UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported) October 28, 1999
BASE TEN SYSTEMS, INC.
------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 0-7100 22-1804206
---------------- ---------------------- --------------------------------
(State or other (Commission File Number) (IRS Employer Identification
jurisdiction of Number
incorporation)
One Electronics Drive, Trenton, New Jersey 08619
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (609) 586-7010
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. Other Events.
Base Ten Systems, Inc. (the "Company") and Stephen A. Cloughley, the
President and Chief Executive Officer of the Company, have entered into an
Employment Agreement, dated as of October 28, 1999 (the "Employment Agreement").
Although the Employment Agreement was executed on April 11, 2000, it is dated as
of October 28, 1999, which is the date upon which Mr. Cloughley succeeded Thomas
E. Gardner as President and Chief Executive Officer of the Company.
A copy of the Employment Agreement is attached hereto as Exhibit
10.hhh. A copy of the Termination Agreement by and between the Company and
Gardner, dated as of October 28, 1999, is attached hereto as Exhibit 10.ggg.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements.
Not Applicable.
(b) Pro Forma Financial Information.
Not Applicable.
(c) Exhibits.
Exhibit No. Title
----------- -----
10.ggg Agreement by and between Base Ten Systems,
Inc. and Thomas E. Gardner, dated as of
October 28, 1999.
10.hhh Agreement by and between Base Ten Systems,
Inc. and Stephen A. Cloughley, dated as of
October 28, 1999.
<PAGE>
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 hereunto duly authorized.
BASE TEN SYSTEMS, INC.
STEPHEN A. CLOUGHLEY
Date: April 12, 2000 By: ______________________________
Stephen A. Cloughley
President and Chief Executive Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Title
----------- -----
10.ggg Agreement by and between Base Ten Systems,
Inc. and Thomas E. Gardner, dated as of
October 28, 1999.
10.hhh Agreement by and between Base Ten Systems,
Inc. and Stephen A. Cloughley, dated as of
October 28, 1999.
AGREEMENT
Agreement, dated as of October 28, 1999, between Base Ten Systems,
Inc., a New Jersey corporation (the "Company"), and Thomas E. Gardner
("Gardner").
In consideration of the mutual promises herein contained, the parties
hereto hereby agree as follows:
1. Resignation. The parties hereto acknowledge that Gardner
has resigned as President and Chief Executive Officer of the Company and as an
officer of the Company and its subsidiaries effective October 28, 1999.
Effective on November 12, 1999 (the "Effective Date"), Gardner hereby resigns as
an employee and as a director of the Company and its subsidiaries.
2. Termination of Agreements; No Further Rights. The parties
hereto agree that the employment agreement, dated as of October 17, 1997 (the
"Employment Agreement"), between the Company and Gardner and the amended and
restated change in control agreement, dated as of October 17, 1997 (the "Change
in Control Agreement"), between the Company and Gardner, and all rights and
obligations of the parties thereunder, are hereby terminated. The parties hereto
agree that, effective as of the Effective Date, Gardner shall not be entitled to
receive any further compensation or benefits from the Company, or rights with
respect to the Common Stock, under the Employment Agreement, the Change in
Control Agreement, any other agreement or otherwise, except as expressly
provided in Sections 3, 4, 5 and 6 of this Agreement.
3. Payments. Simultaneously with the execution of this
Agreement, the Company has paid to Gardner by Company check subject to
collection, and Gardner acknowledges that he has received payment of, the
following amounts:
(a) an amount equal to Gardner's accrued and unpaid base
salary (currently $300,000 per annum) through the Effective Date; and
(b) a single lump sum in the amount of $357,500.
4. Common Stock; Options.
(a) Within five business days after the execution of this
Agreement, the Company shall issue to Gardner 50,000 shares of the Company's
Class A Common Stock, par value $5.00 per share (the "Common Stock").
(b) Gardner shall be entitled to exercise his
Performance-Based Stock Option (as defined below), to the extent that such
option had vested and was exercisable on October 31, 1999 (or becomes vested and
exercisable at any time prior to October 31, 2000), at any time between the time
it becomes exercisable and October 31, 2001. The Performance-Based Stock Option
is the 40,000 rights (each, a "Performance Right"), granted to Gardner under the
Base Ten Systems, Inc. performance-based stock option agreement, dated as of
October 17, 1997 (the "Performance Option Agreement"), between the Company and
Gardner, to subscribe for and purchase one share of the Common Stock at a price
of $55 5/8 per share, which shall vest and become exercisable at the rate of one
Performance Right for each $100 of consolidated earnings (excluding
extraordinary items) before interest, taxes, depreciation and amortization, as
reported in the Company's audited financial statements for the fiscal year
ending December 31, 1999, at the time that such audited financial statements
first become available. Except as otherwise expressly provided in this Section
4(b), the parties hereto agree that the Performance Option Agreement, and all
rights and obligations of the parties thereunder, are hereby terminated.
(c) Gardner shall be entitled to exercise his Service-Based
Stock Option (as defined below), to the extent that such option had vested and
was exercisable as of October 31, 1999, at any time prior to October 31, 2001.
The Service-Based Stock Option is the 50,000 rights (each, a "Service Right"),
granted to Gardner under the Base Ten Systems, Inc. service-based stock option
agreement, dated as of October 17, 1997 (the "Service Option Agreement"),
between the Company and Gardner, to subscribe for and purchase one share of
Common Stock at a price of $55 5/8 per share, of which 26,000 Service Rights had
vested and were exercisable as of October 31, 1999 and 24,000 Service Rights
were unvested as of such date and are hereby canceled. Except as otherwise
expressly provided in this Section 4(c), the parties hereto agree that the
Service Option Agreement, and all rights and obligations of the parties
thereunder, are hereby terminated.
(d) Gardner shall be entitled to exercise his 1998 Plan
Options (as defined below), to the extent that such options had vested and were
exercisable as of October 31, 1999, at any time prior to October 31, 2001. The
1998 Plan options are the (i) 50,000 rights (each, an "April Right"), granted to
Gardner on April 16, 1998 under the Company's 1998 Stock Option and Stock Award
Plan (the "1998 Plan"), to subscribe for and purchase one share of Common Stock
at a price of $25 5/8 per share, of which 25,000 April Rights had vested and
were exercisable as of October 31, 1999 and 25,000 April Rights were unvested as
of such date and are hereby canceled, and (ii) 200,000 rights (each, a
"September Right" and, together with the April Rights, the "1998 Plan Rights"),
granted to Gardner on September 14, 1998 under the 1998 Plan, to subscribe for
and purchase one share of Common Stock at a price of $10 per share, of which
100,000 September Rights had vested and were exercisable as of October 31, 1999
and 100,000 September Rights were unvested as of such date and are hereby
canceled (the Performance Rights, the Service Rights and the 1998 Plan Rights
are hereinafter collectively referred to as the "Rights"). Except as otherwise
expressly provided in this Section 4(d), the parties hereto agree that all
rights and obligations of the parties under the 1998 Plan with respect to the
1998 Plan Rights are hereby terminated.
(e) The parties hereto acknowledge that all share and per
share numbers referenced in this Section 4 give effect to the Company's
one-for-five reverse stock split, which was effected on September 24, 1999.
5. Benefits.
(a) Gardner and Gardner's current dependents shall be entitled
to continued coverage and benefits as provided under any medical, health or
dental plan or arrangement of the Company in which Gardner was participating on
October 31, 1999 for a period of two years after such date, with no reduction in
such coverage or benefits and no increase in cost to Gardner, other than any
such reduction or increase commensurate with a similar reduction or increase for
senior executives of the Company, provided that the Company's obligation to
provide such coverage and benefits shall terminate if Gardner receives any
benefits under the plans of a subsequent employer.
(b) Gardner shall be entitled to receive any capital stock of
the Company and cash amounts that have accrued through the Effective Date in his
accounts maintained under the Company's 401(k) Plan, Employee Stock Purchase
Plan and Discretionary Deferred Compensation Plan. Simultaneously with the
execution of this Agreement, the Company has paid to Gardner, and Gardner
acknowledges that he has received, all amounts that have accrued through the
Effective Date in his account maintained under the Company's Employee Stock
Purchase Plan. The Company represents that there are no accrued amounts in
Gardner's account maintained under the Company's Discretionary Deferred
Compensation Plan.
6. Expenses. The Company shall promptly reimburse Gardner for
his reasonable expenses incurred through the Effective Date in connection with
his duties and responsibilities under the Employment Agreement, subject to
presentation by Gardner of reasonable documentation in accordance with the
Company's policies, up to a maximum of $2,000.
7. Standstill Agreement. During the period from October 31,
1999 through October 31, 2005, Gardner shall not, directly or indirectly, either
acting alone or in concert with any other person, acquire any additional shares
of capital stock of the Company, except for (i) shares of capital stock issued
pursuant to a stock split, stock dividend, rights offering, reorganization,
recapitalization or other like change with respect to the capital stock of the
Company approved by the Company's Board of Directors and (ii) shares of Common
Stock acquired pursuant to Section 4(a) or as a result of Gardner's exercise of
the Rights, as provided in Section 4; provided, however, that the foregoing
limitation shall cease to apply during any period in which the Company or the
USL Group (as defined below), as the case may be, is and remains in material
breach of any of the provisions of this Agreement, the Mutual Release dated the
date hereof between the Company and Gardner or the Mutual Release dated the date
hereof among the USL Group and Gardner. The USL Group shall mean Jesse L.
Upchurch, Trust C of the Constance J. Upchurch Family Trust, World Video
Library, Drew Sycoff, Andrew Garrett, Inc. and Kevin R. Lockhart.
8. Non-Disparagement. At no time shall either party hereto
make any public statement that intentionally disparages or defames the goodwill
or reputation of the other party; provided that it shall not be a violation of
this Section 8 for either party hereto to make truthful statements when required
to do so by law or by a court, governmental agency, administrative body or
legislative body with apparent jurisdiction to require such statements.
9. Withholding. The Company shall withhold all amounts
required by law to be withheld from any payments made pursuant to this
Agreement, including any and all amounts required to be withheld by any
applicable federal, state or foreign country's income tax act, and any
applicable city, county or municipality's earnings or income tax act.
10. Confidential Information; Non-Solicitation.
(a) Gardner acknowledges and agrees that his employment with
the Company pursuant to the Employment Agreement necessarily involved his access
to secrets and confidential information pertaining to the business of the
Company and its subsidiaries. Accordingly, Gardner agrees that at all times he
will not, directly or indirectly, without the express written authority of the
Company, unless directed by applicable legal authority having jurisdiction over
Gardner, knowingly disclose or use for the benefit of any person or himself any
trade secrets and confidential information concerning the Company or any
subsidiary of the Company, including, without limitation, any information
concerning the past, present or prospective clients, creditors, customers,
operations, systems, software or methods (collectively, the "Confidential
Information"). Notwithstanding the foregoing, the term Confidential Information
shall not include any information which is or becomes in the public domain
without breach by Gardner of this Section 10.
(b) Gardner agrees that he will return to the Company on the
Effective Date all Confidential Information then in Gardner's possession, except
such as relates to him personally.
(c) Gardner agrees that, for a period of one year following
the Effective Date, he will not, directly or indirectly (whether for his own
behalf or on behalf of any other person), hire, without the prior written
consent of the Company (such consent not to be unreasonably withheld), or seek
to hire, any individual who was on October 28, 1999 an employee of the Company,
nor will he, during such one-year period, directly or indirectly, induce any
employee of the Company to leave the Company's employ.
(d) If any restriction set forth in Section 10 is found by any
court of competent jurisdiction to be unenforceable because it extends for too
long a period of time or over too great a range of activities, it shall be
interpreted to extend over the maximum period of time or range of activities as
to which it may be enforceable. If any provision of Section 10 shall be declared
to be invalid or unenforceable, in whole or in part, as a result of the
foregoing, as a result of public policy or for any other reason, such invalidity
shall not affect the remaining provisions of Section 10, which shall remain in
full force and effect.
(e) Gardner acknowledges that the restrictions contained in
this Section 10 are fair, reasonable and necessary for the protection of the
legitimate business interests of the Company and that the Company will suffer
irreparable harm in the event of any actual or threatened breach of this Section
10 by Gardner. Accordingly, Gardner hereby consents to the entry of a
restraining order, injunction or other court order to enforce the provisions of
this Section 10 and expressly waives any security that might otherwise be
required in connection with such relief. Gardner also agrees that any request
for such relief by the Company shall be in addition and without prejudice to any
claim for monetary damages that the Company might elect to assert.
11. Indemnification.
(a) The Company agrees that (i) if Gardner is made a party, or
is threatened to be made a party, to any "proceeding" by reason of the fact that
he was a director, officer, employee, agent, manager, consultant or
representative of the Company or was serving at the request of the Company as a
director, officer, member, employee, agent, manager, consultant or
representative of another person, or (ii) if any "claim" is made, or is
threatened to be made, that arises out of or relates to Gardner's service in any
of the foregoing capacities, then Gardner shall be indemnified by the Company to
the fullest extent permitted or authorized by the Company's certificate of
incorporation, bylaws, Board resolutions or, if greater, by the laws of the
State of New Jersey against any and all costs, expenses, liabilities and losses
(including, without limitation, attorneys' fees, judgments, interest, expenses
of investigation, fines, ERISA excise taxes or penalties and amounts paid or to
be paid in settlement) incurred or suffered by Gardner in connection therewith,
and such indemnification shall inure to the benefit of Gardner' successors and
assigns. The Company shall advance to Gardner all costs and expenses incurred by
him in connection with any such proceeding or claim within 30 days of receiving
written notice requesting such an advance, provided that such notice includes,
to the extent and in form and substance required by applicable law, an
undertaking by Gardner to repay the amount of such advance if he is ultimately
determined not to be entitled to indemnification against such costs or expenses.
(b) Neither the failure of the Company (including its Board of
Directors, independent legal counsel or stockholders) to have made a
determination in connection with any request for payment or advancement under
Section 11(a) that Gardner has satisfied any applicable standard of conduct, nor
a determination by the Company (including its Board of Directors, independent
legal counsel or stockholders) that Gardner has not met any applicable standard
of conduct, shall create a presumption that Gardner has not met an applicable
standard of conduct.
(c) The Company shall, during the period from October 31, 1999
through October 31, 2005, keep in place a directors' and officers' liability
insurance policy (or policies) covering Gardner to the extent that the Company
provides such coverage for its senior executives.
(d) Gardner agrees that if any claim is made, or is threatened
to be made, by Gardner's former spouse against the Company that arises out of or
relates to Gardner's employment relationship with the Company or the termination
thereof under this Agreement, then the Company shall be indemnified by Gardner
against any and all costs, expenses, liabilities and losses (including, without
limitation, attorneys' fees, judgments, interest, expenses of investigation,
fines and amounts paid or to be paid in settlement) incurred or suffered by the
Company in connection therewith.
(e) The Company agrees that if any claim is made, or is
threatened to be made, by the USL Group against Gardner that arises out of or
relates to Gardner's employment relationship with the Company, then Gardner
shall be indemnified by the Company against any and all costs, expenses,
liabilities and losses (including, without limitation, attorneys' fees,
judgments, interest, expenses of investigation, fines and amounts paid or to be
paid in settlement) incurred or suffered by Gardner in connection therewith.
(f) Except as otherwise provided in Section 11(d), in no event
shall any party hereto be required to indemnify the other party with respect to
any proceeding or claim arising out of this Agreement. If either party hereto
brings a lawsuit against the other party hereto with respect to any claim under
this Agreement, the losing party in any such lawsuit shall pay the reasonable
attorneys' fees of the prevailing party promptly after the rendering of a final,
non-appealable judgment in such lawsuit.
(g) As used in this Agreement, "person" shall mean any
individual, corporation, partnership, joint venture, trust, estate, board,
committee, agency, body or other person or entity; "proceeding" shall mean any
threatened or actual action, suit or other proceeding, whether civil, criminal,
administrative, investigative, appellate or other; and "claim" shall mean any
claim, demand, request, investigation, dispute, controversy, threat, discovery,
request or request for testimony or information.
12. Cooperation. Gardner agrees to: (i) provide information to
the Company, upon reasonable notice and in a manner which does not interfere
with any other time commitment of Gardner, with regard to matters in which
Gardner was involved while employed by the Company; provided, however, that the
foregoing obligation shall not require Gardner to prepare any documentation or
expend any significant amounts of time; and (ii) cooperate with the Company in
(A) the Company's defense against any threatened or pending proceeding or claim
by any governmental or regulatory authority and (B) any proceeding or claim
brought or asserted by the Company, in each case relating to any events or
actions which occurred when Gardner was employed by the Company. Gardner shall
receive no additional compensation for such information or cooperation.
13. Representations and Warranties.
(a) The Common Stock issued to Gardner pursuant to Section
4(a) is being acquired by Gardner solely for his own account for investment
purposes only and not with a view to or in connection with any resale or
distribution thereof. Gardner can bear the economic risk (including the complete
loss) of his investment in such Common Stock and has such knowledge and
experience in financial or business matters that he is capable of evaluating the
merits and risks of such investment. Gardner is an "accredited investor" within
the meaning of Rule 501 of Regulation D promulgated under the Securities Act of
1933, as amended (the "Securities Act").
(b) Gardner understands that the Common Stock acquired
pursuant to Section 4(a) is characterized as "restricted securities" under the
federal securities laws inasmuch as it is being acquired from the Company in a
transaction not involving a public offering, and that under such laws and
applicable regulations such Common Stock may be resold without registration
under the Securities Act only in certain limited circumstances. In this
connection, Gardner represents that he is familiar with Rule 144 under the
Securities Act, as presently in effect, and understands the resale limitations
imposed thereby and by the Securities Act.
14. Notices. Any notice, consent, demand, request or other
communication given by Gardner or the Company in connection with this Agreement
shall be in writing and shall be deemed to have been given (i) when delivered
personally to the party specified or (ii) three days after mailing by certified
or registered mail, return receipt requested, or (iii) provided that a written
acknowledgment of receipt is obtained, upon delivery by a nationally recognized
overnight courier, to the address set forth below for the party specified (or to
such other address for such party as shall be specified by ten days' advance
notice given pursuant to this Section 14).
(a) If to the Company:
Base Ten Systems, Inc.
One Electronics Drive
Trenton, New Jersey 08619
Attention: Board of Directors
(b) If to Gardner:
Thomas E. Gardner
43 Constitution Hill West
Princeton, New Jersey 08540
15. Assignment/Binding Effect. This Agreement shall be binding
upon and inure to the benefit of Gardner, the Company and their respective
successors and assigns. No rights or obligations of the Company under this
Agreement may be assigned or transferred by the Company, except that such rights
or obligations may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity, or the sale or
liquidation of all or substantially all of the assets of the Company, provided
that the assignee or transferee is the successor to all or substantially all of
the assets of the Company and such assignee or transferee expressly assumes all
the liabilities, obligations and duties of the Company as contained in this
Agreement. In connection with any transfer or assignment of its rights, duties
or obligations under this Agreement, the Company shall take whatever action it
legally can to cause such assignee or transferee to expressly assume the
liabilities, obligations and duties of the Company hereunder. No rights,
obligations or duties of Gardner under this Agreement may be assigned or
transferred, other than his rights provided in Sections 3, 4, 5 and 6, which may
be transferred only by will or operation of law, except as otherwise expressly
provided.
16. Integration. This Agreement represents the entire
understanding of the parties with respect to the subject matter hereof. This
Agreement supersedes all other agreements, contracts, understandings and other
arrangements, written or oral, between the parties with respect to the subject
matter hereof, all of which are hereby terminated and shall be of no further
force or effect, including, without limitation, any employment contracts,
agreements or understandings in effect as of the date hereof.
17. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such modification, waiver or discharge is
agreed to in writing signed by Gardner and such officer of the Company as may be
specifically designated by the Board of Directors. No waiver by either party
hereto at any time of any breach by the other party hereto of any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of any similar or dissimilar provision or condition at the same or any
prior or subsequent time. No representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement. In the event that any
provision or portion of this Agreement shall be determined to be invalid or
unenforceable for any reason, in whole or in part, the remainder of this
Agreement shall be unaffected thereby and shall remain in full force and effect
to the fullest extent permitted by law so as to achieve the purposes of this
Agreement. This Agreement may not be terminated by either party without the
written consent of the other party. The headings of the Sections contained in
this Agreement are for convenience only and shall not be deemed to control or
affect the meaning or construction of any provision of this Agreement. The
validity, interpretation, construction and performance of this Agreement shall
be governed by the laws of the State of New Jersey without regard to conflict of
law principles. This Agreement may be executed in counterparts, each of which
shall be deemed a duplicate original and all of which shall be deemed to be one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on November 12, 1999.
BASE TEN SYSTEMS, INC.
By:_____________________________
Name:
Title:
--------------------------------
Thomas E. Gardner
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of the
28th day of October, 1999, by and between BASE TEN SYSTEMS, INC., a New Jersey
corporation (the "Company") and Stephen A. Cloughley, an individual
("Cloughley").
WHEREAS, the Company believes that given Cloughley's experience and
knowledge of Base Ten Systems technology and the software technology development
industry and his business and management skills, it would be to the benefit of
the Company for Cloughley to serve the Company as President and Chief Executive
Officer; and
WHEREAS, Cloughley is willing to serve the Company in such capacities
and enter into the obligations hereunder set forth.
NOW, THEREFORE, in consideration of the premises, mutual covenants and
agreements contained herein, the parties hereto, intending to be legally bound,
do hereby agree as follows:
1. EMPLOYMENT OF CLOUGHLEY. Effective as of October 28, 1999, the
Company hereby employs Cloughley for the duration of the Employment Term and
Cloughley agrees to serve the Company as its President and Chief Executive
Officer for the duration of the Employment Term.
2. EMPLOYMENT TERM. The term of Cloughley's employment pursuant to this
Agreement shall be from October 28, 1999 to and including October 27, 2000,
unless sooner terminated as provided in this Agreement (the "Employment Term").
Cloughley's employment with the Company pursuant to this Agreement shall expire
(an "Expiration") on October 27, 2000, its natural expiration date (the
"Expiration Date"). In no event shall this Agreement remain in effect beyond the
Expiration Date, provided, that certain provisions of this Agreement may remain
in effect beyond the Expiration Date, as expressly provided herein. Cloughley
may remain an employee-at-will of the Company after the Expiration Date, unless
and until such time as such employment terminates or Cloughley and the Company
execute a new employment agreement.
3. DUTIES. During the Employment Term, Cloughley shall faithfully
perform the duties of President and Chief Executive Officer to the best of his
ability and shall devote substantially all of his working time and efforts to
the affairs of the Company; provided, however, that he may also (a) serve on
such boards of a reasonable number of other business entities, trade
associations and/or charitable organizations as the Board of Directors of the
Company (the "Board") may reasonably approve, (b) engage in charitable
activities and community affairs and (c) manage his personal investments and
affairs, provided that such activities do not interfere with the proper
performance of his duties and responsibilities under this Agreement; and further
provided that Cloughley may serve on the board of directors of Carels Innovative
Software ("Carels") so long as such activities do not interfere with the proper
performance of his duties and responsibilities under this Agreement and so long
as Cloughley is not involved in the day to day activities of Carels. Cloughley
shall report solely to the Board, shall have the authority and responsibilities
customarily associated with the positions of President and Chief Executive
Officer of a publicly held corporation, and shall perform such duties relating
to the management and operations of the Company, consistent with the foregoing,
as may from time to time be assigned to him by the Board. Cloughley shall not be
assigned duties or responsibilities materially inconsistent with the foregoing
duties and responsibilities provided that in the event Cloughley is assigned
duties which he believes are materially inconsistent with such duties, he shall
provide to the Board written, detailed notice of such inconsistencies, whereupon
the Board, without causing a breach of this Agreement with respect thereto,
shall have 10 days within which to make an appropriate adjustment to eliminate
any duties which it determines to be inconsistent with such duties.
4. Compensation. As compensation for the services to be rendered by
Cloughley, the Company shall pay to Cloughley:
(a) During the Employment Term, a salary at a rate of no less
than $180,000 annually (the "Base Salary"), payable in accordance with the
customary payroll practices applicable to senior executives of the Company,
which shall not be decreased at any time, or for any purpose (including for the
purpose of determining severance benefits under Section 5), during the
Employment Term.
(b) On the date hereof, as an inducement to Cloughley's
agreement and willingness to accept this position, the Company shall award to
Cloughley ten-year non-qualified stock options (the "Performance-Based Stock
Options") pursuant to the Base Ten Systems, Inc. 1998 Stock Option and Stock
Award Plan, to purchase a maximum of 55,000 shares of the Company's Class A
Common Stock at $1.00 per share. The Performance-Based Stock Options shall be in
substantially the form of the Performance-Based Stock Option Agreement attached
as Exhibit A and shall vest and become exercisable as follows: (i) 30,000
options shall vest 45 days after the Company achieves its first "profitable
quarter" (provided that the number of days shall be 90 days with respect to the
fourth quarter of a year) following the execution of this Agreement; and (ii)
25,000 options shall vest 45 days after the Company achieves its first "cash
flow positive quarter" (provided that the number of days shall be 90 days with
respect to the fourth quarter of a year) following the execution of this
Agreement. For purposes of this Agreement, (i) a "profitable quarter" shall mean
the first fiscal quarter to occur after the date hereof in which the Company's
net income from continuing operations is not less than $1,000 for such quarter
(excluding as an expense all non-cash expenditures relating to the amortization
of capitalized software, acquired intangible assets and patents and depreciation
of fixed assets which were reflected on the books of account of the Company on
October 28, 1999, estimated to then be approximately $989,591.50 per calendar
quarter), as determined by the Company's accounting staff or by the Company's
independent public accountants, and (ii) a "cash flow positive quarter" shall
mean the first fiscal quarter to occur after the date hereof in which the
Company's total revenue less its total expenses (not including in such expenses
amortization and depreciation) is greater than $1,000 for such quarter, as
determined by the Company's accounting staff or by the Company's independent
public accountants. However, in determining whether the Company has had a
"profitable quarter" or a "cash flow positive quarter," all expenses related to
the termination of Thomas E. Gardner's employment with the Company shall be
excluded. The Performance-Based Stock Options shall remain exercisable after any
termination of Cloughley's employment with the Company only to the extent
provided in Section 5 and in the Performance-Based Option Agreement.
(c) The Company shall use its best reasonable efforts to
assure that all shares received by Cloughley on any exercise of any stock option
awarded to him by the Company shall be, and shall remain, (i) fully registered
(at the Company's expense) under the Securities Act of 1933, as amended (the
"1933 Act"), for resale, (ii) fully registered or qualified (at the Company's
expense) under such state securities laws as Cloughley may reasonably request
for resale, and (iii) qualified for trading on NASDAQ or listed on a national
securities exchange as the Company's Class A Common Stock is then so registered.
(d) In the event there is any change in the Class A Common
Stock subject to the above options, through merger consolidation,
reorganization, recapitalization, stock dividend, stock split or combination, an
appropriate adjustment shall be made to such stock options so as to avoid
dilution or enlargement of Cloughley's rights under the options.
(e) During the Employment Term, Cloughley shall have the
right, by furnishing written notice to the Company at least six months prior to
any exercise of any stock option, to elect to defer any gains realized upon such
exercise. Any such deferral, including the manner of exercise of the stock
option in connection with such deferral, shall be made in such manner as may
reasonably be required by the Company, including such requirements as may apply
in order to defer such gains for Federal income tax purposes or as the
independent public accountants for the Company advises are necessary in order
that the stock option gains not be a charge against the earnings of the Company.
At the time Cloughley elects to defer such gains, such gains shall be deferred
into any non-qualified deferral plan of the Company that accepts such deferrals
on terms that satisfy the requirements of the preceding sentence. If such a plan
is not available, Cloughley may during the Employment Term make an irrevocable
election to defer such gains into Share Units (with a "Share Unit" representing
a share of Class A Common Stock of the Company including any dividends that may
be declared thereon during the period of the deferral). Amounts deferred under
this Section 4(e) shall be paid out as required under the terms of Cloughley's
election to defer.
(f) During the Employment Term, in the event that, for the
calendar year 2000, the Company either (i) reaches "top line sales" of $12.5
million or (ii) reaches "break-even," then the Company shall pay to Cloughley a
bonus equal to 40% of the Base Salary (the "Performance Bonus"). For purposes of
this Agreement, (a) "top line sales" shall mean the total revenue from license
fees and services for the Company for a calendar year, as set forth in the
Company's audited financial statements, and (b) the Company shall be deemed to
"break even" when the Company's net income from continuing operations is not
less than $1,000 for the calendar year, as set forth in the Company's audited
financial statements for such year. If applicable, the Performance Bonus shall
be paid to Cloughley on the date which is 120 days after the end of the fiscal
year or the date which is thirty (30) days after the Company's audited financial
statements (or, if applicable, such independent accountants' determination)
first become available for the fiscal year 2000, whichever is later, but in no
event later than 120 days after the end of such fiscal year.
<PAGE>
(g) For so long as Cloughley remains an employee of the
Company, in the event that a person or entity that beneficially owns less than
5% of the Company's outstanding Class A Common Stock as of the date hereof
acquires the beneficial ownership of greater than 90% of the Company's
outstanding Class A Common Stock (a "Sale of the Company"), the
Performance-Based Stock Options shall immediately vest upon the consummation of
such Sale of the Company. The provisions of this Section 4(g) shall survive any
termination or Expiration of this Agreement.
(h) During the Employment Term, the Company shall provide
Cloughley with disability insurance in accordance with the Company's existing
plan from time to time applicable to senior executives of the Company, on the
same cost basis as for such other senior executives.
(i) During the Employment Term, Cloughley shall be entitled to
four weeks paid vacation each calendar year, in accordance with the Company's
standard vacation policy, as if Cloughley's initial date of employment was
February 1, 1994. Cloughley shall also be entitled to all regular Company
holidays and personal days.
(j) During the Employment Term, Cloughley shall be entitled to
participate in any medical, dental, hospitalization, disability, life insurance,
vision, prescription, accidental death and dismemberment, travel accident, and
other employee welfare benefit plan, program or arrangement that is made
available generally to senior executives of the Company on terms and conditions
that are commensurate with such other senior executives. During the Employment
Term, no such benefit, coverage, term or condition shall be changed in a manner
that is materially adverse to Cloughley without his consent unless such change
is part of a change applying generally to senior executives of the Company.
(k) During the Employment Term, Cloughley shall be entitled to
such other benefits as are made available generally to senior executives of the
Company, including (without limitation) any pension, profit sharing, savings,
employee stock purchase, 401(k) or retirement plan, program or arrangement,
whether funded or unfunded and whether qualified or unqualified.
(l) During the Employment Term, Cloughley shall be entitled to
participate in all fringe benefits and perquisites that are available generally
to senior executives of the Company, at an appropriate level commensurate with
such other senior executives.
(m) During the Employment Term, Cloughley is authorized to
incur reasonable expenses in carrying out his duties and responsibilities under
this Agreement, and the Company shall promptly reimburse him for all such
expenses, subject to reasonable documentation in accordance with the Company's
policies.
5. TERMINATION OF EMPLOYMENT
(a) The Employment Term
(1) shall terminate in the event of Cloughley's death
or "permanent disability" (as hereinafter defined);
(2) may be terminated by the Company for "cause" (as
hereinafter defined) or "without cause" (as
hereinafter defined);
(3) may be "voluntarily" terminated (as hereinafter
defined) by Cloughley; or
(4) shall Expire on the Expiration Date, if not
terminated prior to such time as provided in this
Agreement.
On any termination by the Company "without cause" or any
"voluntary" termination by Cloughley, such party will give the other at least 90
days prior written notice of such termination.
(b) Cloughley's obligation to perform and observe the
obligations, terms and conditions of Sections 7 and 8 of this Agreement shall
survive any termination or Expiration of this Agreement.
(c) Upon any termination of the Employment Term "without
cause," Cloughley shall be entitled to (i) salary through the date of
termination; (ii) any bonus or other incentive compensation award earned but not
yet paid; (iii) the continued right to exercise the Performance-Based Stock
Option, to the extent that such option is, or becomes, vested and exercisable
under the terms of this Agreement, until the second anniversary of the date of
termination of Cloughley's employment; (iv) the continued right to exercise any
other outstanding stock option, to the extent that such option had vested and
was exercisable on the date of termination, until the end of the 90th day
following such date; (v) any amounts earned or accrued, but not yet paid, under
Sections 4(j) through 4(l); (vi) a lump sum payment in respect of accrued but
unused vacation days at his salary rate on the date of termination; (vii) prompt
payout when due of all amounts due and payable under the terms of this Agreement
as a result of his termination; (viii) a lump sum payment of an amount equal to
one month's Base Salary for each full month of Cloughley's service under this
Agreement prior to termination, with a minimum of three months; and (ix) other
or additional benefits, if any, in accordance with the terms and conditions of
applicable plans, programs and arrangements of the Company. If Cloughley is
terminated by the Company "without cause," and the Company's accounting staff or
the Company's independent public accountants subsequently determine that, in the
calendar year 2000, the Company either reached (a) "top line sales" of $12.5
million or (b) "break even," as set forth in Section 4(f) hereof, and Cloughley
was employed by the Company pursuant to this Agreement for at least three (3)
months, the Company shall pay to Cloughley a pro-rated share of the Performance
Bonus provided for in Section 4(f) equal to the product of the Performance Bonus
multiplied by the percentage of the year that Cloughley was employed by the
Company. The Company shall withhold from any such amounts payable to Cloughley
all federal, state, municipal or other deductions as are required by any law,
regulation or ruling. This Section 5(c) shall be the maximum liability and
obligation of the Company (including the officers and directors of the Company)
in the event of any such termination of Cloughley "without cause" at any time.
The provisions of this Section 5(c) which by their terms require the passage of
time beyond the termination of this Agreement shall survive such termination for
the purposes thereof.
(d) Upon termination of the Employment Term by reason of the
death or "permanent disability" of Cloughley, Cloughley shall be entitled to (i)
all rights and benefits provided under Section 5(c); and (ii) the right to
exercise any outstanding stock option (including, without limitation, the
Performance-Based Stock Option), to the extent that such option had vested and
is exercisable on the date of his termination, at any time through the second
anniversary of such date.
(e) Upon termination of the Employment Term at any time during
the Employment Term by the Company for "cause" or by Cloughley "voluntarily,"
Cloughley shall be entitled to (i) salary through the date of termination; (ii)
any bonus or other incentive compensation award earned but not yet paid; (iii)
the continued right to exercise any outstanding stock option other than the
Performance-Based Stock Options, to the extent that such option had vested and
was exercisable on the date of termination, until the end of the 90th day
following such date; (iv) any amounts earned or accrued, but not yet paid, under
Sections 4(j) through 4(l); (v) a lump sum payment in respect of accrued but
unused vacation days at his salary rate on the date of termination; (vi) prompt
payout when due of all amounts due and payable under the terms of this Agreement
as a result of his termination; and (viii) other or additional benefits, if any,
in accordance with the terms and conditions of applicable plans, programs and
arrangements of the Company. Notwithstanding the foregoing, if Cloughley's
employment is terminated by the Company for "cause" or by Cloughley
"voluntarily," Cloughley shall receive no severance payments from the Company.
If Cloughley's employment is terminated for "cause" or is terminated by
Cloughley "voluntarily," Cloughley shall not receive the Performance Bonus or
any portion thereof and all Performance-Based Stock Options which have not been
exercised prior to the date upon which Cloughley is terminated shall be canceled
as of the date of termination. The Company shall withhold from any such amounts
payable to Cloughley all federal, state, municipal or other deductions as are
required by any law, regulation or ruling. This Section 5(e) shall be the
maximum liability and obligation of the Company (including the officers and
directors of the Company) in the event of any such termination of Cloughley for
"cause" or by Cloughley "voluntarily" at any time.
(f) In the event that Cloughley's employment with the Company
is terminated by reason of and at the time of the Expiration of this Agreement,
Cloughley shall receive no severance payments from the Company. If this
Agreement Expires and Cloughley's employment is then terminated, and the
Company's accounting staff or the Company's independent public accountants
subsequently determine that, in the calendar year 2000, the Company either
reached (i) "top line sales" of $12.5 million or (ii) "break even," as set forth
in Section 4(f) hereof, the Company shall pay the Performance Bonus to Cloughley
as provided in Section 4(f). If Cloughley's employment is terminated upon
Expiration, all Performance-Based Options which have not vested shall
immediately be canceled, and shall be null and void. The Company shall withhold
from any such amounts payable to Cloughley all federal, state, municipal or
other deductions as are required by any law, regulation or ruling. This Section
5(f) shall be the maximum liability and obligation of the Company (including the
officers and directors of the Company) in the event of any such termination of
Cloughley due to the Expiration of this Agreement.
<PAGE>
(g) Except as otherwise provided herein, Performance-Based
Stock Options shall remain exercisable, with respect to any shares for which
they have vested and become exercisable, until the earlier of (i) the date upon
which they are exercised for such shares, (ii) the second anniversary of the
date of Cloughley's termination of employment with the Company, if such
termination was "without cause," due to the Expiration of the Employment Term,
or by reason of Cloughley's death or "permanent disability" (iii) the date upon
which Cloughley's employment is terminated for "cause" or "voluntarily" and (iv)
the tenth anniversary of the date of grant.
(h) As used herein, "permanent disability" shall mean a
disability which renders Cloughley mentally or physically unable to perform his
usual and regular duties and responsibilities for a continuous period of 120
days or for a non-continuous period of 180 days in any 365 day period, as
determined by a medical doctor selected by the Company and reasonably acceptable
to Cloughley.
(i) As used herein, "cause" shall mean (i) the continuing
willful failure by Cloughley to substantially perform his duties hereunder as
provided in Section 3 (other than any such failure resulting from Cloughley's
death or incapacity due to physical or mental illness) and the continuance of
such failure for a period of thirty (30) days after a written demand for
substantial performance is delivered to Cloughley by the Board which
specifically identifies the manner in which the Board believes that Cloughley
has not substantially performed such duties; (ii) the engaging by Cloughley in
willful gross misconduct or willful gross neglect in carrying out his duties
under this Agreement, resulting, in either case, in material economic harm to
the Company; (iii) Cloughley engages in any activity that constitutes a felony
involving moral turpitude; or (iv) Cloughley engages in any activity that
constitutes embezzlement, theft, fraud (as determined by the Board) or any
conduct of a similar criminal nature. The Board shall give Cloughley 90 days
prior written notice of its intention to terminate him for "cause," and such
notice shall state in detail the particular circumstances that constitute the
grounds on which the proposed termination for "cause" is based.
(j) As used herein, "without cause" is any termination by the
Company that is not for "cause," other than the termination of Cloughley's
employment with the Company by reason of the Expiration of this Agreement or a
"voluntary" termination by Cloughley, as set forth herein.
(k) As used herein, "voluntary" termination by Cloughley shall
mean any termination by Cloughley that is not by death, by "disability," due to
the Expiration of this Agreement, or by the Company for "cause" or "without
cause." A "voluntary" termination by Cloughley shall not be deemed a breach of
this Agreement.
(l) Notwithstanding anything to the contrary elsewhere in this
Agreement, in no event may any stock option be exercised after the expiration of
its maximum stated term.
(m) In the event of any termination of his employment with the
Company, Cloughley shall be under no obligation to seek other employment and
there shall be no offset against amounts due him under this Agreement on account
of any remuneration or other benefit attributable to any subsequent employment
that he may obtain.
(n) Cloughley and the Company agree that amounts due under
this Section 5 are in the nature of severance payments considered to be
reasonable by the Company and are not in the nature of a penalty.
(o) At no time during the Employment Term or thereafter shall
either party make any public statement that intentionally disparages or defames
the goodwill or reputation of the other party; provided that it shall not be a
violation of this Section 5(o) for either party to make truthful statements when
required to do so by law or by a court, governmental agency, administrative
body, or legislative body with apparent jurisdiction to require such statements.
6. WITHHOLDING. The Company shall withhold all amounts required by law
to be withheld from any payments made pursuant to this Agreement, including any
and all amounts required to be withheld by any applicable Federal, state, or
foreign country's income tax act, and any applicable city, county, or
municipality's earnings or income tax act. Notwithstanding the foregoing,
Cloughley shall be liable for the payment, if any, of any federal, state or
local taxes incurred by him as a result of the Company's provision of benefits
hereunder.
7. CONFIDENTIAL INFORMATION AND DUTY OF NONDISCLOSURE. Cloughley
acknowledges and agrees that his employment with the Company pursuant to this
Agreement necessarily involves his access to secrets and confidential
information pertaining to the business of the Company and its subsidiaries.
Accordingly, Cloughley agrees that at all times during his Employment Term and
thereafter, he will not, directly or indirectly, without the express written
authority of the Company, except as reasonably appropriate in connection with
the performance of his services under this Agreement or unless directed by
applicable legal authority having jurisdiction over Cloughley, knowingly
disclose or use for the benefit of any person, firm, corporation, or other
business entity or himself, any trade secrets, confidential information
concerning the Company or any subsidiary of the Company, including, without
limitation, any information concerning the past, present, or prospective
clients, creditors, customers, operations, systems, software or methods
(collectively, the "Confidential Information"). Notwithstanding the foregoing,
the term Confidential Information shall not include any information which is or
becomes in the public domain without breach by Cloughley of this Section 7.
Cloughley agrees that he will return to the Company upon termination of
the Employment Term all Confidential Information then in Cloughley's possession.
8. COVENANT NOT TO COMPETE
(a) If the Employment Term is terminated (i) by the Company
for "cause," or (ii) by Cloughley "voluntarily," or (iii) due to the Expiration
of this Agreement, Cloughley shall not, directly or indirectly, acting as
employee, investor, officer, partner, principal or otherwise, of any corporation
or other entity, engage in any activity within the United States of America,
Canada or the European Economic Community that involves products or services
which compete materially with products and services of the Company or any of its
subsidiaries, as such products and services exist as of the date hereof and
during the Employment Term. The provisions of this Section 8(a) shall apply upon
the Expiration of this Agreement only if Cloughley rejects an offer made by the
Company at or before the Expiration of this Agreement to either (1) renew this
Agreement, or (2) enter into an agreement with Cloughley on substantially
similar terms as, or on terms more favorable to Cloughley than, this Agreement.
(b) The parties hereto agree that in the event that either the
length of time or the geographical areas set forth in Section 8(a) above is
deemed too restrictive in any court proceeding, the court may reduce such
restrictions to those which it deems reasonable under the circumstances.
(c) Cloughley agrees and acknowledges that the Company and any
of its subsidiaries do not have adequate remedy at law for the breach or
threatened breach by Cloughley of the covenants under this Section 8 and agrees
that the Company or any subsidiary of the Company shall be entitled to apply for
injunctive relief to restrain Cloughley from such breach or threatened breach in
addition to any other remedies which might be available to the Company or any
subsidiary of the Company at law or equity.
For purposes of this Agreement, the term "subsidiary" includes
any limited liability company (including uPACS LLC) or other business directly
affiliated with the Company.
9. INDEMNIFICATION
(a) The Company agrees that (i) if the Executive is made a
party, or is threatened to be made a party, to any "proceeding" by reason of the
fact that he is or was a director, officer, employee, agent, manager, consultant
or representative of the Company or is or was serving at the request of the
Company as a director, office, member, employee, agent, manager, consultant or
representative of another "person," or (ii) if any "claim" is made, or is
threatened to be made, that arises out of or relates to Cloughley's service in
any of the foregoing capacities, then Cloughley shall be indemnified by the
Company to the fullest extent permitted by the laws of the State of New Jersey
against any and all costs, expenses, liabilities and losses (including, without
limitation, attorney's fees, judgments, interest, expenses of investigation,
fines, ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) incurred or suffered by Cloughley in connection therewith (other
than an action by Cloughley against the Company), and such indemnification shall
continue as to Cloughley even if he has ceased to be a director, member,
employee, agent, manager, consultant or representative of the Company or other
"person," and shall inure to the benefit of Cloughley's successors and assigns.
The Company shall provide to Cloughley all costs and expenses incurred by him in
connection with any such proceeding or claim within 30 days of receiving written
notice requesting such payment, provided that such notice includes proper
documentation verifying that such costs were incurred by Cloughley.
(b) The Company shall at all times during the Employment Term
and for six years thereafter keep in place a directors' and officers' liability
insurance policy (or policies) covering Cloughley to the extent that the Company
provides such coverage for other senior executives.
<PAGE>
(c) As used in this Agreement "person" shall mean any
individual, corporation, partnership, joint venture, trust, estate, board,
committee, agency, body, or other person or entity; "proceeding" shall mean any
threatened or actual action, suit, or other proceeding, whether civil, criminal,
administrative, investigative, appellate, or other; and "claim" shall mean any
claim, demand, request, investigation, dispute, controversy, threat, discovery
request, or request for testimony or information.
10. REPRESENTATIONS
(a) The Company represents and warrants that (i) it is fully
authorized by action of its Board (and of any other "person" whose action is
required) to enter into this Agreement and to perform its obligations under it;
(ii) the execution, delivery and performance of this Agreement by the Company
does not violate any law, regulation, order, judgment or decree or any
agreement, plan or corporate governance document of the Company; and (iii) upon
the execution and delivery of this Agreement by Cloughley and the Company, this
Agreement shall be a valid and binding obligation of the Company, enforceable in
accordance with its terms, except to the extent enforceability may be limited by
applicable bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally.
(b) Cloughley represents and warrants that (i) delivery and
performance of this Agreement by him does not violate any law, regulation,
order, judgment or decree or any agreement to which he is a party or by which he
is bound, and (ii) upon the execution and delivery of this Agreement by
Cloughley and the Company, this Agreement shall be a valid and binding
obligation of Cloughley, enforceable in accordance with its terms, except to the
extent enforceability may be limited by applicable bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally.
11. NO EMPLOYMENT GUARANTEE. This Agreement shall not be deemed to
entitle Cloughley to continued employment with the Company, and the rights of
the Company to terminate the employment of Cloughley shall continue as fully as
if this Agreement were not in effect, subject to the provisions in Section 5
above.
12. NOTICES. Any notice, consent, demand, request, or other
communication given by Cloughley or the Company in connection with this
Agreement shall be in writing and shall be deemed to have been given (a) when
delivered personally to the party specified or (b) three days after mailing by
certified or registered mail, return receipt requested, or (c) provided that a
written acknowledgment of receipt is obtained, upon delivery by a nationally
recognized overnight courier, to the address set forth below for the party
specified (or to such other address for such party as shall be specified by ten
days advance notice given pursuant to this Section 12).
If to the Company: Base Ten Systems, Inc.
One Electronics Drive
Trenton, NJ 08619
Attention: Board of Directors
with a copy to: Pitney, Hardin, Kipp & Szuch LLP
If by Delivery
--------------
200 Campus Drive
Florham Park, New Jersey 07962-1945
Attn: Joseph Lunin
If by Mail
----------
P.O. Box 1945
Morristown, New Jersey 07962-1945
Attn: Joseph Lunin
Facsimile: 201-966-1550
If to Cloughley: Stephen A. Cloughley
929 Gainesway Road
Yardley, Pennsylvania 19067
with a copy to: Kwasny and Fegley
993 Lenox Drive
Suite 200
Lawrenceville, New Jersey 08648
Attn: Richard J. Kwasny
13. ASSIGNMENT/BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of Cloughley, the Company, and their respective successors
and assigns. No rights or obligations of the Company under this Agreement may be
assigned or transferred by the Company except that such rights or obligations
may be assigned or transferred pursuant to a merger or consolidation in which
the Company is not the continuing entity, or the sale or liquidation of all or
substantially all of the assets of the Company, provided that the assignee or
transferee is the successor to all or substantially all of the assets of the
Company and such assignee or transferee expressly assumes all the liabilities,
obligations and duties of the Company, as contained in this Agreement. In
connection with any transfer or assignment of its rights, duties, or obligations
under this Agreement, the Company shall take whatever action it legally can to
cause such assignee or transferee to expressly assume the liabilities,
obligations and duties of the Company hereunder. No rights, obligations or
duties of Cloughley under this Agreement may be assigned or transferred by
Cloughley, other than his rights to compensation and benefits, which may be
transferred only by will or operation of law, except as otherwise expressly
provided.
14. DISPUTE RESOLUTION. Except as otherwise provided in Section 8(c),
any dispute or controversy between Cloughley and the Company that arises out of
or relates to this Agreement (or any amendment thereof) shall be resolved in
courts in the State of New Jersey, and for the purposes thereof, Cloughley
hereby submits to the jurisdiction of all courts in the State of New Jersey.
15. INTEGRATION. This Agreement represents the entire understanding of
the parties with respect to the subject matter hereof. This Agreement supersedes
all other agreements, contracts, understandings and other arrangements, written
or oral, between the parties with respect to the subject matter hereof, all of
which are hereby terminated and shall be of no further force or effect,
including without limitation, any employment contracts, agreements, or
understandings in effect as of the date hereof. No compensation or any other
amounts are due from the Company to Cloughley under any prior agreement with the
Company.
16. MISCELLANEOUS.
(a) During the Employment Term, Cloughley shall be authorized to attend
all meetings of the Board, subject to the right of the Board to exclude
Cloughley from any meetings of the Board, or portions thereof, from time to
time, at the sole discretion of the Board.
(b) No provision of this Agreement may be modified, waived or
discharged unless such modification, waiver or discharge is agreed to in writing
signed by Cloughley and such officer of the Company as may be specifically
designated by the Board.
(c) No waiver by either party hereto at any time of any breach by the
other party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of any similar or
dissimilar provision or condition at the same or any prior or subsequent time.
(d) No representations, oral or otherwise, express or implied, with
respect the subject matter hereof have been made by either party which are not
set forth expressly in this Agreement.
(e) In the event that any provision or portion of this Agreement shall
be determined to be invalid or unenforceable for any reason, in whole or in
part, the remainder of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law so as to
achieve the purposes of this Agreement.
(f) Except as otherwise expressly set forth in this Agreement, the
respective rights and obligations of Cloughley and the Company hereunder which
by their terms extend beyond the termination of this Agreement shall survive any
termination of the Executive's employment or the Employment Term.
(g) This Agreement itself (as distinguished from Cloughley's employment
with the Company or the Employment Term) may not be terminated by either party
without the written consent of the other party.
(h) The headings of the Sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
(i) The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New Jersey without
regard to conflict of law principles. This Agreement may be executed in
counterparts, each of which shall be deemed a duplicate original all of which
shall be deemed to be one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first set forth above.
Base Ten Systems, Inc.
By: ___________________________________
Name:
Title:
___________________________
STEPHEN A. CLOUGHLEY
<PAGE>
Exhibit A
Form of Performance-Based Stock Option Agreement
<PAGE>
Exhibit A
BASE TEN SYSTEMS, INC.
PERFORMANCE-BASED
STOCK OPTION AGREEMENT
This Option Agreement (the "Agreement"), made as of October 28, 1999,
is between Base Ten Systems, Inc., a New Jersey corporation (the "Company"), and
Stephen A. Cloughley, an individual (the "Optionee").
WHEREAS, in consideration of the Optionee's agreement to serve as
President and Chief Executive Officer of the Company under an Employment
Agreement dated as of October 28, 1999 between Optionee and the Company (the
"Employment Agreement"), the Company has agreed to grant to Optionee certain
options to purchase shares of the Company's Class A Common Stock ("Common
Stock") pursuant to the Employment Agreement and the Base Ten Systems, Inc. 1998
Stock Option and Stock Award Plan (the "Plan") on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth below, the parties agree as follows:
1. Options. (a) Subject to the terms and conditions set forth herein,
and in the Employment Agreement and the Plan (the terms of both of which are
hereby incorporated by reference), the Company grants to Optionee fifty-five
thousand (55,000) rights (each an "Option") to subscribe for and purchase one
share of Common Stock at the price of one dollar ($1.00) per share ( the
"Purchase Price"). The Options granted pursuant to this Agreement shall be
considered Performance-Based Stock Options, and shall be considered to be
nonqualified stock options. Performance-Based Stock Options shall vest and
become exercisable as follows: (i) thirty thousand (30,000) Options shall vest
forty-five (45) days after the Company achieves its first "profitable quarter"
(provided that the number of days shall be ninety (90) days with respect to the
fourth quarter of a year) following the execution of the Employment Agreement;
and (ii) twenty-five thousand (25,000) Options shall vest forty-five (45) days
after the Company achieves its first "cash flow positive quarter" (provided that
the number of days shall be ninety (90) days with respect to the fourth quarter
of a year) following the execution of the Employment Agreement. For purposes of
this Agreement, the terms "profitable quarter" and "cash flow positive quarter"
shall have the meanings set forth in Section 4(b) of the Employment Agreement.
In addition, for so long as the Optionee remains an employee of the Company, in
the event that a person or entity that beneficially owns less than five percent
(5%) of the Company's outstanding Common Stock as of the date hereof acquires
the beneficial ownership of greater than ninety percent (90%) of the Company's
outstanding Common Stock (a "Sale of the Company"), then the Options shall
immediately vest upon the consummation of such Sale of the Company.
(b) The Options shall not be transferable other than by will or the
laws of descent and distribution or, after the Optionee's death, to a
beneficiary (or beneficiaries) designated by Optionee in writing in a form
satisfactory to the Company, and the Options may be exercised, during the
lifetime of the Optionee, only by the Optionee. Without limiting the generality
of the foregoing, the Options may not be assigned, transferred (except as
provided above), pledged or hypothecated in any way, and shall not be subject to
execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of any of the Options contrary to the
provisions hereof, or the levy of any execution, attachment or similar process
upon any Option, shall be null and void and without effect.
2. Exercise. (a) Subject to the terms and conditions of this Agreement,
the Employment Agreement and the Plan, Optionee shall have the right to exercise
at the Purchase Price all vested Options at any time after the date hereof.
Notwithstanding anything herein to the contrary, all Options granted under this
Agreement shall expire on the tenth anniversary of the date of this Agreement,
unless earlier terminated pursuant to the terms of this Agreement, the
Employment Agreement or the Plan.
In the event of the termination of the "Employment Term" "without
cause," the Optionee shall have the continued right to exercise the Options, to
the extent that the Options are, or become, vested and exercisable under the
terms of the Employment Agreement, until the second anniversary of the date of
the termination of the Optionee's employment with the Company. The terms
"Employment Term" and "without cause" shall have the meanings set forth in the
Employment Agreement.
Upon termination of the Employment Term by reason of the death or
"permanent disability" of the Optionee, the Optionee shall have the right to
exercise any outstanding Options to the extent that such Options had vested and
are exercisable on the date of such termination, at any time through the second
anniversary of such date. The term "permanent disability" shall have the meaning
set forth in the Employment Agreement.
Upon termination of the Employment Term at any time during the
Employment Term by the Company for "cause," or by Optionee "voluntarily," the
Options which have not been exercised prior to the date upon which the
Optionee's employment with the Company terminates shall be canceled as of the
date of such termination and shall be null and void. The terms "cause" and
"voluntarily" shall have the meanings set forth in the Employment Agreement.
If the Optionee's employment with the Company is terminated by reason
of and at the time of the "Expiration" of the Employment Agreement, then all
Options which have not vested shall immediately be canceled, and shall be null
and void. All Options that were vested at the time of the termination of
employment with the Company by reason of and at the time of the "Expiration"
shall remain exercisable until the second anniversary of the Optionee's
termination of employment with the Company; provided, that in the event that
Optionee rejects an offer made by the Company at or before the "Expiration" of
the Employment Agreement to either (1) renew the Employment Agreement, or (2)
enter into an agreement with Optionee on substantially similar terms as, or on
terms more favorable to Optionee than, the Employment Agreement, all Options
which have not been exercised prior to the date on which Optionee's employment
with the Company terminates shall be canceled as of the date of such termination
and shall be null and void. The term "Expiration" shall have the meaning set
forth in the Employment Agreement.
Except as otherwise provided, the Options shall remain exercisable,
with respect to any shares for which they have vested and become exercisable,
until the earlier of (i) the date upon which they are exercised for such shares,
(ii) the second anniversary of the date of the Optionee's termination of
employment with the Company, if such termination was "without cause" (in which
case the Options may thereafter continue to vest), due to the Expiration of the
Employment Term, or by reason of Optionee's death or "permanent disability,"
(iii) the date upon which the Optionee's employment terminates or is terminated
for "cause" or "voluntarily," and (iv) the tenth anniversary of the date of
grant.
(b) Vested Options may be exercised by the Optionee in whole or in
part, but not as to a fractional share, by surrender of such Options, properly
endorsed at the principal office of the Company, and by delivering to the
Company (i) a written exercise notice substantially in the form annexed hereto
as Schedule A, and (ii) payment of the aggregate Purchase Price, plus required
tax withholding amounts (as determined by the Company) for the number of shares
purchased by certified check or bank check (or in such other form or method as
the Company may elect to accept). The shares purchased shall be deemed to be
issued to the Optionee as the record owner as of the close of business on the
date of which the Options are surrendered and payment is made for the shares.
Certificates representing the shares purchased shall be delivered to the
Optionee within thirty (30) days after the rights represented by the Options
have been properly exercised, unless otherwise agreed by the parties hereto.
(c) For so long as Optionee remains an employee of the Company, in the
event that a person or entity that beneficially owns less than 5% of the
Company's outstanding Class A Common Stock as of the date hereof acquires the
beneficial ownership of greater than 90% of the Company's outstanding Class A
Common Stock (a "Sale of the Company"), the Options shall immediately vest upon
the consummation of such Sale of the Company.
3. Shares. (a) The Company covenants and agrees that all shares of
Common Stock shall, on issuance and payment of the consideration therefor
hereunder, be fully paid and nonassessable and free from all taxes, liens and
charges related to the issuance of such shares.
(b) The Company shall use its best reasonable efforts to assure that
all shares of Common Stock received by Optionee on any exercise of any Option
shall be, and shall remain, (i) fully registered (at the Company's expense)
under the Securities Act of 1933, as amended, for resale, (ii) fully registered
or qualified (at the Company's expense) under such state securities laws as
Optionee may reasonably request, for resale, and (iii) qualified for trading on
NASDAQ or listed on a national securities exchange as the Company's Common Stock
is then so registered.
4. Adjustments. In the event that there is any change in the Common
Stock arising through merger, consolidation, reorganization, recapitalization,
stock dividend, stock split or combination, the Board of Directors shall make
such adjustments in the aggregate number of Options subject to this Agreement
and/or the price per share of such Options in order to prevent dilution or
enlargement of the Optionee's rights and the value represented by the Options.
5. Absence of Rights. No Option shall entitle the Optionee to any
rights as a shareholder of the Company prior to the exercise of such Option.
6. Invalidity; Severability. If any clause or provision of this
Agreement shall be adjudged invalid, the same shall not affect the validity of
any other clause or provision of this Agreement, or of any other document
pertaining to the subject matter thereof, or constitute by reason thereof, any
claim or cause of action in favor of Optionee as against the Company. In
addition, the provisions of this Agreement shall be read and construed and shall
have effect as separate, severable and independent provisions or restrictions,
and shall be enforceable accordingly.
7. Entire Agreement; No Waiver; Remedies. This Agreement, the Plan and
the Employment Agreement contain the entire agreement of the parties and
incorporate and supersede any and all prior or contemporaneous oral or written
agreements with respect to the matters referred to in them. No waiver of any
breach or default hereunder shall be considered valid unless in writing and
signed by the party giving such waiver, and no such waiver shall be deemed a
waiver of any subsequent breach or default of the same or similar nature. No
failure on the part of any party to exercise, and no delay in exercising any
right, remedy, power or privilege hereunder shall operate as a waiver thereof;
no waiver whatever shall be valid unless in writing signed by the party or
parties to be charged and then only to the extent specifically set forth in such
writing. All remedies, rights, powers and privileges, either under this
Agreement or by law or otherwise afforded the parties to this Agreement, shall
be cumulative and shall not be exclusive of any remedies, rights, powers and
privileges provided by law.
8. Notices. Any notice required or permitted to be given under this
Agreement shall be given in accordance with Section 12 of the Employment
Agreement.
9. Successors and Assigns. The rights and obligations of the Company
under this Agreement or the Options shall inure to the benefit of and shall be
binding upon the successors and assigns of the Company.
10. Headings; Counterparts; Governing Law. The headings in this
Agreement are for convenience of reference only and are not intended to define
or limit the contents of any section or paragraph. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument. This
Agreement shall in all respects be governed by the internal laws (without
reference to conflicts of laws principles) of the State of New Jersey applicable
to contracts made and performed within the State of New Jersey.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
STEPHEN A. CLOUGHLEY BASE TEN SYSTEMS, INC.
__________________________ By:___________________________
Print Name:____________________
Title:_________________________
<PAGE>
Schedule A
Exercise Notice
Base Ten Systems, Inc.
One Electronics Drive
P.O. Box 3151
Trenton, NJ 08619
Gentlemen:
The undersigned hereby exercises the option to purchase __________shares of
Class A Common Stock of Base Ten Systems, Inc. pursuant to the Base Ten Systems,
Inc. Performance-Based Stock Option Agreement (the "Option Agreement") dated as
of October 28, 1999 between Base Ten Systems, Inc. and the undersigned.
Accompanying this Exercise Notice is payment pursuant to the Option Agreement in
the amount of $____________.
Dated:________________________ By:_________________________________
Stephen A. Cloughley
