will not in any way,
directly or indirectly, request or induce any other employee of DTS to
terminate his employment with DTS.
(f) No Interference with Customers under contract or undergoing
contract negotiations with DTS. The Employee agrees that for a period of one
year following the end of employment hereunder, the Employee will not in any
way, directly or indirectly, interfere with the relationship of DTS and a
customer under contract to purchase equipment and/or services from DTS, or with
contract negotiations between DTS and a prospective Customer to purchase
equipment and/or services from DTS ongoing at the time of employment
termination.
(g) Independent. The agreements set forth in the foregoing Subsections
(a), (b), (c), (d), (e) and (f) (or any part of them) are, shall be deemed and
shall be construed as separate and independent agreements. If any such
agreement or any part of such agreement is held invalid, void or unenforceable
by any court of competent jurisdiction, such invalidity, voidness or
unenforceability shall in no way render invalid, void or unenforceable any
other part or provision thereof or any separate agreement not declared invalid,
void or unenforceable; and this Agreement shall in that case be construed as if
the void, invalid or unenforceable provisions were omitted.
7. Miscellaneous.
(a) Notices. Each notice under this Agreement shall be in writing and
given either in person or by telecopier, a nationally recognized next business
day delivery service or first class mail, postage and any other costs prepaid,
to the address of the party being given notice set forth below his or its
signature or to such other address as a party may furnish to the other as
provided in this sentence; and if notice is given pursuant to the foregoing of
a permitted successor or assign, then notice shall thereafter be given pursuant
to the foregoing to such permitted successor or assign.
(b) Assignment; Binding Nature. No assignment, transfer or
delegation, whether by merger or other operation of law or otherwise, of any
rights or obligations under this Agreement by a party shall be made without the
prior written consent of the other party (which shall not be unreasonably
withheld) (but given the personal nature of the services to be provided by
Employee to DTS pursuant to this Agreement, it is not expected that consent to
assignment, transfer or delegation by Employee will be granted); and no
transfer, whether by merger or other operation of law or otherwise, by DTS of
all or a substantial part of its business shall be made unless DTS's
obligations under this Agreement are assumed in connection with such transfer,
either by merger or other operation of law or by specific assumption executed
by the transferee. This Agreement is
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<PAGE> 8
binding upon the parties and their respective legal representatives, heirs,
devisees, legatees or other successors and assigns and inures to the benefit of
the parties and their respective permitted legal representatives, heirs,
devisees, legatees or other permitted successors and assigns.
(c) Rules of Construction & Certain Definitions. Whenever the context
so requires, the singular includes the plural, the plural includes the
singular, and the gender of any pronoun includes the other genders. Titles and
captions of or in this Agreement are inserted only as a matter of this
Agreement or the intent of its provisions. The parties agree (i) that
"applicable law" means each provision of any constitution, statute, law, rule,
regulation, decision, order, decree, judgment, release, license, permit,
stipulation or other official pronouncement enacted, promulgated or issued by
any governmental authority or arbitrator or arbitration panel; (ii) that
"governmental authority" means any legislative, executive, judicial,
quasi-judicial or other public authority, agency, department, bureau, division,
unit, court or other public body, person or entity; (iii) that "including" and
other words or phrases of inclusion, if any, shall not be construed as terms of
limitation, so that references to "included" matters shall be regarded as non-
exclusive, non-characterizing illustrations; (iv) that "party," "parties,"
"parties to this Agreement" and variations of such means each or all, as
appropriate, of the persons who have executed and delivered this Agreement,
each permitted successor or assign of such a party, and when appropriate to
effect the binding nature of this Agreement for the benefit of another party,
any other successor or assign of such a party; and (v) that "this Agreement"
includes any amendments or other modifications and supplements, and all
exhibits, schedules and other attachments, to it.
(d) Severability. Any determination by any court of competent
jurisdiction of the invalidity of any provision of this Agreement that is not
essential to accomplishing the purposes of this Agreement shall not affect the
validity of any other provision of this Agreement, which shall remain in full
force and effect and which shall be construed as to be valid under applicable
law.
(e) Remedies. The remedies of a party provided in this Agreement are
cumulative and do not exclude any other remedies to which any party may be
lawfully entitled, under this Agreement or applicable law, and the exercise of
a remedy is not an election excluding any other remedy (any such claim by the
other party being hereby waived).
(f) Indemnification. DTS shall indemnify Employee against judgments,
fines, amounts paid in settlement and reasonable expenses, including attorneys'
fees actually and necessarily incurred, in any action or proceeding to which
Employee is made a party by reason of the fact that he is or was an officer or
director of DTS, to the fullest extent permitted by applicable law, the By-laws
of DTS and the Articles of Incorporation of DTS.
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<PAGE> 9
(g) Integration; Amendment; Waiver. This Amendment constitutes the
entire agreement of the parties to its with respect to its subject matter,
supersedes all prior agreements, if any, of the parties with respect to its
subject matter, and may not be amended except in writing signed by the party
against whom the change is being asserted. The failure of any party at any
time or times to require the performance of any provisions of this Agreement
shall in no manner affect the right to enforce the same and no waiver by any
party of any provision (or of a breach of any provision) of this Agreement,
whether by conduct or otherwise, in any one or more instances, shall be deemed
or construed either as a further or continuing waiver of any such provision or
breach or as a waiver of any other provision (or of a breach of any other
provision) of this Agreement.
(h) Controlling Law. This Agreement is governed by, and shall be
construed and enforced in accordance with the internal laws of the State of
Georgia.
(i) Copies and Counterparts. This Agreement may be executed in two or
more copies, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement or its terms to produce or account
for more than one of such copies. This Agreement may be executed by each party
upon a separate copy, and in such case one counterpart of this Agreement
consists of enough of such copies to reflect the signature of all of the
parties. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, and it is not necessary in making proof of
this Agreement or its terms to produce or account for more than one of such
counterparts.
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<PAGE> 10
DULY EXECUTED and delivered by the parties, under seal effective as of
March 5, 1996.
Employee: (L.S.)
-----------------------------------
Thomas C. Mock
DTS: DIGITAL TRANSMISSION SYSTEMS, INC.
Corporate Seal
----------------------------------------
Andres C. Salazar, President & CEO
Attest:
- - -------------------------------------
Dan Seitam, Corporate Secretary
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<PAGE> 1
EXHIBIT 10.3
DTS/EMPLOYEE
EMPLOYMENT AGREEMENT
THIS IS AN EMPLOYMENT AGREEMENT ("this Agreement") by and between
Digital Transmission Systems, Inc., the "Company," a Delaware corporation
("DTS"), and Marlin H. Nelson ("Employee"), and dated as of March 5, 1996 (the
"Effective Date"), and by which DTS and Employee, in consideration of the
mutual promises set forth below and other good and valuable consideration (the
mutuality, adequacy, sufficiency and receipt of which are hereby acknowledged),
hereby agree as follows:
1. EMPLOYMENT. DTS hereby employs Employee as Vice President,
International Sales and Employee agrees to perform the duties of such position
as requested by the employee's supervisor, Andres C. Salazar, DTS President and
CEO, to devote his entire time and business efforts to DTS's business, to
perform his duties to the best of his ability, to promote the success of DTS's
business, and to comply with all of DTS's policies and procedures, all pursuant
to the terms of this Agreement. Employee shall not, during his employment
pursuant to this Agreement, engage in any other business activity or occupation
for gain, profit, or other pecuniary advantage without the prior consent of the
Board of Directors of DTS; provided, however, that such prohibition shall not
prohibit Employee from investing or trading for his own benefit in stocks,
bonds, securities or other forms of investment.
2. TERM. The term of employment under this Agreement shall be from
March 5, 1996 through March 5, 1998 and for successive one-year periods
thereafter, with either party required to provide written notice of nonrenewal
at least ninety (90) days prior to the end of the applicable period, unless
sooner terminated as follows:
(a) Termination by Employee:
(I) Employee may terminate his employment pursuant to this Agreement
at any time upon ninety (90) days' prior notice to DTS, provided that the
provisions of Section 4(b) shall apply; or (ii) Employee may terminate his
employment pursuant to this Agreement for "Good Reason" (as defined below) upon
ninety (90) days' prior notice to DTS, provided that the provisions of Sections
4(a) shall apply. For purposes of this Agreement, for Good Reason shall mean
any of the following: (i) the assignment of the Employee has changed without
his written consent to any position of materially lesser status with fewer
duties or responsibilities than the assignment held at the effective date of
this Agreement; or (ii) the assignment of the Employee has materially changed
without his written consent to any position with greater range of
responsibilities and duties than those held at the effective date of this
Agreement, unless such assignment is accompanied by a commensurate increase in
compensation agreed to in writing by
<PAGE> 2
the Employee.
(b) Termination by Company:
DTS may terminate Employee's employment pursuant to this Agreement
either (i) upon ninety (90) days' prior notice to Employee for any reason (or
for no reason), i.e. "without cause," (ii) or upon total disability of
Employee, "total disability" meaning for purposes of this Agreement, the
inability of Employee to perform assigned duties for ninety (90) consecutive
days or for thirty (30) days in any three (3)-month period, (iii) or upon death
of Employee, (iv) or upon notice at any time "for cause." For purposes of this
Agreement: "for cause" means any reason materially and adversely affecting DTS
or any reason for which, under the circumstances, it would be unreasonable to
expect DTS to continue to employ the Employee, such as the conviction of any
felony or crime of moral turpitude, the commission or attempted commission of
any act of willful misconduct or dishonesty, malfeasance, gross negligence, or
the material breach of any provision of this Agreement or the general policies
as listed in the Policy Manual of DTS, as amended from time to time. The
provisions of Section 4(a) or 4(b), as applicable, shall apply.
3. COMPENSATION.
(a) General:
For all the services rendered to DTS by Employee in
any capacity pursuant to this Agreement: (i) DTS shall pay to
Employee a base salary at the rate of $8,500 per month,
payable in accordance with DTS's payroll practices during
Employee's employment pursuant to this Agreement. DTS shall
review Employee's base salary annually to determine whether
any increase is appropriate, (ii) Employee shall be entitled
to participate in any annual Management Bonus or supplementary
compensation program available to other senior managers in DTS
as approved by the Board of Directors, (iii) Employee shall be
entitled to participate with other employees of DTS in any
employee benefit plans (including retirement or pension plans)
as may be maintained from time to time by DTS in accordance
with their terms, (iv) shall be entitled to twenty (20) days
of vacation with pay (or such greater length of time as may be
approved from time to time by the Board of Directors of DTS)
during each fiscal year during the term of this Agreement
(such vacation to be taken by Employee at such time or times
as shall be approved by his supervisor at DTS), and shall be
entitled to holidays, sick and other leave days in accordance
with DTS's standard policy for employees. Employee agrees that
the compensation and fringe benefits provided to him under
this Agreement
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<PAGE> 3
shall be the only compensation to which Employee shall be
entitled for his services as an employee of DTS, except for
any special bonuses approved by the Board of Directors and
sales commission plans; (v) Employee shall be entitled to a
car allowance in the amount of $400 monthly and shall not
otherwise be entitled to any other reimbursement for personal
car use.
(b) Stock Options. At the discretion of the DTS Board of
Directors, the Employee may be granted stock options in accordance with an
approved Stock Option Plan. Conditions for the vesting of those options will be
stipulated in that Plan or modified in the Stock Option Agreement. However, if
Employee (i) is terminated by the Company for other than cause the Employee's
options will continue to vest through the notice and any severance period, or
(ii) terminates his employment for Good Reason, the Employee's options will
continue to vest as though he were terminated for other than cause. However, if
Employee (i) is terminated by the Company for other than cause, or (ii)
terminates his employment for "Good Reason," in either case, during the 365
days following a "Change in Control," all of the Employee's options will become
fully vested. If a Change in Control occurs and the Employee's employment with
the Company is terminated by the Company without cause prior to the date on
which the Change in Control occurs, and if it is reasonably demonstrated by the
Employee that such termination of employment (a) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control
or (b) otherwise arose in connection with or anticipation of the Change of
Control, then for purposes of this section the termination will have deemed to
have taken place within the 365 day period following the Change of Control. A
Change in Control shall mean:
(i) Approval by the shareholders of the Company of a reorganization,
merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation more than 50% of the then
outstanding common stock of the corporation resulting from such
reorganization, merger or consolidation and the combined voting power
of the then outstanding voting securities of such corporation entitled
to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners of the
outstanding Company common stock immediately prior to such
reorganization, merger or consolidation.
(ii) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended ("the Exchange Act") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 50% or more of either the then outstanding shares of common stock
of the Company or the combined voting power of the then outstanding
securities of the Company then entitled to vote generally in the
election of directors; provided, however, that any acquisition by or
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<PAGE> 4
from the Company shall not constitute a Change in Control.
(iii) Approval by the shareholders of the Company of (aa) a complete
liquidation of the Company or (bb) the sale or other disposition of
all or substantially all of the assets of the Company, other than to a
corporation, with respect to which following such sale or other
disposition, more than 50% of the then outstanding shares of common
stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
or entities who were the beneficial owners of the Company's
outstanding common stock immediately prior to such sale or other
disposition.
4. TERMINATION PAYMENTS.
(a) By DTS without Cause, for disability or upon death or by
Employee for Good Reason:
If Employee's employment pursuant to this Agreement is
terminated by DTS without cause, for disability, or upon Employee's
death or by Employee for Good Reason, then DTS shall with appropriate
notice period specified in 2(b):
(i) pay the Employee's salary through only the remainder, if any, of
the month in which termination is effective and for SIX (6) months
thereafter on the normal Company payroll dates (severance period);
(ii) and pay the Employee's unpaid pro rata share of any Management
Bonus Program and earned sales commissions through the notice period.
These payments shall be made during the normal payment periods for
such compensation.
(b) By DTS for Cause or if Employee voluntarily terminates employment.
If Employee's employment pursuant to this Agreement is
terminated at any time by DTS for cause or if the Employee voluntarily
terminates his employment with DTS, then DTS shall pay him his salary,
pro rata share of any Management Bonus Program and earned sales
commissions through only the date of termination; Employee's accrual
of, or participation in plans providing for, his fringe benefits shall
cease upon termination of employment for any reason, and Employee
shall be entitled to benefits pursuant to such plans only as provided
in such plans. Employee shall also be subject to the noncompetition
provisions of Section 6 for twelve (12) months.
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<PAGE> 5
5. WORKING FACILITIES; EXPENSES.
Employee shall be furnished with working facilities in Norcross,
Georgia and services suitable to his position and adequate for the performance
of his duties. Employee is authorized to incur reasonable expenses in
accordance with DTS's policies and practices guidelines for promoting the
business of DTS, including expenses for entertainment, travel and similar
items. DTS shall reimburse Employee for all such reasonable and approved
expenses upon the submission by Employee, from time to time, of an itemized
account of such expenditures, in accordance with normal Employer's policies and
practices regarding the timeliness of expense reports, standards of
reasonableness and documentation of expenses. All reimbursable expenses due
employee shall be paid by DTS to employee upon termination of employment as
soon as is practicable.
6. NONCOMPETITION AND NONDISCLOSURE
(a) Background. This Agreement is being entered into by the Employee
in consideration of the Employee's employment pursuant to this Agreement. The
Employee expressly acknowledges that he has special knowledge, expertise,
contacts and other information with respect to the Restricted Business (as
defined below), and that DTS would not employ him, or make the expenditures
necessary to enable the Employee to perform the duties incident to his
employment by DTS, without obtaining the agreement of the Employee set forth in
this Section, which the Employee acknowledges and agrees are reasonable
restrictions necessary and appropriate to protect the interests of DTS.
(b) Certain Defined Terms. For purposes of this Agreement, the
following words and phrases shall have the meaning set forth below:
(i) Employer. For purposes of this Section, the term
"Employer" shall mean DTS as defined in the introductory language of
this Agreement and its subsidiaries and affiliates.
(ii) Restricted Business. The phrase "Restricted Business"
shall mean the telecommunications equipment sales and service business
engaged in by DTS.
(iii) Territory. The word "Territory" shall mean any country
in the world that DTS is "actively" marketing its products with sales
representatives whether direct or indirect, with sales or proposals of
sales in the last 12 months defining "activity," and with the United
States being partitioned into states wherever DTS customers are doing
business. The Employee acknowledges that as Vice President,
International Sales, he will work with DTS's operations throughout
such territory and that DTS must protect itself on such basis. The
Employee recognizes and
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<PAGE> 6
acknowledges that DTS, either directly or through its subsidiaries or
affiliates, is engaged in the Restricted Business throughout the
Territory and that it is reasonable and necessary for DTS to protect
its interest on such basis.
The Employee acknowledges that from time to time the Employee and DTS
may agree to change the definition of Restricted Business or Territory, but any
such changes shall be binding upon the Employee only if set forth in a written
instrument signed by the Employee.
(iv) Restricted Customer. For purposes of this Section, the
term "Restricted Customer" means (I) any actual customer to
whom goods or services were provided during the 12 month
period prior to the termination of employment pursuant to this
Agreement and (II) any potential customer whom DTS solicited
(or actively considered soliciting or had made plans to
solicit) during the 12 month period prior to the termination
of employment pursuant to this Agreement.
(c) Non-competition. The Employee hereby agrees that he will not (i)
during the period of his employment with DTS and, (ii) if this Agreement is
terminated (aa) by the Employee other than for Good Reason, or (bb) by DTS for
cause, for a period of one year from notice of termination: (I) have any
ownership interest (whether as proprietor, partner, stockholder or otherwise)
in or, (II) be an officer, director or general or managing partner of, or hold
a similar position in, or (III) act as agent, broker or distributor for, or
advisor or consultant to, or (IV) be employed in any business (without regard
to the form in which conducted) which is engaged, or which he/she reasonably
knows is undertaking to become engaged, in the Territory in the Restricted
Business. The ownership by the Employee of less than five percent (5%) of the
shares of capital stock of a publicly held corporation shall in no event be
deemed a violation of the foregoing.
(d) No Interference with Restricted Customers. The Employee hereby
agrees that during the period of his employment by DTS his primary business
activity shall be as an employee of DTS, and without limiting the foregoing, he
shall solicit customers during such period only for products and services of
DTS. The Employee hereby agrees that, should this Agreement be terminated (a)
by the Employee for other than Good Reason, or (b) by DTS for cause, for a
period of one year following his notice of termination of employment with DTS
and in the Territory, he will not, in any way directly or indirectly: (I)
solicit, divert or take away or accept, or attempt to solicit, divert, take
away or accept, from DTS the business of any Restricted Customer for any
product or service of DTS sold (or offered for sale or planned or proposed to
be offered for sale) to such Restricted Customer during the 12 month period
prior to the date of termination; or (II) attempt or seek to cause any
Restricted Customer to refrain, in any respect, from acquiring from or through
DTS any product or service of DTS sold (or offered for sale
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<PAGE> 7
or planned or proposed to be offered for sale) to such Restricted Customer
during the 12 month period prior to the date of termination. The Employee
agrees that telephonic or written communication by him to any of the Restricted
Customers shall constitute an activity prohibited by the foregoing.
(e) No Interference with Employees. The Employee agrees that during
his employment pursuant to this Agreement and for a period of one year
following the end of employment hereunder the Employee will not in any way,
directly or indirectly, request or induce any other employee of DTS to
terminate his employment with DTS.
(f) No Interference with Customers under contract or undergoing
contract negotiations with DTS. The Employee agrees that for a period of one
year following the end of employment hereunder, the Employee will not in any
way, directly or indirectly, interfere with the relationship of DTS and a
customer under contract to purchase equipment and/or services from DTS, or with
contract negotiations between DTS and a prospective Customer to purchase
equipment and/or services from DTS ongoing at the time of employment
termination.
(g) Independent. The agreements set forth in the foregoing Subsections
(a), (b), (c), (d), (e) and (f) (or any part of them) are, shall be deemed and
shall be construed as separate and independent agreements. If any such
agreement or any part of such agreement is held invalid, void or unenforceable
by any court of competent jurisdiction, such invalidity, voidness or
unenforceability shall in no way render invalid, void or unenforceable any
other part or provision thereof or any separate agreement not declared invalid,
void or unenforceable; and this Agreement shall in that case be construed as if
the void, invalid or unenforceable provisions were omitted.
7. Miscellaneous.
(a) Notices. Each notice under this Agreement shall be in writing and
given either in person or by telecopier, a nationally recognized next business
day delivery service or first class mail, postage and any other costs prepaid,
to the address of the party being given notice set forth below his or its
signature or to such other address as a party may furnish to the other as
provided in this sentence; and if notice is given pursuant to the foregoing of
a permitted successor or assign, then notice shall thereafter be given pursuant
to the foregoing to such permitted successor or assign.
(b) Assignment; Binding Nature. No assignment, transfer or
delegation, whether by merger or other operation of law or otherwise, of any
rights or obligations under this Agreement by a party shall be made without the
prior written consent of the other party (which shall not be unreasonably
withheld) (but given the personal nature of the services to be provided by
Employee to DTS pursuant to this Agreement, it is not expected that consent to
assignment, transfer or delegation by Employee will be granted); and no
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<PAGE> 8
transfer, whether by merger or other operation of law or otherwise, by DTS of
all or a substantial part of its business shall be made unless DTS's
obligations under this Agreement are assumed in connection with such transfer,
either by merger or other operation of law or by specific assumption executed
by the transferee. This Agreement is binding upon the parties and their
respective legal representatives, heirs, devisees, legatees or other successors
and assigns and inures to the benefit of the parties and their respective
permitted legal representatives, heirs, devisees, legatees or other permitted
successors and assigns.
(c) Rules of Construction & Certain Definitions. Whenever the context
so requires, the singular includes the plural, the plural includes the
singular, and the gender of any pronoun includes the other genders. Titles and
captions of or in this Agreement are inserted only as a matter of this
Agreement or the intent of its provisions. The parties agree (i) that
"applicable law" means each provision of any constitution, statute, law, rule,
regulation, decision, order, decree, judgment, release, license, permit,
stipulation or other official pronouncement enacted, promulgated or issued by
any governmental authority or arbitrator or arbitration panel; (ii) that
"governmental authority" means any legislative, executive, judicial,
quasi-judicial or other public authority, agency, department, bureau, division,
unit, court or other public body, person or entity; (iii) that "including" and
other words or phrases of inclusion, if any, shall not be construed as terms of
limitation, so that references to "included" matters shall be regarded as non-
exclusive, non-characterizing illustrations; (iv) that "party," "parties,"
"parties to this Agreement" and variations of such means each or all, as
appropriate, of the persons who have executed and delivered this Agreement,
each permitted successor or assign of such a party, and when appropriate to
effect the binding nature of this Agreement for the benefit of another party,
any other successor or assign of such a party; and (v) that "this Agreement"
includes any amendments or other modifications and supplements, and all
exhibits, schedules and other attachments, to it.
(d) Severability. Any determination by any court of competent
jurisdiction of the invalidity of any provision of this Agreement that is not
essential to accomplishing the purposes of this Agreement shall not affect the
validity of any other provision of this Agreement, which shall remain in full
force and effect and which shall be construed as to be valid under applicable
law.
(e) Remedies. The remedies of a party provided in this Agreement are
cumulative and do not exclude any other remedies to which any party may be
lawfully entitled, under this Agreement or applicable law, and the exercise of
a remedy is not an election excluding any other remedy (any such claim by the
other party being hereby waived).
(f) Indemnification. DTS shall indemnify Employee against judgments,
fines, amounts paid in settlement and reasonable expenses, including attorneys'
fees actually
-8-
<PAGE> 9
and necessarily incurred, in any action or proceeding to which Employee is made
a party by reason of the fact that he is or was an officer or director of DTS,
to the fullest extent permitted by applicable law, the By-laws of DTS and the
Articles of Incorporation of DTS.
(g) Integration; Amendment; Waiver. This Amendment constitutes the
entire agreement of the parties to its with respect to its subject matter,
supersedes all prior agreements, if any, of the parties with respect to its
subject matter, and may not be amended except in writing signed by the party
against whom the change is being asserted. The failure of any party at any
time or times to require the performance of any provisions of this Agreement
shall in no manner affect the right to enforce the same and no waiver by any
party of any provision (or of a breach of any provision) of this Agreement,
whether by conduct or otherwise, in any one or more instances, shall be deemed
or construed either as a further or continuing waiver of any such provision or
breach or as a waiver of any other provision (or of a breach of any other
provision) of this Agreement.
(h) Controlling Law. This Agreement is governed by, and shall be
construed and enforced in accordance with the internal laws of the State of
Georgia.
(i) Copies and Counterparts. This Agreement may be executed in two or
more copies, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement or its terms to produce or account
for more than one of such copies. This Agreement may be executed by each party
upon a separate copy, and in such case one counterpart of this Agreement
consists of enough of such copies to reflect the signature of all of the
parties. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, and it is not necessary in making proof of
this Agreement or its terms to produce or account for more than one of such
counterparts.
-9-
<PAGE> 10
DULY EXECUTED and delivered by the parties, under seal, effective as
of March 5, 1996.
Employee: (L.S.)
--------------------------------
Marlin H. Nelson
DTS: DIGITAL TRANSMISSION SYSTEMS, INC.
Corporate Seal
----------------------------------------
Andres C. Salazar, President & CEO
Attest:
- - --------------------------------------
Dan Seitam, Corporate Secretary
-10-
<PAGE> 1
EXHIBIT 10.4
DTS/EMPLOYEE
EMPLOYMENT AGREEMENT
THIS IS AN EMPLOYMENT AGREEMENT ("this Agreement") by and between
Digital Transmission Systems, Inc., the "Company," a Delaware corporation
("DTS"), and Bobby G. Boykin ("Employee"), and dated as of March 5, 1996 (the
"Effective Date"), and by which DTS and Employee, in consideration of the
mutual promises set forth below and other good and valuable consideration (the
mutuality, adequacy, sufficiency and receipt of which are hereby acknowledged),
hereby agree as follows:
1. EMPLOYMENT. DTS hereby employs Employee as Vice President, U.S.
Sales and Employee agrees to perform the duties of such position as requested
by the employee's supervisor, Andres C. Salazar, DTS President and CEO, to
devote his entire time and business efforts to DTS's business, to perform his
duties to the best of his ability, to promote the success of DTS's business,
and to comply with all of DTS's policies and procedures, all pursuant to the
terms of this Agreement. Employee shall not, during his employment pursuant to
this Agreement, engage in any other business activity or occupation for gain,
profit, or other pecuniary advantage without the prior consent of the Board of
Directors of DTS; provided, however, that such prohibition shall not prohibit
Employee from investing or trading for his own benefit in stocks, bonds,
securities or other forms of investment.
2. TERM. The term of employment under this Agreement shall be from
March 5, 1996 through March 5, 1998 and for successive one-year periods
thereafter, with either party required to provide written notice of nonrenewal
at least ninety (90) days prior to the end of the applicable period, unless
sooner terminated as follows:
(a) Termination by Employee:
(I) Employee may terminate his employment pursuant to this Agreement
at any time upon ninety (90) days' prior notice to DTS, provided that the
provisions of Section 4(b) shall apply; or (ii) Employee may terminate his
employment pursuant to this Agreement for "Good Reason" (as defined below) upon
ninety (90) days' prior notice to DTS, provided that the provisions of Sections
4(a) shall apply. For purposes of this Agreement, for Good Reason shall mean
any of the following: (i) the assignment of the Employee has changed without
his written consent to any position of materially lesser status with fewer
duties or responsibilities than the assignment held at the effective date of
this Agreement; or (ii) the assignment of the Employee has materially changed
without his written consent to any position with greater range of
responsibilities and duties than those held at the effective date of this
Agreement, unless such assignment is accompanied by a commensurate increase in
compensation agreed to in writing by
<PAGE> 2
the Employee.
(b) Termination by Company:
DTS may terminate Employee's employment pursuant to this Agreement
either (i) upon ninety (90) days' prior notice to Employee for any reason (or
for no reason), i.e. "without cause," (ii) or upon total disability of
Employee, "total disability" meaning for purposes of this Agreement, the
inability of Employee to perform assigned duties for ninety (90) consecutive
days or for thirty (30) days in any three (3)-month period, (iii) or upon death
of Employee, (iv) or upon notice at any time "for cause." For purposes of this
Agreement: "for cause" means any reason materially and adversely affecting DTS
or any reason for which, under the circumstances, it would be unreasonable to
expect DTS to continue to employ the Employee, such as the conviction of any
felony or crime of moral turpitude, the commission or attempted commission of
any act of willful misconduct or dishonesty, malfeasance, gross negligence, or
the material breach of any provision of this Agreement or the general policies
as listed in the Policy Manual of DTS, as amended from time to time. The
provisions of Section 4(a) or 4(b), as applicable, shall apply.
3. COMPENSATION.
(a) General:
For all the services rendered to DTS by Employee in
any capacity pursuant to this Agreement: (i) DTS shall pay to
Employee a base salary at the rate of $9,000 per month,
payable in accordance with DTS's payroll practices during
Employee's employment pursuant to this Agreement. DTS shall
review Employee's base salary annually to determine whether
any increase is appropriate, (ii) Employee shall be entitled
to participate in any annual Management Bonus or supplementary
compensation program available to other senior managers in DTS
as approved by the Board of Directors, (iii) Employee shall be
entitled to participate with other employees of DTS in any
employee benefit plans (including retirement or pension plans)
as may be maintained from time to time by DTS in accordance
with their terms, (iv) shall be entitled to twenty (20) days
of vacation with pay (or such greater length of time as may be
approved from time to time by the Board of Directors of DTS)
during each fiscal year during the term of this Agreement
(such vacation to be taken by Employee at such time
or times as shall be approved by his supervisor at DTS), and
shall be entitled to holidays, sick and other leave days in
accordance with DTS's standard policy for employees.
Employee agrees that the compensation and fringe benefits
provided to him under this Agreement
-2-
<PAGE> 3
shall be the only compensation to which Employee shall be entitled for
his services as an employee of DTS, except for any special bonuses
approved by the Board of Directors and sales commission plans; (v)
Employee shall be entitled to a car allowance in the amount of $400
monthly and shall not otherwise be entitled to any other reimbursement
for personal car use.
(b) Stock Options. At the discretion of the DTS Board of Directors,
the Employee may be granted stock options in accordance with an approved Stock
Option Plan. Conditions for the vesting of those options will be stipulated in
that Plan or modified in the Stock Option Agreement. However, if Employee (i)
is terminated by the Company for other than cause the Employee's options will
continue to vest through the notice and any severance period, or (ii)
terminates his employment for Good Reason, the Employee's options will continue
to vest as though he were terminated for other than cause. However, if Employee
(i) is terminated by the Company for other than cause, or (ii) terminates his
employment for "Good Reason," in either case, during the 365 days following a
"Change in Control," all of the Employee's options will become fully vested. If
a Change in Control occurs and the Employee's employment with the Company is
terminated by the Company without cause prior to the date on which the Change
in Control occurs, and if it is reasonably demonstrated by the Employee that
such termination of employment (a) was at the request of a third party who has
taken steps reasonably calculated to effect a Change of Control or (b)
otherwise arose in connection with or anticipation of the Change of Control,
then for purposes of this section the termination will have deemed to have
taken place within the 365 day period following the Change of Control. A Change
in Control shall mean:
(i) Approval by the shareholders of the Company of a reorganization,
merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation more than 50% of the then
outstanding common stock of the corporation resulting from such
reorganization, merger or consolidation and the combined voting power
of the then outstanding voting securities of such corporation entitled
to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners of the
outstanding Company common stock immediately such reorganization,
merger or consolidation.
(ii) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended ("the Exchange Act") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 50% or more of either the then outstanding shares of common stock
of the Company or the combined voting power of the then outstanding
securities of the Company then entitled to vote generally in the
election of directors; provided, however, that any acquisition by or
-3-
<PAGE> 4
from the Company shall not constitute a Change in Control.
(iii) Approval by the shareholders of the Company of (aa) a complete
liquidation of the Company or (bb) the sale or other disposition of
all or substantially all of the assets of the Company, other than to a
corporation, with respect to which following such sale or other
disposition, more than 50% of the then outstanding shares of common
stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
or entities who were the beneficial owners of the Company's
outstanding common stock immediately prior to such sale or other
disposition.
4. TERMINATION PAYMENTS.
(a) By DTS without Cause, for disability or upon death or by
Employee for Good Reason:
If Employee's employment pursuant to this Agreement is
terminated by DTS without cause, for disability, or upon Employee's
death or by Employee for Good Reason, then DTS shall with appropriate
notice period specified in 2(b):
(i) pay the Employee's salary through only the remainder, if any, of
the month in which termination is effective and for SIX (6) months
thereafter on the normal Company payroll dates (severance period);
(ii) and pay the Employee's unpaid pro rata share of any Management
Bonus Program and earned sales commissions through the notice period.
These payments shall be made during the normal payment periods for
such compensation.
(b) By DTS for Cause or if Employee voluntarily terminates employment.
If Employee's employment pursuant to this Agreement is
terminated at any time by DTS for cause or if the Employee voluntarily
terminates his employment with DTS, then DTS shall pay him his salary,
pro rata share of any Management Bonus Program and earned sales
commissions through only the date of termination; Employee's accrual
of, or participation in plans providing for, his fringe benefits shall
cease upon termination of employment for any reason, and Employee
shall be entitled to benefits pursuant to such plans only as provided
in such plans. Employee shall also be subject to the noncompetition
provisions of Section 6 for twelve (12) months.
5. WORKING FACILITIES; EXPENSES.
-4-
<PAGE> 5
Employee shall be furnished with working facilities in Norcross,
Georgia and services suitable to his position and adequate for the performance
of his duties. Employee is authorized to incur reasonable expenses in
accordance with DTS's policies and practices guidelines for promoting the
business of DTS, including expenses for entertainment, travel and similar
items. DTS shall reimburse Employee for all such reasonable and approved
expenses upon the submission by Employee, from time to time, of an itemized
account of such expenditures, in accordance with normal Employer's policies and
practices regarding the timeliness of expense reports, standards of
reasonableness and documentation of expenses. All reimbursable expenses due
employee shall be paid by DTS to employee upon termination of employment as
soon as is practicable.
6. NONCOMPETITION AND NONDISCLOSURE
(a) Background. This Agreement is being entered into by the Employee
in consideration of the Employee's employment pursuant to this Agreement. The
Employee expressly acknowledges that he has special knowledge, expertise,
contacts and other information with respect to the Restricted Business (as
defined below), and that DTS would not employ him, or make the expenditures
necessary to enable the Employee to perform the duties incident to his
employment by DTS, without obtaining the agreement of the Employee set forth in
this Section, which the Employee acknowledges and agrees are reasonable
restrictions necessary and appropriate to protect the interests of DTS.
(b) Certain Defined Terms. For purposes of this Agreement, the
following words and phrases shall have the meaning set forth below:
(i) Employer. For purposes of this Section, the term
"Employer" shall mean DTS as defined in the introductory language of
this Agreement and its subsidiaries and affiliates.
(ii) Restricted Business. The phrase "Restricted Business"
shall mean the telecommunications equipment sales and service business
engaged in by DTS.
(iii) Territory. The word "Territory" shall mean any country
in the world that DTS is "actively" marketing its products with sales
representatives whether direct or indirect, with sales or proposals of
sales in the last 12 months defining "activity," and with the United
States being partitioned into states wherever DTS customers are doing
business. The Employee acknowledges that as Vice President, U.S.
Sales, he will work with DTS's operations throughout such territory
and that DTS must protect itself on such basis. The Employee
recognizes and acknowledges that DTS, either directly or through its
subsidiaries or affiliates, is engaged in the Restricted Business
throughout the Territory and that it is
-5-
<PAGE> 6
reasonable and necessary for DTS to protect its interest on such
basis.
The Employee acknowledges that from time to time the Employee and DTS
may agree to change the definition of Restricted Business or Territory, but any
such changes shall be binding upon the Employee only if set forth in a written
instrument signed by the Employee.
(iv) Restricted Customer. For purposes of this Section, the
term "Restricted Customer" means (I) any actual customer to
whom goods or services were provided during the 12 month
period prior to the termination of employment pursuant to this
Agreement and (II) any potential customer whom DTS solicited
(or actively considered soliciting or had made plans to
solicit) during the 12 month period prior to the termination
of employment pursuant to this Agreement.
(c) Non-competition. The Employee hereby agrees that he will not (i)
during the period of his employment with DTS and, (ii) if this Agreement is
terminated (aa) by the Employee other than for Good Reason, or (bb) by DTS for
cause, for a period of one year from notice of termination: (I) have any
ownership interest (whether as proprietor, partner, stockholder or otherwise)
in or, (II) be an officer, director or general or managing partner of, or hold
a similar position in, or (III) act as agent, broker or distributor for, or
advisor or consultant to, or (IV) be employed in any business (without regard
to the form in which conducted) which is engaged, or which he/she reasonably
knows is undertaking to become engaged, in the Territory in the Restricted
Business. The ownership by the Employee of less than five percent (5%) of the
shares of capital stock of a publicly held corporation shall in no event be
deemed a violation of the foregoing.
(d) No Interference with Restricted Customers. The Employee hereby
agrees that during the period of his employment by DTS his primary business
activity shall be as an employee of DTS, and without limiting the foregoing, he
shall solicit customers during such period only for products and services of
DTS. The Employee hereby agrees that, should this Agreement be terminated (a)
by the Employee for other than Good Reason, or (b) by DTS for cause, for a
period of one year following his notice of termination of employment with DTS
and in the Territory, he will not, in any way directly or indirectly: (I)
solicit, divert or take away or accept, or attempt to solicit, divert, take
away or accept, from DTS the business of any Restricted Customer for any
product or service of DTS sold (or offered for sale or planned or proposed to
be offered for sale) to such Restricted Customer during the 12 month period
prior to the date of termination; or (II) attempt or seek to cause any
Restricted Customer to refrain, in any respect, from acquiring from or through
DTS any product or service of DTS sold (or offered for sale or planned or
proposed to be offered for sale) to such Restricted Customer during the 12
month period prior to the date of termination. The Employee agrees that
telephonic
-6-
<PAGE> 7
or written communication by him to any of the Restricted Customers shall
constitute an activity prohibited by the foregoing.
(e) No Interference with Employees. The Employee agrees that during
his employment pursuant to this Agreement and for a period of one year
following the end of employment hereunder the Employee will not in any way,
directly or indirectly, request or induce any other employee of DTS to
terminate his employment with DTS.
(f) No Interference with Customers under contract or undergoing
contract negotiations with DTS. The Employee agrees that for a period of one
year following the end of employment hereunder, the Employee will not in any
way, directly or indirectly, interfere with the relationship of DTS and a
customer under contract to purchase equipment and/or services from DTS, or with
contract negotiations between DTS and a prospective Customer to purchase
equipment and/or services from DTS ongoing at the time of employment
termination.
(g) Independent. The agreements set forth in the foregoing Subsections
(a), (b), (c), (d), (e) and (f) (or any part of them) are, shall be deemed and
shall be construed as separate and independent agreements. If any such
agreement or any part of such agreement is held invalid, void or unenforceable
by any court of competent jurisdiction, such invalidity, voidness or
unenforceability shall in no way render invalid, void or unenforceable any
other part or provision thereof or any separate agreement not declared invalid,
void or unenforceable; and this Agreement shall in that case be construed as if
the void, invalid or unenforceable provisions were omitted.
7. Miscellaneous.
(a) Notices. Each notice under this Agreement shall be in writing and
given either in person or by telecopier, a nationally recognized next business
day delivery service or first class mail, postage and any other costs prepaid,
to the address of the party being given notice set forth below his or its
signature or to such other address as a party may furnish to the other as
provided in this sentence; and if notice is given pursuant to the foregoing of
a permitted successor or assign, then notice shall thereafter be given pursuant
to the foregoing to such permitted successor or assign.
(b) Assignment; Binding Nature. No assignment, transfer or
delegation, whether by merger or other operation of law or otherwise, of any
rights or obligations under this Agreement by a party shall be made without the
prior written consent of the other party (which shall not be unreasonably
withheld) (but given the personal nature of the services to be provided by
Employee to DTS pursuant to this Agreement, it is not expected that consent to
assignment, transfer or delegation by Employee will be granted); and no
transfer, whether by merger or other operation of law or otherwise, by DTS of
all or a substantial part of its business shall be made unless DTS's
obligations under this
-7-
<PAGE> 8
Agreement are assumed in connection with such transfer, either by merger or
other operation of law or by specific assumption executed by the transferee.
This Agreement is binding upon the parties and their respective legal
representatives, heirs, devisees, legatees or other successors and assigns and
inures to the benefit of the parties and their respective permitted legal
representatives, heirs, devisees, legatees or other permitted successors and
assigns.
(c) Rules of Construction & Certain Definitions. Whenever the context
so requires, the singular includes the plural, the plural includes the
singular, and the gender of any pronoun includes the other genders. Titles and
captions of or in this Agreement are inserted only as a matter of this
Agreement or the intent of its provisions. The parties agree (i) that
"applicable law" means each provision of any constitution, statute, law, rule,
regulation, decision, order, decree, judgment, release, license, permit,
stipulation or other official pronouncement enacted, promulgated or issued by
any governmental authority or arbitrator or arbitration panel; (ii) that
"governmental authority" means any legislative, executive, judicial,
quasi-judicial or other public authority, agency, department, bureau, division,
unit, court or other public body, person or entity; (iii) that "including" and
other words or phrases of inclusion, if any, shall not be construed as terms of
limitation, so that references to "included" matters shall be regarded as non-
exclusive, non-characterizing illustrations; (iv) that "party," "parties,"
"parties to this Agreement" and variations of such means each or all, as
appropriate, of the persons who have executed and delivered this Agreement,
each permitted successor or assign of such a party, and when appropriate to
effect the binding nature of this Agreement for the benefit of another party,
any other successor or assign of such a party; and (v) that "this Agreement"
includes any amendments or other modifications and supplements, and all
exhibits, schedules and other attachments, to it.
(d) Severability. Any determination by any court of competent
jurisdiction of the invalidity of any provision of this Agreement that is not
essential to accomplishing the purposes of this Agreement shall not affect the
validity of any other provision of this Agreement, which shall remain in full
force and effect and which shall be construed as to be valid under applicable
law.
(e) Remedies. The remedies of a party provided in this Agreement are
cumulative and do not exclude any other remedies to which any party may be
lawfully entitled, under this Agreement or applicable law, and the exercise of
a remedy is not an election excluding any other remedy (any such claim by the
other party being hereby waived).
(f) Indemnification. DTS shall indemnify Employee against judgments,
fines, amounts paid in settlement and reasonable expenses, including attorneys'
fees actually and necessarily incurred, in any action or proceeding to which
Employee is made a party by reason of the fact that he is or was an officer or
director of DTS, to the fullest extent
-8-
<PAGE> 9
permitted by applicable law, the By-laws of DTS and the Articles of
Incorporation of DTS.
(g) Integration; Amendment; Waiver. This Amendment constitutes the
entire agreement of the parties to its with respect to its subject matter,
supersedes all prior agreements, if any, of the parties with respect to its
subject matter, and may not be amended except in writing signed by the party
against whom the change is being asserted. The failure of any party at any
time or times to require the performance of any provisions of this Agreement
shall in no manner affect the right to enforce the same and no waiver by any
party of any provision (or of a breach of any provision) of this Agreement,
whether by conduct or otherwise, in any one or more instances, shall be deemed
or construed either as a further or continuing waiver of any such provision or
breach or as a waiver of any other provision (or of a breach of any other
provision) of this Agreement.
(h) Controlling Law. This Agreement is governed by, and shall be
construed and enforced in accordance with the internal laws of the State of
Georgia.
(i) Copies and Counterparts. This Agreement may be executed in two or
more copies, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement or its terms to produce or account
for more than one of such copies. This Agreement may be executed by each party
upon a separate copy, and in such case one counterpart of this Agreement
consists of enough of such copies to reflect the signature of all of the
parties. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, and it is not necessary in making proof of
this Agreement or its terms to produce or account for more than one of such
counterparts.
-9-
<PAGE> 10
DULY EXECUTED and delivered by the parties, under seal, effective as of
March 5, 1996.
Employee: (L.S.)
--------------------------------
Bobby G. Boykin
DTS: DIGITAL TRANSMISSION SYSTEMS, INC.
Corporate Seal
---------------------------------------
Andres C. Salazar, President & CEO
Attest:
- - -------------------------------------
Dan Seitam, Corporate Secretary
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FORM BALANCE
SHEETS AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FORM 10-QSB.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,254
<SECURITIES> 3,000
<RECEIVABLES> 2,498
<ALLOWANCES> 0
<INVENTORY> 1,745
<CURRENT-ASSETS> 10,935
<PP&E> 1,094
<DEPRECIATION> 827
<TOTAL-ASSETS> 11,456
<CURRENT-LIABILITIES> 2,628
<BONDS> 0
0
0
<COMMON> 38
<OTHER-SE> 8,790
<TOTAL-LIABILITY-AND-EQUITY> 11,456
<SALES> 7,851
<TOTAL-REVENUES> 7,851
<CGS> 4,467
<TOTAL-COSTS> 4,603
<OTHER-EXPENSES> (60)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55
<INCOME-PRETAX> (1,214)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,214)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,214)
<EPS-PRIMARY> (.44)
<EPS-DILUTED> (.44)
</TABLE>
