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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1999
Commission file number 0-16182
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AXSYS TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-1962029
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
910 Sylvan Avenue
Englewood Cliffs, New Jersey 07632
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 871-1500
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Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 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 |X| No |_|
4,007,135 shares of Common Stock, $.01 par value, were outstanding as of April
28, 1999.
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<PAGE>
AXSYS TECHNOLOGIES, INC.
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets -
March 31, 1999 and December 31, 1998 3
Condensed Consolidated Statements of Operations -
Three Months Ended March 31, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 13
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 14
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AXSYS TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands, except share data)
(Unaudited)
March 31, December 31,
1999 1998
--------- ------------
ASSETS
CURRENT ASSETS:
Cash ................................................. $ 134 $ 69
Accounts receivable - net ............................ 16,281 16,877
Inventories - net .................................... 28,871 27,028
Other current assets ................................. 2,732 2,838
-------- --------
TOTAL CURRENT ASSETS ............................... 48,018 46,812
PROPERTY, PLANT AND EQUIPMENT - net .................... 15,509 15,080
EXCESS OF COST OVER NET ASSETS ACQUIRED - net .......... 12,109 12,216
OTHER ASSETS ........................................... 2,387 2,103
-------- --------
TOTAL ASSETS ....................................... $ 78,023 $ 76,211
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ..................................... $ 8,765 $ 7,867
Accrued expenses and other liabilities ............... 6,329 7,050
Current portion of long-term debt and capital
lease obligations .................................. 1,286 1,179
-------- --------
TOTAL CURRENT LIABILITIES .......................... 16,380 16,096
LONG-TERM DEBT & CAPITAL LEASES, less current portion .. 7,534 5,612
OTHER LONG-TERM LIABILITIES ............................ 2,287 2,375
Common Stock, issued 4,122,767 shares at
March 31, 1999 and December 31, 1998 ............... 41 41
Capital in Excess of Par ............................. 40,761 40,761
Retained Earnings .................................... 12,630 12,966
Treasury Stock, at cost, 115,632 shares at
March 31, 1999 and 117,750 at December 31, 1998 .... (1,610) (1,640)
-------- --------
TOTAL SHAREHOLDERS' EQUITY ......................... 51,822 52,128
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ......... $ 78,023 $ 76,211
======== ========
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
AXSYS TECHNOLOGIES, INC.
Condensed Consolidated Statements of Operations
(Unaudited, dollars in thousands, except per share data)
Three Months Ended March 31,
1999 1998
----------- -----------
NET SALES .................................. $ 25,135 $ 31,898
Cost of sales .............................. 18,288 21,930
Selling, general and administrative
expenses ................................. 5,095 6,013
Research and development expenses .......... 1,026 957
Amortization of intangible assets .......... 107 107
----------- -----------
OPERATING INCOME ........................... 619 2,891
Interest expense ........................... 190 258
Special charge ............................. 1,000 --
Other expense .............................. 1 7
----------- -----------
(LOSS) INCOME FROM CONTINUING
OPERATIONS BEFORE TAXES .................. (572) 2,626
(Benefit) provision for income
taxes .................................... (236) 1,063
----------- -----------
(LOSS) INCOME FROM CONTINUING
OPERATIONS ............................... (336) 1,563
DISCONTINUED OPERATIONS:
Loss from operations, net of tax ......... -- (26)
----------- -----------
NET (LOSS) INCOME .......................... $ (336) $ 1,537
=========== ===========
BASIC (LOSS) EARNINGS PER SHARE:
(Loss) income from continuing
operations ............................. $ (0.08) $ 0.37
Discontinued operations .................. -- (0.01)
----------- -----------
TOTAL ...................................... $ (0.08) $ 0.36
=========== ===========
Weighted average common shares
outstanding .............................. 4,106,247 4,215,976
=========== ===========
DILUTED (LOSS) EARNINGS PER SHARE:
Income from continuing operations ........ $ (0.08) $ 0.37
Discontinued operations .................. -- (0.01)
----------- -----------
TOTAL ...................................... $ (0.08) $ 0.36
=========== ===========
Weighted average common shares
outstanding .............................. 4,106,247 4,262,698
=========== ===========
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
AXSYS TECHNOLOGIES, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, dollars in thousands)
Three Months Ended March 31,
1999 1998
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income ............................... $ (336) $ 1,537
Adjustments to reconcile net income to cash
(used in) provided by operating activities:
Depreciation and amortization ................... 910 895
Change in net assets of discontinued
operation ..................................... -- (82)
Increase in current assets, other than cash ..... (1,141) (2,577)
Increase in current liabilities ................. 207 195
Other-net ....................................... (40) 212
------- -------
NET CASH (USED IN) PROVIDED BY OPERATING
ACTIVITIES .................................. (400) 180
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................ (116) (1,695)
Advance to third party .......................... (331) --
------- -------
NET CASH USED IN INVESTING ACTIVITIES ......... (447) (1,695)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from borrowings .................... 1,250 1,400
Net repayment of borrowings ..................... (342) (223)
Other ........................................... 4 19
------- -------
NET CASH PROVIDED BY FINANCING
ACTIVITIES .................................. 912 1,196
------- -------
NET INCREASE (DECREASE) IN CASH ............... 65 (319)
CASH AT BEGINNING OF PERIOD ....................... 69 573
------- -------
CASH AT END OF PERIOD ............................. $ 134 $ 254
======= =======
Supplemental Cash Flow Information:
Cash paid for:
Interest ...................................... $ 110 $ 161
Income Tax .................................... 50 194
Non-Cash Investing and Financing Activities:
Equipment acquired under capital leases ....... $ 1,117 $ 75
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
AXSYS TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except per share data)
Note 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Axsys
Technologies, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments considered necessary for a fair
presentation (consisting of normal recurring accruals) have been included.
Operating results for the three month period ended March 31, 1999 are not
indicative of the results that may be expected for the year ending December 31,
1999. For further information, refer to the financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998.
Certain reclassifications have been made to previously reported financial
statements to conform to current classifications.
Note 2 - Earnings per Share
Basic earnings per share has been computed by dividing Net Income Applicable to
Common Shareholders by the weighted average number of common shares outstanding.
Diluted earnings per share has been computed by dividing Net Income Applicable
to Common Shareholders by the weighted average number of common shares
outstanding including the dilutive effects of stock options, if any.
Note 3 - Discontinued Operations
On September 16, 1998, the Company sold its Sensor Systems business unit
("Sensor Systems") which manufactured position sensor devices such as
potentiometers, pressure transducers and encoders primarily for defense and
industrial automation applications, for $3,030, of which $1,030 was in the form
of a five year, 10% subordinated note. Sensor Systems' land and building were
not sold as part of this transaction, but are being marketed for sale by the
Company and are recorded in Other Assets on the March 31, 1999 Condensed
Consolidated Balance Sheet at their estimated net realizable value.
The disposal of Sensor Systems has been accounted for as a discontinued
operation and, accordingly, the related net assets and operating results have
been reported separately from continuing operations in all years presented.
Revenues applicable to the discontinued operation for the three months ended
March 31, 1998 were $1,697.
Note 4 - Advances to Third Parties
On August 12, 1998, the Company entered into an agreement with Westlake
Technology Corporation ("WTC") whereby the Company has the exclusive right to
market and sell WTC's electronic and electromechanical test equipment. In return
for these exclusive rights, the Company has agreed to provide loans of up to a
maximum of $1,900 to WTC. Outstanding loans bear interest at 10.5% and mature on
August 12, 2001. As of March 31, 1999, the outstanding loan balance, which is
recorded under "Other Assets" in the Condensed Consolidated Balance Sheet, was
$1,383.
6
<PAGE>
AXSYS TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except per share data)
Note 5 - Inventories
Inventories have been determined generally by lower of cost (first-in, first-out
or average) or market. Inventories consist of:
March 31, December 31,
1999 1998
--------- ------------
Raw materials ............................... $10,247 $ 9,401
Work-in-process ............................. 10,105 8,665
Finished goods .............................. 12,287 12,642
------- -------
32,639 30,708
Less reserves ............................... 3,768 3,680
------- -------
$28,871 $27,028
======= =======
Note 6 - Shareholders' Equity
Treasury Stock -
In August 1998, the Company's Board of Directors authorized the repurchase, from
time to time, on the open market or otherwise, of up to 200,000 shares of the
Company's Common Stock at prevailing market prices or at negotiated prices. The
Company plans to use the repurchased shares for general corporate purposes,
including the satisfaction of commitments under its employee benefit plans. As
of March 31, 1999 the Company has repurchased 119,500 shares for an aggregate
purchase price of $1,664, of which 2,980 shares were used to satisfy commitments
under its employee benefit plans.
Note 7 - Income Taxes
The Company has determined, based upon the level of its current taxable income,
it is more likely than not that it will realize the benefit of a portion of its
deferred tax assets which previously had been fully reserved with a valuation
allowance. As such, beginning in the second quarter of 1998, the Company has
reversed a portion of its tax valuation allowance equal to the amount it would
have recorded as a tax provision on income from continuing operations before
taxes during the period. During the first quarter of 1999, the Company reported
a loss from continuing operations before taxes and, as a result, no additional
reversal of the tax valuation allowance was recorded.
As of March 31, 1999, the remaining tax valuation allowance is approximately
$0.9 million.
Note 8 - Segment Data
The Company classifies its businesses under two major groups, the Precision
Systems Group ("PSG") and the Industrial Components Group ("ICG"). The PSG
designs and manufactures micro-positioning and precision optical components and
systems primarily for defense, space, electronics capital equipment and digital
imaging applications. The ICG is comprised of the Precision Ball Bearings
segment, which distributes and services precision miniature ball bearings, and
the Electronic Interconnect Products segment, which designs and manufactures
interconnect devices, barrier terminal blocks, and connectors. The products of
both the ICG segments are used in a variety of commercial and industrial
applications.
As discussed in Note 3, the company sold its Sensor Systems segment during the
third quarter of 1998. The disposal of Sensor Systems, which previously was part
of the PSG, has been accounted for as a discontinued operation and, accordingly,
their related operating results have been reported separately from continuing
operations and the segment data below has been restated to exclude the Sensor
Systems segment.
7
<PAGE>
AXSYS TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except per share data)
Note 8 - Segment Data - Cont'd.
The following tables present financial data for each of the Company's segments.
Three Months Ended March 31,
----------------------------
1999 1998
------------ -------------
Net sales:
PSG .......................................... $ 14,030 $ 19,407
-------- --------
Precision Ball Bearings ...................... 6,553 7,263
Electronic Interconnect Products ............. 4,552 5,228
-------- --------
Total ICG ................................ 11,105 12,491
-------- --------
Total Sales .......................... $ 25,135 $ 31,898
======== ========
(Loss) earnings before amortization, interest
and taxes:
PSG .......................................... $ (96) $ 2,074
-------- --------
Precision Ball Bearings ...................... 851 979
Electronic Interconnect Products ............. 778 938
-------- --------
Total ICG ................................ 1,629 1,917
Non-allocated expenses ....................... (2,105) (1,365)
-------- --------
(Loss) income from continuing
operations before taxes ............. $ (572) $ 2,626
======== ========
March 31, December 31,
1999 1998
---------- ------------
Identifiable assets:
PSG .......................................... $ 39,279 $ 38,585
-------- --------
Precision Ball Bearings ...................... 13,911 13,653
Electronic Interconnect Products ............. 9,024 8,351
-------- --------
Total ICG ................................ 22,935 22,004
Non-allocated assets ......................... 15,809 15,622
-------- --------
Total assets ........................... $ 78,023 $ 76,211
======== ========
Included in non-allocated expenses are the following: general corporate expense,
interest expense, amortization of goodwill, special charges and other income and
expense. Identifiable assets by segment consist of those assets that are used in
the segments' operations. Non-allocated assets are comprised primarily of
goodwill and net deferred tax assets.
Note 9 - Other Information
March 31, December 31,
1999 1998
---------- ------------
Allowance for doubtful accounts .................. $ 525 $ 507
======== ========
Accumulated depreciation and amortization
of property, plant and equipment ................ $ 12,294 $ 11,531
======== ========
Accumulated amortization of excess of cost
over net assets acquired ....................... $ 1,697 $ 1,590
======== ========
8
<PAGE>
AXSYS TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Dollars in thousands, except per share data)
Note 10 - Potential Sale of the Company and Special Charge
On November 20, 1998, the Company's Chairman and CEO and the owner of
approximately 31% of the Company's common stock ("the Chairman"), submitted an
offer to purchase all of the common stock not owned by him for $15.00 per share
in cash (the "Chairman's Proposal"). Shortly thereafter, the Company's Board of
Directors formed a Special Committee to evaluate the Chairman's Proposal. On
January 11, 1999, the Company received an unsolicited offer to purchase the
Company for $20.00 per share in cash. In response to this unsolicited offer, the
Chairman withdrew his proposal, and on January 13, 1999, the Company's Board of
Directors dissolved the Special Committee. On January 14, 1999, the Company
engaged investment bankers to explore various strategic alternatives, including
the potential sale of the Company. On January 29, 1999, the Company publicly
announced that the Board of Directors had instructed its investment bankers to
explore the potential sale of the Company. During the first quarter of 1999, the
Company recorded a pre-tax special charge of $1,000 for expenses related to the
ongoing process of exploring the potential sale of the Company.
9
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
The following table sets forth certain financial data as a percentage of net
sales for the three month periods ended March 31, 1999 and 1998. On September
16, 1998 the Company sold certain assets related to its Sensor Systems segment.
The divestiture, which was previously part of the PSG, has been accounted for as
a discontinued operation. Accordingly, the results of the operations of Sensor
Systems through the date of the sale and the loss from the disposal are
reflected in discontinued operations.
Three Months Ended March 31,
----------------------------
1999 1998
------------ -------------
Net sales:
PSG ............................................ 55.8% 60.8%
----- -----
Precision Ball Bearings ........................ 26.1 22.8
Electronic Interconnect Products ............... 18.1 16.4
----- -----
Total ICG .................................. 44.2 39.2
----- -----
Total Company .......................... 100.0 100.0
----- -----
Cost of sales ...................................... 72.8 68.8
----- -----
Gross profit ....................................... 27.2 31.2
----- -----
Operating expenses:
Selling, general and administrative expenses ... 20.2 18.9
Research and development expenses .............. 4.1 3.0
Amortization of intangible assets .............. 0.4 0.3
----- -----
2.5 9.0
----- -----
Operating income
Interest expense ............................... 0.7 0.8
Special charge ................................. 4.0 --
Other expense .................................. -- --
----- -----
(Loss) income from continuing operations
before taxes ..................................... (2.2) 8.2
(Benefit) provision for income taxes ............. (0.9) 3.3
----- -----
(Loss) income from continuing operations ........... (1.3) 4.9
Discontinued operations:
Loss from operations, net of tax ................. -- (0.1)
----- -----
Net (loss) income .................................. (1.3)% 4.8%
===== =====
Gross profit (as a percentage of related
net sales):
PSG ................................................ 24.1% 31.2%
ICG ................................................ 31.0 31.4
10
<PAGE>
Comparison of the Three Months Ended March 31, 1999 and March 31, 1998
Net sales. Net sales decreased by 21.2%, or $6.8 million, from $31.9 million in
the three month period ended March 31, 1998 to $25.1 million in the same period
of 1999. The PSG's sales decreased by 27.7%, or $5.4 million, from $19.4 million
in 1998 to $14.0 million in 1999. This decrease was primarily the result of the
continuing soft market conditions in the electronics capital equipment and
digital imaging markets. In addition, the PSG had lower sales to the space
market primarily due to the timing of major satellite programs. The ICG's sales
were 11.1%, or $1.4 million lower than the record level sales of $12.5 million
recorded in the first quarter of 1998. However, the soft market conditions
experienced over the second half of 1998 appear to be improving as the ICG's
first quarter 1999 sales were 22% higher than those recorded during the fourth
quarter of 1998.
Gross profit. The Company's gross profit decreased by 31.3%, or $3.2 million,
from $10.0 million in 1998 to $6.8 million in 1999. Gross profit margin
decreased from 31.2% of net sales in 1998 to 27.2% in 1999. The gross margin for
the PSG decreased from 31.2% of net sales in 1998 to 24.1% in 1999 and, for the
ICG, decreased from 31.4% of net sales in 1998 to 31.0% in 1999. The decline in
the PSG and ICG gross profit margins were primarily due to the lost variable
contribution margin on their lower sales volume.
Selling, general and administrative expenses. SG&A expenses decreased by 15.3%,
or $0.9 million, from $6.0 million in 1998 to $5.1 million in 1999. As a
percentage of net sales, however, SG&A increased from 18.9% in 1998 to 20.2% in
1999. The decrease in SG&A expenses is primarily due to lower incentive expense.
Research and development expenses. R&D expenses of $1.0 million in 1999 were
substantially the same as 1998.
Interest expense. Interest expense decreased by 26.4%, or $0.1 million, from
$0.3 million in 1998 to $0.2 million in 1999. The decrease in interest expense
was primarily due to lower average borrowings during 1999 resulting from cash
flow from operations.
Special charge. During the first quarter of 1999, the Company recorded a pre-tax
special charge of $1.0 million for expenses related to the ongoing process of
exploring the potential sale of the Company (See Note 10 to the Condensed
Consolidated Financial Statements).
Taxes. The Company's effective tax rate increased from 40.5% in 1998 to 41.3% in
1999, primarily reflecting the effect of a fixed non-deductible goodwill
amortization over a lower income base.
Discontinued Operations. In September 1998, the Company sold its Sensor Systems
business unit. Results of operations from the discontinued business have been
reported separately from continuing operations in 1998.
Backlog
A substantial portion of the Company's business is of a build-to-order nature
requiring various engineering, manufacturing, testing and other processes to be
performed prior to shipment. As a result, the Company generally has a
significant backlog of orders to be shipped. The Company's backlog of orders
increased by 6.3% or $3.1 million, from $49.0 million at December 31, 1998 to
$52.1 million at March 31, 1999 reflecting increases in each of the Company's
major market segments other than the digital imaging market which remains soft.
The Company believes that a substantial portion of the backlog of orders at
March 31, 1999 will be shipped over the next twelve months.
11
<PAGE>
Liquidity and Capital Resources
The Company funds its operations primarily from cash flow generated by
operations and, to a lesser extent, from borrowings under its credit facility
and through capital lease transactions.
Net cash (used in) provided by operations for the three months ended March 31,
1999 and 1998 was $(0.4) million and $0.2 million, respectively. The decrease in
cash provided from operations in 1999 was primarily due to reduced earnings. At
December 31, 1998, the Company had approximately $0.3 million of tax credits
available to reduce future taxable income. These tax credits are expected to be
used to offset tax payments in 1999.
The Company's working capital was $31.6 million and $30.7 million on March 31,
1999 and December 31, 1998, respectively.
Net cash used in investing activities for the three months ended March 31, 1999
and 1998 was $0.4 million and $1.7 million, respectively. This reduction in use
of cash was primarily due to the use of capital leases to finance $1.1 million
of its capital expenditures, compared with $0.1 million in 1998.
The Company had no material commitments for capital expenditures as of March 31,
1999.
The Company has an $11.0 million senior secured revolving credit facility which
expires on April 25, 2000 (the "Credit Facility"), of which $3.4 million was
outstanding as of March 31, 1999. The Credit Facility contains restrictive
covenants which, among other things, impose limitations with respect to the
incurrence of additional liens and indebtedness, mergers, consolidations and
specified sale of assets and requires the Company to meet certain financial
tests including minimum levels of earnings and net worth and various other
financial ratios. In addition, the Credit Facility prohibits the payment of cash
dividends. The Company believes that the remaining availability under the Credit
Facility and cash generated from operations will be sufficient to finance its
future capital expenditures, working capital requirements and the purchase of
additional Company Common Stock for at least the next 12 months.
Year 2000
The Company is continuously monitoring Year 2000 compliance issues affecting its
information technology ("IT") and non-IT systems. No significant non-IT system
Year 2000 compliance issues have been identified.
As related to IT systems, the Company has substantially completed the
implementation of new management information systems at three of its business
units. While the implementation of these new systems does address Year 2000
concerns, Year 2000 compliance was not the predominant justification supporting
such investments. These new IT systems are also expected to enhance future
operations through improved operating management and efficiencies. The cost of
these new systems was approximately $1.2 million, of which $1.0 million has been
capitalized and will be depreciated over future periods. Of the total $1.2
million Year 2000 spending, approximately $0.9 million and $0.3 million was
spent in 1998 and 1997, respectively. With the implementation of these new
management information systems substantially completed, the Company has adequate
time to identify and correct potential hardware or software problems that may
arise. As such, no further contingency plans have been formulated.
The Company is continuing the process of surveying material third parties such
as customers, vendors, banks and others to determine their Year 2000 readiness.
While it is not possible to fully assess the actual readiness of these third
parties, a majority of their responses indicate that they are or will be Year
2000 compliant. For those vendors who have not responded satisfactorily,
alternative sources will be identified.
12
<PAGE>
Recently Issued Accounting Standards
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities" was issued in June 1998. SFAS No.
133 is effective for fiscal years beginning after June 15, 1999. Management does
not believe that the implementation of the statement will have a material impact
on the consolidated financial position or consolidated results of operations of
the Company.
This quarterly report on Form 10-Q provides certain forward-looking statements.
The Company's business is subject to a variety of risks and uncertainties. As a
result, actual future results and developments may be materially different from
those expressed or implied in any forward-looking statement. Disclosure
regarding factors affecting the Company's future results and developments is
contained in the Company's public filings with the Securities and Exchange
Commission, including the Company's annual report on Form 10-K for the fiscal
year ended December 31, 1998.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risk sensitive instruments do not subject the Company to
material risk exposures.
13
<PAGE>
PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None during the quarter ended March 31, 1999.
Item 5. OTHER INFORMATION
Not applicable during the quarter ended March 31, 1999.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 10(1): Severance Protection Agreement between the Company and
Stephen W. Bershad dated as of February 11, 1999
Exhibit 10(2): Severance Protection Agreement between the Company and
Richard V. Howitt dated as of February 11, 1999
Exhibit 10(3): Severance Protection Agreement between the Company and
Raymond F. Kunzmann dated as of February 11, 1999
Exhibit 10(4): Severance Protection Agreement between the Company and
Kenneth F. Stern dated as of February 11, 1999
Exhibit 10(5): Severance Protection Agreement between the Company and
David L. Concannon dated as of February 11, 1999
Exhibit 10(6): Net Lease dated as of February 1, 1999, by and between the
Company and Joel Nosanchuk
Exhibit 27(1): Financial Data Schedule (For SEC use only).
Exhibit 27(2): Restated Financial Data Schedule (For SEC use only).
b) Reports on Form 8-K
None during the quarter ended March 31, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated this 11th day of May, 1999.
Date: May 11, 1999 AXSYS TECHNOLOGIES, INC.
By: /s/Stephen W. Bershad
----------------------
Stephen W. Bershad
Chairman of the Board and Chief Executive
Officer
By: /s/Raymond F. Kunzmann
----------------------
Raymond F. Kunzmann
Vice President-Finance and Chief Financial
Officer
14
Exhibit 10(1)
SEVERANCE PROTECTION AGREEMENT
THIS AGREEMENT made as of the 11th day of February, 1999, by and between
Axsys Technologies, Inc. (the "Company") and Stephen W. Bershad (the
"Executive").
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the possibility of a Change in Control (as hereinafter defined) exists and
that the threat or the occurrence of a Change in Control can result in
significant distraction of the Company's key management personnel because of the
uncertainties inherent in such a situation;
WHEREAS, the Board has determined that it is essential and in the best
interests of the Company and its stockholders for the Company to retain the
services of the Executive in the event of a threat or occurrence of a Change in
Control and to ensure the Executive's continued dedication and efforts in such
event without undue concern for the Executive's personal financial and
employment security; and
WHEREAS, in order to induce the Executive to remain in the employ of the
Company and/or one of its Affiliates (the entity or entities employing the
Executive, the "Employing Affiliate"), particularly in the event of a threat or
the occurrence of a Change in Control, the Company desires to enter into this
Agreement with the Executive to provide the Executive with certain benefits in
the event the Executive's employment is terminated as a result of, or in
connection with, a Change in Control.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. Term of Agreement. This Agreement shall commence as of February 11,
1999, and shall continue in effect until February 11, 2001 (the "Term");
provided, however, that on February 11, 2000, and on each February 11
thereafter, the Term shall automatically be extended for one year unless either
the Executive or the Company shall have given written notice to the other at
least ninety days prior thereto that the Term shall not be so extended;
provided, further, however, that following the occurrence of a Change in
Control, the Term shall not expire prior to the expiration of twenty-four months
after such occurrence.
2. Termination of Employment. If, during the Term, the Executive's
employment with the Company or an Employing Affiliate shall be terminated within
twenty-four months following a Change in Control, the Executive shall be
entitled to the following compensation and benefits:
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(a) If the Executive's employment with the Company or an Employing
Affiliate shall be terminated (1) by the Company for Cause or Disability, (2) by
reason of the Executive's death, or (3) by the Executive other than for Good
Reason or pursuant to a Window Period Termination, the Company shall pay to the
Executive the Accrued Compensation.
(b) If the Executive's employment with the Company or an Employing
Affiliate shall be terminated for any reason other than as specified in Section
2(a), or if the Executive terminates his employment with or without Good Reason
during the one month period commencing six months following a Change in Control
(a "Window Period Termination"), the Executive shall be entitled to the
following:
(1) the Company shall pay the Executive the Accrued
Compensation;
(2) the Company shall pay the Executive as severance pay an
amount equal to 2.99 times the Executive's Base Amount; and
(3) for twelve months following the Termination Date (the
"Continuation Period"), the Company shall continue on behalf of the Executive
and his dependents and beneficiaries the life insurance, disability, medical,
dental, prescription drug and hospitalization coverages and benefits provided to
the Executive immediately prior to a Change in Control (the "Benefits
Continuation"), or, if greater, the coverages and benefits provided at any time
thereafter; provided, however, that within five days following the Termination
Date, the Executive may elect to receive from the Company in cash, in lieu of
the Benefits Continuation, the value of the Benefits Continuation. The coverages
and benefits (including deductibles and costs to the Executive) provided in this
Section 2(b)(3) during the Continuation Period shall be no less favorable to the
Executive and his dependents and beneficiaries than the most favorable of such
coverages and benefits referred to above. The Company's obligation hereunder
with respect to the foregoing coverages and benefits shall be reduced to the
extent that the Executive obtains any such coverages and benefits pursuant to a
subsequent employer's benefit plans, in which case the Company may reduce any of
the coverages or benefits it is required to provide the Executive hereunder so
long as the aggregate coverages and benefits (including deductibles and costs to
the Executive) of the combined benefit plans are no less favorable to the
Executive than the coverages and benefits required to be provided hereunder.
This Section 2(b)(3) shall not be interpreted so as to limit any benefits to
which the Executive, his dependents or beneficiaries may be entitled under any
of the Company's employee benefit plans, programs or practices following the
Executive's termination of employment, including but not limited to retiree
medical and life insurance benefits.
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(c) The cash amounts provided for in Sections 2(a) and 2(b) shall be
paid in a single lump sum cash payment within ten days after the Termination
Date (or earlier, if required by applicable law).
(d) The severance pay and benefits provided for in this Section 2
shall be in lieu of any other severance pay to which the Executive may be
entitled under any severance or employment agreement with the Company or any
other plan, agreement or arrangement of the Company or any other Affiliate of
the Company. The Executive's entitlement to any compensation or benefits other
than as provided herein shall be determined in accordance with the employee
benefit plans of the Company and any of its Affiliates and other applicable
agreements, programs and practices as in effect from time to time.
(e) If the Executive's employment is terminated by the Company or an
Employing Affiliate without Cause prior to the date of a Change in Control but
the Executive reasonably demonstrates that such termination (1) was at the
request of a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control (a "Third Party") and who
effectuates a Change in Control or (2) otherwise arose in connection with, or in
anticipation of, a Change in Control which has been threatened or proposed and
which actually occurs, such termination shall be deemed to have occurred after a
Change in Control, it being agreed that any such action taken following
shareholder approval of a transaction which if consummated would constitute a
Change in Control, shall be deemed to be in anticipation of a Change in Control
provided such transaction is actually consummated.
3. Effect of Section 280G of the Internal Revenue Code.
(a) Notwithstanding anything contained in this Agreement to the
contrary, to the extent that the payments and benefits provided under this
Agreement and benefits provided to, or for the benefit of, the Executive under
any other Company plan or agreement (such payments or benefits collectively
referred to herein as the "Payments") would be subject to the excise tax (the
"Excise Tax") imposed under Section 280G of the Internal Revenue Code of 1986,
as amended (the "Code"), the Payments shall be reduced (but not below zero) if
and to the extent necessary so that no Payment to be made or benefit to be
provided to the Executive shall be subject to the Excise Tax (such reduced
amount is hereinafter referred to as the "Limited Payment Amount"). Unless the
Executive shall have given prior written notice specifying a different order to
the Company to effectuate the foregoing, the Company shall reduce or eliminate
the Payments by first reducing or eliminating the portion of the Payments which
are not payable in cash and then by reducing or eliminating cash payments, in
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each case in reverse order beginning with payments or benefits which are to be
paid the farthest in time from the Determination (as hereinafter defined). Any
notice given by the Executive pursuant to the preceding sentence shall take
precedence over the provisions of any other plan, arrangement or agreement
governing the Executive's rights and entitlements to any benefits or
compensation.
(b) The determination of whether the Payments shall be reduced to
the Limited Payment Amount pursuant to this Agreement and the amount of such
Limited Payment Amount shall be made, at the Company's expense, by an accounting
firm selected by the Company and reasonably acceptable to the Executive which is
one of the five largest accounting firms in the United States (the "Accounting
Firm"). The Accounting Firm shall provide its determination (the
"Determination"), together with detailed supporting calculations and
documentation to the Company and the Executive within ten days of the
Termination Date, if applicable, or such other time as requested by the Company
or by the Executive (provided the Executive reasonably believes that any of the
Payments may be subject to the Excise Tax) and if the Accounting Firm determines
that no Excise Tax is payable by the Executive with respect to the Payments, it
shall furnish the Executive with an opinion reasonably acceptable to the
Executive that no Excise Tax will be imposed with respect to any such Payments.
The Determination shall be binding, final and conclusive upon the Company and
the Executive.
4. Notice of Termination. Following a Change in Control, any intended
termination of the Executive's employment by the Company or an Employing
Affiliate shall be communicated by a Notice of Termination from the Company to
the Executive, and any intended termination of the Executive's employment by the
Executive for Good Reason shall be communicated by a Notice of Termination from
the Executive to the Company.
5. Fees and Expenses. The Company shall pay, as incurred, all legal fees
and related expenses (including the costs of experts, evidence and counsel) that
the Executive may reasonably incur following a Change in Control as a result of
or in connection with (a) the Executive's contesting, defending or disputing the
basis for the termination of the Executive's employment, (b) the Executive's
hearing before the Board of Directors of the Company as contemplated in Section
16.4 or (c) the Executive's seeking to obtain or enforce any right or benefit
provided by this Agreement or by any other plan or arrangement maintained by the
Company or one of its Affiliates under which the Executive is or may be entitled
to receive benefits.
6. Unauthorized Disclosure.
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(a) The Executive agrees and understands that during the Executive's
employment with the Company or an Employing Affiliate, the Executive has been
and will be exposed to and receive information relating to the affairs of the
Company considered by the Company to be confidential and in the nature of trade
secrets (including but not limited to procedures, memoranda, notes, records and
customer lists, whether such information has been or is made, developed or
compiled by the Executive or otherwise has been or is made available to him)
(any and all such information, the "Confidential Information"). The Executive
agrees that, during the Term and thereafter, he shall keep such Confidential
Information confidential and will not disclose such Confidential Information,
either directly or indirectly, to any third person or entity without the prior
written consent of the Company; provided, however, that (i) the Executive shall
have no such obligation to the extent such Confidential Information is or
becomes publicly known other than as a result of the Executive's breach of his
obligations hereunder or is received by the Executive following the Termination
Date and (ii) the Executive may, after giving prior notice to the Company to the
extent practicable under the circumstances, disclose such Confidential
Information to the extent required by applicable laws or governmental
regulations or judicial or regulatory process.
(b) The Executive agrees that all Confidential Information is and
will remain the property of the Company. The Executive further agrees that,
during the Term and thereafter, he shall hold in the strictest confidence all
Confidential Information, and shall not, directly or indirectly, duplicate,
sell, use, lease, commercialize, disclose or otherwise divulge to any person or
entity any portion of the Confidential Information or use any Confidential
Information for his own benefit or profit or allow any person or entity, other
than the Company and its authorized employees, to use or otherwise gain access
to any Confidential Information.
(c) All memoranda, notes, records, customer lists and other
documents made or compiled by the Executive or otherwise made available to him
concerning the business of the Company or its subsidiaries or Affiliates shall
be the Company's property and shall be delivered to the Company upon the
termination of the Executive's employment with the Company or an Employing
Affiliate or at any other time upon request by the Company, and the Executive
shall retain no copies of those documents. The Executive shall never at any time
have or claim any right, title or interest in any material, invention or matter
of any sort created, prepared or used in connection with the business of the
Company or its subsidiaries or Affiliates.
7. Non-competition.
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(a) By and in consideration of the Company's entering into this
Agreement and the payments to be made and benefits to be provided by the Company
hereunder and further in consideration of the Executive's exposure to the
proprietary information of the Company, the Executive agrees that the Executive
will not, during the Term, and thereafter during the Non-competition Term (as
hereinafter defined), directly or indirectly, own, manage, operate, join,
control, be employed by, or participate in the ownership, management, operation
or control of, or be connected in any manner with, including but not limited to
holding any position as a shareholder, director, officer, consultant,
independent contractor, employee, partner, or investor in, any Restricted
Enterprise (as defined below); provided, however, that in no event shall
ownership of less than one percent of the outstanding equity securities of any
issuer whose securities are registered under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), standing alone, be prohibited by this
Section 7. For purposes of this paragraph, the term "Restricted Enterprise"
shall mean any person, corporation, partnership or other entity that competes,
directly or indirectly, with any business or activity conducted or proposed to
be conducted by the Company or any of its subsidiaries or Affiliates as of the
date of the Executive's termination of employment. Following termination of
employment, upon request of the Company, the Executive shall notify the Company
of the Executive's then current employment status. For purposes of this
Agreement, the "Non-competition Term" shall mean the period beginning on the
Termination Date and ending on the first anniversary of such date. Any material
breach of the terms of this paragraph shall be considered Cause under Section
16.4.
(b) The Executive agrees that any breach of the terms of this
Section 7 would result in irreparable injury and damage to the Company and/or
its subsidiaries or Affiliates for which the Company and/or its subsidiaries or
Affiliates would have no adequate remedy at law; the Executive therefore also
agrees that in the event of said breach or any threat of breach, the Company
and/or its subsidiaries or Affiliates, as applicable, shall be entitled to an
immediate injunction and restraining order to prevent such breach and/or
threatened breach and/or continued breach by the Executive and/or any and all
persons and/or entities acting for and/or with the Executive, without having to
prove damages, in addition to any other remedies to which the Company and/or its
subsidiaries or Affiliates may be entitled at law or in equity. The terms of
this paragraph shall not prevent the Company and/or its subsidiaries or
Affiliates from pursuing any other available remedies for any breach or
threatened breach hereof, including but not limited to the recovery of damages
from the Executive. The Executive and the Company further agree that the
provisions of the covenants contained in this Section 7 are reasonable and
necessary to protect the businesses of the Company and its subsidiaries or
Affiliates because of the Executive's access to Confidential Information and his
material participation in the operation of such businesses. Should a court or
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arbitrator determine, however, that any provision of the covenants contained in
this Section 7 is not reasonable or valid, either in period of time,
geographical area, or otherwise, the parties hereto agree that such covenants
should be interpreted and enforced to the maximum extent which such court or
arbitrator deems reasonable or valid.
The existence of any claim or cause of action by the Executive against the
Company and/or its subsidiaries or Affiliates, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company of the covenants contained in this Section 7.
8. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement (including any Notice of
Termination) shall be in writing, shall be signed by the Executive if to the
Company or by a duly authorized officer of the Company if to the Executive, and
shall be deemed to have been duly given when personally delivered or sent by
certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses last given by each party to the other, provided that all
notices to the Company shall be directed to the attention of the Board with a
copy to the Secretary of the Company. All notices and communications shall be
deemed to have been received on the date of delivery thereof or on the third
business day after the mailing thereof (whichever is earlier), except that
notice of change of address shall be effective only upon receipt.
9. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company or any other
Affiliate of the Company for which the Executive may qualify, nor shall anything
herein limit or reduce such rights as the Executive may have under any other
agreements with the Company or any other Affiliate of the Company. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan or program of the Company or any other Affiliate of the Company
shall be payable in accordance with such plan or program, except as explicitly
modified by this Agreement.
10. (a) Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including but not limited
to any set-off, counterclaim, defense, recoupment, or other claim, right or
action which the Company may have against the Executive or others.
(b) No Mitigation. The Executive shall not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment or otherwise and no such payment shall be offset or reduced by the
amount of any
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compensation or benefits provided to the Executive in any subsequent employment
except as provided in Section 2(b)(3).
11. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and the Company. No waiver by any party
hereto at any time of any breach by any other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by any party which are not expressly set
forth in this Agreement.
12. Successors; Binding Agreement.
(a) This Agreement shall be binding upon and shall inure to the
benefit of the Company and its Successors and Assigns. The Company shall require
its Successors and Assigns to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place.
(b) Neither this Agreement nor any right or interest hereunder shall
be assignable or transferable by the Executive, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal personal representative.
13. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware without giving
effect to the conflict of laws principles thereof. Any action brought by any
party to this Agreement shall be brought and maintained in a court of competent
jurisdiction in the State of Delaware.
14. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
15. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto, and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto,
with respect to the subject matter hereof.
16. Definitions.
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16.1. Accrued Compensation. For purposes of this Agreement, "Accrued
Compensation" shall mean all amounts of compensation for services rendered to
the Company or an Employing Affiliate that have been earned or accrued through
the Termination Date but that have not been paid as of the Termination Date,
including (a) base salary, (b) reimbursement for reasonable and necessary
business expenses incurred by the Executive on behalf of the Company or an
Employing Affiliate during the period ending on the Termination Date and (c)
vacation pay; provided, however, that Accrued Compensation shall not include any
amounts described in clause (a) that have been deferred pursuant to any salary
reduction or deferred compensation elections made by the Executive.
16.2. Affiliate. For purposes of this Agreement, "Affiliate" means,
with respect to any Person, any entity, directly or indirectly, controlled by,
controlling or under common control with such Person.
16.3. Base Amount. For purposes of this Agreement, "Base Amount"
shall mean, with respect to a Change in Control, the Executive's "base amount"
as determined under Section 280G of the Code and the regulations proposed
thereunder.
16.4. Cause. For purposes of this Agreement, a termination of
employment is for "Cause" if the Executive
(a) has been convicted of a felony (including a plea of
nolo contendere);
(b) intentionally and continually failed substantially to
perform his reasonably assigned duties with the Company or an Employing
Affiliate (other than a failure resulting from the Executive's incapacity due to
physical or mental illness or from the assignment to the Executive of duties
that would constitute Good Reason) which failure continued for a period of at
least thirty days after a written notice of demand for substantial performance,
signed by a duly authorized officer of the Company, has been delivered to the
Executive specifying the manner in which the Executive has failed substantially
to perform such duties; or
(c) intentionally engaged in illegal conduct or willful
misconduct which is demonstrably and materially injurious to the Company or an
Employing Affiliate.
For purposes of this Agreement, no act, or failure to act, on the Executive's
part shall be considered "intentional" unless the Executive has acted, or failed
to act, with a lack of good faith and with a lack of reasonable belief that the
Executive's action or failure to act was in the best interest of the Company or
an Employing Affiliate. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the
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Board or upon the instructions of the Company's Chairman of the Board, Chief
Executive Officer or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the Company
or an Employing Affiliate. The termination of employment of the Executive shall
not be deemed to be for Cause pursuant to subparagraph (b) or (c) above unless
and until there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less than three-fourths
of the entire membership of the Board at a meeting of the Board called and held
for such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board) finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (b) or (c) above, and specifying
the particulars thereof in detail. Notwithstanding anything contained in this
Agreement to the contrary, no failure to perform by the Executive after a Notice
of Termination is given to the Company by the Executive shall constitute Cause
for purposes of this Agreement.
16.5. Change in Control. A "Change in Control" shall mean the
occurrence during the Term of:
(a) An acquisition (other than directly from the Company) of
any common stock of the Company ("Common Stock") or other voting securities of
the Company entitled to vote generally for the election of directors (the
"Voting Securities") by any "Person" (as the term "person" is used for purposes
of Section 13(d) or 14(d) of the Exchange Act), immediately after which such
Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of fifty percent or more of the then outstanding shares
of Common Stock or the combined voting power of the Company's then outstanding
Voting Securities; provided, however, in determining whether a Change in Control
has occurred, Common Stock or Voting Securities which are acquired in a
Non-Control Acquisition (as hereinafter defined) shall not constitute an
acquisition which would cause a Change in Control. A "Non-Control Acquisition"
shall mean an acquisition by (i) an employee benefit plan (or a trust forming a
part thereof) maintained by (A) the Company or (B) any corporation or other
Person of which a majority of its voting power or its voting equity securities
or equity interest is owned, directly or indirectly, by the Company (a
"Subsidiary"), (ii) the Company or its Subsidiaries, (iii) any Person in
connection with a Non-Control Transaction (as hereinafter defined) or (iv) an
Affiliate;
(b) The individuals who, as of February 11, 1999, are members
of the Board (the "Incumbent Board"), cease for any reason to constitute at
least a majority of the members of the Board; provided, however, that if the
election, or nomination for election by the Company's shareholders, of any new
director was
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approved by a vote of at least two-thirds of the Incumbent Board, such new
director shall, for purposes of this Agreement, be considered a member of the
Incumbent Board; provided further, however, that no individual shall be
considered a member of the Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board (a "Proxy Contest") including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy Contest; or
(c) The consummation of:
(1) A merger, consolidation, reorganization or other
business combination with or into the Company or in which securities of the
Company are issued, unless such merger, consolidation, reorganization or other
business combination is a "Non-Control Transaction." A "Non-Control Transaction"
shall mean a merger, consolidation, reorganization or other business combination
with or into the Company or in which securities of the Company are issued where:
(A) the shareholders of the Company, immediately
before such merger, consolidation, reorganization or other business combination
own directly or indirectly immediately following such merger, consolidation,
reorganization or other business combination, at least fifty percent of the
combined voting power of the outstanding voting securities of the corporation
resulting from such merger or consolidation, reorganization or other business
combination (the "Surviving Corporation") in substantially the same proportion
as their ownership of the Voting Securities immediately before such merger,
consolidation, reorganization, or other business combination,
(B) the individuals who were members of the
Incumbent Board immediately prior to the execution of the agreement providing
for such merger, consolidation, reorganization or other business combination
constitute at least two-thirds of the members of the board of directors of the
Surviving Corporation, or a corporation beneficially directly or indirectly
owning a majority of the combined voting power of the outstanding voting
securities of the Surviving Corporation, and
(C) no Person other than (i) the Company, (ii) any
Subsidiary, (iii) any employee benefit plan (or any trust forming a part
thereof) that, immediately prior to such merger, consolidation, reorganization
or other business combination was maintained by the Company, the Surviving
Corporation, or any Subsidiary, or (iv) any Person who, immediately prior to
such merger, consolidation, reorganization or other business combination had
Beneficial Ownership of fifty percent
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or more of the then outstanding Voting Securities or common stock of the
Company, has Beneficial Ownership of fifty percent or more of the combined
voting power of the Surviving Corporation's then outstanding voting securities
or its common stock.
(2) A complete liquidation or dissolution of the
Company; or
(3) The sale or other disposition of all or
substantially all of the assets of the Company to any Person (other than (i) any
such sale or disposition that results in at least fifty percent of the Company's
assets being owned by a Subsidiary or Subsidiaries or (ii) a distribution to the
Company's stockholders of the stock of a Subsidiary or any other assets).
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because any Person (the "Subject Person") acquired Beneficial Ownership
of more than the permitted amount of the then outstanding Common Stock or Voting
Securities as a result of the acquisition of Common Stock or Voting Securities
by the Company which, by reducing the number of shares of Common Stock or Voting
Securities then outstanding, increases the proportional number of shares
Beneficially Owned by the Subject Person, provided that if a Change in Control
would occur (but for the operation of this sentence) as a result of the
acquisition of shares of Common Stock or Voting Securities by the Company, and
after such share acquisition by the Company, the Subject Person becomes the
Beneficial Owner of any additional shares of Common Stock or Voting Securities
which increase the percentage of the then outstanding shares of Common Stock or
Voting Securities Beneficially Owned by the Subject Person, then a Change in
Control shall occur.
16.6. Company. For purposes of this Agreement, all references to the
Company shall include its Successors and Assigns.
16.7. Disability. For purposes of this Agreement, "Disability" shall
mean a physical or mental infirmity which impairs the Executive's ability to
substantially perform his duties with the Company or an Employing Affiliate for
six consecutive months, and within the time period set forth in a Notice of
Termination given to the Executive (which time period shall not be less than
thirty days), the Executive shall not have returned to full-time performance of
his duties; provided, however, that if the Company's Long Term Disability Plan,
or any successor plan (the "Disability Plan"), is then in effect, the Executive
shall not be deemed disabled for purposes of this Agreement unless the Executive
is also eligible for long-term disability benefits under the Disability Plan (or
similar benefits in the event of a successor plan).
16.8. Good Reason.
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(a) For purposes of this Agreement, "Good Reason" shall mean
the occurrence after a Change in Control of any of the following events or
conditions:
(1) a material adverse change in the Executive's duties
or responsibilities (including reporting responsibilities), except in connection
with the termination of his employment for Disability, Cause, as a result of his
death or by the Executive other than for Good Reason;
(2) a reduction in the Executive's annual base salary;
(3) the relocation of the offices of the Company or an
Employing Affiliate at which the Executive is principally employed to a location
more than 25 miles from the location of such offices immediately prior to a
Change in Control, or the requirement that the Executive be based anywhere other
than at such offices, except to the extent the Executive was not previously
assigned to a principal location and except for required travel on the business
of the Company or an Employing Affiliate to an extent substantially consistent
with the Executive's business travel obligations at the time of a Change in
Control; or
(4) the failure by the Company or an Employing Affiliate
to pay to the Executive any portion of the Executive's current compensation or
to pay to the Executive any portion of an installment of deferred compensation
under any deferred compensation program of the Company or an Employing Affiliate
in which the Executive participated, within seven days of the date such
compensation is due.
(b) Any event or condition described in Section 16.8(a)(1)
through (4) which occurs prior to a Change in Control but which the Executive
reasonably demonstrates (i) was at the request of a Third Party who effectuates
a Change in Control or (ii) otherwise arose in connection with or in
anticipation of a Change in Control which has been threatened or proposed and
which actually occurs, shall constitute Good Reason for purposes of this
Agreement notwithstanding that it occurred prior to a Change in Control, it
being agreed that any such action taken following shareholder approval of a
transaction which if consummated would constitute a Change in Control, shall be
deemed to be in anticipation of a Change in Control provided such transaction is
actually consummated.
16.9. Notice of Termination. For purposes of this Agreement,
following a Change in Control, "Notice of Termination" shall mean a written
notice of termination of the Executive's employment, signed by the Executive if
to the Company or by a duly authorized officer of the Company if to the
Executive, which indicates the specific termination provision in this Agreement,
if any, relied upon and which sets forth in
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reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated. The
failure by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason, Disability or Cause shall not serve to waive any right of the Executive
or the Company, respectively, hereunder or preclude the Executive or the
Company, respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
16.10. Successors and Assigns. For purposes of this Agreement,
"Successors and Assigns" shall mean, with respect to the Company, a corporation
or other entity acquiring all or substantially all the assets and business of
the Company, as the case may be, whether by operation of law or otherwise.
16.11. Termination Date. For purposes of this Agreement,
"Termination Date" shall mean (a) in the case of the Executive's death, his date
of death, (b) if the Executive's employment is terminated for Disability, thirty
days after Notice of Termination is given (provided that the Executive shall not
have returned to the performance of his duties on a full-time basis during such
thirty day period) and (c) if the Executive's employment is terminated for any
other reason, the date specified in the Notice of Termination (which, in the
case of a termination for Cause shall not be less than thirty days, and in the
case of a termination for Good Reason shall not be more than sixty days, from
the date such Notice of Termination is given); provided, however, that if within
thirty days after any Notice of Termination is given the party receiving such
Notice of Termination in good faith notifies the other party that a dispute
exists concerning the basis for the termination, the Termination Date shall be
the date on which the dispute is finally determined, either by mutual written
agreement of the parties, or by the final judgment, order or decree of a court
of competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been taken). Notwithstanding the pendency of any such dispute, the
Company or an Employing Affiliate shall continue to pay the Executive his base
salary and continue the Executive as a participant (at or above the level
provided prior to the date of such dispute) in all compensation, incentive,
bonus, pension, profit sharing, medical, hospitalization, prescription drug,
dental, life insurance and disability benefit plans in which he was
participating when the notice giving rise to the dispute was given, until the
dispute is finally resolved whether or not the dispute is resolved in favor of
the Company, and the Executive shall not be obligated to repay to the Company or
an Employing Affiliate any amounts paid or benefits provided pursuant to this
sentence.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officers and the Executive has executed this Agreement as
of the day and year first above written.
AXSYS TECHNOLOGIES, INC.
/s/ Raymond F. Kunzmann
---------------------------------
By: Raymond F. Kunzmann
Its: Vice President
EXECUTIVE
/s/ Stephen W. Bershad
---------------------------------
Stephen W. Bershad
ATTEST
/s/ David L. Concannon
- ----------------------------------
By: David L. Concannon
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Exhibit 10(2)
SEVERANCE PROTECTION AGREEMENT
THIS AGREEMENT made as of the 11th day of February, 1999, by and between
Axsys Technologies, Inc. (the "Company") and Richard V. Howitt (the
"Executive").
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the possibility of a Change in Control (as hereinafter defined) exists and
that the threat or the occurrence of a Change in Control can result in
significant distraction of the Company's key management personnel because of the
uncertainties inherent in such a situation;
WHEREAS, the Board has determined that it is essential and in the best
interests of the Company and its stockholders for the Company to retain the
services of the Executive in the event of a threat or occurrence of a Change in
Control and to ensure the Executive's continued dedication and efforts in such
event without undue concern for the Executive's personal financial and
employment security; and
WHEREAS, in order to induce the Executive to remain in the employ of the
Company and/or one of its Affiliates (the entity or entities employing the
Executive, the "Employing Affiliate"), particularly in the event of a threat or
the occurrence of a Change in Control, the Company desires to enter into this
Agreement with the Executive to provide the Executive with certain benefits in
the event the Executive's employment is terminated as a result of, or in
connection with, a Change in Control.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. Term of Agreement. This Agreement shall commence as of February 11,
1999, and shall continue in effect until February 11, 2001 (the "Term");
provided, however, that on February 11, 2000, and on each February 11
thereafter, the Term shall automatically be extended for one year unless either
the Executive or the Company shall have given written notice to the other at
least ninety days prior thereto that the Term shall not be so extended;
provided, further, however, that following the occurrence of a Change in
Control, the Term shall not expire prior to the expiration of twenty-four months
after such occurrence.
2. Termination of Employment. If, during the Term, the Executive's
employment with the Company or an Employing Affiliate shall be terminated within
twenty-four months following a Change in Control, the Executive shall be
entitled to the following compensation and benefits:
<PAGE>
(a) If the Executive's employment with the Company or an Employing
Affiliate shall be terminated (1) by the Company for Cause or Disability, (2) by
reason of the Executive's death, or (3) by the Executive other than for Good
Reason, the Company shall pay to the Executive the Accrued Compensation.
(b) If the Executive's employment with the Company or an Employing
Affiliate shall be terminated for any reason other than as specified in Section
2(a), the Executive shall be entitled to the following:
(1) the Company shall pay the Executive the Accrued
Compensation;
(2) the Company shall pay the Executive as severance pay an
amount equal to 1.5 times the Executive's Base Amount; and
(3) for twelve months following the Termination Date (the
"Continuation Period"), the Company shall continue on behalf of the Executive
and his dependents and beneficiaries the life insurance, disability, medical,
dental, prescription drug and hospitalization coverages and benefits provided to
the Executive immediately prior to a Change in Control (the "Benefits
Continuation"), or, if greater, the coverages and benefits provided at any time
thereafter; provided, however, that within five days following the Termination
Date, the Executive may elect to receive from the Company in cash, in lieu of
the Benefits Continuation, the value of the Benefits Continuation. The coverages
and benefits (including deductibles and costs to the Executive) provided in this
Section 2(b)(3) during the Continuation Period shall be no less favorable to the
Executive and his dependents and beneficiaries than the most favorable of such
coverages and benefits referred to above. The Company's obligation hereunder
with respect to the foregoing coverages and benefits shall be reduced to the
extent that the Executive obtains any such coverages and benefits pursuant to a
subsequent employer's benefit plans, in which case the Company may reduce any of
the coverages or benefits it is required to provide the Executive hereunder so
long as the aggregate coverages and benefits (including deductibles and costs to
the Executive) of the combined benefit plans are no less favorable to the
Executive than the coverages and benefits required to be provided hereunder.
This Section 2(b)(3) shall not be interpreted so as to limit any benefits to
which the Executive, his dependents or beneficiaries may be entitled under any
of the Company's employee benefit plans, programs or practices following the
Executive's termination of employment, including but not limited to retiree
medical and life insurance benefits.
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<PAGE>
(c) The cash amounts provided for in Sections 2(a) and 2(b) shall be
paid in a single lump sum cash payment within ten days after the Termination
Date (or earlier, if required by applicable law).
(d) The severance pay and benefits provided for in this Section 2
shall be in lieu of any other severance pay to which the Executive may be
entitled under any severance or employment agreement with the Company or any
other plan, agreement or arrangement of the Company or any other Affiliate of
the Company. The Executive's entitlement to any compensation or benefits other
than as provided herein shall be determined in accordance with the employee
benefit plans of the Company and any of its Affiliates and other applicable
agreements, programs and practices as in effect from time to time.
(e) If the Executive's employment is terminated by the Company or an
Employing Affiliate without Cause prior to the date of a Change in Control but
the Executive reasonably demonstrates that such termination (1) was at the
request of a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control (a "Third Party") and who
effectuates a Change in Control or (2) otherwise arose in connection with, or in
anticipation of, a Change in Control which has been threatened or proposed and
which actually occurs, such termination shall be deemed to have occurred after a
Change in Control, it being agreed that any such action taken following
shareholder approval of a transaction which if consummated would constitute a
Change in Control, shall be deemed to be in anticipation of a Change in Control
provided such transaction is actually consummated.
3. Effect of Section 280G of the Internal Revenue Code.
(a) Notwithstanding anything contained in this Agreement to the
contrary, to the extent that the payments and benefits provided under this
Agreement and benefits provided to, or for the benefit of, the Executive under
any other Company plan or agreement (such payments or benefits collectively
referred to herein as the "Payments") would be subject to the excise tax (the
"Excise Tax") imposed under Section 280G of the Internal Revenue Code of 1986,
as amended (the "Code"), the Payments shall be reduced (but not below zero) if
and to the extent necessary so that no Payment to be made or benefit to be
provided to the Executive shall be subject to the Excise Tax (such reduced
amount is hereinafter referred to as the "Limited Payment Amount"). Unless the
Executive shall have given prior written notice specifying a different order to
the Company to effectuate the foregoing, the Company shall reduce or eliminate
the Payments by first reducing or eliminating the portion of the Payments which
are not payable in cash and then by reducing or eliminating cash payments, in
each case in reverse order beginning with payments or benefits which are to be
paid the
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<PAGE>
farthest in time from the Determination (as hereinafter defined). Any notice
given by the Executive pursuant to the preceding sentence shall take precedence
over the provisions of any other plan, arrangement or agreement governing the
Executive's rights and entitlements to any benefits or compensation.
(b) The determination of whether the Payments shall be reduced to
the Limited Payment Amount pursuant to this Agreement and the amount of such
Limited Payment Amount shall be made, at the Company's expense, by an accounting
firm selected by the Company and reasonably acceptable to the Executive which is
one of the five largest accounting firms in the United States (the "Accounting
Firm"). The Accounting Firm shall provide its determination (the
"Determination"), together with detailed supporting calculations and
documentation to the Company and the Executive within ten days of the
Termination Date, if applicable, or such other time as requested by the Company
or by the Executive (provided the Executive reasonably believes that any of the
Payments may be subject to the Excise Tax) and if the Accounting Firm determines
that no Excise Tax is payable by the Executive with respect to the Payments, it
shall furnish the Executive with an opinion reasonably acceptable to the
Executive that no Excise Tax will be imposed with respect to any such Payments.
The Determination shall be binding, final and conclusive upon the Company and
the Executive.
4. Notice of Termination. Following a Change in Control, any intended
termination of the Executive's employment by the Company or an Employing
Affiliate shall be communicated by a Notice of Termination from the Company to
the Executive, and any intended termination of the Executive's employment by the
Executive for Good Reason shall be communicated by a Notice of Termination from
the Executive to the Company.
5. Fees and Expenses. The Company shall pay, as incurred, all legal fees
and related expenses (including the costs of experts, evidence and counsel) that
the Executive may reasonably incur following a Change in Control as a result of
or in connection with (a) the Executive's contesting, defending or disputing the
basis for the termination of the Executive's employment, (b) the Executive's
hearing before the Board of Directors of the Company as contemplated in Section
14.4 or (c) the Executive's seeking to obtain or enforce any right or benefit
provided by this Agreement or by any other plan or arrangement maintained by the
Company or one of its Affiliates under which the Executive is or may be entitled
to receive benefits.
6. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement (including any Notice of
Termination) shall be in writing, shall be signed by the Executive if to the
Company or by a duly authorized officer of the Company if to the Executive, and
shall be deemed to have been
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<PAGE>
duly given when personally delivered or sent by certified mail, return receipt
requested, postage prepaid, addressed to the respective addresses last given by
each party to the other, provided that all notices to the Company shall be
directed to the attention of the Board with a copy to the Secretary of the
Company. All notices and communications shall be deemed to have been received on
the date of delivery thereof or on the third business day after the mailing
thereof (whichever is earlier), except that notice of change of address shall be
effective only upon receipt.
7. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company or any other
Affiliate of the Company for which the Executive may qualify, nor shall anything
herein limit or reduce such rights as the Executive may have under any other
agreements with the Company or any other Affiliate of the Company. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan or program of the Company or any other Affiliate of the Company
shall be payable in accordance with such plan or program, except as explicitly
modified by this Agreement.
8. (a) Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including but not limited
to any set-off, counterclaim, defense, recoupment, or other claim, right or
action which the Company may have against the Executive or others.
(b) No Mitigation. The Executive shall not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment or otherwise and no such payment shall be offset or reduced by the
amount of any compensation or benefits provided to the Executive in any
subsequent employment except as provided in Section 2(b)(3).
9. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and the Company. No waiver by any party
hereto at any time of any breach by any other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by any party which are not expressly set
forth in this Agreement.
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<PAGE>
10. Successors; Binding Agreement.
(a) This Agreement shall be binding upon and shall inure to the
benefit of the Company and its Successors and Assigns. The Company shall require
its Successors and Assigns to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place.
(b) Neither this Agreement nor any right or interest hereunder shall
be assignable or transferable by the Executive, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal personal representative.
11. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware without giving
effect to the conflict of laws principles thereof. Any action brought by any
party to this Agreement shall be brought and maintained in a court of competent
jurisdiction in the State of Delaware.
12. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
13. Entire Agreement from and after the Termination Date. This Agreement
constitutes the entire agreement between the parties hereto, and from and after
a Termination Date on or following a Change in Control, supersedes all prior
agreements, if any, understandings and arrangements, oral or written, between
the parties hereto, with respect to the subject matter hereof, including the
employment agreement between the Company and the Executive, dated as of May 30,
1997, which shall be null and void; provided, however, that Section 7(b)(iii) of
such employment agreement shall not be superseded by this Agreement and shall
not be null and void and; provided, further, that the Non-Competition Agreement,
dated as of May 30, 1997, between the Company and the Executive shall not be
superseded by this Agreement and shall not be null and void.
14. Definitions.
14.1. Accrued Compensation. For purposes of this Agreement, "Accrued
Compensation" shall mean all amounts of compensation for services rendered to
the Company or an Employing Affiliate that have been earned or accrued through
the Termination Date but that have not been paid as of the Termination Date,
including (a) base salary, (b) reimbursement for reasonable and necessary
business expenses incurred by the Executive on behalf of the Company or an
Employing Affiliate during
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<PAGE>
the period ending on the Termination Date and (c) vacation pay; provided,
however, that Accrued Compensation shall not include any amounts described in
clause (a) that have been deferred pursuant to any salary reduction or deferred
compensation elections made by the Executive.
14.2. Affiliate. For purposes of this Agreement, "Affiliate" means,
with respect to any Person, any entity, directly or indirectly, controlled by,
controlling or under common control with such Person.
14.3. Base Amount. For purposes of this Agreement, "Base Amount"
shall mean, with respect to a Change in Control, the Executive's base salary as
in effect on the date of such Change in Control.
14.4. Cause. For purposes of this Agreement, a termination of
employment is for "Cause" if the Executive
(a) has been convicted of a felony (including a plea of nolo
contendere);
(b) intentionally and continually failed substantially to
perform his reasonably assigned duties with the Company or an Employing
Affiliate (other than a failure resulting from the Executive's incapacity due to
physical or mental illness or from the assignment to the Executive of duties
that would constitute Good Reason) which failure continued for a period of at
least thirty days after a written notice of demand for substantial performance,
signed by a duly authorized officer of the Company, has been delivered to the
Executive specifying the manner in which the Executive has failed substantially
to perform such duties; or
(c) intentionally engaged in illegal conduct or willful
misconduct which is demonstrably and materially injurious to the Company or an
Employing Affiliate.
For purposes of this Agreement, no act, or failure to act, on the Executive's
part shall be considered "intentional" unless the Executive has acted, or failed
to act, with a lack of good faith and with a lack of reasonable belief that the
Executive's action or failure to act was in the best interest of the Company or
an Employing Affiliate. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board or upon the instructions of
the Company's Chairman of the Board, Chief Executive Officer or a senior officer
of the Company or based upon the advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company or an Employing Affiliate.
The termination of employment of the Executive shall not be deemed to be for
Cause pursuant to subparagraph (b) or (c) above unless and until there
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<PAGE>
shall have been delivered to the Executive a copy of a resolution duly adopted
by the affirmative vote of not less than three-fourths of the entire membership
of the Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel, to be heard before the Board) finding that,
in the good faith opinion of the Board, the Executive is guilty of the conduct
described in subparagraph (b) or (c) above, and specifying the particulars
thereof in detail. Notwithstanding anything contained in this Agreement to the
contrary, no failure to perform by the Executive after a Notice of Termination
is given to the Company by the Executive shall constitute Cause for purposes of
this Agreement.
14.5. Change in Control. A "Change in Control" shall mean the
occurrence during the Term of:
(a) An acquisition (other than directly from the Company) of
any common stock of the Company ("Common Stock") or other voting securities of
the Company entitled to vote generally for the election of directors (the
"Voting Securities") by any "Person" (as the term "person" is used for purposes
of Section 13(d) or 14(d) of the Exchange Act), immediately after which such
Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of fifty percent or more of the then outstanding shares
of Common Stock or the combined voting power of the Company's then outstanding
Voting Securities; provided, however, in determining whether a Change in Control
has occurred, Common Stock or Voting Securities which are acquired in a
Non-Control Acquisition (as hereinafter defined) shall not constitute an
acquisition which would cause a Change in Control. A "Non-Control Acquisition"
shall mean an acquisition by (i) an employee benefit plan (or a trust forming a
part thereof) maintained by (A) the Company or (B) any corporation or other
Person of which a majority of its voting power or its voting equity securities
or equity interest is owned, directly or indirectly, by the Company (a
"Subsidiary"), (ii) the Company or its Subsidiaries, (iii) any Person in
connection with a Non-Control Transaction (as hereinafter defined) or (iv) an
Affiliate;
(b) The individuals who, as of February 11, 1999, are members
of the Board (the "Incumbent Board"), cease for any reason to constitute at
least a majority of the members of the Board; provided, however, that if the
election, or nomination for election by the Company's shareholders, of any new
director was approved by a vote of at least two-thirds of the Incumbent Board,
such new director shall, for purposes of this Agreement, be considered a member
of the Incumbent Board; provided further, however, that no individual shall be
considered a member of the Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on
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<PAGE>
behalf of a Person other than the Board (a "Proxy Contest") including by reason
of any agreement intended to avoid or settle any Election Contest or Proxy
Contest; or
(c) The consummation of:
(1) A merger, consolidation, reorganization or other
business combination with or into the Company or in which securities of the
Company are issued, unless such merger, consolidation, reorganization or other
business combination is a "Non-Control Transaction." A "Non-Control Transaction"
shall mean a merger, consolidation, reorganization or other business combination
with or into the Company or in which securities of the Company are issued where:
(A) the shareholders of the Company, immediately
before such merger, consolidation, reorganization or other business combination
own directly or indirectly immediately following such merger, consolidation,
reorganization or other business combination, at least fifty percent of the
combined voting power of the outstanding voting securities of the corporation
resulting from such merger or consolidation, reorganization or other business
combination (the "Surviving Corporation") in substantially the same proportion
as their ownership of the Voting Securities immediately before such merger,
consolidation, reorganization, or other business combination,
(B) the individuals who were members of the
Incumbent Board immediately prior to the execution of the agreement providing
for such merger, consolidation, reorganization or other business combination
constitute at least two-thirds of the members of the board of directors of the
Surviving Corporation, or a corporation beneficially directly or indirectly
owning a majority of the combined voting power of the outstanding voting
securities of the Surviving Corporation, and
(C) no Person other than (i) the Company, (ii) any
Subsidiary, (iii) any employee benefit plan (or any trust forming a part
thereof) that, immediately prior to such merger, consolidation, reorganization
or other business combination was maintained by the Company, the Surviving
Corporation, or any Subsidiary, or (iv) any Person who, immediately prior to
such merger, consolidation, reorganization or other business combination had
Beneficial Ownership of fifty percent or more of the then outstanding Voting
Securities or common stock of the Company, has Beneficial Ownership of fifty
percent or more of the combined voting power of the Surviving Corporation's then
outstanding voting securities or its common stock.
(2) A complete liquidation or dissolution of the
Company; or
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(3) The sale or other disposition of all or
substantially all of the assets of the Company to any Person (other than (i) any
such sale or disposition that results in at least fifty percent of the Company's
assets being owned by a Subsidiary or Subsidiaries or (ii) a distribution to the
Company's stockholders of the stock of a Subsidiary or any other assets).
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because any Person (the "Subject Person") acquired Beneficial Ownership
of more than the permitted amount of the then outstanding Common Stock or Voting
Securities as a result of the acquisition of Common Stock or Voting Securities
by the Company which, by reducing the number of shares of Common Stock or Voting
Securities then outstanding, increases the proportional number of shares
Beneficially Owned by the Subject Person, provided that if a Change in Control
would occur (but for the operation of this sentence) as a result of the
acquisition of shares of Common Stock or Voting Securities by the Company, and
after such share acquisition by the Company, the Subject Person becomes the
Beneficial Owner of any additional shares of Common Stock or Voting Securities
which increase the percentage of the then outstanding shares of Common Stock or
Voting Securities Beneficially Owned by the Subject Person, then a Change in
Control shall occur.
14.6. Company. For purposes of this Agreement, all references to the
Company shall include its Successors and Assigns.
14.7. Disability. For purposes of this Agreement, "Disability" shall
mean a physical or mental infirmity which impairs the Executive's ability to
substantially perform his duties with the Company or an Employing Affiliate for
six consecutive months, and within the time period set forth in a Notice of
Termination given to the Executive (which time period shall not be less than
thirty days), the Executive shall not have returned to full-time performance of
his duties; provided, however, that if the Company's Long Term Disability Plan,
or any successor plan (the "Disability Plan"), is then in effect, the Executive
shall not be deemed disabled for purposes of this Agreement unless the Executive
is also eligible for long-term disability benefits under the Disability Plan (or
similar benefits in the event of a successor plan).
14.8. Good Reason.
(a) For purposes of this Agreement, "Good Reason" shall mean
the occurrence after a Change in Control of any of the following events or
conditions:
(1) a material adverse change in the Executive's duties
or responsibilities (including reporting responsibilities), except in connection
with the
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<PAGE>
termination of his employment for Disability, Cause, as a result of his death or
by the Executive other than for Good Reason;
(2) a reduction in the Executive's annual base salary;
(3) the relocation of the offices of the Company or an
Employing Affiliate at which the Executive is principally employed to a location
more than 35 miles from the location of such offices immediately prior to a
Change in Control, or the requirement that the Executive be based anywhere other
than at such offices, except to the extent the Executive was not previously
assigned to a principal location and except for required travel on the business
of the Company or an Employing Affiliate to an extent substantially consistent
with the Executive's business travel obligations at the time of a Change in
Control; or
(4) the failure by the Company or an Employing Affiliate
to pay to the Executive any portion of the Executive's current compensation or
to pay to the Executive any portion of an installment of deferred compensation
under any deferred compensation program of the Company or an Employing Affiliate
in which the Executive participated, within seven days of the date such
compensation is due.
(b) Any event or condition described in Section 14.8(a)(1)
through (4) which occurs prior to a Change in Control but which the Executive
reasonably demonstrates (i) was at the request of a Third Party who effectuates
a Change in Control or (ii) otherwise arose in connection with or in
anticipation of a Change in Control which has been threatened or proposed and
which actually occurs, shall constitute Good Reason for purposes of this
Agreement notwithstanding that it occurred prior to a Change in Control, it
being agreed that any such action taken following shareholder approval of a
transaction which if consummated would constitute a Change in Control, shall be
deemed to be in anticipation of a Change in Control provided such transaction is
actually consummated.
14.9. Notice of Termination. For purposes of this Agreement,
following a Change in Control, "Notice of Termination" shall mean a written
notice of termination of the Executive's employment, signed by the Executive if
to the Company or by a duly authorized officer of the Company if to the
Executive, which indicates the specific termination provision in this Agreement,
if any, relied upon and which sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason, Disability or Cause shall not serve to
waive any right of the Executive or the Company, respectively, hereunder or
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preclude the Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the Company's rights hereunder.
14.10. Successors and Assigns. For purposes of this Agreement,
"Successors and Assigns" shall mean, with respect to the Company, a corporation
or other entity acquiring all or substantially all the assets and business of
the Company, as the case may be, whether by operation of law or otherwise.
14.11. Termination Date. For purposes of this Agreement,
"Termination Date" shall mean (a) in the case of the Executive's death, his date
of death, (b) if the Executive's employment is terminated for Disability, thirty
days after Notice of Termination is given (provided that the Executive shall not
have returned to the performance of his duties on a full-time basis during such
thirty day period) and (c) if the Executive's employment is terminated for any
other reason, the date specified in the Notice of Termination (which, in the
case of a termination for Cause shall not be less than thirty days, and in the
case of a termination for Good Reason shall not be more than sixty days, from
the date such Notice of Termination is given); provided, however, that if within
thirty days after any Notice of Termination is given the party receiving such
Notice of Termination in good faith notifies the other party that a dispute
exists concerning the basis for the termination, the Termination Date shall be
the date on which the dispute is finally determined, either by mutual written
agreement of the parties, or by the final judgment, order or decree of a court
of competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been taken). Notwithstanding the pendency of any such dispute, the
Company or an Employing Affiliate shall continue to pay the Executive his base
salary and continue the Executive as a participant (at or above the level
provided prior to the date of such dispute) in all compensation, incentive,
bonus, pension, profit sharing, medical, hospitalization, prescription drug,
dental, life insurance and disability benefit plans in which he was
participating when the notice giving rise to the dispute was given, until the
dispute is finally resolved whether or not the dispute is resolved in favor of
the Company, and the Executive shall not be obligated to repay to the Company or
an Employing Affiliate any amounts paid or benefits provided pursuant to this
sentence.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officers and the Executive has executed this Agreement as
of the day and year first above written.
AXSYS TECHNOLOGIES, INC.
/s/ Stephen W. Bershad
-----------------------------------
By: Stephen W. Bershad
Its: Chairman and Chief Executive
Officer
EXECUTIVE
/s/ Richard V. Howitt
-----------------------------------
Richard V. Howitt
ATTEST
/s/ David L. Concannon
- ------------------------------
By: David L. Concannon
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Exhibit 10(3)
SEVERANCE PROTECTION AGREEMENT
THIS AGREEMENT made as of the 11th day of February, 1999, by and between
Axsys Technologies, Inc. (the "Company") and Raymond F. Kunzmann (the
"Executive").
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the possibility of a Change in Control (as hereinafter defined) exists and
that the threat or the occurrence of a Change in Control can result in
significant distraction of the Company's key management personnel because of the
uncertainties inherent in such a situation;
WHEREAS, the Board has determined that it is essential and in the best
interests of the Company and its stockholders for the Company to retain the
services of the Executive in the event of a threat or occurrence of a Change in
Control and to ensure the Executive's continued dedication and efforts in such
event without undue concern for the Executive's personal financial and
employment security; and
WHEREAS, in order to induce the Executive to remain in the employ of the
Company and/or one of its Affiliates (the entity or entities employing the
Executive, the "Employing Affiliate"), particularly in the event of a threat or
the occurrence of a Change in Control, the Company desires to enter into this
Agreement with the Executive to provide the Executive with certain benefits in
the event the Executive's employment is terminated as a result of, or in
connection with, a Change in Control.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. Term of Agreement. This Agreement shall commence as of February 11,
1999, and shall continue in effect until February 11, 2001 (the "Term");
provided, however, that on February 11, 2000, and on each February 11
thereafter, the Term shall automatically be extended for one year unless either
the Executive or the Company shall have given written notice to the other at
least ninety days prior thereto that the Term shall not be so extended;
provided, further, however, that following the occurrence of a Change in
Control, the Term shall not expire prior to the expiration of twenty-four months
after such occurrence.
2. Termination of Employment. If, during the Term, the Executive's
employment with the Company or an Employing Affiliate shall be terminated within
twenty-four months following a Change in Control, the Executive shall be
entitled to the following compensation and benefits:
<PAGE>
(a) If the Executive's employment with the Company or an Employing
Affiliate shall be terminated (1) by the Company for Cause or Disability, (2) by
reason of the Executive's death, or (3) by the Executive other than for Good
Reason or pursuant to a Window Period Termination, the Company shall pay to the
Executive the Accrued Compensation.
(b) If the Executive's employment with the Company or an Employing
Affiliate shall be terminated for any reason other than as specified in Section
2(a), or if the Executive terminates his employment with or without Good Reason
during the one month period commencing six months following a Change in Control
(a "Window Period Termination"), the Executive shall be entitled to the
following:
(1) the Company shall pay the Executive the Accrued
Compensation;
(2) the Company shall pay the Executive as severance pay an
amount equal to 2.99 times the Executive's Base Amount; and
(3) for twelve months following the Termination Date (the
"Continuation Period"), the Company shall continue on behalf of the Executive
and his dependents and beneficiaries the life insurance, disability, medical,
dental, prescription drug and hospitalization coverages and benefits provided to
the Executive immediately prior to a Change in Control (the "Benefits
Continuation"), or, if greater, the coverages and benefits provided at any time
thereafter; provided, however, that within five days following the Termination
Date, the Executive may elect to receive from the Company in cash, in lieu of
the Benefits Continuation, the value of the Benefits Continuation. The coverages
and benefits (including deductibles and costs to the Executive) provided in this
Section 2(b)(3) during the Continuation Period shall be no less favorable to the
Executive and his dependents and beneficiaries than the most favorable of such
coverages and benefits referred to above. The Company's obligation hereunder
with respect to the foregoing coverages and benefits shall be reduced to the
extent that the Executive obtains any such coverages and benefits pursuant to a
subsequent employer's benefit plans, in which case the Company may reduce any of
the coverages or benefits it is required to provide the Executive hereunder so
long as the aggregate coverages and benefits (including deductibles and costs to
the Executive) of the combined benefit plans are no less favorable to the
Executive than the coverages and benefits required to be provided hereunder.
This Section 2(b)(3) shall not be interpreted so as to limit any benefits to
which the Executive, his dependents or beneficiaries may be entitled under any
of the Company's employee benefit plans, programs or practices following the
Executive's termination of employment, including but not limited to retiree
medical and life insurance benefits.
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<PAGE>
(c) The cash amounts provided for in Sections 2(a) and 2(b) shall be
paid in a single lump sum cash payment within ten days after the Termination
Date (or earlier, if required by applicable law).
(d) The severance pay and benefits provided for in this Section 2
shall be in lieu of any other severance pay to which the Executive may be
entitled under any severance or employment agreement with the Company or any
other plan, agreement or arrangement of the Company or any other Affiliate of
the Company. The Executive's entitlement to any compensation or benefits other
than as provided herein shall be determined in accordance with the employee
benefit plans of the Company and any of its Affiliates and other applicable
agreements, programs and practices as in effect from time to time.
(e) If the Executive's employment is terminated by the Company or an
Employing Affiliate without Cause prior to the date of a Change in Control but
the Executive reasonably demonstrates that such termination (1) was at the
request of a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control (a "Third Party") and who
effectuates a Change in Control or (2) otherwise arose in connection with, or in
anticipation of, a Change in Control which has been threatened or proposed and
which actually occurs, such termination shall be deemed to have occurred after a
Change in Control, it being agreed that any such action taken following
shareholder approval of a transaction which if consummated would constitute a
Change in Control, shall be deemed to be in anticipation of a Change in Control
provided such transaction is actually consummated.
3. Effect of Section 280G of the Internal Revenue Code.
(a) Notwithstanding anything contained in this Agreement to the
contrary, to the extent that the payments and benefits provided under this
Agreement and benefits provided to, or for the benefit of, the Executive under
any other Company plan or agreement (such payments or benefits collectively
referred to herein as the "Payments") would be subject to the excise tax (the
"Excise Tax") imposed under Section 280G of the Internal Revenue Code of 1986,
as amended (the "Code"), the Payments shall be reduced (but not below zero) if
and to the extent necessary so that no Payment to be made or benefit to be
provided to the Executive shall be subject to the Excise Tax (such reduced
amount is hereinafter referred to as the "Limited Payment Amount"). Unless the
Executive shall have given prior written notice specifying a different order to
the Company to effectuate the foregoing, the Company shall reduce or eliminate
the Payments by first reducing or eliminating the portion of the Payments which
are not payable in cash and then by reducing or eliminating cash payments, in
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<PAGE>
each case in reverse order beginning with payments or benefits which are to be
paid the farthest in time from the Determination (as hereinafter defined). Any
notice given by the Executive pursuant to the preceding sentence shall take
precedence over the provisions of any other plan, arrangement or agreement
governing the Executive's rights and entitlements to any benefits or
compensation.
(b) The determination of whether the Payments shall be reduced to
the Limited Payment Amount pursuant to this Agreement and the amount of such
Limited Payment Amount shall be made, at the Company's expense, by an accounting
firm selected by the Company and reasonably acceptable to the Executive which is
one of the five largest accounting firms in the United States (the "Accounting
Firm"). The Accounting Firm shall provide its determination (the
"Determination"), together with detailed supporting calculations and
documentation to the Company and the Executive within ten days of the
Termination Date, if applicable, or such other time as requested by the Company
or by the Executive (provided the Executive reasonably believes that any of the
Payments may be subject to the Excise Tax) and if the Accounting Firm determines
that no Excise Tax is payable by the Executive with respect to the Payments, it
shall furnish the Executive with an opinion reasonably acceptable to the
Executive that no Excise Tax will be imposed with respect to any such Payments.
The Determination shall be binding, final and conclusive upon the Company and
the Executive.
4. Notice of Termination. Following a Change in Control, any intended
termination of the Executive's employment by the Company or an Employing
Affiliate shall be communicated by a Notice of Termination from the Company to
the Executive, and any intended termination of the Executive's employment by the
Executive for Good Reason shall be communicated by a Notice of Termination from
the Executive to the Company.
5. Fees and Expenses. The Company shall pay, as incurred, all legal fees
and related expenses (including the costs of experts, evidence and counsel) that
the Executive may reasonably incur following a Change in Control as a result of
or in connection with (a) the Executive's contesting, defending or disputing the
basis for the termination of the Executive's employment, (b) the Executive's
hearing before the Board of Directors of the Company as contemplated in Section
16.4 or (c) the Executive's seeking to obtain or enforce any right or benefit
provided by this Agreement or by any other plan or arrangement maintained by the
Company or one of its Affiliates under which the Executive is or may be entitled
to receive benefits.
6. Unauthorized Disclosure.
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<PAGE>
(a) The Executive agrees and understands that during the Executive's
employment with the Company or an Employing Affiliate, the Executive has been
and will be exposed to and receive information relating to the affairs of the
Company considered by the Company to be confidential and in the nature of trade
secrets (including but not limited to procedures, memoranda, notes, records and
customer lists, whether such information has been or is made, developed or
compiled by the Executive or otherwise has been or is made available to him)
(any and all such information, the "Confidential Information"). The Executive
agrees that, during the Term and thereafter, he shall keep such Confidential
Information confidential and will not disclose such Confidential Information,
either directly or indirectly, to any third person or entity without the prior
written consent of the Company; provided, however, that (i) the Executive shall
have no such obligation to the extent such Confidential Information is or
becomes publicly known other than as a result of the Executive's breach of his
obligations hereunder or is received by the Executive following the Termination
Date and (ii) the Executive may, after giving prior notice to the Company to the
extent practicable under the circumstances, disclose such Confidential
Information to the extent required by applicable laws or governmental
regulations or judicial or regulatory process.
(b) The Executive agrees that all Confidential Information is and
will remain the property of the Company. The Executive further agrees that,
during the Term and thereafter, he shall hold in the strictest confidence all
Confidential Information, and shall not, directly or indirectly, duplicate,
sell, use, lease, commercialize, disclose or otherwise divulge to any person or
entity any portion of the Confidential Information or use any Confidential
Information for his own benefit or profit or allow any person or entity, other
than the Company and its authorized employees, to use or otherwise gain access
to any Confidential Information.
(c) All memoranda, notes, records, customer lists and other
documents made or compiled by the Executive or otherwise made available to him
concerning the business of the Company or its subsidiaries or Affiliates shall
be the Company's property and shall be delivered to the Company upon the
termination of the Executive's employment with the Company or an Employing
Affiliate or at any other time upon request by the Company, and the Executive
shall retain no copies of those documents. The Executive shall never at any time
have or claim any right, title or interest in any material, invention or matter
of any sort created, prepared or used in connection with the business of the
Company or its subsidiaries or Affiliates.
7. Non-competition.
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(a) By and in consideration of the Company's entering into this
Agreement and the payments to be made and benefits to be provided by the Company
hereunder and further in consideration of the Executive's exposure to the
proprietary information of the Company, the Executive agrees that the Executive
will not, during the Term, and thereafter during the Non-competition Term (as
hereinafter defined), directly or indirectly, own, manage, operate, join,
control, be employed by, or participate in the ownership, management, operation
or control of, or be connected in any manner with, including but not limited to
holding any position as a shareholder, director, officer, consultant,
independent contractor, employee, partner, or investor in, any Restricted
Enterprise (as defined below); provided, however, that in no event shall
ownership of less than one percent of the outstanding equity securities of any
issuer whose securities are registered under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), standing alone, be prohibited by this
Section 7. For purposes of this paragraph, the term "Restricted Enterprise"
shall mean any person, corporation, partnership or other entity that competes,
directly or indirectly, with any business or activity conducted or proposed to
be conducted by the Company or any of its subsidiaries or Affiliates as of the
date of the Executive's termination of employment. Following termination of
employment, upon request of the Company, the Executive shall notify the Company
of the Executive's then current employment status. For purposes of this
Agreement, the "Non-competition Term" shall mean the period beginning on the
Termination Date and ending on the first anniversary of such date. Any material
breach of the terms of this paragraph shall be considered Cause under Section
16.4.
(b) The Executive agrees that any breach of the terms of this
Section 7 would result in irreparable injury and damage to the Company and/or
its subsidiaries or Affiliates for which the Company and/or its subsidiaries or
Affiliates would have no adequate remedy at law; the Executive therefore also
agrees that in the event of said breach or any threat of breach, the Company
and/or its subsidiaries or Affiliates, as applicable, shall be entitled to an
immediate injunction and restraining order to prevent such breach and/or
threatened breach and/or continued breach by the Executive and/or any and all
persons and/or entities acting for and/or with the Executive, without having to
prove damages, in addition to any other remedies to which the Company and/or its
subsidiaries or Affiliates may be entitled at law or in equity. The terms of
this paragraph shall not prevent the Company and/or its subsidiaries or
Affiliates from pursuing any other available remedies for any breach or
threatened breach hereof, including but not limited to the recovery of damages
from the Executive. The Executive and the Company further agree that the
provisions of the covenants contained in this Section 7 are reasonable and
necessary to protect the businesses of the Company and its subsidiaries or
Affiliates because of the Executive's access to Confidential Information and his
material participation in the operation of such businesses. Should a court or
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arbitrator determine, however, that any provision of the covenants contained in
this Section 7 is not reasonable or valid, either in period of time,
geographical area, or otherwise, the parties hereto agree that such covenants
should be interpreted and enforced to the maximum extent which such court or
arbitrator deems reasonable or valid.
The existence of any claim or cause of action by the Executive against the
Company and/or its subsidiaries or Affiliates, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company of the covenants contained in this Section 7.
8. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement (including any Notice of
Termination) shall be in writing, shall be signed by the Executive if to the
Company or by a duly authorized officer of the Company if to the Executive, and
shall be deemed to have been duly given when personally delivered or sent by
certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses last given by each party to the other, provided that all
notices to the Company shall be directed to the attention of the Board with a
copy to the Secretary of the Company. All notices and communications shall be
deemed to have been received on the date of delivery thereof or on the third
business day after the mailing thereof (whichever is earlier), except that
notice of change of address shall be effective only upon receipt.
9. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company or any other
Affiliate of the Company for which the Executive may qualify, nor shall anything
herein limit or reduce such rights as the Executive may have under any other
agreements with the Company or any other Affiliate of the Company. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan or program of the Company or any other Affiliate of the Company
shall be payable in accordance with such plan or program, except as explicitly
modified by this Agreement.
10. (a) Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including but not limited
to any set-off, counterclaim, defense, recoupment, or other claim, right or
action which the Company may have against the Executive or others.
(b) No Mitigation. The Executive shall not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment or otherwise and no such payment shall be offset or reduced by the
amount of any
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compensation or benefits provided to the Executive in any subsequent employment
except as provided in Section 2(b)(3).
11. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and the Company. No waiver by any party
hereto at any time of any breach by any other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by any party which are not expressly set
forth in this Agreement.
12. Successors; Binding Agreement.
(a) This Agreement shall be binding upon and shall inure to the
benefit of the Company and its Successors and Assigns. The Company shall require
its Successors and Assigns to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place.
(b) Neither this Agreement nor any right or interest hereunder shall
be assignable or transferable by the Executive, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal personal representative.
13. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware without giving
effect to the conflict of laws principles thereof. Any action brought by any
party to this Agreement shall be brought and maintained in a court of competent
jurisdiction in the State of Delaware.
14. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
15. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto, and from and after a Termination Date on or
following a Change in Control, supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto,
with respect to the subject matter hereof, including the letter agreement
between the Company and the Executive, dated as of June 10, 1996.
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<PAGE>
16. Definitions.
16.1. Accrued Compensation. For purposes of this Agreement, "Accrued
Compensation" shall mean all amounts of compensation for services rendered to
the Company or an Employing Affiliate that have been earned or accrued through
the Termination Date but that have not been paid as of the Termination Date,
including (a) base salary, (b) reimbursement for reasonable and necessary
business expenses incurred by the Executive on behalf of the Company or an
Employing Affiliate during the period ending on the Termination Date and (c)
vacation pay; provided, however, that Accrued Compensation shall not include any
amounts described in clause (a) that have been deferred pursuant to any salary
reduction or deferred compensation elections made by the Executive.
16.2. Affiliate. For purposes of this Agreement, "Affiliate" means,
with respect to any Person, any entity, directly or indirectly, controlled by,
controlling or under common control with such Person.
16.3. Base Amount. For purposes of this Agreement, "Base Amount"
shall mean, with respect to a Change in Control, the Executive's "base amount"
as determined under Section 280G of the Code and the regulations proposed
thereunder.
16.4. Cause. For purposes of this Agreement, a termination of
employment is for "Cause" if the Executive
(a) has been convicted of a felony (including a plea of nolo
contendere);
(b) intentionally and continually failed substantially to
perform his reasonably assigned duties with the Company or an Employing
Affiliate (other than a failure resulting from the Executive's incapacity due to
physical or mental illness or from the assignment to the Executive of duties
that would constitute Good Reason) which failure continued for a period of at
least thirty days after a written notice of demand for substantial performance,
signed by a duly authorized officer of the Company, has been delivered to the
Executive specifying the manner in which the Executive has failed substantially
to perform such duties; or
(c) intentionally engaged in illegal conduct or willful
misconduct which is demonstrably and materially injurious to the Company or an
Employing Affiliate.
For purposes of this Agreement, no act, or failure to act, on the Executive's
part shall be considered "intentional" unless the Executive has acted, or failed
to act, with a lack of good faith and with a lack of reasonable belief that the
Executive's action or failure to
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act was in the best interest of the Company or an Employing Affiliate. Any act,
or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Company's Chairman of the
Board, Chief Executive Officer or a senior officer of the Company or based upon
the advice of counsel for the Company shall be conclusively presumed to be done,
or omitted to be done, by the Executive in good faith and in the best interests
of the Company or an Employing Affiliate. The termination of employment of the
Executive shall not be deemed to be for Cause pursuant to subparagraph (b) or
(c) above unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel, to
be heard before the Board) finding that, in the good faith opinion of the Board,
the Executive is guilty of the conduct described in subparagraph (b) or (c)
above, and specifying the particulars thereof in detail. Notwithstanding
anything contained in this Agreement to the contrary, no failure to perform by
the Executive after a Notice of Termination is given to the Company by the
Executive shall constitute Cause for purposes of this Agreement.
16.5. Change in Control. A "Change in Control" shall mean the
occurrence during the Term of:
(a) An acquisition (other than directly from the Company) of
any common stock of the Company ("Common Stock") or other voting securities of
the Company entitled to vote generally for the election of directors (the
"Voting Securities") by any "Person" (as the term "person" is used for purposes
of Section 13(d) or 14(d) of the Exchange Act), immediately after which such
Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of fifty percent or more of the then outstanding shares
of Common Stock or the combined voting power of the Company's then outstanding
Voting Securities; provided, however, in determining whether a Change in Control
has occurred, Common Stock or Voting Securities which are acquired in a
Non-Control Acquisition (as hereinafter defined) shall not constitute an
acquisition which would cause a Change in Control. A "Non-Control Acquisition"
shall mean an acquisition by (i) an employee benefit plan (or a trust forming a
part thereof) maintained by (A) the Company or (B) any corporation or other
Person of which a majority of its voting power or its voting equity securities
or equity interest is owned, directly or indirectly, by the Company (a
"Subsidiary"), (ii) the Company or its Subsidiaries, (iii) any Person in
connection with a Non-Control Transaction (as hereinafter defined) or (iv) an
Affiliate;
(b) The individuals who, as of February 11, 1999, are members
of the Board (the "Incumbent Board"), cease for any reason to constitute at
least a
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majority of the members of the Board; provided, however, that if the election,
or nomination for election by the Company's shareholders, of any new director
was approved by a vote of at least two-thirds of the Incumbent Board, such new
director shall, for purposes of this Agreement, be considered a member of the
Incumbent Board; provided further, however, that no individual shall be
considered a member of the Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board (a "Proxy Contest") including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy Contest; or
(c) The consummation of:
(1) A merger, consolidation, reorganization or other
business combination with or into the Company or in which securities of the
Company are issued, unless such merger, consolidation, reorganization or other
business combination is a "Non-Control Transaction." A "Non-Control Transaction"
shall mean a merger, consolidation, reorganization or other business combination
with or into the Company or in which securities of the Company are issued where:
(A) the shareholders of the Company, immediately
before such merger, consolidation, reorganization or other business combination
own directly or indirectly immediately following such merger, consolidation,
reorganization or other business combination, at least fifty percent of the
combined voting power of the outstanding voting securities of the corporation
resulting from such merger or consolidation, reorganization or other business
combination (the "Surviving Corporation") in substantially the same proportion
as their ownership of the Voting Securities immediately before such merger,
consolidation, reorganization, or other business combination,
(B) the individuals who were members of the
Incumbent Board immediately prior to the execution of the agreement providing
for such merger, consolidation, reorganization or other business combination
constitute at least two-thirds of the members of the board of directors of the
Surviving Corporation, or a corporation beneficially directly or indirectly
owning a majority of the combined voting power of the outstanding voting
securities of the Surviving Corporation, and
(C) no Person other than (i) the Company, (ii) any
Subsidiary, (iii) any employee benefit plan (or any trust forming a part
thereof) that, immediately prior to such merger, consolidation, reorganization
or other business combination was maintained by the Company, the Surviving
Corporation, or any
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Subsidiary, or (iv) any Person who, immediately prior to such merger,
consolidation, reorganization or other business combination had Beneficial
Ownership of fifty percent or more of the then outstanding Voting Securities or
common stock of the Company, has Beneficial Ownership of fifty percent or more
of the combined voting power of the Surviving Corporation's then outstanding
voting securities or its common stock.
(2) A complete liquidation or dissolution of the
Company; or
(3) The sale or other disposition of all or
substantially all of the assets of the Company to any Person (other than (i) any
such sale or disposition that results in at least fifty percent of the Company's
assets being owned by a Subsidiary or Subsidiaries or (ii) a distribution to the
Company's stockholders of the stock of a Subsidiary or any other assets).
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because any Person (the "Subject Person") acquired Beneficial Ownership
of more than the permitted amount of the then outstanding Common Stock or Voting
Securities as a result of the acquisition of Common Stock or Voting Securities
by the Company which, by reducing the number of shares of Common Stock or Voting
Securities then outstanding, increases the proportional number of shares
Beneficially Owned by the Subject Person, provided that if a Change in Control
would occur (but for the operation of this sentence) as a result of the
acquisition of shares of Common Stock or Voting Securities by the Company, and
after such share acquisition by the Company, the Subject Person becomes the
Beneficial Owner of any additional shares of Common Stock or Voting Securities
which increase the percentage of the then outstanding shares of Common Stock or
Voting Securities Beneficially Owned by the Subject Person, then a Change in
Control shall occur.
16.6. Company. For purposes of this Agreement, all references to the
Company shall include its Successors and Assigns.
16.7. Disability. For purposes of this Agreement, "Disability" shall
mean a physical or mental infirmity which impairs the Executive's ability to
substantially perform his duties with the Company or an Employing Affiliate for
six consecutive months, and within the time period set forth in a Notice of
Termination given to the Executive (which time period shall not be less than
thirty days), the Executive shall not have returned to full-time performance of
his duties; provided, however, that if the Company's Long Term Disability Plan,
or any successor plan (the "Disability Plan"), is then in effect, the Executive
shall not be deemed disabled for purposes of this Agreement unless the Executive
is also eligible for long-term disability benefits under the Disability Plan (or
similar benefits in the event of a successor plan).
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16.8. Good Reason.
(a) For purposes of this Agreement, "Good Reason" shall mean
the occurrence after a Change in Control of any of the following events or
conditions:
(1) a material adverse change in the Executive's duties
or responsibilities (including reporting responsibilities), except in connection
with the termination of his employment for Disability, Cause, as a result of his
death or by the Executive other than for Good Reason;
(2) a reduction in the Executive's annual base salary;
(3) the relocation of the offices of the Company or an
Employing Affiliate at which the Executive is principally employed to a location
more than 25 miles from the location of such offices immediately prior to a
Change in Control, or the requirement that the Executive be based anywhere other
than at such offices, except to the extent the Executive was not previously
assigned to a principal location and except for required travel on the business
of the Company or an Employing Affiliate to an extent substantially consistent
with the Executive's business travel obligations at the time of a Change in
Control; or
(4) the failure by the Company or an Employing Affiliate
to pay to the Executive any portion of the Executive's current compensation or
to pay to the Executive any portion of an installment of deferred compensation
under any deferred compensation program of the Company or an Employing Affiliate
in which the Executive participated, within seven days of the date such
compensation is due.
(b) Any event or condition described in Section 16.8(a)(1)
through (4) which occurs prior to a Change in Control but which the Executive
reasonably demonstrates (i) was at the request of a Third Party who effectuates
a Change in Control or (ii) otherwise arose in connection with or in
anticipation of a Change in Control which has been threatened or proposed and
which actually occurs, shall constitute Good Reason for purposes of this
Agreement notwithstanding that it occurred prior to a Change in Control, it
being agreed that any such action taken following shareholder approval of a
transaction which if consummated would constitute a Change in Control, shall be
deemed to be in anticipation of a Change in Control provided such transaction is
actually consummated.
16.9. Notice of Termination. For purposes of this Agreement,
following a Change in Control, "Notice of Termination" shall mean a written
notice of termination of the Executive's employment, signed by the Executive if
to the Company or by a duly authorized officer of the Company if to the
Executive, which indicates the specific
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termination provision in this Agreement, if any, relied upon and which sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated. The failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason, Disability or Cause shall not serve to waive any right of the
Executive or the Company, respectively, hereunder or preclude the Executive or
the Company, respectively, from asserting such fact or circumstance in enforcing
the Executive's or the Company's rights hereunder.
16.10. Successors and Assigns. For purposes of this Agreement,
"Successors and Assigns" shall mean, with respect to the Company, a corporation
or other entity acquiring all or substantially all the assets and business of
the Company, as the case may be, whether by operation of law or otherwise.
16.11. Termination Date. For purposes of this Agreement,
"Termination Date" shall mean (a) in the case of the Executive's death, his date
of death, (b) if the Executive's employment is terminated for Disability, thirty
days after Notice of Termination is given (provided that the Executive shall not
have returned to the performance of his duties on a full-time basis during such
thirty day period) and (c) if the Executive's employment is terminated for any
other reason, the date specified in the Notice of Termination (which, in the
case of a termination for Cause shall not be less than thirty days, and in the
case of a termination for Good Reason shall not be more than sixty days, from
the date such Notice of Termination is given); provided, however, that if within
thirty days after any Notice of Termination is given the party receiving such
Notice of Termination in good faith notifies the other party that a dispute
exists concerning the basis for the termination, the Termination Date shall be
the date on which the dispute is finally determined, either by mutual written
agreement of the parties, or by the final judgment, order or decree of a court
of competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been taken). Notwithstanding the pendency of any such dispute, the
Company or an Employing Affiliate shall continue to pay the Executive his base
salary and continue the Executive as a participant (at or above the level
provided prior to the date of such dispute) in all compensation, incentive,
bonus, pension, profit sharing, medical, hospitalization, prescription drug,
dental, life insurance and disability benefit plans in which he was
participating when the notice giving rise to the dispute was given, until the
dispute is finally resolved whether or not the dispute is resolved in favor of
the Company, and the Executive shall not be obligated to repay to the Company or
an Employing Affiliate any amounts paid or benefits provided pursuant to this
sentence.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officers and the Executive has executed this Agreement as
of the day and year first above written.
AXSYS TECHNOLOGIES, INC.
/s/ Stephen W. Bershad
------------------------------------
By: Stephen W. Bershad
Its: Chairman and Chief Executive
Officer
EXECUTIVE
/s/ Raymond F. Kunzmann
------------------------------------
Raymond F. Kunzmann
ATTEST
/s /David L. Concannon
- ---------------------------
By: David L. Concannon
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Exhibit 10(4)
SEVERANCE PROTECTION AGREEMENT
THIS AGREEMENT made as of the 11th day of February, 1999, by and between
Axsys Technologies, Inc. (the "Company") and Kenneth F. Stern (the "Executive").
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the possibility of a Change in Control (as hereinafter defined) exists and
that the threat or the occurrence of a Change in Control can result in
significant distraction of the Company's key management personnel because of the
uncertainties inherent in such a situation;
WHEREAS, the Board has determined that it is essential and in the best
interests of the Company and its stockholders for the Company to retain the
services of the Executive in the event of a threat or occurrence of a Change in
Control and to ensure the Executive's continued dedication and efforts in such
event without undue concern for the Executive's personal financial and
employment security; and
WHEREAS, in order to induce the Executive to remain in the employ of the
Company and/or one of its Affiliates (the entity or entities employing the
Executive, the "Employing Affiliate"), particularly in the event of a threat or
the occurrence of a Change in Control, the Company desires to enter into this
Agreement with the Executive to provide the Executive with certain benefits in
the event the Executive's employment is terminated as a result of, or in
connection with, a Change in Control.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. Term of Agreement. This Agreement shall commence as of February 11,
1999, and shall continue in effect until February 11, 2001 (the "Term");
provided, however, that on February 11, 2000, and on each February 11
thereafter, the Term shall automatically be extended for one year unless either
the Executive or the Company shall have given written notice to the other at
least ninety days prior thereto that the Term shall not be so extended;
provided, further, however, that following the occurrence of a Change in
Control, the Term shall not expire prior to the expiration of twenty-four months
after such occurrence.
2. Termination of Employment. If, during the Term, the Executive's
employment with the Company or an Employing Affiliate shall be terminated within
twenty-four months following a Change in Control, the Executive shall be
entitled to the following compensation and benefits:
<PAGE>
(a) If the Executive's employment with the Company or an Employing
Affiliate shall be terminated (1) by the Company for Cause or Disability, (2) by
reason of the Executive's death, or (3) by the Executive other than for Good
Reason or pursuant to a Window Period Termination, the Company shall pay to the
Executive the Accrued Compensation.
(b) If the Executive's employment with the Company or an Employing
Affiliate shall be terminated for any reason other than as specified in Section
2(a), or if the Executive terminates his employment with or without Good Reason
during the one month period commencing six months following a Change in Control
(a "Window Period Termination"), the Executive shall be entitled to the
following:
(1) the Company shall pay the Executive the Accrued
Compensation;
(2) the Company shall pay the Executive as severance pay an
amount equal to 2.99 times the Executive's Base Amount; and
(3) for twelve months following the Termination Date (the
"Continuation Period"), the Company shall continue on behalf of the Executive
and his dependents and beneficiaries the life insurance, disability, medical,
dental, prescription drug and hospitalization coverages and benefits provided to
the Executive immediately prior to a Change in Control (the "Benefits
Continuation"), or, if greater, the coverages and benefits provided at any time
thereafter; provided, however, that within five days following the Termination
Date, the Executive may elect to receive from the Company in cash, in lieu of
the Benefits Continuation, the value of the Benefits Continuation. The coverages
and benefits (including deductibles and costs to the Executive) provided in this
Section 2(b)(3) during the Continuation Period shall be no less favorable to the
Executive and his dependents and beneficiaries than the most favorable of such
coverages and benefits referred to above. The Company's obligation hereunder
with respect to the foregoing coverages and benefits shall be reduced to the
extent that the Executive obtains any such coverages and benefits pursuant to a
subsequent employer's benefit plans, in which case the Company may reduce any of
the coverages or benefits it is required to provide the Executive hereunder so
long as the aggregate coverages and benefits (including deductibles and costs to
the Executive) of the combined benefit plans are no less favorable to the
Executive than the coverages and benefits required to be provided hereunder.
This Section 2(b)(3) shall not be interpreted so as to limit any benefits to
which the Executive, his dependents or beneficiaries may be entitled under any
of the Company's employee benefit plans, programs or practices following the
Executive's termination of employment, including but not limited to retiree
medical and life insurance benefits.
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(c) The cash amounts provided for in Sections 2(a) and 2(b) shall be
paid in a single lump sum cash payment within ten days after the Termination
Date (or earlier, if required by applicable law).
(d) The severance pay and benefits provided for in this Section 2
shall be in lieu of any other severance pay to which the Executive may be
entitled under any severance or employment agreement with the Company or any
other plan, agreement or arrangement of the Company or any other Affiliate of
the Company. The Executive's entitlement to any compensation or benefits other
than as provided herein shall be determined in accordance with the employee
benefit plans of the Company and any of its Affiliates and other applicable
agreements, programs and practices as in effect from time to time.
(e) If the Executive's employment is terminated by the Company or an
Employing Affiliate without Cause prior to the date of a Change in Control but
the Executive reasonably demonstrates that such termination (1) was at the
request of a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control (a "Third Party") and who
effectuates a Change in Control or (2) otherwise arose in connection with, or in
anticipation of, a Change in Control which has been threatened or proposed and
which actually occurs, such termination shall be deemed to have occurred after a
Change in Control, it being agreed that any such action taken following
shareholder approval of a transaction which if consummated would constitute a
Change in Control, shall be deemed to be in anticipation of a Change in Control
provided such transaction is actually consummated.
3. Effect of Section 280G of the Internal Revenue Code.
(a) Notwithstanding anything contained in this Agreement to the
contrary, to the extent that the payments and benefits provided under this
Agreement and benefits provided to, or for the benefit of, the Executive under
any other Company plan or agreement (such payments or benefits collectively
referred to herein as the "Payments") would be subject to the excise tax (the
"Excise Tax") imposed under Section 280G of the Internal Revenue Code of 1986,
as amended (the "Code"), the Payments shall be reduced (but not below zero) if
and to the extent necessary so that no Payment to be made or benefit to be
provided to the Executive shall be subject to the Excise Tax (such reduced
amount is hereinafter referred to as the "Limited Payment Amount"). Unless the
Executive shall have given prior written notice specifying a different order to
the Company to effectuate the foregoing, the Company shall reduce or eliminate
the Payments by first reducing or eliminating the portion of the Payments which
are not payable in cash and then by reducing or eliminating cash payments, in
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<PAGE>
each case in reverse order beginning with payments or benefits which are to be
paid the farthest in time from the Determination (as hereinafter defined). Any
notice given by the Executive pursuant to the preceding sentence shall take
precedence over the provisions of any other plan, arrangement or agreement
governing the Executive's rights and entitlements to any benefits or
compensation.
(b) The determination of whether the Payments shall be reduced to
the Limited Payment Amount pursuant to this Agreement and the amount of such
Limited Payment Amount shall be made, at the Company's expense, by an accounting
firm selected by the Company and reasonably acceptable to the Executive which is
one of the five largest accounting firms in the United States (the "Accounting
Firm"). The Accounting Firm shall provide its determination (the
"Determination"), together with detailed supporting calculations and
documentation to the Company and the Executive within ten days of the
Termination Date, if applicable, or such other time as requested by the Company
or by the Executive (provided the Executive reasonably believes that any of the
Payments may be subject to the Excise Tax) and if the Accounting Firm determines
that no Excise Tax is payable by the Executive with respect to the Payments, it
shall furnish the Executive with an opinion reasonably acceptable to the
Executive that no Excise Tax will be imposed with respect to any such Payments.
The Determination shall be binding, final and conclusive upon the Company and
the Executive.
4. Notice of Termination. Following a Change in Control, any intended
termination of the Executive's employment by the Company or an Employing
Affiliate shall be communicated by a Notice of Termination from the Company to
the Executive, and any intended termination of the Executive's employment by the
Executive for Good Reason shall be communicated by a Notice of Termination from
the Executive to the Company.
5. Fees and Expenses. The Company shall pay, as incurred, all legal fees
and related expenses (including the costs of experts, evidence and counsel) that
the Executive may reasonably incur following a Change in Control as a result of
or in connection with (a) the Executive's contesting, defending or disputing the
basis for the termination of the Executive's employment, (b) the Executive's
hearing before the Board of Directors of the Company as contemplated in Section
16.4 or (c) the Executive's seeking to obtain or enforce any right or benefit
provided by this Agreement or by any other plan or arrangement maintained by the
Company or one of its Affiliates under which the Executive is or may be entitled
to receive benefits.
6. Unauthorized Disclosure.
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(a) The Executive agrees and understands that during the Executive's
employment with the Company or an Employing Affiliate, the Executive has been
and will be exposed to and receive information relating to the affairs of the
Company considered by the Company to be confidential and in the nature of trade
secrets (including but not limited to procedures, memoranda, notes, records and
customer lists, whether such information has been or is made, developed or
compiled by the Executive or otherwise has been or is made available to him)
(any and all such information, the "Confidential Information"). The Executive
agrees that, during the Term and thereafter, he shall keep such Confidential
Information confidential and will not disclose such Confidential Information,
either directly or indirectly, to any third person or entity without the prior
written consent of the Company; provided, however, that (i) the Executive shall
have no such obligation to the extent such Confidential Information is or
becomes publicly known other than as a result of the Executive's breach of his
obligations hereunder or is received by the Executive following the Termination
Date and (ii) the Executive may, after giving prior notice to the Company to the
extent practicable under the circumstances, disclose such Confidential
Information to the extent required by applicable laws or governmental
regulations or judicial or regulatory process.
(b) The Executive agrees that all Confidential Information is and
will remain the property of the Company. The Executive further agrees that,
during the Term and thereafter, he shall hold in the strictest confidence all
Confidential Information, and shall not, directly or indirectly, duplicate,
sell, use, lease, commercialize, disclose or otherwise divulge to any person or
entity any portion of the Confidential Information or use any Confidential
Information for his own benefit or profit or allow any person or entity, other
than the Company and its authorized employees, to use or otherwise gain access
to any Confidential Information.
(c) All memoranda, notes, records, customer lists and other
documents made or compiled by the Executive or otherwise made available to him
concerning the business of the Company or its subsidiaries or Affiliates shall
be the Company's property and shall be delivered to the Company upon the
termination of the Executive's employment with the Company or an Employing
Affiliate or at any other time upon request by the Company, and the Executive
shall retain no copies of those documents. The Executive shall never at any time
have or claim any right, title or interest in any material, invention or matter
of any sort created, prepared or used in connection with the business of the
Company or its subsidiaries or Affiliates.
7. Non-competition.
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(a) By and in consideration of the Company's entering into this
Agreement and the payments to be made and benefits to be provided by the Company
hereunder and further in consideration of the Executive's exposure to the
proprietary information of the Company, the Executive agrees that the Executive
will not, during the Term, and thereafter during the Non-competition Term (as
hereinafter defined), directly or indirectly, own, manage, operate, join,
control, be employed by, or participate in the ownership, management, operation
or control of, or be connected in any manner with, including but not limited to
holding any position as a shareholder, director, officer, consultant,
independent contractor, employee, partner, or investor in, any Restricted
Enterprise (as defined below); provided, however, that in no event shall
ownership of less than one percent of the outstanding equity securities of any
issuer whose securities are registered under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), standing alone, be prohibited by this
Section 7. For purposes of this paragraph, the term "Restricted Enterprise"
shall mean any person, corporation, partnership or other entity that is engaged
in the precision systems or industrial components business or otherwise
competes, directly or indirectly, with any business or activity conducted or
proposed to be conducted by the Company or any of its subsidiaries or Affiliates
as of the date of the Executive's termination of employment. Following
termination of employment, upon request of the Company, the Executive shall
notify the Company of the Executive's then current employment status. For
purposes of this Agreement, the "Non-competition Term" shall mean the period
beginning on the Termination Date and ending on the first anniversary of such
date. Any material breach of the terms of this paragraph shall be considered
Cause under Section 16.4.
(b) The Executive agrees that any breach of the terms of this
Section 7 would result in irreparable injury and damage to the Company and/or
its subsidiaries or Affiliates for which the Company and/or its subsidiaries or
Affiliates would have no adequate remedy at law; the Executive therefore also
agrees that in the event of said breach or any threat of breach, the Company
and/or its subsidiaries or Affiliates, as applicable, shall be entitled to an
immediate injunction and restraining order to prevent such breach and/or
threatened breach and/or continued breach by the Executive and/or any and all
persons and/or entities acting for and/or with the Executive, without having to
prove damages, in addition to any other remedies to which the Company and/or its
subsidiaries or Affiliates may be entitled at law or in equity. The terms of
this paragraph shall not prevent the Company and/or its subsidiaries or
Affiliates from pursuing any other available remedies for any breach or
threatened breach hereof, including but not limited to the recovery of damages
from the Executive. The Executive and the Company further agree that the
provisions of the covenants contained in this Section 7 are reasonable and
necessary to protect the businesses of the Company and its subsidiaries or
Affiliates because of the Executive's access to Confidential Information
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<PAGE>
and his material participation in the operation of such businesses. Should a
court or arbitrator determine, however, that any provision of the covenants
contained in this Section 7 is not reasonable or valid, either in period of
time, geographical area, or otherwise, the parties hereto agree that such
covenants should be interpreted and enforced to the maximum extent which such
court or arbitrator deems reasonable or valid.
The existence of any claim or cause of action by the Executive against the
Company and/or its subsidiaries or Affiliates, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company of the covenants contained in this Section 7.
8. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement (including any Notice of
Termination) shall be in writing, shall be signed by the Executive if to the
Company or by a duly authorized officer of the Company if to the Executive, and
shall be deemed to have been duly given when personally delivered or sent by
certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses last given by each party to the other, provided that all
notices to the Company shall be directed to the attention of the Board with a
copy to the Secretary of the Company. All notices and communications shall be
deemed to have been received on the date of delivery thereof or on the third
business day after the mailing thereof (whichever is earlier), except that
notice of change of address shall be effective only upon receipt.
9. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company or any other
Affiliate of the Company for which the Executive may qualify, nor shall anything
herein limit or reduce such rights as the Executive may have under any other
agreements with the Company or any other Affiliate of the Company. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan or program of the Company or any other Affiliate of the Company
shall be payable in accordance with such plan or program, except as explicitly
modified by this Agreement.
10. (a) Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including but not limited
to any set-off, counterclaim, defense, recoupment, or other claim, right or
action which the Company may have against the Executive or others.
(b) No Mitigation. The Executive shall not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment or
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otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Executive in any subsequent employment
except as provided in Section 2(b)(3).
11. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and the Company. No waiver by any party
hereto at any time of any breach by any other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by any party which are not expressly set
forth in this Agreement.
12. Successors; Binding Agreement.
(a) This Agreement shall be binding upon and shall inure to the
benefit of the Company and its Successors and Assigns. The Company shall require
its Successors and Assigns to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place.
(b) Neither this Agreement nor any right or interest hereunder shall
be assignable or transferable by the Executive, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal personal representative.
13. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware without giving
effect to the conflict of laws principles thereof. Any action brought by any
party to this Agreement shall be brought and maintained in a court of competent
jurisdiction in the State of Delaware.
14. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
15. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto, and from and after a Termination Date on or
following a Change in Control, supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto,
with respect to the subject
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matter hereof, including the letter agreement between the Company and the
Executive, dated as of June 10, 1996.
16.Definitions.
16.1. Accrued Compensation. For purposes of this Agreement, "Accrued
Compensation" shall mean all amounts of compensation for services rendered to
the Company or an Employing Affiliate that have been earned or accrued through
the Termination Date but that have not been paid as of the Termination Date,
including (a) base salary, (b) reimbursement for reasonable and necessary
business expenses incurred by the Executive on behalf of the Company or an
Employing Affiliate during the period ending on the Termination Date and (c)
vacation pay; provided, however, that Accrued Compensation shall not include any
amounts described in clause (a) that have been deferred pursuant to any salary
reduction or deferred compensation elections made by the Executive.
16.2. Affiliate. For purposes of this Agreement, "Affiliate" means,
with respect to any Person, any entity, directly or indirectly, controlled by,
controlling or under common control with such Person.
16.3. Base Amount. For purposes of this Agreement, "Base Amount"
shall mean, with respect to a Change in Control, the Executive's "base amount"
as determined under Section 280G of the Code and the regulations proposed
thereunder.
16.4. Cause. For purposes of this Agreement, a termination of
employment is for "Cause" if the Executive
(a) has been convicted of a felony (including a plea of nolo
contendere);
(b) intentionally and continually failed substantially to
perform his reasonably assigned duties with the Company or an Employing
Affiliate (other than a failure resulting from the Executive's incapacity due to
physical or mental illness or from the assignment to the Executive of duties
that would constitute Good Reason) which failure continued for a period of at
least thirty days after a written notice of demand for substantial performance,
signed by a duly authorized officer of the Company, has been delivered to the
Executive specifying the manner in which the Executive has failed substantially
to perform such duties; or
(c) intentionally engaged in illegal conduct or willful
misconduct which is demonstrably and materially injurious to the Company or an
Employing Affiliate.
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For purposes of this Agreement, no act, or failure to act, on the Executive's
part shall be considered "intentional" unless the Executive has acted, or failed
to act, with a lack of good faith and with a lack of reasonable belief that the
Executive's action or failure to act was in the best interest of the Company or
an Employing Affiliate. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board or upon the instructions of
the Company's Chairman of the Board, Chief Executive Officer or a senior officer
of the Company or based upon the advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company or an Employing Affiliate.
The termination of employment of the Executive shall not be deemed to be for
Cause pursuant to subparagraph (b) or (c) above unless and until there shall
have been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-fourths of the entire membership of the
Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel, to be heard before the Board) finding that,
in the good faith opinion of the Board, the Executive is guilty of the conduct
described in subparagraph (b) or (c) above, and specifying the particulars
thereof in detail. Notwithstanding anything contained in this Agreement to the
contrary, no failure to perform by the Executive after a Notice of Termination
is given to the Company by the Executive shall constitute Cause for purposes of
this Agreement.
16.5. Change in Control. A "Change in Control" shall mean the
occurrence during the Term of:
(a) An acquisition (other than directly from the Company) of
any common stock of the Company ("Common Stock") or other voting securities of
the Company entitled to vote generally for the election of directors (the
"Voting Securities") by any "Person" (as the term "person" is used for purposes
of Section 13(d) or 14(d) of the Exchange Act), immediately after which such
Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of fifty percent or more of the then outstanding shares
of Common Stock or the combined voting power of the Company's then outstanding
Voting Securities; provided, however, in determining whether a Change in Control
has occurred, Common Stock or Voting Securities which are acquired in a
Non-Control Acquisition (as hereinafter defined) shall not constitute an
acquisition which would cause a Change in Control. A "Non-Control Acquisition"
shall mean an acquisition by (i) an employee benefit plan (or a trust forming a
part thereof) maintained by (A) the Company or (B) any corporation or other
Person of which a majority of its voting power or its voting equity securities
or equity interest is owned, directly or indirectly, by the Company (a
"Subsidiary"), (ii) the Company or its Subsidiaries, (iii) any Person in
connection with a Non-Control Transaction (as hereinafter defined) or (iv) an
Affiliate;
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(b) The individuals who, as of February 11, 1999, are members
of the Board (the "Incumbent Board"), cease for any reason to constitute at
least a majority of the members of the Board; provided, however, that if the
election, or nomination for election by the Company's shareholders, of any new
director was approved by a vote of at least two-thirds of the Incumbent Board,
such new director shall, for purposes of this Agreement, be considered a member
of the Incumbent Board; provided further, however, that no individual shall be
considered a member of the Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board (a "Proxy Contest") including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy Contest; or
(c) The consummation of:
(1) A merger, consolidation, reorganization or other
business combination with or into the Company or in which securities of the
Company are issued, unless such merger, consolidation, reorganization or other
business combination is a "Non-Control Transaction." A "Non-Control Transaction"
shall mean a merger, consolidation, reorganization or other business combination
with or into the Company or in which securities of the Company are issued where:
(A) the shareholders of the Company, immediately
before such merger, consolidation, reorganization or other business combination
own directly or indirectly immediately following such merger, consolidation,
reorganization or other business combination, at least fifty percent of the
combined voting power of the outstanding voting securities of the corporation
resulting from such merger or consolidation, reorganization or other business
combination (the "Surviving Corporation") in substantially the same proportion
as their ownership of the Voting Securities immediately before such merger,
consolidation, reorganization, or other business combination,
(B) the individuals who were members of the
Incumbent Board immediately prior to the execution of the agreement providing
for such merger, consolidation, reorganization or other business combination
constitute at least two-thirds of the members of the board of directors of the
Surviving Corporation, or a corporation beneficially directly or indirectly
owning a majority of the combined voting power of the outstanding voting
securities of the Surviving Corporation, and
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(C) no Person other than (i) the Company, (ii) any
Subsidiary, (iii) any employee benefit plan (or any trust forming a part
thereof) that, immediately prior to such merger, consolidation, reorganization
or other business combination was maintained by the Company, the Surviving
Corporation, or any Subsidiary, or (iv) any Person who, immediately prior to
such merger, consolidation, reorganization or other business combination had
Beneficial Ownership of fifty percent or more of the then outstanding Voting
Securities or common stock of the Company, has Beneficial Ownership of fifty
percent or more of the combined voting power of the Surviving Corporation's then
outstanding voting securities or its common stock.
(2) A complete liquidation or dissolution of the
Company; or
(3) The sale or other disposition of all or
substantially all of the assets of the Company to any Person (other than (i) any
such sale or disposition that results in at least fifty percent of the Company's
assets being owned by a Subsidiary or Subsidiaries or (ii) a distribution to the
Company's stockholders of the stock of a Subsidiary or any other assets).
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because any Person (the "Subject Person") acquired Beneficial Ownership
of more than the permitted amount of the then outstanding Common Stock or Voting
Securities as a result of the acquisition of Common Stock or Voting Securities
by the Company which, by reducing the number of shares of Common Stock or Voting
Securities then outstanding, increases the proportional number of shares
Beneficially Owned by the Subject Person, provided that if a Change in Control
would occur (but for the operation of this sentence) as a result of the
acquisition of shares of Common Stock or Voting Securities by the Company, and
after such share acquisition by the Company, the Subject Person becomes the
Beneficial Owner of any additional shares of Common Stock or Voting Securities
which increase the percentage of the then outstanding shares of Common Stock or
Voting Securities Beneficially Owned by the Subject Person, then a Change in
Control shall occur.
16.6. Company. For purposes of this Agreement, all references to the
Company shall include its Successors and Assigns.
16.7. Disability. For purposes of this Agreement, "Disability" shall
mean a physical or mental infirmity which impairs the Executive's ability to
substantially perform his duties with the Company or an Employing Affiliate for
six consecutive months, and within the time period set forth in a Notice of
Termination given to the Executive (which time period shall not be less than
thirty days), the Executive shall not have returned to full-time performance of
his duties; provided, however, that if the
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Company's Long Term Disability Plan, or any successor plan (the "Disability
Plan"), is then in effect, the Executive shall not be deemed disabled for
purposes of this Agreement unless the Executive is also eligible for long-term
disability benefits under the Disability Plan (or similar benefits in the event
of a successor plan).
16.8. Good Reason.
(a) For purposes of this Agreement, "Good Reason" shall mean
the occurrence after a Change in Control of any of the following events or
conditions:
(1) a material adverse change in the Executive's duties
or responsibilities (including reporting responsibilities), except in connection
with the termination of his employment for Disability, Cause, as a result of his
death or by the Executive other than for Good Reason;
(2) a reduction in the Executive's annual base salary;
(3) the relocation of the offices of the Company or an
Employing Affiliate at which the Executive is principally employed to a location
more than 25 miles from the location of such offices immediately prior to a
Change in Control, or the requirement that the Executive be based anywhere other
than at such offices, except to the extent the Executive was not previously
assigned to a principal location and except for required travel on the business
of the Company or an Employing Affiliate to an extent substantially consistent
with the Executive's business travel obligations at the time of a Change in
Control; or
(4) the failure by the Company or an Employing Affiliate
to pay to the Executive any portion of the Executive's current compensation or
to pay to the Executive any portion of an installment of deferred compensation
under any deferred compensation program of the Company or an Employing Affiliate
in which the Executive participated, within seven days of the date such
compensation is due.
(b) Any event or condition described in Section 16.8(a)(1)
through (4) which occurs prior to a Change in Control but which the Executive
reasonably demonstrates (i) was at the request of a Third Party who effectuates
a Change in Control or (ii) otherwise arose in connection with or in
anticipation of a Change in Control which has been threatened or proposed and
which actually occurs, shall constitute Good Reason for purposes of this
Agreement notwithstanding that it occurred prior to a Change in Control, it
being agreed that any such action taken following shareholder approval of a
transaction which if consummated would constitute a Change in Control, shall be
deemed to be in anticipation of a Change in Control provided such transaction is
actually consummated.
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16.9. Notice of Termination. For purposes of this Agreement,
following a Change in Control, "Notice of Termination" shall mean a written
notice of termination of the Executive's employment, signed by the Executive if
to the Company or by a duly authorized officer of the Company if to the
Executive, which indicates the specific termination provision in this Agreement,
if any, relied upon and which sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason, Disability or Cause shall not serve to
waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the Company's rights hereunder.
16.10. Successors and Assigns. For purposes of this Agreement,
"Successors and Assigns" shall mean, with respect to the Company, a corporation
or other entity acquiring all or substantially all the assets and business of
the Company, as the case may be, whether by operation of law or otherwise.
16.11. Termination Date. For purposes of this Agreement,
"Termination Date" shall mean (a) in the case of the Executive's death, his date
of death, (b) if the Executive's employment is terminated for Disability, thirty
days after Notice of Termination is given (provided that the Executive shall not
have returned to the performance of his duties on a full-time basis during such
thirty day period) and (c) if the Executive's employment is terminated for any
other reason, the date specified in the Notice of Termination (which, in the
case of a termination for Cause shall not be less than thirty days, and in the
case of a termination for Good Reason shall not be more than sixty days, from
the date such Notice of Termination is given); provided, however, that if within
thirty days after any Notice of Termination is given the party receiving such
Notice of Termination in good faith notifies the other party that a dispute
exists concerning the basis for the termination, the Termination Date shall be
the date on which the dispute is finally determined, either by mutual written
agreement of the parties, or by the final judgment, order or decree of a court
of competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been taken). Notwithstanding the pendency of any such dispute, the
Company or an Employing Affiliate shall continue to pay the Executive his base
salary and continue the Executive as a participant (at or above the level
provided prior to the date of such dispute) in all compensation, incentive,
bonus, pension, profit sharing, medical, hospitalization, prescription drug,
dental, life insurance and disability benefit plans in which he was
participating when the notice giving rise to the dispute was given, until the
dispute is finally resolved whether or not the dispute is resolved in favor of
the Company, and the
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Executive shall not be obligated to repay to the Company or an Employing
Affiliate any amounts paid or benefits provided pursuant to this sentence.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officers and the Executive has executed this Agreement as
of the day and year first above written.
AXSYS TECHNOLOGIES, INC.
/s/ Stephen W. Bershad
--------------------------------------
By: Stephen W. Bershad
Its: Chairman and Chief Executive
Officer
EXECUTIVE
/s/ Kenneth F. Stern
--------------------------------------
Kenneth F. Stern
ATTEST
/s/ David L. Concannon
- ----------------------------
By: David L. Concannon
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Exhibit 10(5)
SEVERANCE PROTECTION AGREEMENT
THIS AGREEMENT made as of the 11th day of February, 1999, by and between
Axsys Technologies, Inc. (the "Company") and David L. Concannon (the
"Executive").
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the possibility of a Change in Control (as hereinafter defined) exists and
that the threat or the occurrence of a Change in Control can result in
significant distraction of the Company's key management personnel because of the
uncertainties inherent in such a situation;
WHEREAS, the Board has determined that it is essential and in the best
interests of the Company and its stockholders for the Company to retain the
services of the Executive in the event of a threat or occurrence of a Change in
Control and to ensure the Executive's continued dedication and efforts in such
event without undue concern for the Executive's personal financial and
employment security; and
WHEREAS, in order to induce the Executive to remain in the employ of the
Company and/or one of its Affiliates (the entity or entities employing the
Executive, the "Employing Affiliate"), particularly in the event of a threat or
the occurrence of a Change in Control, the Company desires to enter into this
Agreement with the Executive to provide the Executive with certain benefits in
the event the Executive's employment is terminated as a result of, or in
connection with, a Change in Control.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. Term of Agreement. This Agreement shall commence as of February 11,
1999, and shall continue in effect until February 11, 2001 (the "Term");
provided, however, that on February 11, 2000, and on each February 11
thereafter, the Term shall automatically be extended for one year unless either
the Executive or the Company shall have given written notice to the other at
least ninety days prior thereto that the Term shall not be so extended;
provided, further, however, that following the occurrence of a Change in
Control, the Term shall not expire prior to the expiration of twenty-four months
after such occurrence.
2. Termination of Employment. If, during the Term, the Executive's
employment with the Company or an Employing Affiliate shall be terminated within
twenty-four months following a Change in Control, the Executive shall be
entitled to the following compensation and benefits:
<PAGE>
(a) If the Executive's employment with the Company or an Employing
Affiliate shall be terminated (1) by the Company for Cause or Disability, (2) by
reason of the Executive's death, or (3) by the Executive other than for Good
Reason or pursuant to a Window Period Termination, the Company shall pay to the
Executive the Accrued Compensation.
(b) If the Executive's employment with the Company or an Employing
Affiliate shall be terminated for any reason other than as specified in Section
2(a), or if the Executive terminates his employment with or without Good Reason
during the one month period commencing six months following a Change in Control
(a "Window Period Termination"), the Executive shall be entitled to the
following:
(1) the Company shall pay the Executive the Accrued
Compensation;
(2) the Company shall pay the Executive as severance pay an
amount equal to 2 times the Executive's Base Amount; and
(3) for twelve months following the Termination Date (the
"Continuation Period"), the Company shall continue on behalf of the Executive
and his dependents and beneficiaries the life insurance, disability, medical,
dental, prescription drug and hospitalization coverages and benefits provided to
the Executive immediately prior to a Change in Control (the "Benefits
Continuation"), or, if greater, the coverages and benefits provided at any time
thereafter; provided, however, that within five days following the Termination
Date, the Executive may elect to receive from the Company in cash, in lieu of
the Benefits Continuation, the value of the Benefits Continuation. The coverages
and benefits (including deductibles and costs to the Executive) provided in this
Section 2(b)(3) during the Continuation Period shall be no less favorable to the
Executive and his dependents and beneficiaries than the most favorable of such
coverages and benefits referred to above. The Company's obligation hereunder
with respect to the foregoing coverages and benefits shall be reduced to the
extent that the Executive obtains any such coverages and benefits pursuant to a
subsequent employer's benefit plans, in which case the Company may reduce any of
the coverages or benefits it is required to provide the Executive hereunder so
long as the aggregate coverages and benefits (including deductibles and costs to
the Executive) of the combined benefit plans are no less favorable to the
Executive than the coverages and benefits required to be provided hereunder.
This Section 2(b)(3) shall not be interpreted so as to limit any benefits to
which the Executive, his dependents or beneficiaries may be entitled under any
of the Company's employee benefit plans, programs or practices following the
Executive's termination of employment, including but not limited to retiree
medical and life insurance benefits.
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(c) The cash amounts provided for in Sections 2(a) and 2(b) shall be
paid in a single lump sum cash payment within ten days after the Termination
Date (or earlier, if required by applicable law).
(d) The severance pay and benefits provided for in this Section 2
shall be in lieu of any other severance pay to which the Executive may be
entitled under any severance or employment agreement with the Company or any
other plan, agreement or arrangement of the Company or any other Affiliate of
the Company. The Executive's entitlement to any compensation or benefits other
than as provided herein shall be determined in accordance with the employee
benefit plans of the Company and any of its Affiliates and other applicable
agreements, programs and practices as in effect from time to time.
(e) If the Executive's employment is terminated by the Company or an
Employing Affiliate without Cause prior to the date of a Change in Control but
the Executive reasonably demonstrates that such termination (1) was at the
request of a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control (a "Third Party") and who
effectuates a Change in Control or (2) otherwise arose in connection with, or in
anticipation of, a Change in Control which has been threatened or proposed and
which actually occurs, such termination shall be deemed to have occurred after a
Change in Control, it being agreed that any such action taken following
shareholder approval of a transaction which if consummated would constitute a
Change in Control, shall be deemed to be in anticipation of a Change in Control
provided such transaction is actually consummated.
3. Effect of Section 280G of the Internal Revenue Code.
(a) Notwithstanding anything contained in this Agreement to the
contrary, to the extent that the payments and benefits provided under this
Agreement and benefits provided to, or for the benefit of, the Executive under
any other Company plan or agreement (such payments or benefits collectively
referred to herein as the "Payments") would be subject to the excise tax (the
"Excise Tax") imposed under Section 280G of the Internal Revenue Code of 1986,
as amended (the "Code"), the Payments shall be reduced (but not below zero) if
and to the extent necessary so that no Payment to be made or benefit to be
provided to the Executive shall be subject to the Excise Tax (such reduced
amount is hereinafter referred to as the "Limited Payment Amount"). Unless the
Executive shall have given prior written notice specifying a different order to
the Company to effectuate the foregoing, the Company shall reduce or eliminate
the Payments by first reducing or eliminating the portion of the Payments which
are not payable in cash and then by reducing or eliminating cash payments, in
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each case in reverse order beginning with payments or benefits which are to be
paid the farthest in time from the Determination (as hereinafter defined). Any
notice given by the Executive pursuant to the preceding sentence shall take
precedence over the provisions of any other plan, arrangement or agreement
governing the Executive's rights and entitlements to any benefits or
compensation.
(b) The determination of whether the Payments shall be reduced to
the Limited Payment Amount pursuant to this Agreement and the amount of such
Limited Payment Amount shall be made, at the Company's expense, by an accounting
firm selected by the Company and reasonably acceptable to the Executive which is
one of the five largest accounting firms in the United States (the "Accounting
Firm"). The Accounting Firm shall provide its determination (the
"Determination"), together with detailed supporting calculations and
documentation to the Company and the Executive within ten days of the
Termination Date, if applicable, or such other time as requested by the Company
or by the Executive (provided the Executive reasonably believes that any of the
Payments may be subject to the Excise Tax) and if the Accounting Firm determines
that no Excise Tax is payable by the Executive with respect to the Payments, it
shall furnish the Executive with an opinion reasonably acceptable to the
Executive that no Excise Tax will be imposed with respect to any such Payments.
The Determination shall be binding, final and conclusive upon the Company and
the Executive.
4. Notice of Termination. Following a Change in Control, any intended
termination of the Executive's employment by the Company or an Employing
Affiliate shall be communicated by a Notice of Termination from the Company to
the Executive, and any intended termination of the Executive's employment by the
Executive for Good Reason shall be communicated by a Notice of Termination from
the Executive to the Company.
5. Fees and Expenses. The Company shall pay, as incurred, all legal fees
and related expenses (including the costs of experts, evidence and counsel) that
the Executive may reasonably incur following a Change in Control as a result of
or in connection with (a) the Executive's contesting, defending or disputing the
basis for the termination of the Executive's employment, (b) the Executive's
hearing before the Board of Directors of the Company as contemplated in Section
16.4 or (c) the Executive's seeking to obtain or enforce any right or benefit
provided by this Agreement or by any other plan or arrangement maintained by the
Company or one of its Affiliates under which the Executive is or may be entitled
to receive benefits.
6. Unauthorized Disclosure.
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(a) The Executive agrees and understands that during the Executive's
employment with the Company or an Employing Affiliate, the Executive has been
and will be exposed to and receive information relating to the affairs of the
Company considered by the Company to be confidential and in the nature of trade
secrets (including but not limited to procedures, memoranda, notes, records and
customer lists, whether such information has been or is made, developed or
compiled by the Executive or otherwise has been or is made available to him)
(any and all such information, the "Confidential Information"). The Executive
agrees that, during the Term and thereafter, he shall keep such Confidential
Information confidential and will not disclose such Confidential Information,
either directly or indirectly, to any third person or entity without the prior
written consent of the Company; provided, however, that (i) the Executive shall
have no such obligation to the extent such Confidential Information is or
becomes publicly known other than as a result of the Executive's breach of his
obligations hereunder or is received by the Executive following the Termination
Date and (ii) the Executive may, after giving prior notice to the Company to the
extent practicable under the circumstances, disclose such Confidential
Information to the extent required by applicable laws or governmental
regulations or judicial or regulatory process.
(b) The Executive agrees that all Confidential Information is and
will remain the property of the Company. The Executive further agrees that,
during the Term and thereafter, he shall hold in the strictest confidence all
Confidential Information, and shall not, directly or indirectly, duplicate,
sell, use, lease, commercialize, disclose or otherwise divulge to any person or
entity any portion of the Confidential Information or use any Confidential
Information for his own benefit or profit or allow any person or entity, other
than the Company and its authorized employees, to use or otherwise gain access
to any Confidential Information.
(c) All memoranda, notes, records, customer lists and other
documents made or compiled by the Executive or otherwise made available to him
concerning the business of the Company or its subsidiaries or Affiliates shall
be the Company's property and shall be delivered to the Company upon the
termination of the Executive's employment with the Company or an Employing
Affiliate or at any other time upon request by the Company, and the Executive
shall retain no copies of those documents. The Executive shall never at any time
have or claim any right, title or interest in any material, invention or matter
of any sort created, prepared or used in connection with the business of the
Company or its subsidiaries or Affiliates.
7. Non-competition.
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(a) By and in consideration of the Company's entering into this
Agreement and the payments to be made and benefits to be provided by the Company
hereunder and further in consideration of the Executive's exposure to the
proprietary information of the Company, the Executive agrees that the Executive
will not, during the Term, and thereafter during the Non-competition Term (as
hereinafter defined), directly or indirectly, own, manage, operate, join,
control, be employed by, or participate in the ownership, management, operation
or control of, or be connected in any manner with, including but not limited to
holding any position as a shareholder, director, officer, consultant,
independent contractor, employee, partner, or investor in, any Restricted
Enterprise (as defined below); provided, however, that in no event shall
ownership of less than one percent of the outstanding equity securities of any
issuer whose securities are registered under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), standing alone, be prohibited by this
Section 7. For purposes of this paragraph, the term "Restricted Enterprise"
shall mean any person, corporation, partnership or other entity that competes,
directly or indirectly, with any business or activity conducted or proposed to
be conducted by the Company or any of its subsidiaries or Affiliates as of the
date of the Executive's termination of employment. Following termination of
employment, upon request of the Company, the Executive shall notify the Company
of the Executive's then current employment status. For purposes of this
Agreement, the "Non-competition Term" shall mean the period beginning on the
Termination Date and ending on the first anniversary of such date. Any material
breach of the terms of this paragraph shall be considered Cause under Section
16.4.
(b) The Executive agrees that any breach of the terms of this
Section 7 would result in irreparable injury and damage to the Company and/or
its subsidiaries or Affiliates for which the Company and/or its subsidiaries or
Affiliates would have no adequate remedy at law; the Executive therefore also
agrees that in the event of said breach or any threat of breach, the Company
and/or its subsidiaries or Affiliates, as applicable, shall be entitled to an
immediate injunction and restraining order to prevent such breach and/or
threatened breach and/or continued breach by the Executive and/or any and all
persons and/or entities acting for and/or with the Executive, without having to
prove damages, in addition to any other remedies to which the Company and/or its
subsidiaries or Affiliates may be entitled at law or in equity. The terms of
this paragraph shall not prevent the Company and/or its subsidiaries or
Affiliates from pursuing any other available remedies for any breach or
threatened breach hereof, including but not limited to the recovery of damages
from the Executive. The Executive and the Company further agree that the
provisions of the covenants contained in this Section 7 are reasonable and
necessary to protect the businesses of the Company and its subsidiaries or
Affiliates because of the Executive's access to Confidential Information and his
material participation in the operation of such businesses. Should a court or
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arbitrator determine, however, that any provision of the covenants contained in
this Section 7 is not reasonable or valid, either in period of time,
geographical area, or otherwise, the parties hereto agree that such covenants
should be interpreted and enforced to the maximum extent which such court or
arbitrator deems reasonable or valid.
The existence of any claim or cause of action by the Executive against the
Company and/or its subsidiaries or Affiliates, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company of the covenants contained in this Section 7.
8. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement (including any Notice of
Termination) shall be in writing, shall be signed by the Executive if to the
Company or by a duly authorized officer of the Company if to the Executive, and
shall be deemed to have been duly given when personally delivered or sent by
certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses last given by each party to the other, provided that all
notices to the Company shall be directed to the attention of the Board with a
copy to the Secretary of the Company. All notices and communications shall be
deemed to have been received on the date of delivery thereof or on the third
business day after the mailing thereof (whichever is earlier), except that
notice of change of address shall be effective only upon receipt.
9. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company or any other
Affiliate of the Company for which the Executive may qualify, nor shall anything
herein limit or reduce such rights as the Executive may have under any other
agreements with the Company or any other Affiliate of the Company. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan or program of the Company or any other Affiliate of the Company
shall be payable in accordance with such plan or program, except as explicitly
modified by this Agreement.
10. (a) Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including but not limited
to any set-off, counterclaim, defense, recoupment, or other claim, right or
action which the Company may have against the Executive or others.
(b) No Mitigation. The Executive shall not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment or otherwise and no such payment shall be offset or reduced by the
amount of any
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compensation or benefits provided to the Executive in any subsequent employment
except as provided in Section 2(b)(3).
11. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and the Company. No waiver by any party
hereto at any time of any breach by any other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by any party which are not expressly set
forth in this Agreement.
12. Successors; Binding Agreement.
(a) This Agreement shall be binding upon and shall inure to the
benefit of the Company and its Successors and Assigns. The Company shall require
its Successors and Assigns to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place.
(b) Neither this Agreement nor any right or interest hereunder shall
be assignable or transferable by the Executive, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal personal representative.
13. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware without giving
effect to the conflict of laws principles thereof. Any action brought by any
party to this Agreement shall be brought and maintained in a court of competent
jurisdiction in the State of Delaware.
14. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
15. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto, and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto,
with respect to the subject matter hereof.
16. Definitions.
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16.1. Accrued Compensation. For purposes of this Agreement, "Accrued
Compensation" shall mean all amounts of compensation for services rendered to
the Company or an Employing Affiliate that have been earned or accrued through
the Termination Date but that have not been paid as of the Termination Date,
including (a) base salary, (b) reimbursement for reasonable and necessary
business expenses incurred by the Executive on behalf of the Company or an
Employing Affiliate during the period ending on the Termination Date and (c)
vacation pay; provided, however, that Accrued Compensation shall not include any
amounts described in clause (a) that have been deferred pursuant to any salary
reduction or deferred compensation elections made by the Executive.
16.2. Affiliate. For purposes of this Agreement, "Affiliate" means,
with respect to any Person, any entity, directly or indirectly, controlled by,
controlling or under common control with such Person.
16.3. Base Amount. For purposes of this Agreement, "Base Amount"
shall mean, with respect to a Change in Control, the Executive's "base amount"
as determined under Section 280G of the Code and the regulations proposed
thereunder.
16.4. Cause. For purposes of this Agreement, a termination of
employment is for "Cause" if the Executive
(a) has been convicted of a felony (including a plea of nolo
contendere);
(b) intentionally and continually failed substantially to
perform his reasonably assigned duties with the Company or an Employing
Affiliate (other than a failure resulting from the Executive's incapacity due to
physical or mental illness or from the assignment to the Executive of duties
that would constitute Good Reason) which failure continued for a period of at
least thirty days after a written notice of demand for substantial performance,
signed by a duly authorized officer of the Company, has been delivered to the
Executive specifying the manner in which the Executive has failed substantially
to perform such duties; or
(c) intentionally engaged in illegal conduct or willful
misconduct which is demonstrably and materially injurious to the Company or an
Employing Affiliate.
For purposes of this Agreement, no act, or failure to act, on the Executive's
part shall be considered "intentional" unless the Executive has acted, or failed
to act, with a lack of good faith and with a lack of reasonable belief that the
Executive's action or failure to act was in the best interest of the Company or
an Employing Affiliate. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the
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Board or upon the instructions of the Company's Chairman of the Board, Chief
Executive Officer or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the Company
or an Employing Affiliate. The termination of employment of the Executive shall
not be deemed to be for Cause pursuant to subparagraph (b) or (c) above unless
and until there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less than three-fourths
of the entire membership of the Board at a meeting of the Board called and held
for such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board) finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (b) or (c) above, and specifying
the particulars thereof in detail. Notwithstanding anything contained in this
Agreement to the contrary, no failure to perform by the Executive after a Notice
of Termination is given to the Company by the Executive shall constitute Cause
for purposes of this Agreement.
16.5. Change in Control. A "Change in Control" shall mean the
occurrence during the Term of:
(a) An acquisition (other than directly from the Company) of
any common stock of the Company ("Common Stock") or other voting securities of
the Company entitled to vote generally for the election of directors (the
"Voting Securities") by any "Person" (as the term "person" is used for purposes
of Section 13(d) or 14(d) of the Exchange Act), immediately after which such
Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of fifty percent or more of the then outstanding shares
of Common Stock or the combined voting power of the Company's then outstanding
Voting Securities; provided, however, in determining whether a Change in Control
has occurred, Common Stock or Voting Securities which are acquired in a
Non-Control Acquisition (as hereinafter defined) shall not constitute an
acquisition which would cause a Change in Control. A "Non-Control Acquisition"
shall mean an acquisition by (i) an employee benefit plan (or a trust forming a
part thereof) maintained by (A) the Company or (B) any corporation or other
Person of which a majority of its voting power or its voting equity securities
or equity interest is owned, directly or indirectly, by the Company (a
"Subsidiary"), (ii) the Company or its Subsidiaries, (iii) any Person in
connection with a Non-Control Transaction (as hereinafter defined) or (iv) an
Affiliate;
(b) The individuals who, as of February 11, 1999, are members
of the Board (the "Incumbent Board"), cease for any reason to constitute at
least a majority of the members of the Board; provided, however, that if the
election, or nomination for election by the Company's shareholders, of any new
director was
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approved by a vote of at least two-thirds of the Incumbent Board, such new
director shall, for purposes of this Agreement, be considered a member of the
Incumbent Board; provided further, however, that no individual shall be
considered a member of the Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board (a "Proxy Contest") including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy Contest; or
(c) The consummation of:
(1) A merger, consolidation, reorganization or other
business combination with or into the Company or in which securities of the
Company are issued, unless such merger, consolidation, reorganization or other
business combination is a "Non-Control Transaction." A "Non-Control Transaction"
shall mean a merger, consolidation, reorganization or other business combination
with or into the Company or in which securities of the Company are issued where:
(A) the shareholders of the Company, immediately
before such merger, consolidation, reorganization or other business combination
own directly or indirectly immediately following such merger, consolidation,
reorganization or other business combination, at least fifty percent of the
combined voting power of the outstanding voting securities of the corporation
resulting from such merger or consolidation, reorganization or other business
combination (the "Surviving Corporation") in substantially the same proportion
as their ownership of the Voting Securities immediately before such merger,
consolidation, reorganization, or other business combination,
(B) the individuals who were members of the
Incumbent Board immediately prior to the execution of the agreement providing
for such merger, consolidation, reorganization or other business combination
constitute at least two-thirds of the members of the board of directors of the
Surviving Corporation, or a corporation beneficially directly or indirectly
owning a majority of the combined voting power of the outstanding voting
securities of the Surviving Corporation, and
(C) no Person other than (i) the Company, (ii) any
Subsidiary, (iii) any employee benefit plan (or any trust forming a part
thereof) that, immediately prior to such merger, consolidation, reorganization
or other business combination was maintained by the Company, the Surviving
Corporation, or any Subsidiary, or (iv) any Person who, immediately prior to
such merger, consolidation, reorganization or other business combination had
Beneficial Ownership of fifty percent
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or more of the then outstanding Voting Securities or common stock of the
Company, has Beneficial Ownership of fifty percent or more of the combined
voting power of the Surviving Corporation's then outstanding voting securities
or its common stock.
(2) A complete liquidation or dissolution of the
Company; or
(3) The sale or other disposition of all or
substantially all of the assets of the Company to any Person (other than (i) any
such sale or disposition that results in at least fifty percent of the Company's
assets being owned by a Subsidiary or Subsidiaries or (ii) a distribution to the
Company's stockholders of the stock of a Subsidiary or any other assets).
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because any Person (the "Subject Person") acquired Beneficial Ownership
of more than the permitted amount of the then outstanding Common Stock or Voting
Securities as a result of the acquisition of Common Stock or Voting Securities
by the Company which, by reducing the number of shares of Common Stock or Voting
Securities then outstanding, increases the proportional number of shares
Beneficially Owned by the Subject Person, provided that if a Change in Control
would occur (but for the operation of this sentence) as a result of the
acquisition of shares of Common Stock or Voting Securities by the Company, and
after such share acquisition by the Company, the Subject Person becomes the
Beneficial Owner of any additional shares of Common Stock or Voting Securities
which increase the percentage of the then outstanding shares of Common Stock or
Voting Securities Beneficially Owned by the Subject Person, then a Change in
Control shall occur.
16.6. Company. For purposes of this Agreement, all references to the
Company shall include its Successors and Assigns.
16.7. Disability. For purposes of this Agreement, "Disability" shall
mean a physical or mental infirmity which impairs the Executive's ability to
substantially perform his duties with the Company or an Employing Affiliate for
six consecutive months, and within the time period set forth in a Notice of
Termination given to the Executive (which time period shall not be less than
thirty days), the Executive shall not have returned to full-time performance of
his duties; provided, however, that if the Company's Long Term Disability Plan,
or any successor plan (the "Disability Plan"), is then in effect, the Executive
shall not be deemed disabled for purposes of this Agreement unless the Executive
is also eligible for long-term disability benefits under the Disability Plan (or
similar benefits in the event of a successor plan).
16.8. Good Reason.
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(a) For purposes of this Agreement, "Good Reason" shall mean
the occurrence after a Change in Control of any of the following events or
conditions:
(1) a material adverse change in the Executive's duties
or responsibilities (including reporting responsibilities), except in connection
with the termination of his employment for Disability, Cause, as a result of his
death or by the Executive other than for Good Reason;
(2) a reduction in the Executive's annual base salary;
(3) the relocation of the offices of the Company or an
Employing Affiliate at which the Executive is principally employed to a location
more than 25 miles from the location of such offices immediately prior to a
Change in Control, or the requirement that the Executive be based anywhere other
than at such offices, except to the extent the Executive was not previously
assigned to a principal location and except for required travel on the business
of the Company or an Employing Affiliate to an extent substantially consistent
with the Executive's business travel obligations at the time of a Change in
Control; or
(4) the failure by the Company or an Employing Affiliate
to pay to the Executive any portion of the Executive's current compensation or
to pay to the Executive any portion of an installment of deferred compensation
under any deferred compensation program of the Company or an Employing Affiliate
in which the Executive participated, within seven days of the date such
compensation is due.
(b) Any event or condition described in Section 16.8(a)(1)
through (4) which occurs prior to a Change in Control but which the Executive
reasonably demonstrates (i) was at the request of a Third Party who effectuates
a Change in Control or (ii) otherwise arose in connection with or in
anticipation of a Change in Control which has been threatened or proposed and
which actually occurs, shall constitute Good Reason for purposes of this
Agreement notwithstanding that it occurred prior to a Change in Control, it
being agreed that any such action taken following shareholder approval of a
transaction which if consummated would constitute a Change in Control, shall be
deemed to be in anticipation of a Change in Control provided such transaction is
actually consummated.
16.9. Notice of Termination. For purposes of this Agreement,
following a Change in Control, "Notice of Termination" shall mean a written
notice of termination of the Executive's employment, signed by the Executive if
to the Company or by a duly authorized officer of the Company if to the
Executive, which indicates the specific termination provision in this Agreement,
if any, relied upon and which sets forth in
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reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated. The
failure by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason, Disability or Cause shall not serve to waive any right of the Executive
or the Company, respectively, hereunder or preclude the Executive or the
Company, respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
16.10. Successors and Assigns. For purposes of this Agreement,
"Successors and Assigns" shall mean, with respect to the Company, a corporation
or other entity acquiring all or substantially all the assets and business of
the Company, as the case may be, whether by operation of law or otherwise.
16.11. Termination Date. For purposes of this Agreement,
"Termination Date" shall mean (a) in the case of the Executive's death, his date
of death, (b) if the Executive's employment is terminated for Disability, thirty
days after Notice of Termination is given (provided that the Executive shall not
have returned to the performance of his duties on a full-time basis during such
thirty day period) and (c) if the Executive's employment is terminated for any
other reason, the date specified in the Notice of Termination (which, in the
case of a termination for Cause shall not be less than thirty days, and in the
case of a termination for Good Reason shall not be more than sixty days, from
the date such Notice of Termination is given); provided, however, that if within
thirty days after any Notice of Termination is given the party receiving such
Notice of Termination in good faith notifies the other party that a dispute
exists concerning the basis for the termination, the Termination Date shall be
the date on which the dispute is finally determined, either by mutual written
agreement of the parties, or by the final judgment, order or decree of a court
of competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been taken). Notwithstanding the pendency of any such dispute, the
Company or an Employing Affiliate shall continue to pay the Executive his base
salary and continue the Executive as a participant (at or above the level
provided prior to the date of such dispute) in all compensation, incentive,
bonus, pension, profit sharing, medical, hospitalization, prescription drug,
dental, life insurance and disability benefit plans in which he was
participating when the notice giving rise to the dispute was given, until the
dispute is finally resolved whether or not the dispute is resolved in favor of
the Company, and the Executive shall not be obligated to repay to the Company or
an Employing Affiliate any amounts paid or benefits provided pursuant to this
sentence.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officers and the Executive has executed this Agreement as
of the day and year first above written.
AXSYS TECHNOLOGIES, INC.
/s/ Stephen W. Bershad
---------------------------------------
By: Stephen W. Bershad
Its: Chairman and Chief Executive
Officer
EXECUTIVE
/s/ David L. Concannon
---------------------------------------
David L. Concannon
ATTEST
/s/Anel Jimenez
- ----------------------------
By:
------------------------
Exhibit 10.(6)
NET LEASE
This Lease is made as of FEBRUARY 1, 1999, by and between JOEL NOSANCHUK,
whose address is P.O. Box 668, Bloomfield Hills, Michigan 48303-0668
("Landlord"), and SPEEDRING SYSTEMS, INC., a Delaware corporation, whose address
is 2909 Waterview Drive, Rochester Hills, Michigan 48309 ("Tenant"), who agree
as follows:
SECTION 1
THE PREMISES
1.01 Landlord hereby leases to Tenant the real property located in the
City of Rochester Hills, County of Oakland, and State of Michigan, more
particularly described in Exhibit "A" attached to, and made an integral part of,
this Lease (the "Land"), together with the buildings and other improvements on
the Land, (the "Improvements")(the Land and the Improvements collectively will
constitute and be referred to in this Lease as the "Premises"), more commonly
known as 2909 and 2917 Waterview Drive.
SECTION 2
CONSTRUCTION OF IMPROVEMENTS
THIS SECTION HAS BEEN INTENTIONALLY DELETED
SECTION 3
THE TERM
3.01 The Term will commence (the "Commencement Date") on December 1, 1999
with respect to 2909 Waterview Drive and on February 1, 2000 with to 2917
Waterview Drive or the earlier of:
(i) The date Tenant takes possession of the Premises.
The Term will be 38 months with respect to 2909 Waterview Drive and 36 months
with respect to 2917 Waterview Drive, from and after the Commencement Date. If
the Commencement Date is other than the first day of the calendar month the term
will be extended to terminate at the end of the calendar month in which it would
otherwise terminate tinder the preceding sentence.
3.02 If Landlord is unable, for any reason, to tender possession on or
before the Commencement Date, Tenant may not terminate this Lease, and Landlord
will have no liability for damages provided however, rent shall not increase as
provided in Section 4.01 until possession of 2917 Waterview Drive is tendered.
3.03 Tenant will inspect the Premises at 2917 Waterview Drive prior to
occupancy to assure that the facilities and equipment are in good condition and
Landlord will agree to repair facilities or equipment reasonably identified as
substandard. Landlord shall not be required to replace the carpeting or to
repaint provided the walls and floors are in good condition reasonable wear and
tear excepted.
3.04 If Landlord permits Tenant to enter into possession of the Premises,
prior to the Commencement Date, Tenant agrees that such occupancy will be deemed
to be under all the provisions of this Lease, including but not limited to the
rental established therein.
3.05 Upon request by Landlord, Tenant will execute a written instrument
confirming the Commencement Date and the expiration date of the Term.
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SECTION 4
THE BASE RENT
4.01 Tenant agrees to pay to Landlord, as minimum net rental for the
original Term of this Lease, the total amount of One Million Three Hundred
Forty-Eight Thousand and Ninety-six and no/100 ($1,348,096.00) Dollars in
monthly installments as follows:
December 1999 through January 2000 $20,792.00
February 2000 through January 2003 $36,292.00
4.02 Each monthly installment of minimum net rental will be paid in
advance without any setoffs or deductions, on the first day of each and every
month (the "Rent Day") during the Term, at the office of the Landlord at the
address first shown above, or at such other place as Landlord from time to time
may designate in writing. In the event the Commencement Date is other than the
first day of a calendar month, the rental for the partial first calendar month
of the Term will be prorated accordingly.
4.03 THIS SECTION INTENTIONALLY DELETED
SECTION 5
LATE CHARGES AND INTEREST
5.01 Any rent or other sums, if any, payable by Tenant to Landlord under
this Lease which are not paid within ten (10) days after they are due, and any
rent or other sums received and accepted by Landlord more than ten (10) days
after they are due, will be subject to a late charge of five (5%) percent of the
amount due. Such late charges will be due and payable as additional rent on or
before the next Rent Day.
5.02 Any rent, late charges or other sums payable by Tenant to Landlord
under this Lease not paid within thirty (30) days after the same are due will
bear interest at a per annum rate equal to the greater of eleven (11%) percent
or four percentage points above the effective prime interest rate per annum
charged by Comerica Bank to its best commercial customers on the date when the
rent, late charges or other sums became due, but not in excess of the maximum
interest rate permitted by law. Such interest will be due and payable as
additional rent on or before the next Rent Day, and will accrue from the date
that such rent, late charges or other sums are payable under the provisions of
this Lease until actually paid by Tenant.
5.03 Any default in the payment of rent, late charges or other sums will
not be considered cured unless and until the late charges and interest due
hereunder are paid by Tenant to Landlord. If Tenant defaults in paying such late
charges and/or interest, Landlord will have the same remedies as on default in
the payment of rent. The obligation hereunder to pay late charges and interest
will exist in addition to, and not in the place of, the other default provisions
of this Lease.
SECTION 6
TAXES, ASSESSMENTS AND UTILITIES
6.01 Tenant agrees to pay as additional rent for the Premises all taxes
and assessments, general and special, all water rates and all other governmental
impositions which may be levied on the Premises or any part thereof, or on any
building or improvements at any time situated thereon, during or pertaining to
the Term and any extensions thereof. All such taxes, assessments, water rates
and other impositions will be paid by Tenant before they become delinquent. The
property taxes and assessments for the first and last years of the Term or any
extension thereof, will be prorated between Landlord and Tenant so that Tenant
will be responsible for any such tax or assessment attributable to the period
during which Tenant has possession of the Premises.
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The so-called "due-date" method of proration will be used, it being
presumed that taxes and assessments are payable in advance. In the event that
during the Term or any extension thereof (1) the real property taxes levied or
assessed against the Premises are reduced or eliminated, whether the cause is a
judicial determination of unconstitutionality, a change in the nature of the
taxes imposed or otherwise, and (ii) there is levied, assessed or otherwise
imposed on the Landlord, in substitution for all or part of the tax thus reduced
or eliminated, a tax (the "Substitute Tax") which imposes a burden upon Landlord
by reason of its ownership of the Premises, then to the extent of such burden
the Substitute Tax will be deemed a real estate tax for purposes of this
paragraph.
6.02 Tenant agrees to pay all charges made against the Premises for gas,
heat, electricity and all other utilities as and when due during the continuance
of this Lease.
6.03 In the event that payment of any or all of the foregoing taxes,
assessments and utilities are to be made from an escrowed fund required to be
established by Landlord as Mortgagor under the terms of any first mortgage on
the Premises, then Landlord will so notify Tenant. Tenant will not be required
to pay directly such taxes, assessments and utilities as are paid from the
escrowed fund, but will instead, as additional rent, pay to Landlord on the
first day of each month of the Term an amount equal to the amount required to be
paid by Landlord under the terms of such first mortgage to the escrowed fund on
account of such charges. If the actual taxes, assessments and utilities, when
due, exceed the total amounts from time to time paid therefor by Tenant, then
Tenant will pay on demand any deficiency to Landlord. If such payments by
Tenant, over the Term, exceed the amount of taxes, assessments and utilities
paid therefrom, such excess will be refunded by Landlord to Tenant promptly.
6.04 Tenant also agrees to pay as additional rent for the Premises all
dues and assessments levied against or in regard to the Premises by Rochester
Hills Corporate Center Subdivision Association until the termination of the Term
and of any extended term of this Lease. Tenant will pay all such dues and
assessments before they become delinquent. Such dues and assessments which
relate to specific periods of time which periods include the Commencement Date
and/or the termination date of this Lease or any extension thereof, will be
prorated between Landlord and Tenant so that Tenant will be responsible for any
such dues and assessments attributable to the period during which Tenant has
possession of the Premises.
6.05 Tenant, at its expense, may contest, by appropriate legal proceedings
conducted in good faith and with due diligence, the amount or validity or
application, in whole or in part, of any tax, assessment, imposition or any
legal requirements applicable to the Premises or any lien, encumbrance or
charge, provided that (a) in the case of an unpaid tax, assessment, imposition,
lien, encumbrance or charge, the commencement of such proceedings shall suspend
the collection thereof from Landlord and from the Premises, (b) neither the
Lease Property nor any rent therefrom nor any part thereof or interest therein
would be in any immediate danger of being sold, forfeited, attached or lost, (c)
in the case of a legal requirement applicable to the Premises, Landlord would
not be in any immediate danger of civil or criminal liability for failure to
comply therewith pending the outcome of such proceedings, (d) in the case of an
insurance requirement, the coverage required by Section 8 shall be maintained,
(e) if such contest be finally resolved against Tenant, Tenant shall promptly
pay the amount required to be paid, together with all interest and penalties
accrued thereon, or comply with the applicable legal requirement or insurance
requirement, and (f) no default shall exist hereunder: Landlord, at Tenant's
expense, shall execute and deliver to Tenant such authorizations and other
documents as may reasonably be required in any such contest, and, if reasonably
requested by Tenant, Landlord shall join as a party therein. Tenant shall
indemnify and save Landlord harmless against any cost or expense of any kind
that may be imposed upon Landlord in connection with any such contest any loss
resulting therefrom.
6.06 Landlord shall give prompt notice to Tenant of all taxes, assessments
or impositions payable by Tenant hereunder of which Landlord at any time has
knowledge, but Landlord's failure to give any such notice shall in no way
diminish Tenant's obligations hereunder.
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SECTION 7
USE OF PREMISES
7.01 The Premises during the continuance of this Lease will be used and
occupied for office, engineering, light manufacturing, sales, distribution, and
warehouse uses including, the manufacture of optical scanners and air bearings.
Tenant agrees that it will not use or permit any person to use the Premises or
any part thereof for any use or purposes in violation of the laws of the United
States, the laws, ordinances or other regulations of the State and municipality
in which the Premises are located, or of any other lawful authorities, or the
Declaration of Covenants and Restrictions, dated July 9, 1987, recorded in
Oakland County records (a copy of which is attached hereto as Exhibit "B"), to
which Declaration this Lease is hereby expressly made subject. During the Term
or any extended term, Tenant will keep the Premises and every part thereof and
all buildings at any time situated thereon generally in compliance with all
lawful health and policy regulations. All signs and advertising displayed in and
about the Premises will be such only as to advertise the business carried on
upon the Premises and Landlord will control the location, character and size
thereof. No signs will be displayed except as approved in writing by Landlord,
which approval shall not be unreasonably withheld or delayed and no awning will
be installed or used on the exterior of the building unless approved in writing
by Landlord.
SECTION 8
INSURANCE
(LANDLORD TO OBTAIN)
THIS SECTION INTENTIONALLY DELETED
INSURANCE
(TENANT TO OBTAIN)
8.01 Tenant, at its sole expense, will obtain and maintain at all times
until termination of this Lease and surrender of the Premises to Landlord, a
primary policy of insurance covering the Premises and providing the insurance
protection described in this Section 8.
8.02 The liability coverage under the primary policy will name Landlord
and Landlord's mortgagee as additional insured parties, and will provide
comprehensive general public liability insurance coverage against claims for or
arising out of bodily injury, death or property damage, occurring in, on or
about the Premises or property in, on or about the streets, sidewalks or
properties adjacent to the Premises. The limits of coverage will be, if dual
limits are provided, initially, not less than Two Million ($2,000,000.00)
Dollars with respect to injury or death of a single person, not less than Two
Million ($2,000,000.00) Dollars with respect to any one occurrence and not less
than One Million ($1,000,000.00) Dollars with respect to any one occurrence of
property damage, or, in the alternative, a single limit policy in the amount of
Two Million ($2,000,000.00) Dollars, and thereafter in such reasonably
appropriate increased amounts as may be determined by Landlord or Landlord's
mortgagee; provided, however, that the amount of coverage will not be increased
more frequently than at one (1) year intervals. The policy will contain
cross-liability endorsements.
8.03 The primary policy will insure the Improvements, as defined in
Section 1.01 hereof (but not any personal property, fixtures or equipment of
Tenant), for full replacement cost against loss by fire, with standard extended
risk coverage, vandalism, malicious mischief, sprinkler leakage and all other
risk perils. The named insureds will be Landlord and Landlord's mortgagee, only.
The initial amount of this insurance will be: 2901 Waterview Drive Two Million
($2,000,000.00) Dollars and 2917 Waterview Drive One Million, Eight Hundred and
Fity Thousand ($1,850,000.00) 00/100 Dollars, but such amounts may be increased
upon notice to Tenant on the recommendation or requirement of Landlord or
Landlord's mortgagee, in order to reflect increases in the replacement cost of
the Improvements.
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8.04 The primary policy also will provide loss of rents coverage
sufficient, as reasonably determined by Landlord, to cover the net rental and
all other charges which are the obligation of Tenant under this Lease for a
12-month period from the date of any loss or casualty.
8.05 The insurance policy or policies to be provided by Tenant hereunder
shall be issued by an insurance company or companies having an A.M. Best Company
rating of not less than "A". Each policy procured by Tenant under this Section 8
must provide for at least thirty (30) days' written notice to Landlord of any
cancellation. At Landlord's option, either certificates of insurance or the
original policy or policies will be delivered by Tenant to Landlord prior to the
effective date thereof, together with receipts evidencing payment of the
premiums therefor. Tenant will deliver certificates of renewal for such policies
to Landlord at least thirty (30) days prior to the expiration dates thereof. The
insurance provided by Tenant under this Section 8 may be in the form of a
blanket insurance policy covering other properties as well as the Premises;
provided, however, that any such policy or policies of blanket insurance (I)
must specify therein, or Tenant must furnish Landlord with a written statement
from the insurers under such policy or policies specifying, the amount of the
total insurance allocated to the Premises, which amounts will not be less than
the amounts required by Subsections 8.02, 8.03 and 8.04 hereof, and (ii) such
amounts so specified must be sufficient to prevent Landlord or Landlord's
mortgagee from becoming a co-insurer within the terms of the applicable policy
or policies, and provided further, however, that any such policy or policies of
blanket insurance must, as to the Premises, otherwise comply as to endorsements
and coverage with the other provisions of this Section 8.
8.06 Except with respect to the insurance required by Subsections 8.02,
neither Landlord nor Tenant may take out separate insurance concurrent in form
or contributing in the event of loss with that required under this Section 8
unless Landlord and Tenant are included therein as the insured payable as
provided in this Lease. Each party will notify the other immediately of the
placing of any such separate insurance.
8.07 If Tenant fails to provide all or any of the insurance required by
this Section 8, or subsequently fails to maintain such insurance in accordance
with the requirements of this Section, Landlord may (but will not be required
to) procure or renew such insurance, and any amounts paid by Landlord for such
insurance will be additional rental due and payable on or before the next Rent
Day, together with late charges and interest as provided in Section 5.
8.08 In the event of loss under any policy or policies provided by Tenant
to Landlord under this Section 8, other than the liability policy required by
Subsection 8.02, the insurance proceeds will be payable to Landlord or
Landlord's mortgagee; thereafter, such proceeds, with the exception of the loss
of rents insurance proceeds, will be used for the expense of repairing or
rebuilding the Improvements which have been damaged or destroyed if Landlord and
its mortgagee are satisfied that the amount of insurance proceeds are and will
be at all times sufficient to pay for the completion of the repairs or
rebuilding.
8.09 Landlord's mortgagee under any first mortgage on the Premises at any
time requires, pursuant to the terms of the mortgage, that payment of
insurance premiums be made from an escrowed fund, then Landlord will so notify
Tenant. In such event, Tenant will not directly pay the insurance premiums, but
instead such excess is refunded by the mortgagee to Landlord, whichever occurs
first.
SECTION 9
DAMAGE BY FIRE OR OTHER CASUALTY
9.01 It is understood and agreed that if either building is damaged or
destroyed in whole or in part by fire or other casualty during the term, the
Landlord shall have the right to demolish or to repair and restore the damaged
building. If the Landlord elects not to repair and restore the damaged building,
Landlord may cancel this Lease within 30 days after such fire or other casualty
by giving Tenant notice of Landlord's intention to so do. The Lease shall
terminate as to the damaged building only, 60 days after such cancellation
notice to Tenant in which event the rent shall be reduced by the amount
attributable to the building which is subject to such cancellation ($20,792.00
per month as to 2909 Waterview Drive or $15,500.00 as to 2917 Waterview Drive).
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If Landlord elects to rerpair and restore the damaged building the rent and all
other charges which are the obligation of Tenant under this Lease will abate as
to the damaged building ($20,792.00 per month as to 2909 Waterview Drive or
$15,500.00 as to 2917 Waterview Drive) for the period the building is untenable.
Notwithstanding anything to the contrary, if in the reasonable opinion of the
Landlord and/or Tenant the premises cannot be or are in fact are not restored to
its prior condition within six months after the date of such casualty than
either party shall have the option to terminate this Lease as to the building
which was subject to such fire or other casualty; provided, however, that if
Tenant shall fail to adjust its own insurance or remove its damaged property and
equipment within a reasonable time and as a result thereof the repair and
restoration is delayed, the aforesaid 6-month period shall be extended for an
additional period equal to the delay.
9.02 If Tenant has elected, under Alternate Section 8, to carry its own
insurance, and the insurance proceeds therefrom are insufficient, in Landlord's
judgment, to cover the cost of repairing and restoring the Premises to good
tenantable condition, Tenant will deposit with Landlord or the mortgagee of any
first mortgage on the Premises the amount by which such proceeds are
insufficient and Landlord thereupon will proceed with such repairs and
restoration; if Tenant fails to make such a deposit, Landlord will be under no
obligation to make such repairs or undertake such restoration, or to use any
portion of the insurance proceeds for such restoration and repair, but Tenant
will not thereby be relieved of its obligations to repair and restore the
Premises to good tenantable condition.
9.03 Tenant will have the option, exercisable by written notice to
Landlord upon restoration of the Premises, to extend the original Term of this
Lease (or the extension of the Term during which the damage or destruction
occurred, as the case may be) for a period equal to the period, if any, during
which Tenant was deprived of the use of all or a significant portion of the
Premises by reason of such damage or destruction. Tenant's option must be
exercised within twenty (20) days following completion of the work of
restoration and repair.
SECTION 10
REPAIRS
10.01 Except as otherwise provided in this Section 10, Tenant agrees at
its own expense to keep the Improvements, including all structural, electrical,
mechanical and plumbing systems at all times in good appearance and repair
except for reasonable and normal wear and tear. Tenant will also pay all other
expenses in connection with the maintenance of the Premises including repair and
upkeep of grounds, sidewalks, driveways and parking areas in a first class
condition.
10.02 Notwithstanding any other provision of this Lease, from and after
the date Tenant takes occupancy of the Premises any repairs, additions or
alterations to the improvements or any of its systems (e.g., plumbing,
electrical, mechanical) structural or non-structural, which are required by any
law, statute, ordinance, rule, regulation or governmental authority or insurance
carrier, including, without limitation, 0SHA, will be the obligation of Tenant.
Provided, however, that Tenant shall not be responsible for any repairs,
additions or alterations to the building or any of its systems (e.g. plumbing,
electrical, mechanical) structural or non-structural which are required by any
law, statute, ordinance rule, regulation or governmental authority or insurance
carrier, including without limitation, OSHA if a violation or nocompliance
existed at the time Tenant took occupancy of 2917 Waterview Drive, in which case
Landlord shall be responsible for the repairs, additions or alterations as
required.
10.03 Tenant acknowledges that he has examined the Premises prior to the
making of this Lease, that he knows the condition thereof, that no
representations as to the condition of the state of repairs thereof have been
made by Landlord or Landlord's agent which are not expressly set forth herein,
and that except as otherwise specifically set forth herein, Tenant hereby
accepts the Premises in their present condition at the date of execution of this
Lease. Anything contained herein to the contrary notwithstanding the Premises at
2917 Waterview Drive shall be in good order and repair upon the date occupancy
is delivered to Tenant. Tenant will inspect the Premises at 2917 Waterview
Drive prior to occupancy to assure that the facilities and equipment are in good
condition and Landlord will agree to repair facilities or equipment reasonably
identified as substandard. Landlord shall not be required to replace carpeting
or repaint provided the walls and floors are in good condition, reasonable wear
and tear excepted.
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SECTION 11
PAYMENT FOR SERVICES RENDERED BY LANDLORD
11.01 If Landlord at any time: (I) does any work or performs any service
in connection with the Premises, or (ii) supplies any materials to the Premises,
and the cost of the services, work or materials is Tenant's responsibility under
the provisions of this Lease, Landlord will invoice Tenant for the cost, payable
within thirty (30) days after delivery of the invoice. This Section will apply
to any such work, services or materials, if furnished at Tenant's request or on
its behalf when failure by Tenant to furnish same constitutes a default
hereunder and whether furnished or caused to be furnished by Landlord or its
agents, employees or contractors. All amounts payable under this Section will be
additional rental, and failure by Tenant to pay them when due will be a default
under this Lease and further will result in the assessment of late charges and
interest under Section 5.
SECTION 12
ALTERATIONS
12.01 The parties agree that Tenant will not make any alterations,
additions, or improvements to the Premises without the written consent of
Landlord, which consent shall not be unreasonably withheld or delayed, and if
required by the terms of any mortgage on the Premises, the written consent of
the mortgagee (which consent shall not be unreasonably withheld or delayed). All
alterations, additions or improvements made by either of the parties hereto on
the Premises after the commencement date will be the property of Landlord and
will remain on and be surrendered with the Premises at the termination of this
Lease, except that alterations, additions or improvements made by Tenant must be
removed and the Premises restored by Tenant if so requested by Landlord.
12.02 If Landlord shall determine to repair, alter, remove, reconstruct or
improve any part of the Premises, then Landlord shall do such work with
reasonable dispatch and with minimal interference with Tenant's use and
enjoyment of the Premises as is reasonably necessary under the circumstances.
12.03 Tenant, at its option, may add eight (8) to ten (10) additional
parking spaces at 2909 Waterview Drive by removing the concrete sidewalk,
altering the landscaping and adding asphalt paving between the front entranceway
and the side door and these alterations will be considered permanent such that
Tenant will not be required to remove or restore the Premises to its original
condition at the end of the Lease. All work shall be done in a good and
workmanlike manner and in conformity with all appropriate governmental
requirements.
SECTION 13
LIENS
13.01 After the Commencement Date, Tenant will keep the Premises free of
liens of any sort and will hold Landlord harmless from any perfected liens which
may be placed on the Premises except those attributable to the acts of Landlord.
SECTION 14
EMINENT DOMAIN
14.01 If fifty (50%) percent or more of a building's net rentable area is
condemned or taken in any manner (including without limitation any conveyance in
lieu thereof) for any public or quasi-public use, the Term of this Lease as to
that building shall cease and terminate as of the date title is vested in the
condemning authority. If twenty-five (25%) percent or less of a building's net
rentable area is so condemned or taken, the Landlord may terminate this Lease as
to that building if it determines, in the reasonable exercise of its business
judgment, that continued operation of the Premises under this Lease would be
uneconomic. If more than twenty-five (25%) percent but less
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than fifty (50%) percent of a building's net rentable area is so condemned or
taken, with the result that Tenant's business is significantly and adversely
affected thereby, or if such a portion of the parking area is so condemned or
taken that the number of parking spaces remaining are less than the number
required by applicable zoning or other code for the building, then either
Landlord or Tenant may terminate this Lease as to that building of the date
title is vested in the condemning authority by written notice to the other.
14.02 If this Lease is not terminated following such a condemnation or
taking, Landlord, as soon as reasonably practicable after such condemnation or
taking and the determination and payment of Landlord's award on account thereof,
shall expend as much as may be necessary of the net amount which is awarded to
Landlord and released by Landlord's mortgagee, if any, in restoring, to the
extent originally constructed by Landlord (consistent, however, with zoning laws
and building codes then in existence), so much of the building as was originally
constructed by Landlord to an architectural unit as nearly like its condition
prior to such taking as shall be practicable. Should the net amount so awarded
to Landlord be insufficient to cover the cost of restoring the building, in the
reasonable estimate of Landlord, Landlord may, but shall have no obligation to,
supply the amount of such insufficiency and restore the building to such an
architectural unit, with all reasonable diligence, or Landlord may terminate
this Lease by giving notice to Tenant not later than a reasonable time after
Landlord has determined the estimated net amount which may be awarded to
Landlord and the estimated cost of such restoration.
14.03 If this Lease is not terminated pursuant to Section 14.01, the
minimum net rental payable by Tenant shall be reduced in proportion to the
reduction in net rentable area of the building by reason of the condemnation or
taking. If this Lease is terminated pursuant to Section 14.01, the minimum net
rental and other charges which are the obligation of Tenant hereunder shall be
apportioned and prorated accordingly as of the date of termination.
14.04 The whole of any award or compensation for any portion of the
Premises taken, condemned or conveyed in lieu of taking or condemnation shall be
solely the property of and payable to Landlord. Nothing herein contained shall
be deemed to preclude Tenant from seeking, at its own cost and expense, an award
from the condemning authority for loss of its business, the value of any trade
fixtures or other personal property of Tenant in the Premises, moving expenses
or any other damages, provided that the award for such claim or claims shall not
be in diminution of the award made to Landlord.
SECTION 15
ASSIGNMENT OR SUBLETTING
15.01 Tenant agrees not to assign or in any manner transfer this Lease or
any interest in this Lease without the previous written consent of Landlord, and
not to sublet the Premises or any part of the Premises or allow anyone to use or
to come in with, through or under it without like consent, which consent will
not be unreasonably withheld. One such consent will not be deemed a consent to
any subsequent assignment, subletting, occupation, or use by any other person.
Tenant may, however, assign this Lease to a corporation with which it may merge
or consolidate, to any parent or subsidiary of Tenant or subsidiary of Tenant's
parent, or to a purchaser of substantially all of Tenant's asssets if the
assignee has assets and creditworthiness substantially equal to or greater than
Tenant and if the assignee executes an agreement required by Landlord assuming
Tenant's obligations. The acceptance of rent from an assignee, subtenant or
occupant will not constitute a release of Tenant from the further performance of
the obligations of Tenant contained in this Lease. Tenant acknowledges that
Landlord selected Tenant in part on the basis of Tenant's proposed use and
occupation of the Premises, and agrees that Landlord may withhold consent to any
proposed sublease or assignment if the subtenant's or assignee's business or
proposed use of the Premises would be physically injurious to the Building or
would detract from the reputation of the industrial park within which the
premises are located.
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SECTION 16
INSPECTION OF PREMISES
16.01 Tenant agrees to permit Landlord and the authorized representatives
of Landlord to enter the Premises at all reasonable times and upon reasonable
prior notice during business hours for the purpose of inspecting the same.
SECTION 17
FIXTURES AND EQUIPMENT
17.01 All fixtures and equipment paid for by Landlord and all fixtures and
equipment which may be paid for and placed on the Premises by Tenant from time
to time but which are so incorporated and affixed to Improvements that their
removal would involve damage or structural change to Improvements, will be and
remain the property of Landlord.
17.02 All furnishings, equipment and fixtures other than those specified
in Section 17.01, which are paid for and placed on the Premises by Tenant from
time to time (other than those which are replacements for fixtures originally
paid for by Landlord) will remain the property of Tenant.
SECTION 18
SECURITY
18.01 THIS SECTION HAS BEEN INTENTIONALLY DELETED
SECTION 19
NOTICE OR DEMANDS
19.01 All bills, notices, statements, communications to or demands
(collectively, "notices or demands") upon Landlord or Tenant desired or required
to be given under any of the provisions hereof must be in writing. Any such
notices or demands from Landlord to Tenant will be deemed to have been duly and
sufficiently given if a copy thereof has been mailed by United States mail in an
envelope properly stamped and addressed to Tenant at the address of the Premises
or Tenant's registered office in the State in which the Premises are located at
such time, or at such other address as Tenant may have last furnished in writing
to the Landlord for such purpose, and any such notices or demands from Tenant to
Landlord will be deemed to have been duly and sufficiently given if personally
delivered to Landlord or mailed by United States mail in an envelope properly
stamped and addressed to Landlord at the address last furnished by written
notice from Landlord to Tenant. The effective date of such notice or demand will
be deemed to be the time when personally delivered or mailed as herein provided.
SECTION 20
BREACH; INSOLVENCY; RE-ENTRY
20.01 If any rental payable by Tenant to Landlord remains unpaid for more
than seven (7) days after written notice to Tenant of non-payment, or if Tenant
violates or defaults in the performance of any of its obligations in this Lease
and the violation or default continues for a period of thirty (30) days after
written notice (or if such violation or default cannot reasonably be cured
within such 30-day period, then such longer period as may be reasonably
necessary, provided Tenant commences such cure within such 30-day period and
diligently pursues such cure to completion), then Landlord may (but will not be
required to) declare this Lease forfeited and the Term ended, or re-enter the
Premises, or may exercise all other remedies available under Michigan law.
Landlord will not be liable for damages to person or property by reason of any
legitimate re-entry or forfeiture, and Landlord will be aided and assisted by
Tenant, its agents, representatives and employees.
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Tenant, by the execution of this Lease, waives notice of re-entry by Landlord.
In the event of re-entry by Landlord without declaration of forfeiture, the
liability of Tenant for the rent provided herein will not be relinquished or
extinguished for the balance of the Term, and any rentals prepaid may be
retained by Landlord and applied against the cost of re-entry, or as liquidated
damages, or both. Tenant will pay, in addition to the rentals and other sums
agreed to be paid hereunder, reasonable attorneys' fees, costs and expenses in
any suit or action instituted by or involving Landlord to enforce the provisions
of, or the collection of the rentals due Landlord under this Lease, including
any proceeding under the Federal Bankruptcy Code.
If Tenant is adjudged bankrupt or insolvent, files or consents to the
filing of a petition in bankruptcy under Federal or State law, applies for or
consents to the appointment of a receiver for all or substantially all of its
assets, makes a general assignment for the benefit of its creditors, or does
anything which, under the applicable provisions of the Federal Bankruptcy Code
would permit a petition to be filed by or against Tenant, and such petition is
not removed within sixty (60) days then Tenant shall be in default under this
Lease and, to the extent from time to time permitted by applicable law,
including but not limited to the Federal Bankruptcy Code, Landlord shall be
entitled to exercise all remedies set forth in the preceding paragraph of this
Section 20. In a reorganization under Chapter II of the Federal Bankruptcy Code,
the debtor or trustee must assume this Lease or assign it within sixty (60) days
from the filing of the proceeding, or he shall be deemed to have rejected and
terminated this Lease. Tenant acknowledges that its selection to be the tenant
hereunder was premised in material part on Landlord's determination of Tenant's
creditworthiness and ability to perform the economic terms of this Lease, and
Landlord's further determination that Tenant and the character of its occupancy
and use of the Premises would be compatible with the nature of the Premises and
other adjacent properties of Landlord. Therefore, if Tenant, as debtor, or its
trustee elects to assume or assign this Lease, in addition to complying with all
other requirements for assumption or assignment under the Federal Bankruptcy
Code, then Tenant, as debtor, or its trustee or assignee, as the case may be,
must also provide adequate assurance of future performance, including but not
limited to a deposit, the amount of which shall be reasonably determined based
on the duration of time remaining in the Term, the physical condition of the
Premises at the time the proceeding was filed, and such damages as may be
reasonably anticipated after reinstatement of the Lease, taking into account
rental market conditions at the time of the reinstatement. In the event of an
assignment, the Landlord must be reasonably assured that the financial condition
of the assignee is sound, and that its use of the Premises will be compatible
with the nature of the Premises and other adjacent properties of Landlord.
In the event of declaration of forfeiture at or after the time of
re-entry, Landlord may re-lease the Premises or any portion(s) of the Premises
for a term or terms and at a rent which may be less than or exceed the balance
of the Term of and the rent reserved under this Lease. In such event Tenant will
pay to Landlord as liquidated damages for Tenant's default any deficiency
between the total rent reserved and the net amount, if any, of the rents
collected on account of the lease or leases of the Premises which otherwise
would have constituted the balance of the term of this Lease. In computing such
liquidated damages, (here will be added to the deficiency any expenses which
Landlord may incur in connection with re-leasing, such as legal expenses,
attorneys' fees, brokerage fees and expenses, advertising and for keeping the
Premises in good order or for preparing the Premises for re-leasing. Any such
liquidated damages will be paid in monthly installments by Tenant on the Rent
Day and any suit brought to collect the deficiency for any month will not
prejudice Landlord's right to collect the deficiency for any subsequent month by
a similar proceeding. In lieu of the foregoing computation of liquidated
damages, Landlord may elect, at its sole option, to receive liquidated damages
in one payment equal to any deficiency between the total rent reserved hereunder
and the fair and reasonable rental of the Premises, both discounted at ten (10%)
percent per annum to present value at the time of declaration of forfeiture.
Whether or not forfeiture has been declared, Landlord will not be obliged
or be responsible in any way for failure to re-lease the Premises or, in the
event that the Premises are re-leased, for failure to collect the rent under
such re-leasing. The failure of Landlord to re-lease all or any part of the
Premises will not release or affect Tenant's liability for rent or damages.
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SECTION 21
SURRENDER OF PREMISES ON TERMINATION
21.01 At the expiration (or earlier termination) of the Term, Tenant will
surrender the Premises broom clean and in as good condition and repair as they
were at the time Tenant took possession, reasonable wear and tear excepted, and
promptly upon surrender will deliver all keys and building security cards for
the Premises to Landlord at the place then fixed for payment of rent. All costs
and expenses incurred by Landlord in connection with repairing or restoring the
Premises to the condition called for herein, together with the costs, if any, of
removing from the Premises any property of Tenant left therein, together with
liquidated damages in an amount equal to the amount of minimum net rental plus
all other charges which would have been payable by Tenant under this Lease if
the term of this Lease had been extended for the period of time reasonably
required for Landlord to repair or restore the Premises to the condition called
for herein, shall be invoiced to Tenant and shall be payable as additional
rental within thirty (30) days after receipt of notice.
SECTION 22
PERFORMANCE BY LANDLORD OF THE COVENANTS OF TENANT
22.01 If Tenant fails to pay any sum of money, other than rental, required
to be paid hereunder or fails to perform any act on its part to be performed
hereunder, including without limitation the performance of all covenants
pertaining to the condition and repair of the Premises pursuant to Section 10,
above, and such failure shall continue for a period of thirty (30) days (or a
reasonable period of less than thirty (30) days when life, person or property is
in jeopardy) after notice thereof by Landlord, Landlord may (but shall not be
required to), and without waiving or releasing Tenant from any of Tenant's
obligations, make any such payment or perform any such other act. All sums so
paid by Landlord and all necessary incidental costs, including without
limitation the cost of repair, maintenance or restoration of the Premises if so
performed by Landlord hereunder, shall be deemed additional rental and, together
with interest thereon at the rate set forth in Section 5.02, from the date of
payment by Landlord until the date of repayment by Tenant to Landlord, shall be
payable to Landlord within thirty (30) days after receipt of invoice by Tenant.
On default in such payment, Landlord shall have the same remedies as on default
in payment of rent. The rights and remedies granted to Landlord under this
Section 22 shall be in addition to, and not in lieu of all other remedies, if
any, available to Landlord under this Lease or otherwise, and nothing herein
contained shall be construed to limit such other remedies of Landlord with
respect to any matters covered herein.
SECTION 23
SUBORDINATION; ESTOPPEL CERTIFICATES
23.01 Tenant agrees that Landlord may choose to make this lease
subordinate or paramount to any construction loans, mortgages, trust deeds and
ground or underlying leases now or hereafter affecting the Premises and to any
and all advances to be made thereunder, and to the interest and charges thereon,
and all renewals, replacements, and extensions thereon, provided the mortgagee,
lessor or trustee named in any such mortgages, trust deeds or leases agrees to
recognize the lease of Tenant in the event of foreclosure if Tenant is not in
default provided that no such loan, mortgage, trust deed, or lease shall
materially and adversely affect any substantial right of Tenant hereunder.
Tenant will execute promptly any instrument or certificate that Landlord may
request to confirm such subordination, and hereby irrevocably appoints Landlord
as Tenant's attorney-in-fact to execute such instrument or certificate on its
behalf.
23.02 Tenant, within ten (10) days after request (at any time or times) by
Landlord, will execute and deliver to Landlord, an estoppel certificate
identifying the Commencement Date and expiration date of the Term and stating
that this Lease is unmodified and in full force and effect, or is in full force
and effect as modified, stating the modifications, and stating that Tenant does
not claim that Landlord is in default in any way, or listing any such claimed
defaults. The certificate also will confirm the amount of monthly Base Rent and
additional rent as of the date of the
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certificate, the date to which the rent has been paid in advance, and the amount
of any security deposit or prepaid rent. If Tenant fails to deliver the executed
certificate to Landlord within the ten (10) day period, then after an additional
ten (10) day notice by Landlord to Tenant, the accuracy of the proposed
certificate will be deemed conclusively confirmed.
23.3 Notwithstanding anything to the contrary contained in this Lease,
Landlord agrees that Tenant may pledge, hypothecate or otherwise encumber its
interests in the leased property and under this Lease in connection with its or
its corporate parent's existing or future secured borrowing arrangements.
SECTION 24
QUIET ENJOYMENT
24.01 Landlord agrees that at all times when Tenant is not in default
under the provisions and during the Term of this Lease, Tenant's quiet and
peaceable enjoyment of the Premises will not be disturbed or interfered with by
Landlord or any person claiming by, through, or under Landlord.
SECTION 25
HOLDING OVER
25.01 If Tenant remains in possession of the Premises after the expiration
date of this Lease without executing a new lease, it will be deemed to be
occupying the Premises as a tenant from month to month, subject to all the
provisions of this Lease to the extent that they can be applicable to a
month-to-month tenancy, except that the minimum net rental for each month will
be one hundred fifty (150%) percent of the regular monthly installments of
minimum net rental set forth in Section 4.01, above.
SECTION 26
REMEDIES NOT EXCLUSIVE; WAIVER
26.01 Each and every of the rights, remedies and benefits provided by this
Lease are cumulative, and are not exclusive of any other of said rights,
remedies and benefits, or of any other rights, remedies and benefits allowed by
law.
26.02 One or more waivers of any covenant or condition by Landlord will
not be construed as a waiver of a further or subsequent breach of the same
covenant or condition, and the consent or approval by Landlord to or of any act
by Tenant requiring Landlord's consent or approval will not be deemed to waive
or render unnecessary Landlord's consent or approval to or of any subsequent
similar act by Tenant.
SECTION 27
WAIVER OF SUBROGATION
27.01 Landlord and Tenant hereby waive any and all right of recovery
against each other for any loss or damage caused by fire or any of the risks
covered by standard fire and extended coverage, vandalism and malicious mischief
insurance policies.
SECTION 28
RIGHT TO SHOW PREMISES
28.01 For a period commencing one hundred eighty (180) days prior to the
termination of this Lease or any extension thereof, Landlord may show the
Premises and may display about the Premises signs advertising the availability
of the Premises.
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SECTION 29
SECURITY DEPOSIT
29.01 Landlord hereby acknowledges the receipt of $17,762.00 (has been
transferred from the prior Lease respecting 2909 Waterview Drive) which shall
constitute a Security Deposit. If Tenant defaults in any of the provisions of
this Lease, Landlord may use, apply or retain all or any part of the Security
Deposit for the payment of any minimum net rental and/or other charges which are
the obligation of Tenant under this Lease in default or for any other sum which
Landlord may expend by reason of Tenant's default, including any damages or
deficiency in the releasing of the Premises. Tenant shall pay Landlord an
additional security deposit in the sum of $15,500.00 on or before November 1,
1999, to be held by Landlord pursuant to this paragraph.
SECTION 30
INDEMNIFICATION
30.01 Tenant at its expense will defend, indemnify and save Landlord, its
licensees, servants, agents, employees and contractors, harmless from any loss,
damage, liability or expense to or for any person or property, whether based on
contract, tort, negligence or otherwise, arising directly or indirectly out of
or in connection with (i) the condition of the Premises, to the extent arising
out of the use or misuse thereof by Tenant or any of its licensees, servants,
agents, employees or contractors, (ii) the acts or omissions of Tenant, its
licensees, servants, agents, employees or contractors, and (iii) any failure by
Tenant to comply with any provision of this Lease; provided that nothing herein
shall be construed to require Tenant to indemnify Landlord against the acts,
omissions or negligence of Landlord, its licensees, servants, agents, employees
or contractors.
30.02 Landlord at its expense will defend, indemnify and save Tenant, its
licencees, servants, agents, employees and contractors, harmless from any loss,
damage, liability or expense to or for any person or property, whether based on
contract, tort, negligence or otherwise, arising directly or indirectly out of
or in connection with (i) any failure by Landlord to comply with any provision
of this Lease and (ii) any action taken by Landlord on or concerning the
Premises during the term of this Lease.
SECTION 31
PREVENTING REMOTE VESTING
31.01 Notwithstanding any other provisions of this Lease, if the Term of
this Lease does not commence within three (3) years from the date hereof, this
Lease will be deemed terminated three (3) years from the date hereof without
necessity of any notice or act by Landlord or Tenant. It is the intention of
this Section to prevent this Lease from becoming unenforceable by reason of any
claim that it might violate the rule against perpetuities.
SECTION 32
DEFINITION OF LANDLORD; LANDLORD'S LIABILITY
32.01 The term "Landlord" as used in this Lease so far as covenants,
agreements, stipulations or obligation on the part of the Landlord are concerned
is limited to mean and include only the owner or owners of fee title (or of a
ground leasehold interest) to the Premises at the time in question, and in the
event of any transfer or transfers of the title to such fee the Landlord herein
named (and in case of any subsequent transfers or conveyances the then grantor)
will automatically be freed and relieved from and after the date of such
transfer or conveyance of all personal liability for the performance of any
covenants or obligations on the part of the Landlord contained in this Lease
thereafter to be performed.
If Landlord fails to perform any provision of this Lease upon
Landlord's part to be
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performed, and if as a consequence of such default Tenant recovers a money
judgment against Landlord, such judgment may be satisfied only out of the
proceeds of sale received upon execution of such judgment and levied thereon
against the right, title and interest of Landlord in the Premises and out of
rents or other income from such property receivable by Landlord and Landlord
shall not be personally liable for any deficiency.
SECTION 33
ENTIRE AGREEMENT
33.01 This Lease and the Exhibits attached hereto and forming a part
hereof, set forth all of the covenants, agreements, stipulations, promises,
conditions and understandings between Landlord and Tenant concerning the
Premises and there are no covenants, agreements, stipulations, promises,
conditions or understanding, either oral or written, between them other than
herein set forth.
SECTION 34
GENERAL
34.01 Many references in this Lease to persons, entities and items have
been generalized for ease of reading. Therefore, references to a single person,
entity or item will also mean more than one person, entity or thing whenever
such usage is appropriate (for example, "Tenant" may include, if appropriate, a
group of persons acting as a single entity, or as tenants-in-common). Similarly,
pronouns of any gender should be considered interchangeable with pronouns of
other genders.
34.02 All agreements and obligations of Tenant under this Lease are joint
and several in nature. Any waiver or waivers by Landlord of any of the
provisions of this Lease will not constitute a waiver of any later breach of
that provision, and any consent or approval given by Landlord with respect to
any act, neglect or default by Tenant will not waive or make unnecessary
Landlord's consent or approval with respect to any later similar act, neglect or
default by Tenant.
34.03 Topical headings appearing in this Lease are for convenience only.
They do not define, limit or construe the contents of any paragraphs or clauses.
34.04 This Lease can be modified or amended only by a written agreement
signed by Landlord and Tenant.
34.05 All provisions of this Lease are and will be binding on the heirs,
executors, administrators, personal representatives, successors and assigns of
Landlord and Tenant.
34.06 The laws of the State of Michigan will control in the construction
and enforcement of this Lease.
SECTION 35
HAZARDOUS MATERIALS
35.01 A. Tenant shall be fully responsible, at its own expense, for
compliance with all laws and/or regulations governing the handling of Hazardous
Materials or other substances used or stored on the Leased Premises in
connection with Tenant's business conducted therein. All hazardous or
potentially Hazardous Materials shall be stored in proper containers and shall
be further protected against spills by secondary containment facilities. Tenant
shall not, in violation of any applicable law or regulation, spill, introduce,
discharge or bury any Hazardous Materials, substance or contaminant of any kind
in, on, or under the Leased Premises or any portion thereof or any adjacent
premises or into the ambient air. Tenant shall not permit the discharge of any
Hazardous Materials into the sanitary or storm sewer or water system serving the
Leased Premises or any adjacent premises or into any municipal or other
governmental water system or storm and/or sanitary sewer system. Tenant shall
employ all appropriate safeguards and procedures necessary or appropriate to
protect such systems from contamination. Tenant shall undertake, at its expense,
any
14
<PAGE>
necessary and/or appropriate cleanup process in connection with any breach of
the foregoing covenants, and without limiting Tenant's other indemnity or
insurance obligations under this Lease. Tenant shall indemnify and hold harmless
Landlord from and against all liability whether direct, indirect, consequential
or otherwise, arising from any incident or occurrence on or about the Leased
Premises or any adjacent premises pertaining to Hazardous Materials which
results from the acts or omissions of Tenant, its agents, employees or invitees,
during the term hereof. The obligations of Tenant under this section shall
survive the termination of this Lease.
B. "Hazardous Materials" shall include, without limitation, any
chemical or other material which is or may become injurious to the public
health, safety or welfare, or to the environment, flammable explosives,
petroleum fractions, pesticides, radioactive materials, Hazardous Materials,
regulated substances, hazardous or toxic substances, contaminating pollutants or
related or similar materials, including by way of example, substances or
materials defined by any federal, state or local environmental law, ordinance,
rule or regulation, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Hazardous
Materials Transportation Act, the Resource Conservation and Recovery Act, the
Federal Insecticide, Fungicide, and Rodenticide Act or the Michigan
Environmental Response Act, and the regulations adopted and publications
promulgated thereto, all as amended.
C. Landlord agrees to indemnify and hold Tenant harmless from and
against any and all actions, claims, suits, damages, judgments, costs, charges,
expenses, attorney fees or liabilities arising out of or as a result of any
toxic or hazardous wastes or substances that may have been deposited on or about
the premises prior to occupancy of 2909 Waterview Drive and 2917 Waterview Drive
by Tenant. Prior to commencement of the term, Landlord shall have an updated
Phase I environmental audit conducted at 2917 Waterview Drive. Landlord shall
take such corrective action as shall be necessary in order to place said
Premises in a lawful condition should the audit establish that such corrective
action is required
D. Upon termination hereof, Tenant, at its own cost and expense,
shall conduct an environmental audit of the property. Such audit shall be
conducted pursuant to Standard Quality Control/Quality Assurance Procedures
reasonably satisfactory to Landlord. Tenant shall promptly furnish Landlord with
a copy of the report of the firm conducting such audit and Tenant shall, if
necessary, at its sole expense, promptly take all steps required to repair
and/or restore the Premises to a lawful condition.
SECTION 36
OPTION TO EXTEND LEASE TERM
36.01 Providing that Tenant has not defaulted in the terms or conditions
of this Lease, Tenant shall have one (1) option to extend the Term of this Lease
from and after the expiration of the original Term for a period of three (3)
years. Should Tenant decide to exercise this option, same shall be deemed
validly exercised only if Landlord shall have received written notice of
exercise of option from Tenant in writing on or before twelve (12) months prior
to the expiration of the original Term. TIME SHALL BE DEEMED TO BE OF THE
ESSENCE IN CONNECTION WITH THE EXERCISE OF THIS OPTION. In the event of the
exercise of this option, all terms and conditions of this Lease shall continue
and remain in full force and effect during the three (3) year option term,
provided, however, that the minimum net monthly rental installments during the
three (3) year option term shall be Thirty-Nine Thousand Nine Hundred Twenty-One
($39,921.00) Dollars.
SECTION 37
TENANT'S OPTION TO TERMINATE LEASE
37.01 Tenant may elect to terminate this Lease effective January 31, 2002.
Tenant may exercise its right to so terminate the term hereof by (i) giving
Landlord notice to that effect by registered or certified mail, return receipt
requested, during the month of July 2001; (ii) accompanying the notice of
termination shall be a termination fee in the sum of Two Hundred
15
<PAGE>
Seventeen Thousand Seven Hundred Fifty-Two ($217,752.00) Dollars; (iii)
performing all of Tenant's obligations hereunder through such termination date,
including the surrender of the Leased Premises on or before that date.
IN WITNESS WHEREOF, the Landlord and Tenant have executed this Lease as
of the date set forth at the outset hereof
WITNESS: LANDLORD:
By: /s/ Joel Nosanchuk
- ---------------------------- ----------------------------------
JOEL NOSANCHUK
- ----------------------------
TENANT: SPEEDRING SYSTEMS, INC.,
A Delaware Corporation
By: /s/ Mark Maiberger
----------------------------------
Its: President
---------------------------------
16
<PAGE>
EXHIBIT A
Lot 14 of "Rochester hills Corporate Center" Subdivision, a subdivision of the
S.W. 1/4 of Section 30, Town 3 North, Range 11 East, City of Rochester Hills,
Michigan.
Also known as 2909 Waterview Drive.
A parcel of land located in the City of Rochester Hills, Oakland County,
Michigan described as:
Lot 15 of Rochester Hills Corporate Center Subdivision, accordingly to the plat
thereof recorded in Liber 193 of Plats, Pages 32, 33, 34, and 35, Oakland County
Records.
Also known as 2917 Waterview Drive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF AXSYS TECHNOLOGIES, INC. AS OF MARCH 31, 1999 AND
THE RELATED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1999
<CASH> 134
<SECURITIES> 0
<RECEIVABLES> 16,806
<ALLOWANCES> 525
<INVENTORY> 28,871
<CURRENT-ASSETS> 48,081
<PP&E> 27,803
<DEPRECIATION> 12,294
<TOTAL-ASSETS> 78,023
<CURRENT-LIABILITIES> 16,380
<BONDS> 7,534
0
0
<COMMON> 41
<OTHER-SE> 51,781
<TOTAL-LIABILITY-AND-EQUITY> 78,023
<SALES> 25,135
<TOTAL-REVENUES> 25,135
<CGS> 18,288
<TOTAL-COSTS> 18,288
<OTHER-EXPENSES> 7,211
<LOSS-PROVISION> 18
<INTEREST-EXPENSE> 190
<INCOME-PRETAX> (572)
<INCOME-TAX> (236)
<INCOME-CONTINUING> (336)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (336)
<EPS-PRIMARY> (0.08)<F1>
<EPS-DILUTED> (0.08)<F1>
<FN>
<F1> Earnings per share has been prepared in accordance with SFAS No. 128.
Basic and diluted EPS have been entered in place of primary and fully
diluted, respectively.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF AXSYS TECHNOLOGIES, INC. AS OF MARCH 31, 1998 AND
THE RELATED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 31,898
<TOTAL-REVENUES> 31,898
<CGS> 21,930
<TOTAL-COSTS> 21,930
<OTHER-EXPENSES> 7,060
<LOSS-PROVISION> 24
<INTEREST-EXPENSE> 258
<INCOME-PRETAX> 2,626
<INCOME-TAX> 1,063
<INCOME-CONTINUING> 1,563
<DISCONTINUED> (26)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,537
<EPS-PRIMARY> 0.36<F1>
<EPS-DILUTED> 0.36<F1>
<FN>
<F1> Earnings per share has been prepared in accordance with SFAS No. 128.
Basic and diluted EPS have been entered in place of primary and fully
diluted, respectively.
</FN>
</TABLE>
