SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Earliest Event Reported): February 28, 1997
Exact name of Registrant
as specified in its charter: The Diana Corporation
State or Other Jurisdiction of Incorporation: Delaware
Commission File Number: 1-5486
I.R.S. Employer Identification Number: 36-2448698
Address of Principal Executive Office: 26025 Mureau Road
Calabasas, CA 91302
Registrant's Telephone Number, Including Area Code: (818) 878-7711
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
10.1 Asset Purchase Agreement dated January 31, 1997 by and
among Atlanta Provision Company, Inc. and Colorado
Boxed Beef Company
10.2 Agreement Regarding Class A Units dated October 2, 1996
by and between Sydney B. Lilly and Sattel
Communications LLC
10.3 Amended and Restated Agreement Regarding Award of Class
B Units dated November 11, 1996 by and between James J.
Fiedler and Sattel Communications LLC
10.4 Amended and Restated Agreement Regarding Award of Class
B Units dated November 11, 1996 by and between Daniel
W. Latham and Sattel Communications LLC
10.5 Amendment to Stock Option Agreements dated November 20,
1996 by and between The Diana Corporation and Richard
Y. Fisher
10.6 Separation Agreement dated November 20, 1996 by and
between The Diana Corporation and Richard Y. Fisher
10.7 Amendment to Stock Option Agreements dated November 20,
1996 by and between The Diana Corporation and Sydney B.
Lilly
10.8 Separation Agreement dated November 20, 1996 by and
between The Diana Corporation and Sydney B. Lilly
10.9 Amendment to Stock Option Agreements dated November 20,
1996 by and between The Diana Corporation and Donald E.
Runge
10.10 Separation Agreement dated November 20, 1996 by and
between The Diana Corporation and Donald E. Runge
10.11 Employment Agreement dated November 27, 1996 by and
between The Diana Corporation and R. Scott Miswald
10.12 Form of Indemnification Agreement dated November 26,
1996 or November 27, 1996 between The Diana Corporation
and (i) Bruce C. Borchardt, (ii) Jack E. Donnelly,
(iii) James J. Fiedler, (iv) Jay M. Lieberman and (v)
R. Scott Miswald
10.13 Loan Agreement and Promissory Note dated November 11,
1996 by and between The Diana Corporation and James J.
Fiedler
10.14 Loan Agreement and Promissory Note dated November 11,
1996 by and between The Diana Corporation and Daniel W.
Latham
10.15 Employment Agreement dated September 11, 1995 by and
between Sattel Communications Company and James J.
Fiedler
10.16 Employment Agreement dated September 13, 1995 by and
between Sattel Communications Company and Daniel W.
Latham
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
THE DIANA CORPORATION
(Registrant)
Date: February 28, 1997 /s/ R. Scott Miswald
Vice President and Treasurer
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered this 31st day of January,
1997, by and among ATLANTA PROVISION COMPANY, INC., a Georgia
corporation (the "Company"), and COLORADO BOXED BEEF COMPANY, a
Florida corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, the Company is engaged in business as a distributor
of meat, poultry and seafood to retail food outlets, meat
wholesalers and restaurants (the "Subject Business"); and
WHEREAS, Buyer wishes to purchase, and the Company wishes to
sell, certain of the assets owned and employed by the Company in
connection with the Subject Business on the terms and conditions
set forth herein;
NOW, THEREFORE, the parties hereto, in consideration of the
mutual promises hereinafter set forth, do promise and agree as
follows:
1. Purchase and Sale of Assets.
1.1 Purchased Assets. At the Closing (as hereinafter
defined), the Company will sell, transfer, assign, convey and
deliver to Buyer, and Buyer will purchase, accept and receive the
following assets of the Company (collectively, the "Purchased
Assets"):
(a) all accounts receivable, employee loans, notes receivable
and other receivables, as specifically identified on Schedule
1.1(a) (excluding the Excluded Receivables as defined below), but
only as such exist at the close of business on January 31, 1997
(the "Effective Time") and are identified on a schedule to the
Closing Statement (as defined below) (the "Receivables"), and all
goodwill associated therewith;
(b) all inventories, raw materials, work in progress and
finished products, whether on hand or in transit, as specifically
identified on Schedule 1.1(b), but only as such exist at the
Effective Time and are identified on a schedule to the Closing
Statement (the "Inventory");
(c) all business permits, licenses and regulatory approvals
currently utilized by the Company, which are specifically
identified on Schedule 1.1(c) (the "Necessary Permits"), to the
extent they are assignable to Buyer;
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(d) all rights of the Company under unfilled sales orders
with customers of the Subject Business or purchase orders with
suppliers of the Subject Business, in each case to the extent
assignable to Buyer;
(e) All rights of the Company under equipment leases, service
agreements and other agreements listed on Schedule 1.1(e)
(collectively, the "Operating Agreements");
(f) all machinery, equipment, furniture, information systems,
automobiles, trailers, tools and other fixed assets of the Company
specifically identified on Schedule 1.1(f) (the "Machinery,
Equipment and Furniture");
(g) the right to use and copy all financial and operating
records related to the Subject Business, including, without
limitation, all customer lists and customer records, books of
account, related computer software and personnel records, as set
forth in Section 7.2 below (collectively, the "Business Records");
(h) all supplies, prepaid expenses and security deposits
specifically identified on Schedule 1.1(h), but only as such exist
at the Effective Time and are identified on a schedule to the
Closing Statement (the "Supplies");
(i) all United States, state and foreign trademark rights,
including trademark applications, trademark registrations, trade
names, brand names and interests thereunder as set forth on
Schedule 1.1(i) (collectively, the "Proprietary Rights");
(j) all defenses related, directly or indirectly, to the
Assumed Liabilities (as defined below);
(k) all rights of the Company under written or oral
agreements, contracts and commitments to which the Company is a
party, and which the Company could terminate on thirty (30) days or
less notice without liability to the Company (the "Smaller
Commitments"), to the extent they are assignable to Buyer;
(l) the right to use "lockbox" account No. 198929 currently
in the name of the Company and maintained by NationsBank, N.A.
(South) ("NationsBank");
(m) the right to use "disbursement" accounts No. 010-114-1324
and 010-711-6650 currently in the name of the Company and
maintained by Nationsbank;
(n) the right to use the Company's name, and derivations
thereof, as set forth in Section 8.5; and
(o) all rights of the Company to utilize its existing phone
numbers and post office boxes.
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1.2 Assumed Liabilities. At the Closing, the Buyer will
assume and agree to pay, perform and discharge the following debts,
obligations, contracts and liabilities of the Company
(collectively, the "Assumed Liabilities"), and no others:
(a) all accounts payable and trade payables specifically
identified on Schedule 1.2(a), but only as such exist at the
Effective Time and are identified on a schedule to the Closing
Statement (the "Payables");
(b) all obligations and liabilities pertaining to the
accruals and outstanding checks specifically identified on Schedule
1.2(b), but only as such exist at the Effective Time and are
identified on a schedule to the Closing Statement (the "Accruals");
(c) all obligations and liabilities of the Company under
sales orders and purchase orders specifically identified on
Schedule 1.2(c), but only as such exist at the Effective Time and
are identified on a schedule to the Closing Statement
(d) all obligations and liabilities of the Company under the
Operating Agreements;
(e) the contracts reflected on Schedule 4.9(b) and
liabilities of the Company thereunder to the extent such
liabilities are identified on Schedules 1.2(a) or 1.2(b), which
are in existence at the Effective Time and were incurred in the
ordinary course of business or which arise thereunder after the
Effective Time (such contracts and liabilities are referred to
collectively as the "Employee Benefit Liabilities"), and also
including any obligations that arise by operation of the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"),
the National Labor Relations Act and the Labor Management Relations
Act with respect of such benefits;
(f) all obligations and liabilities of the Company relating
to returns of products in the ordinary course of business in
accordance with past practices (but not including any product
liability claims related to such returns); and
(g) all obligations and liabilities of the Company arising
under the Smaller Commitments to the extent that such liabilities
are identified on Schedules 1.2(a) or 1.2(b), and all obligations
and liabilities arising pursuant to the Smaller Commitments on or
after the Effective Time.
1.3 Excluded Assets and Liabilities. The Purchased Assets
specifically exclude cash and cash accounts, the Company's interest
in Fieldstone Meats of Alabama, unamortized loan fees, any real
estate owned by the Company, and the troubled accounts and notes
receivable specifically described on Schedule 1.3 (the "Excluded
Receivables"). The Assumed Liabilities specifically, and without
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limitation, exclude all liabilities of the Company not specifically
identified as an Assumed Liability, all liabilities for personal
property taxes, business license fees or taxes, and real estate
taxes, and any liabilities of the Company to The Diana Corporation
("Diana"), Entree Corporation ("Entree"), or any officers,
directors or stockholders of the Company, Diana, Entree, or any
entity related to said corporations which are not identified on
Schedule 1.2(b) (collectively, the "Excluded Liabilities").
2. Purchase Price.
2.1 Amount. The Purchase Price shall equal (i) one hundred
percent (100%) of the aggregate cost of the Inventory as reflected
in the Closing Statement (defined in Section 2.2 below), plus (ii)
one hundred percent (100%) of the aggregate face amount of the
Receivables as reflected in the Closing Statement, plus (iii) the
value of the Machinery, Equipment and Furniture as reflected on
Schedule 1.1(f), and the Supplies as reflected on the Closing
Statement, minus (iv) the value of the Payables as reflected on the
Closing Statement, minus (v) the value of the Accruals as reflected
on the Closing Statement; and minus (vi) Three Hundred Thousand
Dollars ($300,000.00).
2.2 Closing Statement. On or before 10:00 A.M. on February
3, 1997, the Company and Buyer shall agree upon a Closing Statement
detailing the Purchase Price and reflecting an Inventory physical
count, changes in Receivables, Payables, Accruals and Supplies, all
as of the Effective Time, and based upon the review of Company and
bank records and other matters conducted by representatives of
Company and Buyer after the Effective Time and prior to February 3,
1997. The closing of this transaction shall be effective as of the
Effective Time and, if closed, Buyer shall be responsible for the
Assumed Liabilities and shall have title to the Purchased Assets as
of the Effective Time. The value of the Inventory, Payables and
Supplies as reflected on the Closing Statement shall be final,
conclusive and binding on the parties, and there shall be no post-
Closing adjustment of said value.
2.3 Payment at Closing. At Closing, Buyer shall pay to the
Company, in immediately available funds, the Purchase Price, minus
the Escrow Amount (as defined below), and shall deposit the Escrow
Amount with the Escrow Agent identified in Section 2.4 below.
2.4 Accounts Receivable and Indemnification Escrow. At
Closing, Buyer shall deposit a sum equal to the amount of the
Receivables plus the Excluded Receivables, multiplied by ten
percent (10%), and then minus the amount of the Excluded
Receivables (the "Escrow Amount") with Reliance Trust Company, as
escrow agent (the "Escrow Agent"), to be held in accordance with
the Escrow Agreement substantially in the form of Schedule 8.2(e).
After Closing, there shall be no adjustment for the value of the
Receivables, except for the procedure set forth in Section 8.4 and
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the Escrow Agreement as to specific accounts, or portions thereof,
constituting portions of the Receivables.
3. Allocation of Purchase Price. Company and Buyer shall
allocate the Purchase Price among the Purchased Assets in
accordance with Section 1060 of the Internal Revenue Code of 1986,
as amended (the "Code"), and Schedule 3 attached. Buyer, the
Company, and any persons or entities related to the Company, shall
make all filings and reports required by Section 1060 of the Code
on a basis consistent with Schedule 3.
4. Representations and Warranties of the Company. The
Company represents and warrants as follows:
4.1 Corporate.
(a) The Company is a corporation incorporated, organized and
validly existing and in good standing under the laws of Georgia and
has all requisite power and authority to own and operate the
business and property of the Subject Business as and where it is
now being conducted, and to perform its respective obligations
under this Agreement and the instruments contemplated herein.
(b) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby has
been duly authorized by the Board of Directors and shareholders of
the Company and no other corporate action by the Company is
necessary to authorize such actions.
(c) This Agreement is, and the agreements, instruments and
documents to be executed by the Company pursuant hereto or in
connection herewith will be, when executed by it, the valid and
legally binding obligations of the Company, enforceable in
accordance with their respective terms, except to the extent
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally or by general
equitable principles.
(d) All of the outstanding shares of stock of the Company
are, and as of the Closing will be, owned by those persons or
entities set forth on Schedule 4.1(d).
4.2 Financial.
(a) Attached hereto as Schedule 4.2(a) are copies of the
audited financial statements of the Company as of March 30, 1996,
and for the year then ended (the "Company Year-End Financials").
These financial statements present fairly the assets and
liabilities of the Company in accordance with generally accepted
accounting principles, consistently applied. There is no material
obligation, claim or liability which is not properly reflected or
reserved in the Company Year-End Financials.
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(b) Attached hereto as Schedule 4.2(b) are copies of the
internal financial statements of the Company as of January 4, 1997
(the "Company Current Financial Statements"). The Company Current
Financial Statements present fairly the assets and liabilities of
the Company in accordance with generally accepted accounting
principles consistently applied (except for the omission of
footnotes and subject to year-end adjustments) and are consistent
with past financial statements of the Company.
(c) Except as disclosed in Schedule 4.2(a), (b) and (c),
since January 4, 1997, there has not been:
(1) any material adverse change in the financial
condition or the operations of the Subject Business;
(2) any sale, pledge or assignment of material assets or
properties of the Company, except for assets disposed of in
the ordinary course of business;
(3) any damage, theft or destruction to the Purchased
Assets, whether covered by insurance or not, which has had or
could be reasonably anticipated to have a material adverse
effect on the Subject Business;
(4) any change in the Company's accounting methods or
practices, including, without limitation, any change in the
practice and procedures regarding inventory costing, accounts
receivable and accounts payable;
(5) any general or uniform increase in the salaries,
wages or benefits of employees of the Company, or any increase
in the salaries or benefits of the ten (10) most highly
compensated employees of the Company;
(6) incurred any obligation or liability (whether
accrued, absolute, contingent or otherwise, and whether due or
to become due), except in the ordinary course of its business;
and
(7) any default in any material obligation of the
Company.
4.3 Title to and Condition of Property.
(a) The Company has and will have as of the Closing good and
marketable title to all of the Purchased Assets free and clear of
all liens, encumbrances or obligations of any kind, nature or
description, and whether fixed or contingent, except those set
forth in Schedule 4.3(a) hereto and which shall be discharged or
released at or prior to Closing by the Company or assumed at
Closing by Buyer.
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(b) Except as set forth in Section 4.3(a), no representation
or warranty is made as to the condition of the Machinery, Equipment
and Furniture, or the Supplies, and the property subject to the
Operating Agreements. Said assets shall be sold to Buyer "as is"
and "where is," with all faults.
4.4 Contracts and Commitments.
(a) Schedule 4.4(a) attached hereto contains a list of all
written or oral agreements, contracts and commitments (except for
sales orders, purchase orders and the Smaller Commitments) to which
the Company is a party. The Company is not, and to the Company's
knowledge no other party is, in breach of any provisions of, and is
not in default in any respect under the terms of, any such
agreement, contract or commitment.
(b) All sales orders and purchase orders to which the Company
is, as of this date, a party are set forth on Schedule 1.2(c)
attached hereto.
(c) The Company is not a party to or bound by any contracts
with officers, employees, agents, consultants or distributors of
the Subject Business, and the Company has no obligations for
increases in compensation to employees other than pursuant to the
Collective Bargaining Agreement, which is not a part of the Assumed
Liabilities.
4.5 No Breach of Statute or Contract. Except as set forth in
Schedule 4.5 hereto, neither the execution and delivery of this
Agreement, nor compliance with the terms and provisions hereof, on
the part of the Company will (i) violate any provision of the
articles of incorporation or by-laws of the Company, (ii) cause the
Company to breach any statute, ordinance or regulation of any
governmental authority, domestic or foreign, or (iii) conflict with
or result in a breach of any of the terms, conditions or provisions
of any agreement or instrument to which the Company is a party or
by which it may be bound, or constitute a default thereunder.
4.6 Litigation. Except as set forth in Schedule 4.6, there
is no suit, action, grievance, workmen's compensation claim,
unemployment compensation claim, unfair labor practice claim or
arbitration, nor is there any investigation, legal or
administrative or other proceeding before or by any federal, local
or other governmental agency, pending or, to the best knowledge of
the Company, threatened against the Company or related to the
Purchased Assets or the Subject Business. Schedule 4.6 sets forth
a true, correct and complete list and description of all claims,
settled and open (including amounts paid, the nature of the claim,
the amount of reserves established, if known) asserted against the
Company during the current and past year, or which remain open at
this time. Such claims are not part of the Assumed Liabilities,
and the Company warrants that it has adequate insurance coverage
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and will maintain adequate reserves after Closing to fully satisfy
all liabilities, if any, of the Company pursuant to such claims.
4.7 Proprietary Rights. Except as set forth in Schedule
1.1(i), there are no patents, patent applications, trademarks,
copyrights, trade secrets or proprietary rights necessary to the
conduct of the Subject Business as now conducted.
4.8 Insurance. Schedule 4.8 hereto contains a list of all
policies of insurance relating to the operations and assets of the
Subject Business in effect as of the date hereof.
4.9 Labor Matters.
(a) Except as set forth in Schedule 4.9(a), no employee of
the Subject Business is covered by any collective bargaining
agreements and, to the knowledge of the Company, no union
organizing activities are in process or contemplated involving such
employees and no petitions have been filed for union organization
or representation of such employees. There is not pending or, to
the knowledge of the Company, threatened any labor dispute, strike
or work stoppage involving the employees of the Subject Business
which affects or which may affect or interfere with its continued
operation, and the Company has not experienced any work stoppages
in the past three (3) years.
(b) Schedule 4.9(b) lists all employee benefit plans,
programs, policies or arrangements with respect to the Company's
employees and former employees that the Company maintains,
contributes to, or has any liability under, including, without
limitation, all bonus, pension, profit-sharing, retirement,
deferred compensation, welfare benefit, vacation and severance pay
plans. The Company does not maintain, contribute to, have any
obligation to contribute to, or have any actual or potential
liability under any "employee pension benefit plan" (as such term
is defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) that is a defined
benefit pension plan (other than the Multi-Employer Plan described
in Section 4.9(c) below).
(c) The only multi-employer plan, as that term is defined in
Section 3(37) of ERISA, to which the Company contributes (or to
which it has any obligation to contribute) or to which, to the
Company's knowledge, it may have actual or potential liability
under Title IV of ERISA for a complete or partial withdrawal from
a multi-employer plan is the United Food & Commercial Workers
International Union-Industry Pension Fund (the "Multi-Employer
Plan").
(d) With respect to the Company's 401(k) plan, neither the
Company nor any fiduciary therefor has engaged in a prohibited
transaction which would subject the Company to a tax or penalty on
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prohibited transactions imposed by ERISA or the Code, or to any
other liability under ERISA or the Code. All reports, statements,
returns and other information required to be furnished or filed
with respect to said 401(k) have been furnished or filed in
accordance with ERISA and the Code, and they are true, correct and
complete in all material respects. The Company has no knowledge of
any threatened or pending claim against the Company or its
fiduciaries by any participant, beneficiary or governmental agency.
4.10 No Governmental Approval. No consent, approval, order,
authorization or designation of, and no registration, declaration,
filing or recording with, any governmental authority is required to
be obtained by the Company in connection with the transactions
contemplated by this Agreement.
4.11 Brokers. There are no claims for brokerage commissions,
finder's fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of the Company.
4.12 Compliance with Laws.
(a) Except as set forth on Schedule 4.12(a), all of the
Purchased Assets and existing operations of the Subject Business
comply, to the Company's knowledge, in all material respects with
all statutes, ordinances and regulations relating to the Purchased
Assets and the Subject Business or their use, including, without
limitation, all federal, state and local acts, including rules and
regulations thereunder, regulating or otherwise affecting employee
health and safety or the environment.
(b) Except as set forth on Schedule 4.12(b), the Company has
not received, during the twelve (12) months prior to this date,
notice of any violation by the Company of, and, to the best of the
Company's knowledge, the Company is not in violation of, the
Occupational Safety & Health Act of 1970, as amended, including
rules and regulations thereunder, or any other federal, state or
local laws, including rules and regulations thereunder, regulating
or otherwise affecting employee health and safety, which violation
would have a material adverse effect on the Subject Business or
Purchased Assets.
(c) Company has filed all federal, state and local income tax
returns, and Company has filed all excise or franchise tax returns,
real estate and personal property tax returns, sales and use tax
returns, and other tax returns (including returns with respect to
withholding and unemployment tax) required to be filed by it, and
has paid all taxes owing by it, including interest and penalties
thereon, except taxes which have not yet accrued or otherwise
become due for which adequate provision has been made. Neither the
Internal Revenue Service nor any other taxing authority is now
asserting, or, to the knowledge of the Company or any stockholder
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thereof, threatening to assert against Company any deficiency or
claim for additional taxes or interest thereon or penalties.
4.13 Product Liability Claims. Except as set forth on
Schedule 4.6, the Company has not been served with any currently
effective summons or complaint, and there is no action or suit,
equitable or legal, to which the Company is a party, nor any
administrative, arbitration or other proceeding pending or, to the
Company's knowledge, threatened against the Company with respect to
products sold or distributed by the Company.
4.14 Permits/Approvals. Company currently possesses such
certificates, authorities or permits issued by the appropriate
local, state or federal regulatory agencies or bodies as are
necessary to conduct the Subject Business, the failure of which to
have would create a material adverse impact on the Subject
Business. All of such certificates, authorities and permits are
listed on Schedule 1.1(c), and the Company has not received any
notice of proceedings relating to the revocation or modification of
any such certificate, authority or permit.
4.15 Certain Environmental Matters. Except as set forth on
Schedule 4.15, the Company is operating and has operated the
Subject Business in material compliance with all applicable local,
state and federal environmental laws, regulations and ordinances,
including, but not limited to, the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. Sections 9601
et seq. ("CERCLA"), the Resource Conservation and Recovery Act, 42
U.S.C. Sections 6901 et seq., the Clean Water Act, 33 U.S.C.
Sections 1251 et seq., and the environmental laws and regulations
of the State of Georgia, as each such statute or regulation has
been amended from time to time ("Environmental Laws and
Regulations"). The Company has not knowingly accepted for storage
and, to the best of its knowledge, does not store any hazardous
substance or hazardous material at the property and buildings at
which the Subject Business is conducted (the "Property") in
violation of the Environmental Laws. The Company has never
knowingly caused the release of any amount of any hazardous
substance or hazardous material to the environment, which release
would constitute a violation of any Environmental Laws and
Regulations. The Company does not own, lease, rent or otherwise
utilize any underground storage tanks, and, to the best of the
Company's knowledge, there are no waste tanks, containers,
cylinders, drums or cans buried, stored or deposited in or at the
Subject Business in violation of the Environmental Laws and
Regulations. To the best of Company's knowledge, the property and
buildings from which the Subject Business is conducted does not
contain (i) any asbestos, (ii) any polychlorinated biphenyl (PCB)
substances, or (iii) any waste petroleum products. For purposes of
this Section 4.15, "hazardous substance", "release" and
"environment" shall have the same meanings as those terms are
defined by Section 101 of CERCLA, 42 U.S.C. Section 9601, and
"hazardous material" shall have the same meaning as that term is
defined by
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Environmental Laws and Regulations.
4.16 Transactions with Interested Persons. Neither Company
nor any of its stockholders own, directly or indirectly, on an
individual or joint basis, any material interest in any customer,
competitor or supplier of the Subject Business, or any organization
which has a material contract or arrangement with the Subject
Business, except for the Company's interest in Fieldstone Meats of
Alabama, Inc.
4.17 Financial Matters.
(a) The value of assets of Company at a fair valuation in the
aggregate will, immediately following the Closing, and after giving
effect to all of the transactions contemplated by this Agreement,
exceed the amount of its then existing debts and other liabilities
(including contingent liabilities).
(b) The assets of Company will not, immediately following
Closing, and after giving effect to all of the transactions
contemplated by this Agreement, constitute unreasonably small
capital to carry out its business as conducted or as proposed to be
conducted.
(c) Company will receive reasonably equivalent value in
exchange for the Purchased Assets (including Buyer's assumption of
the Assumed Liabilities), and Company does not intend to, does not
believe it will, nor should it reasonably believe it will incur
debts beyond its ability to pay such debts as they mature (taking
into account the timing and amounts of cash to be received by Buyer
and amounts to be payable or in respect of then existing debts of
the Buyer).
4.18 Receivables. To the Company's knowledge, the Receivables
represent bona fide undisputed accounts now owed to the Company for
products delivered in accordance with purchase orders or
specifications of customers of the Company, and, to the Company's
knowledge, no such account is subject to a defense, counterclaim or
offset, or an agreement for reduction or discount, except to the
extent of an Assumed Liability. To the Company's knowledge, no
payment on any of the Receivables is contingent upon performance of
any other obligation of the Company, or any other person or entity.
4.19 Exhibits and Deliveries. To the Company's knowledge,
all schedules and exhibits attached hereto accurately reflect the
true, correct and complete list of all material items and matters
referenced therein. Company has delivered to Buyer true, correct
and complete originals or copies of all documents and instruments
referenced, listed or described in all of the exhibits or
schedules, including any and all material riders, attachments,
addenda and amendments thereto, and guaranties thereof.
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4.20 Disclosure. To the Company's knowledge, no
representation or warranty by the Company contained in this
Agreement, and no statement, schedule, exhibit, writing,
certificate, list, document or other instrument furnished, to be
furnished or delivered to Buyer by Company (or on behalf of the
Company) pursuant hereto or in connection with the transaction
contemplated herein, contains any untrue statement of material fact
or omits to state a material fact necessary to make the statements
and information herein or therein not misleading.
4.21 Disclaimer of Disclosure. The Company does not make,
and has not made, any representation or warranty relating to the
Company, the Subject Business, the Purchased Assets or otherwise in
connection with the transactions contemplated hereby other than
those expressly set out. It is understood that any cost estimates,
projections or other predictions, or any other data not included
herein are not and shall not be deemed to be or to include
representations or warranties of the Company. Except as set forth
herein, no person has been authorized by the Company to make any
representation or warranty relating to the Company, the Subject
Business, the Purchased Assets or otherwise in connection with the
transactions contemplated hereby and, if made, such representation
or warranty must not be relied upon as having been authorized by
the Company.
5. Representations and Warranties of Buyer. The Buyer
represents, warrants and agrees as follows:
5.1 Corporate.
(a) Buyer is a corporation organized, validly existing and in
good standing under the laws of Florida, and has all requisite
power and authority to own and operate its business and property as
and where it is now being conducted.
(b) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have
been duly authorized by the Board of Directors of Buyer and no
other corporate action by Buyer is necessary to authorize such
actions.
(c) This Agreement is, and the agreements, instruments and
documents to be executed by Buyer pursuant hereto or in connection
herewith will be when executed by it, the valid and legally binding
obligations of Buyer enforceable in accordance with their
respective terms, except to the extent limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by general equitable principles.
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5.2 Financial.
(a) Attached hereto as Schedule 5.2(a) are copies of the
audited financial statements of the Buyer as of March 30, 1996, and
for the year then ended (the "Buyer Year-End Financials"). These
financial statements present fairly the assets and liabilities of
the Buyer in accordance with generally accepted accounting
principles, consistently applied. There is no material obligation,
claim or liability which is not properly reflected or reserved in
the Buyer Year-End Financials.
(b) Attached hereto as Schedule 5.2(b) are copies of the
internal financial statements of the Buyer as of December 27, 1996
(the "Buyer Current Financial Statements"). Buyer Current
Financial Statements present fairly the assets and liabilities of
the Buyer in accordance with generally accepted accounting
principles, consistently applied (except for the omission of
footnotes and subject to year-end adjustments), and are consistent
with past financial statements of the Buyer.
(c) Since December 27, 1996, there has not been:
(1) any material adverse change in the financial
condition or the operations of the business of the Buyer;
(2) any obligation or liability incurred (whether
accrued, absolute, contingent or otherwise, and whether due or to
become due), except in the ordinary course of its business; and
(3) any default in any material obligation of the Buyer.
5.3 Financial Matters.
(a) The value of the assets of Buyer at a fair valuation in
the aggregate will, immediately following the Closing and after
giving effect to all of the transactions contemplated by this
Agreement, exceed the amount of its debts and other liabilities
(including contingent liabilities).
(b) The assets of Buyer will not, immediately following
Closing and after giving effect to all of the transactions
contemplated by this Agreement, constitute unreasonably small
capital to carry out its business as conducted or as proposed to be
conducted.
(c) Buyer has received reasonably equivalent value in
exchange for its payment of the Purchase Price (including Buyer's
assumption of the Assumed Liabilities), and Buyer does not intend
to, will not, does not believe it will, nor should it reasonably
believe it will incur debts beyond its ability to pay such debts as
they mature (taking into account the timing and amounts of cash to
be received by Buyer and amounts to be payable on or in respect of
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debts of Buyer).
5.4 No Breach of Statute or Contract. Neither the execution
and delivery of this Agreement, nor compliance with the terms and
conditions hereof, on the part of Buyer will (i) violate any
provision of the articles of incorporation or by-laws of Buyer,
(ii) cause Buyer to breach any statute, ordinance or regulation of
any governmental authority, domestic or foreign, or (iii) conflict
with or result in a breach of any of the terms, conditions or
provisions of any agreement or instrument to which Buyer is a party
or by which it may be bound, or constitute a default thereunder.
5.5 Brokers. There are no claims for brokerage commissions,
finder's fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of Buyer.
6. Covenants of the Company Pending Closing. The Company
covenants and agrees that from and after the date of this Agreement
and until the Closing:
6.1 Access to Information. Buyer and its authorized
representatives and agents (including, but not limited to,
potential lenders, accountants, attorneys, and agents and
representatives of the foregoing) shall have reasonably full access
during normal business hours to all plant and other properties,
books, records, contracts and documents of the Subject Business and
other materials reasonably related to the business and affairs of
the Company. The Company shall furnish or cause to be furnished to
Buyer and its authorized representatives and agents all information
with respect to the business and affairs of the Company as they may
reasonably request, including such information as Buyer may
reasonably request for the purpose of disclosure to any financial
institution in connection with providing such financing as Buyer
deems to be in its best interest, all subject to the terms of the
Mutual Confidentiality Agreement executed by the Company and Buyer.
Any inspection or testing of physical properties or facilities by
Buyer must be approved in advance by an officer of the Company.
Buyer and its representatives and agents shall not meet with
representatives of the Union (as defined in Section 10.16) or
discuss any potential collective bargaining agreement without the
consent of the Company and without a representative of the Company
being present.
6.2 Carry On In Regular Course. The Company will use its
best efforts to cause the Subject Business to be conducted
according to its ordinary and usual course and substantially in the
manner heretofore conducted, except as contemplated by this
Agreement. The Company will use its reasonable best efforts to
preserve in all material respects its business organization and
business relationships.
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6.3 Best Efforts. The Company will use its best efforts to
cause all conditions to the consummation of the transactions
contemplated hereby which are within the control of the Company to
be satisfied as promptly as practicable, shall not undertake any
course of action inconsistent therewith or which would make any of
its representations contained herein untrue at or prior to Closing,
and shall deliver at Closing all documents which are to be
delivered by it as a condition to Buyer's obligations hereunder.
6.4 Insurance. The Company shall maintain all existing or
equivalent insurance covering the Subject Business, the premises
from which it is currently conducting the Subject Business and/or
the Purchased Assets in effect as of the date hereof.
6.5 Property and Assets. The Purchased Assets will be used,
preserved and maintained in the ordinary course of business to the
same extent as is consistent with past customs and practices.
6.6 Corporate Action and Consents. The Company shall take
all corporate and other action necessary to consummate the
transaction contemplated hereby and shall use its best efforts to
obtain all corporate and similar consents and approvals required
from third-parties to enable it to carry out the transactions
contemplated by this Agreement.
6.7 Financial Affairs. The Company shall not take any action
(or omit to take any action) within its control which would
necessitate disclosure on Schedules 4.2(a), (b) or (c).
6.8 Excluded Liabilities. The Company covenants and agrees
that at or prior to Closing, or, as appropriate, after Closing,
that it shall pay, perform and discharge all of the Excluded
Liabilities, and shall do so no later than their respective due
dates, and that the Company will maintain adequate reserves, or, at
this time, has adequate assurances that all sums necessary to pay
the Excluded Liabilities shall be available to the Company.
6.9 No Further Encumbrances. The Company covenants and
agrees that it shall not, for one (1) year after the Effective
Time, impose, or allow the imposition of, any lien or encumbrance
on the Property securing money borrowed, other than the two (2)
existing mortgages on the Property, and shall not request or allow
any future advances to be made under said existing mortgages so as
to increase the outstanding principal balances thereunder in excess
of their respective present outstanding principal balances.
Notwithstanding the above, this covenant shall not in any manner
restrict the Company's sale of the Property at any time to a bona
fide purchaser for value.
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7. Covenants of Buyer.
7.1 Best Efforts. Buyer will use its best efforts to cause
all conditions of the consummation of the transactions contemplated
hereby which are within its sole control to be satisfied as soon as
practicable, shall not undertake any course of action inconsistent
therewith or which would make any of its representations contained
herein untrue at or prior to Closing, and shall deliver at Closing
all documents which are to be delivered by it as a condition to the
Company's obligations hereunder.
7.2 Utilization and Maintenance of Records. From and after
the Closing Date until the termination or expiration of the Lease
between the Company and the Buyer referred to in Schedule 8.2(d)
below (the "Utilization Period"), the Buyer shall have the right to
fully utilize and copy the Business Records. At or prior to the
end of the Utilization Period, the Buyer shall notify the Company
that the Business Records are available at the Property to be
picked up or utilized there by the Company; provided, however, that
the Buyer shall be allowed to permanently retain and remove from
the Property all personnel records. Buyer further covenants that,
during the Utilization Period, and upon request of the Company, the
Company and its authorized representatives shall have reasonable
access during normal business hours to the Business Records, and
shall thereafter allow the Company or its authorized
representatives and agents reasonable access during normal business
hours to all personnel records, all as such records pertain to the
period before the Effective Time.
7.3 Letters of Credit. On the Closing Date, Buyer shall use
its best efforts to provide security or make other arrangements as
are necessary to release the Company from any reimbursement
obligations under outstanding letters of credit.
7.4 Assistance to the Company. Buyer covenants and agrees
that subsequent to the Closing it will provide the following
services to the Company:
(a) During the Utilization Period, Buyer shall provide the
Company with administrative support and personnel reasonably
sufficient to enable the Company (i) to prepare, file and make all
necessary property, payroll, withholding and sales tax reports, as
are required of the Company, (ii) to assist in gathering supporting
documentation and payments by the Company of Excluded Liabilities,
(iii) to prepare final business license tax and final sales tax
returns, and (iv) to provide similar assistance as the Company may
reasonably request. Such services shall include, but not be
limited to, reasonable assistance in the preparation of all
required payroll related reports and returns, such as applicable
Forms W-2, Form 941 and unemployment reports and all materials
relating to the taxes and fees described in Section 10.13.
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(b) Buyer shall complete and deliver to the Company within 45
days of the Closing Date information as of the Closing Date
reasonably requested by the Company to assist in preparation of
income tax returns for the Company and its affiliates.
(c) Buyer shall deliver to the Company within seven (7) days
of the Closing Date information reasonably requested by the Company
to assist with the Company's preparation of an interim financial
statement through the period immediately prior to and immediately
after and giving effect to the Closing.
(d) Buyer shall provide reasonable administrative assistance
with respect to remaining insurance plan liabilities of the Company
and all outstanding claims and arbitrations in which the Company is
presently involved.
7.5 Guarantees. Buyer shall, at Closing, use its best
efforts to obtain releases of Diana from all guarantees by it of
liabilities of the Company.
7.6 Payment of Assumed Liabilities. Buyer covenants and
agrees that it shall pay, perform and discharge in the ordinary
course of business all of the Assumed Liabilities, and shall do so
no later than their respective due dates. Buyer further covenants
and agrees that all payments made by the Buyer after the Closing
Date to individuals or entities to whom trade payables that
constitute Assumed Liabilities are owed (the "Assumed Trade Debt
Vendors") shall be designated (by notation on the check or
remittance advice to the Assumed Trade Debt Vendor accompanying
payment, copies of which shall be retained by Buyer for no less
than three years following the Closing Date) as repayment first of
outstanding indebtedness constituting Assumed Liabilities. For
purposes of the preceding sentence, such designation, whenever
possible, shall be made by reference to a specific invoice number.
8. Closing.
8.1 Time and Place of Closing. The closing of this Agreement
(herein called the "Closing") shall be held at the offices of the
Company, Atlanta, Georgia, at 11 o'clock a.m. local time on or
before February 3, 1997, or on such other date and at such other
time or place agreed to by the parties. The date of Closing is
sometimes referred to herein as the "Closing Date." For all
purposes, however, this transaction, if closed, shall be effective
as of the Effective Time.
8.2 Conditions Precedent to Obligations of Buyer. Each and
every obligation of Buyer under this Agreement shall be subject to
fulfillment, prior to or at the Closing, of each of the following
conditions unless waived by Buyer:
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(a) each representation and warranty made by the Company in
this Agreement or any schedule hereto shall be true and correct in
all material respects on and as of the Closing Date with the same
effect as though each such representation and warranty had been
made or given on and as of the Closing Date;
(b) the Company shall have performed and complied with all of
its obligations under this Agreement which are to be performed or
complied with by it prior to or at the Closing;
(c) the Company shall have tendered for delivery to Buyer a
Bill of Sale, Assignment and Assumption Agreement in the form of
Schedule 8.2(c), along with such other assignments, certificates of
title and instruments of transfer as shall be necessary to vest in
Buyer the Purchased Assets in form reasonably satisfactory to
Buyer;
(d) the Company shall have tendered for delivery the Lease in
the form of Schedule 8.2(d), shall have subordinated all of its
interests as landlord in the Buyer's property to the interests of
Buyer's lender and have complied with any other reasonable requests
of Buyer's lender;
(e) the Company shall have tendered for delivery the Escrow
Agreement in the form of Schedule 8.2(e) (the "Escrow Agreement");
(f) the Company, Diana and Entree shall have tendered for
delivery the Noncompetition and Confidentiality Agreement in the
form of Schedule 8.2(f);
(g) the Company shall have delivered to the Buyer a copy of
resolutions of the Board of Directors and the shareholders of the
Company, certified by the Secretary of the Company, authorizing the
transactions contemplated by this Agreement;
(h) the Company shall have obtained all consents necessary
for the transfer and assignment of all Operating Agreements;
(i) Buyer shall have obtained such licenses, permits and
other regulatory approvals necessary for it to conduct the Subject
Business, except where failure to obtain such a consent or new
licenses, permits or regulatory approvals (i) results from Buyer's
failure to utilize its reasonable best efforts to obtain such
authorization, or (ii) would not have a material adverse effect on
Buyer in its operation of the Subject Business following Closing;
(j) Diana shall have executed that Guaranty in the form of
Schedule 8.2(j);
(k) no action or proceeding before any court or governmental
body shall be pending or threatened wherein a judgment, decree or
order would prevent any of the transactions contemplated herein or
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cause such transactions to be unlawful or rescinded, or which
materially affect the right of Buyer to own, operate or control the
Purchased Assets;
(l) the Buyer shall have received from the Company's counsel,
Godfrey and Kahn, S.C., an opinion in the form set forth in
Schedule 8.2(l), addressed to the Buyer and Buyer's lenders, dated
as of the Closing Date;
(m) the Company shall have delivered to the Buyer a
certificate of its officers certifying to the fulfillment of the
conditions set forth in Sections 8.2(a) and 8.2(b) above;
(n) Buyer shall receive written evidence that all liens,
encumbrances or security interests affecting the Purchased Assets
(and not related to an Assumed Liability) have been released and
terminated, and adequate provision has been made to terminate such
interests of record; and
(o) the Closing Statement shall be prepared and delivered by
the Company in accordance with this Agreement.
8.3 Conditions Precedent to Obligations of the Company. Each
and every obligation of the Company under this Agreement shall be
subject to fulfillment, prior to or at the Closing, of each of the
following conditions unless waived by the Company:
(a) each representation and warranty made by the Buyer in
this Agreement or any schedule hereto shall be true and correct in
all material respects on and as of the Closing Date with the same
effect as though each such representation and warranty had been
made or given on and as of the Closing Date;
(b) Buyer shall have performed and complied with all of its
obligations under this Agreement which are to be performed or
complied with by it prior to or at the Closing;
(c) Buyer shall have tendered to Company a Bill of Sale,
Assignment and Assumption Agreement in the form of Schedule 8.2(c);
(d) Buyer shall have tendered for delivery the Lease in the
form of Schedule 8.2(d);
(e) Buyer shall have tendered for delivery the Escrow
Agreement;
(f) Buyer shall have delivered to the Company a copy of
resolutions of the Board of Directors of Buyer, certified by the
Secretary of Buyer, authorizing the transactions contemplated by
this Agreement;
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(g) Buyer shall have delivered to the Company a certificate
of its officers certifying to the fulfillment of the conditions set
forth in Sections 8.3(a) and 8.3(b) above;
(h) Buyer shall have made the Closing payment to the Company;
(i) The Company shall have received from the Buyer's counsel,
Peterson & Myers, P.A., an opinion in the form set forth in
Schedule 8.3(i), addressed to the Company, dated as of the Closing
Date;
(j) Buyer shall not have terminated this Agreement during the
Inspection Period referred to in Section 10.12;
(k) no action or proceeding before any court or governmental
body shall be pending or threatened wherein a judgment, decree or
order would prevent any of the transactions contemplated herein or
cause such transactions to be unlawful or rescinded, or which might
materially affect the right of Buyer to own, operate or control the
Purchased Assets;
(l) Buyer shall have provided the security, or have made
other arrangements, as set forth in Section 7.3, and shall have
obtained releases of Diana, as set forth in Section 7.5; and
(m) Buyer shall have received reasonable assurances that
Buyer's lender shall have no security interest, or shall release
any security interest it may claim, in any of the Receivables that
are re-assigned to the Company in accordance with the Escrow
Agreement.
8.4 Authority to Collect Receivables. Upon Closing, the
Company shall fully cooperate with Buyer with respect to Buyer's
collection of the Receivables. The Company shall, by communication
prepared and approved by Buyer, notify all account debtors that the
Company has assigned the Receivables to Buyer and shall instruct
such account debtors to make all payments directly to Buyer or to
such accounts as Buyer shall direct. Any payments on such
Receivables which may be received by the Company or made payable to
the Company shall be immediately endorsed or paid over to Buyer.
For the limited purpose of collecting the Receivables, the Company
hereby irrevocably appoints the Buyer as the Company's attorney-in-
fact, with full authority in the place and stead of the Company,
and in the name of the Company, or otherwise, to take any action
and to execute any instrument necessary or convenient to receive,
endorse and collect any drafts or other instruments, documents and
chattel paper in connection with the Receivables, to ask, demand,
collect, sue for, recover, issue valid credits in the ordinary
course of business (other than for the return of product assumed in
Section 1.2(f), and receive and give acquittance and receipts for
monies due with respect to the Receivables, and to file any claims
or take any action or institute any proceedings which the Buyer may
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deem necessary or desirable for the collection of the Receivables,
or otherwise to enforce the rights of the Company with respect to
the Receivables.
With respect to any Receivables which are re-assigned to the
Company as uncollectible accounts under the Escrow Agreement, Buyer
shall fully cooperate with the Company with respect to Company's
collection, if possible, of such Receivables. The Buyer shall
notify appropriate account debtors that the Buyer has re-assigned
the Receivables to the Company, and shall instruct such account
debtors to make all payments directly to the Company, or to such
accounts as the Company shall direct. Any payments on such
Receivables which may be received by the Buyer or made payable to
the Buyer shall be immediately endorsed or paid over to the
Company. In the event that such uncollectible account is, because
of valid credits or other adjustment issued by the Company, unable
of being further pursued by the Company, the Buyer, simultaneously
with making a Receivable Claim (as that phrase is defined in the
Escrow Agreement) with the Escrow Agent, shall deliver to the
Company appropriate documentation reflecting such valid credit or
adjustment. Buyer shall proceed diligently to collect the
Receivables in the ordinary course of its business, and Buyer will
not take any action to interfere with or impair the orderly
collection of the Receivables; provided, however, that the parties
agree that Buyer shall not be restricted in any manner in dealing
with account receivable debtors as it would normally deal with such
debtors in the ordinary course of its business, including, without
limitation, the procurement of new credit applications, instituting
new credit terms or payment schedules, and, if prudent in Buyer's
judgment, ceasing to do business with certain debtors.
The parties agree that as a condition of Closing, the Buyer
shall be required to execute and deliver that Indemnity and Release
Agreement in favor of the Company's lender ("Sanwa"), in the form
attached as Schedule 8.4 (the "Indemnity Agreement"). In the event
that Sanwa makes any claim against the Buyer pursuant to the
Indemnity Agreement, the parties agree that the Buyer shall be
entitled to immediately make a Receivable Claim with the Escrow
Agent for the claimed amount, and that the Buyer shall direct Sanwa
to deliver the applicable returned or insufficient fund check(s) to
the Company. For all purposes hereunder and under the Escrow
Agreement, the amount of any claim by Sanwa under the Indemnity
Agreement shall be treated in the same manner as an uncollectible
Receivable and as a Disputed Account (as that phrase is defined in
the Escrow Agreement).
The Buyer shall use its best efforts to have the UCC-1
executed by the Company, as debtor, filed in connection with the
sale of the Receivables, in favor of NationsBank, to be terminated
of record within one (1) year of the Closing Date.
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8.5 Use of Name. For a period not less than six (6) months
from Closing, but not to exceed the Utilization Period, the Buyer
shall have the right to use the Company's name, and derivations
thereof, incident to the Buyer's use, in the normal course of
business, of the Supplies, existing signage on the Property,
existing signage with respect to vehicles and other equipment, and
existing stationery, checks and other supplies constituting a part
of the Purchased Assets; provided, however, that Buyer shall have
the right to use the Company's name incident to Buyer's use of the
tractors and trailers under the UPS equipment lease for the
remaining term of said lease. Buyer shall indemnify and hold the
Company harmless from and against any loss, cost, expense or other
damage (including reasonable attorneys' fees) resulting from,
arising out of, or incurred with respect to, the Buyer's use of the
Company name, or any derivation thereof, after Closing.
9. Survival of Warranties; Indemnification.
9.1 Survival of Representations and Warranties. The
representations and warranties, and the covenants and agreements to
be performed after the Closing of each party contained in this
Agreement or in any document delivered pursuant hereto shall be
deemed continuing and shall survive the Closing for a period of one
(1) year after the Closing Date, unless a longer period is
specifically provided.
9.2 Indemnification by the Company. The Company shall
indemnify and hold Buyer harmless from and against any loss, cost,
expense or other damage (including reasonable attorneys' fees)
resulting from, arising out of, or incurred with respect to (i) the
falsity or breach of any representation or warranty made by the
Company herein, (ii) the breach of any covenant or agreement made
by the Company herein, and (iii) any debts, obligations, contracts
and liabilities of the Company other than Assumed Liabilities,
including, without limitation, the Excluded Liabilities and any
liability which may follow the Purchased Assets pursuant to
applicable bulk sales laws (except to the extent that such
liability is or arises from an Assumed Liability).
9.3 Indemnification by Buyer. Buyer shall indemnify and hold
the Company harmless from and against any loss, cost, expense or
other damage (including reasonable attorneys' fees) resulting from,
arising out of, or incurred with respect to (i) the falsity or
breach of any representation or warranty made by Buyer herein, (ii)
the breach of any covenant or agreement made by the Buyer herein,
(iii) any Assumed Liabilities, or (iv) any obligations or
liabilities of Buyer.
9.4 Limitations. The foregoing notwithstanding, any claim
for indemnification under Sections 9.2 and 9.3 shall be asserted by
written notice ("Indemnification Notice") specifying its nature in
reasonable detail by the party claiming indemnification. In the
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event such Indemnification Notice is not given within one (1) year
following the Closing Date, the right to assert such claim shall
lapse. The Company's indemnification obligation shall in no event
exceed the Purchase Price.
9.5 Defense of Claim. If any third party shall assert any
claims against Buyer which, if successful, would entitle Buyer to
indemnification under this Section 9, Buyer shall give notice of
such claim to the Company and the Company shall have the right to
assume the defense of such claim at its expense. If the Company
does assume the defense of such claim, it shall indemnify and hold
Buyer harmless, to the extent provided in Sections 9.1 through 9.4
and Section 9.6, from and against any and all losses, damages and
liabilities, including, without limitation, reasonable attorneys'
fees, caused by or arising out of any settlement or judgment of
such claim. In addition, Buyer shall have the right to participate
in the defense of such claim at its expense, in which case (i) the
Company agrees to cooperate in providing information to and
consulting with Buyer about the claim, and (ii) the Company shall
not consent to the entry of judgment or enter into any settlement
without the prior written consent of Buyer, which consent shall not
unreasonably be withheld. If the Company does not assume the
defense of any such claim, Buyer may defend against and/or settle
the claim in such manner and on such terms as they in good faith
deem appropriate and shall be indemnified, to the extent provided
in Sections 9.1 through 9.4 and Section 9.6, for the amount of any
judgment or settlement and for all losses or expenses, legal or
otherwise, incurred in connection with the defense and/or
settlement of any claim. Failure by the Company to give written
notice to Buyer of its election to defend any claim within fifteen
(15) days after written notice thereof is given to the Company by
Buyer shall be deemed a waiver of its right to defend such claim.
The Buyer shall be entitled to make an Indemnification Claim (as
that phrase is defined in the Escrow Agreement) with the Escrow
Agent, in accordance with the terms and conditions set forth in the
Escrow Agreement for such claims, without first complying with the
procedures set forth in this Section 9.5.
9.6 Buyer's Remedies. Any provision herein to the contrary
notwithstanding, Buyer shall be entitled to any remedy at law or in
equity in order to enforce any provision of this Agreement,
including, without limitation, specific performance and injunctive
relief; provided that Buyer's remedy for monetary damages shall be
limited by the provisions of Sections 9.4 and 9.5 above.
9.7 Prompt Notice. Buyer and the Company covenant and agree
to promptly provide to the other party any Indemnification Notice
described in Section 9.4 above.
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10. Miscellaneous.
10.1 Expenses Incident to Transaction. Each party shall pay
his or its own expenses and costs relating to the negotiation,
execution and performance of this Agreement, including all fees of
their respective attorneys, accountants, financial advisors and
other professionals.
10.2 Further Assurances. After the Closing, the Company will
execute and deliver such further instruments of conveyance and
transfer and take such other reasonable actions as Buyer may
request to carry out the transactions contemplated by this
Agreement.
10.3 Governing Law. This Agreement shall be construed and
interpreted according to the laws of Georgia.
10.4 Notices. All notices hereunder shall be in writing and
shall be deemed to have been duly given, and all document
deliveries will be deemed to have been made, when personally
delivered or three (3) days after the date when mailed, certified
or registered mail, with postage prepaid, and
(a) if to Buyer, to: Colorado Boxed Beef Company
c/o Bryan Saterbo, Senior Vice
President
302 Progress Road
Auburndale Industrial Park
Auburndale, FL 33823
with copy to: Kerry Wilson
Peterson & Myers, P.A.
141 Fifth Street
Suite 300
Winter Haven, FL 33881
or to such other person or address as Buyer shall designate from
time to time by notice in writing to the Company pursuant hereto;
or
(b) if to Company, to: Atlanta Provision Company, Inc.
c/o James Fiedler
Sattel Communications LLC
26025 Mureau Road
Calabasas, CA 91302
with copy to Larry D. Lieberman
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, WI 53202
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or to such other person or address as the Company shall designate
from time to time by notice in writing to Buyer pursuant hereto.
10.5 Publicity. Neither party shall issue any news releases
regarding the proposed transaction unless and until the transaction
closes, except as required by law. The attorneys for the
respective parties must agree that a news release is required by
law. Any news release must be agreed to in writing between the
parties as to the text before it is released. This Agreement is
otherwise subject to the Mutual Confidentiality Agreement between
the parties.
10.6 Entire Agreement. This Agreement and its schedules, and
the Mutual Confidentiality Agreement executed by Buyer and the
Company, embody the entire agreement among the parties hereto with
respect to the transactions contemplated herein, and there have
been and are no agreements, representations or warranties between
the parties other than those set forth or provided for herein.
This Agreement supersedes all proposals, letters or intent and
other agreements relating to the subject matter hereof.
10.7 Headings. The headings used in this Agreement are
inserted for convenience only and shall not constitute a part
hereof.
10.8 Modification; Waiver. No modification or waiver of any
provision of this Agreement or consent to any departure therefrom
shall be effective unless in writing and signed by authorized
officers of the Company and Buyer.
10.9 Counterparts. This Agreement may be executed
simultaneously in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument. It shall not be necessary that any single
counterpart be executed by all parties hereto provided that each
party shall have executed at least one counterpart.
10.10 Binding Nature. This Agreement shall be binding and
inure to the benefit of all the parties named herein and their
respective successors and assigns.
10.11 Bulk Sales. The parties each hereby waive compliance
with any applicable bulk sales or similar law of any jurisdiction
in connection with the sale of the Purchased Assets.
10.12 Termination and Abandonment. The transactions provided
for by this Agreement may be terminated and abandoned at any time
on or before the Closing:
(a) by mutual written consent of Buyer and the Company,
without liability on the part of any party to the other; or
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(b) by Buyer, if any of the conditions of Section 8.2
above have not been met or have not been waived in writing by
Buyer as of the Closing Date; or
(c) by the Company, if any of the conditions of Section
8.3 above have not been met and have not been waived in
writing by the Company as of the Closing Date;
(d) by Buyer or the Company, if the transaction
contemplated by this Agreement has not closed on or before
February 3, 1997, provided the party seeking to terminate
shall have performed in all material respects all of its
covenants under this Agreement which were to have been
performed prior to the time of termination; or
(e) by Buyer by written notice to the Company on or
prior to Closing (the "Inspection Period"), if (a) Buyer shall
have determined during its due diligence investigation of the
Company that any matters had been materially misrepresented by
the Company or (b) if Buyer shall not have received
unconditional assurances satisfactory to it that it will
obtain financing on terms reasonably satisfactory to it to
consummate the purchase of the Purchased Assets, provided that
Buyer has used its best efforts to obtain such unconditional
assurances.
In the event of termination and abandonment by any party as
provided in this Section 10.12, written notice shall forthwith be
given to the other party by facsimile transmission or as set forth
in Section 10.4 above. In the event of such termination, this
Agreement shall terminate and become null and void other than with
respect to Section 10.1 and Section 9. No termination shall
release a party of any liability for breach hereof. The Mutual
Confidentiality Agreement executed by Buyer and the Company shall
survive any termination of this Agreement.
10.13 Sales and Transfer Taxes. The Buyer shall pay and
discharge when due any and all liability for recording fees, sales
and use taxes, documentary taxes, motor vehicle transfer taxes and
all similar fees, taxes and costs relating to the consummation of
the transactions contemplated in this Agreement.
10.14 Assumption of Employee Benefit Plans. With respect
to the employees of the Company who become employees of the Buyer
after the Closing, Buyer will assume the Employee Benefit
Liabilities set forth on Schedule 1.2(e), along with all of the
powers previously reserved by the Company under the plans related
to the Employee Benefit Liabilities to amend, terminate or modify
such contracts.
10.15 Employment of Company Employees. Buyer agrees to
provide a written offer of employment or written posting of notice
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of offer of employment effective as of the Effective Time to
substantially all employees of the Company promptly following the
Effective Time, which offer shall be conditioned upon the Closing.
Nothing in this Section shall create any rights on behalf of such
employees as third-party beneficiaries with respect to this
obligation. Buyer hereby agrees to indemnify and hold the Company
harmless from and against any and all claims and liability arising
solely as a result of Buyer's conduct after the Closing taken with
respect to the employment of or refusal to hire a previous Company
employee, including, without limitation, any claims or liability,
based on the Buyer's acts or omissions arising after the Closing,
and arising under the Workers Adjustment and Retraining
Notification Act ("WARN") and any regulations promulgated
thereunder or any similar state or local laws.
10.16 Union Contract. The Buyer agrees to employ
substantially all of the Company's employees covered by the current
collective bargaining agreement between the Company and Local
Number 1996 of the United Food and Commercial Workers Union (the
"Union"), effective as of the Effective Time, but conditioned upon
Closing. (The agreement with the Union is herein referred to as
the "Collective Bargaining Agreement.") In addition, the Buyer
agrees to recognize the Union as the current exclusive collective
bargaining representative of the employees covered by the
Collective Bargaining Agreement, a complete copy of which has been
previously furnished to Buyer. Nothing in this Section shall
create any rights on behalf of such Union or any other union as
third-party beneficiaries with respect to this obligation.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed all as of the day and year first
above written.
THE COMPANY:
ATLANTA PROVISION COMPANY, INC.
/s/ G. Michael Coggins
President & CEO
BUYER:
COLORADO BOXED BEEF COMPANY
/s/ Bryan N. Saterbo
Senior Vice President
27
AGREEMENT REGARDING CLASS A UNITS
This Agreement is dated as of the 2nd day of October, 1996, by
and between Sydney B. Lilly (the "Investor") and Sattel
Communications LLC, a California limited liability company (the
"Company"). All capitalized terms used herein and not otherwise
defined have the same meaning as set forth in the Operating
Agreement of Sattel Communications LLC dated as of April 1, 1996,
as amended (the "Operating Agreement").
1. Class A Units. For good and valuable consideration, the
Investor is the transferee of 100 Class A Units in the Company (the
"Units"), subject to the terms and conditions of this Agreement and
the Operating Agreement. The parties acknowledge that Investor
shall have a capital account of $42,000.
2. Consent to Terms of Operating Agreement. The Investor
acknowledges receipt of a copy of the Operating Agreement. By his
execution of this Agreement, the Investor agrees to be bound by all
of the terms and provisions of the Operating Agreement.
3. Transferability. The transferability of Class A Units is
restricted by Article VII of the Operating Agreement and Section 4
of this Agreement. Any transfer in violation of the Operating
Agreement or this Agreement shall be void and of no legal effect.
4. Permitted Transfers.
4.1. Permitted Transferees. The Investor may transfer
all or any part of his Class A Units to (i) the Company,
(ii) Sattel or (iii) a group consisting of Investor's
spouse, issue or a trust created for the benefit of his
spouse or issue (such spouse, issue or trust being
hereinafter referred to as a "Permitted Transferee");
provided, however, that (i) any such Permitted Transferee
shall agree in writing to be bound by the terms and
conditions of this Agreement, (ii) if the proposed transfer
is to a trust, prior to the transfer the Board of Directors
shall have approved the trustee thereof in writing and (iii)
any transfer to a Permitted Transferee shall only be of the
economic interest, as defined in Section 17001(n) of the
California Act, attributable to the transferred Class A Units.
Thus, the Investor still retains the right to vote and to
exercise all rights and decisions under this Agreement and the
Operating Agreement as regards the Class A Units transferred
to the Permitted Transferee unless said Permitted Transferee
is admitted to the Company as a Member as provided in
Article VII of the Operating Agreement.
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4.2. Subsequent Transfers. A Permitted Transferee may
transfer all or any portion of the Class A Units transferred
to such Permitted Transferee only to the Company, Sattel,
the Investor or another Permitted Transferee in accordance
with Section 4.1.
5. Put Right. The provisions of this Section 5 shall govern
the Company's obligation to purchase any Class A Units held by the
Investor or a Permitted Transferee at any time on or after April 1,
1999.
5.1. Obligation to Purchase. At any time on or after
April 1, 1999, Investor or his Permitted Transferees holding
a majority of the Class A Units held by Investor and his
Permitted Transferees will have the continuing right, but
not the obligation, to require the Company to purchase all,
but not less than all, of the Class A Units held by the
Investor and such Permitted Transferees for their Fair
Market Value as determined below. Such right shall be
exercised by written notice given to the Company and shall
apply to all Units held by Investor and his Permitted
Transferees at the time the notice is given. Prior to any
such purchase, the Class A Units shall remain subject in all
respects to this Agreement and the Operating Agreement.
5.2. Determination of Fair Market Value. For purposes
of this Agreement, the "Fair Market Value" (which shall mean
the "Agreed Fair Market Value" and the "Appraised Fair
Market Value," as applicable) of the Class A Units to be
purchased pursuant to Section 5.1 hereof shall be determined
as of the close of the fiscal year immediately preceding the
date the notice is given. The Fair Market Value shall be
determined pursuant to the following procedure:
(a) The holders of a majority of the Class A Units
which are to be purchased may reach agreement with the
Company as to the Fair Market Value of the Class A Units
(the "Agreed Fair Market Value"). All selling Class A Unit
holders are then bound to sell at such Agreed Fair Market
Value.
(b) If the parties cannot reach agreement as to the
Fair Market Value of the Class A Units within thirty (30)
days after the date the notice is given under Section 5.1,
any selling party or the Company may request that the Fair
Market Value of the Class A Units to be purchased be
determined by appraisal of the Class A Units according to
the procedure set forth in Section 5.3, below (the
"Appraised Fair Market Value"); provided, however, that only
one appraisal of the Class A Units shall be performed if
there are multiple sellers of the Class A Units that request
an appraisal.
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5.3. Appraisal. The Appraised Fair Market Value shall
be determined by an appraiser which (i) shall be an
investment banking firm which has a seat on the New York
Stock Exchange and (ii) shall be approved by the Company and
a representative of the holders of a majority of the Class A
Units to be sold. If the parties cannot agree upon an
appraiser within fifteen (15) days after the expiration of
the thirty (30) day period for determining the Agreed Fair
Market Value under Section 5.2(a), above, the Company and
the representative of the Class A Units to be sold shall
each select an appraiser which shall be an investment
banking firm which has a seat on the New York Stock
Exchange, and the two (2) appraisers so selected shall
select an appraiser meeting the same criteria who shall
determine the Appraised Fair Market Value for purposes of
this Section 5.3. The determination of such appraiser shall
be binding and conclusive on the parties concerned for
purposes hereof. Such appraisal shall be performed as soon
as practicable, and the Company will bear the cost of the
appraisal. In valuing the Class A Units, the appraiser
shall appraise the Company on the basis of the sale of all
of the equity interests in the Company to a single purchaser
and then determine a value for the Class A Units by first
taking into account the terms of the Operating Agreement.
5.4. Closing for Purchase. The closing of any
purchase of Class A Units pursuant hereto shall occur at the
Company's principal office on such day as the Company shall
select, but not more one hundred and twenty (120) days after
the date on which the notice is given under Section 5.1. At
the closing, the seller or sellers shall deliver to the
Company the Class A Units to be purchased, free and clear of
any liens, security interests, encumbrances, charges or
other restrictions, and all such instruments or documents of
conveyance as shall be reasonably required by the Company in
connection with the purchase of such Class A Units.
5.5. Payment for Purchase and Adjustment of Purchase
Price. The Company may pay the entire purchase price to the
selling parties at the closing. Alternatively, the Company
may pay one-third of the purchase price in cash at the
closing, with the remaining two-thirds of the payments to be
made on the first and second anniversaries of the closing
unless the Company chooses to accelerate said payments. The
deferred payments will bear interest at a rate of 10% per
annum until paid. If there is a Triggering Event (defined
below) within six months after the date as of which the Fair
Market Value is determined, the Investor will receive an
additional payment equal to the excess, if any, of the
amount that would have been paid based on the sales terms
(net of expenses reasonably appropriate to the sale) or
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exchange over the initial Appraised or Agreed Fair Market
Value. Payment will be made in the form of consideration
given in the sale or exchange. In addition, the deferred
payments shall be accelerated and paid upon the occurrence
of a Triggering Event.
6. Investor's Right to Have Units Redeemed. If The Diana
Corporation ("Diana") or a person controlling, controlled by or
under common control with Diana (an "Affiliate") or the Company at
any time redeems or purchases in one or more transactions a
majority of the Class B Units presently outstanding, the Investor
may elect to have his Units (and those of his Permitted
Transferees) redeemed or purchased as well. The Company agrees to
provide Investor at least thirty (30) days prior written notice of
such redemptions. The price at which the Class A Units will be
redeemed is the redemption or purchase amount for the Class B Units
as adjusted upward to reflect the priority distribution associated
with the Class A Units. The other terms and conditions shall be
the same as for the Class B Units.
7. Cooperation If a Triggering Event Occurs. In the event
that in one or more transactions (i) Diana or an Affiliate of Diana
sells or transfers, directly or indirectly, all or a portion of its
interest in the Company with the result that it reduces Diana's
interest to a level which would not allow it to consolidate with
the Company for federal income tax purposes, (ii) the Company sells
or transfers all or substantially all of its assets other than to
an Affiliate of Diana, or (iii) a majority of the Class B Units
presently outstanding are exchanged for or converted or made
convertible into any securities registered under the Securities
Exchange Act of 1934, as amended (individually, "Triggering
Event"), the Investor (and his Permitted Transferees) will be
entitled to participate in such Triggering Event on the same terms
(in the event of a sale after sharing expenses reasonably
appropriate to the sale) as Diana or its Affiliate owning the
equity interests in the Company or such holders of Class B Units,
except as otherwise specifically modified by this Agreement and
except as appropriate to reflect the higher value associated with
the priority distribution for Class A Units. The Company agrees to
provide Investor at least thirty (30) days prior written notice of
any such Triggering Event.
8. Miscellaneous. Any amendment to this agreement must be in
a writing signed by the Company and the Investor. This Agreement
shall be governed by the laws of the State of California without
application of choice of law principles. All pronouns and
variations thereof shall be deemed to refer to the masculine,
feminine, neuter, singular or plural as the context may require.
This Agreement constitutes the entire agreement among the parties
hereto pertaining to the subject matter hereof and supersedes all
prior agreements and understandings (oral or
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written) of the parties in connection with any matter covered
hereby, including any prior commitments, whether oral or written,
for equity interests, real or phantom, in the business of the
Company.
9. Notices. All notices required or permitted to be given
pursuant to this Agreement shall be in writing and shall be
considered as properly given or made if delivered personally or if
mailed by certified mail (return receipt requested), with proper
postage, to the addresses of the parties set forth beneath their
respective signature lines of this Agreement. All notices shall be
deemed effective on the date when delivered personally, or five
business days after having been mailed. Any party hereto may
change its address by like notice stating its new address to the
other party.
10. Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled
by arbitration conducted before a single arbitrator in accordance
with the Commercial Arbitration rules of the American Arbitration
Association, and judgment upon the award entered by the arbitrator
may be entered in any court having jurisdiction thereof.
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<PAGE>
Executed as of the day and year first above written.
SATTEL COMMUNICATIONS LLC
/s/ James J. Fiedler
Chairman of the Board and
Chief Executive Officer
Address:
26025 Mureau Road
Calabasas, California 91302
INVESTOR:
/s/ Sydney B. Lilly
Address:
6868 North Green Bay Avenue,
Apt. 206
Glendale, Wisconsin 53209
AMENDED AND RESTATED
AGREEMENT REGARDING AWARD OF CLASS B UNITS
This Agreement is dated as of the 11th day of November, 1996,
by and between James J. Fiedler (the "Executive") and Sattel
Communications LLC, a California limited liability company (the
"Company"). All capitalized terms used herein and not otherwise
defined have the same meaning as set forth in the Operating
Agreement of Sattel Communications LLC dated as of April 1, 1996
(the "Operating Agreement"). This Agreement amends, restates, and
supersedes that certain Agreement Regarding Award of Class B Units
dated April 1, 1996, by and between Executive and the Company.
1. Award of Class B Units. In consideration for the
services rendered or to be rendered by the Executive to the Company
or for other consideration, the Executive is the holder of 350
Class B Units in the Company (the "Units"), subject to the terms
and conditions of this Agreement and the Operating Agreement.
1.1. Forfeiture. Notwithstanding anything contained in this
Agreement to the contrary, if (i) the Executive's employment with
the Company, or with an assignee (an "Assignee") of the Company's
rights with respect to Executive's Employment Agreement with Sattel
Communications Company as currently in effect or as contained in a
subsequent employment agreement with the Company or an Assignee, is
terminated upon the occurrence of any of the events specified in
Section 2.2 of such Employment Agreement (referred to below as a
termination for "Cause"), (ii) the Executive violates the
disclosure and assignment, confidentiality or non-compete
provisions contained in Sections 8, 9 or 10, hereof, or (iii) the
Executive voluntarily leaves the employ of the Company or of an
Assignee other than for Good Reason as defined herein, then the
Executive will forfeit a portion of the Units on the following
basis:
150 Class B Units will be forfeited upon the occurrence
of any such event on or before April 1, 1997;
75 Class B Units will be forfeited upon the occurrence of
any such event after April 1, 1997, and on or before April 1, 1998;
provided, however, that if the Executive's employment is terminated
for Cause based solely on performance, then the number of Units
forfeited will equal 150 multiplied by a fraction, the numerator of
which is the number of full months remaining as of the date of
termination until April 1, 1998, and the denominator of which is
24. Upon the forfeiture of any Units, such Units will be treated
as no longer outstanding for any purpose. "Good
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Reason" means a material reduction in either the Executive's duties
with the Company or an Assignee or his cash compensation from the
Company or an Assignee.
1.2. Termination of Forfeiture Provisions. If (i) the Class
B Units are converted into common stock of The Diana Corporation
("Diana") in accordance with Section 6 hereof, (ii) Diana sells or
transfers, directly or indirectly, all or a portion of its interest
in the Company with the result that it reduces Diana's interest to
a level which would not allow it to consolidate with the Company
for financial accounting purposes, (iii) the Company sells or
transfers all or substantially all of its assets other than to an
Affiliate of Diana, or (iv) Diana is a party to a consummated
merger, consolidation or share exchange and as a result of such
merger, consolidation or share exchange (A) stockholders of Diana
no longer hold equity securities registered under the Securities
Exchange Act of 1934, as amended or (B) less than 50% of the
outstanding voting securities of the surviving or resulting entity
shall be owned in the aggregate by the former stockholders of
Diana, in each case as the same shall have existed immediately
prior to such merger, consolidation or share exchange
(individually, a "Triggering Event" and jointly, the "Triggering
Events") then from and after the date of the Triggering Event,
Section 1.1 will no longer apply.
1.3 Cooperation If a Triggering Event Occurs. In the event
of a Triggering Event, the Executive (and his Permitted
Transferees) will be entitled, and required, to participate in such
Triggering Event on the same terms (in the event of a sale after
sharing expenses reasonably appropriate to the sale) as Diana or
its Affiliate owning the equity interests in the Company, except as
otherwise specifically modified by this Agreement.
2. Consent to Terms of Operating Agreement. The Executive
acknowledges receipt of a copy of the Operating Agreement. By his
execution of this Agreement, the Executive agrees to be bound by
all of the terms and provisions of the Operating Agreement.
3. Transferability. The transferability of Class B Units
is restricted by Article VII of the Operating Agreement and Section
4 of this Agreement. Any transfer in violation of the Operating
Agreement or this Agreement shall be void and of no legal effect.
4. Permitted Transfers.
4.1. Permitted Transfers. The Executive may transfer any
Class B Units which are not subject to forfeiture to (i) the
Company, (ii) Sattel or (iii) a group consisting of Executive's
spouse, issue or a trust created for the benefit of his spouse or
issue (such spouse, issue or trust being hereinafter referred to as
a "Permitted Transferee"); provided however, that the Executive
may not transfer pursuant to this Section 4.1 more than fifty
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<PAGE>
percent (50%) of the number of Units awarded to him and not subject
to forfeiture from time to time; and provided, further, that (i)
any such Permitted Transferee shall agree in writing to be bound by
the terms and conditions of this Agreement, (ii) if the proposed
transfer is to a trust, prior to the transfer the Board of
Directors shall have approved the trustee thereof in writing and
(iii) any transfer to a Permitted Transferee shall only be of the
economic interest, as defined in Section 17001(n) of the California
Act, attributable to the transferred Class B Units. Thus, the
Executive still retains the right to vote and to exercise all
rights and decisions under this Agreement and the Operating
Agreement as regards the Class B Units transferred to the Permitted
Transferee unless said Permitted Transferee is admitted to the
Company as a Member as provided in Article VII of the Operating
Agreement.
4.2. Subsequent Transfers. A Permitted Transferee may
transfer all or any portion of the Class B Units transferred to
such Permitted Transferee only to the Company, Sattel, the
Executive or another Permitted Transferee of the Executive in
accordance with Section 4.1.
5. Purchase of Interest on Termination of Employment. If
the Executive's employment with the Company terminates, the
provisions of this Section 5 shall govern the Company's option to
purchase any Class B Units then held by the Executive or a
Permitted Transferee.
5.1. Option to Purchase. Upon and following the Executive's
termination of employment with the Company, the Company will have
the continuing right, but not the obligation, to purchase all, but
not less than all, of the Class B Units held by the Executive and
all Permitted Transferees for their Fair Market Value as determined
below. Such right shall be exercised by written notice given by the
Company to the Executive and shall apply to all Units held at the
time the notice is given. Prior to any such purchase, the Class B
Units shall remain subject in all respects to this Agreement and
the Operating Agreement. Notwithstanding the foregoing, if the
Executive's employment terminates because of death or disability,
the Company's option to purchase the Class B Units will not become
effective until one year after the termination of employment.
5.2. Determination of Fair Market Value. For purposes of
this Agreement, the "Fair Market Value" (which shall mean the
"Agreed Fair Market Value" and the "Appraised Fair Market Value,"
as applicable) of the Class B Units to be purchased pursuant to
Section 5.1 hereof shall be determined as of the close of the
fiscal quarter immediately preceding the date the Company's notice
is given. The Fair Market Value shall be determined pursuant to
the following procedure:
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(a) The holders of a majority of the Class B Units which
are to be purchased may reach agreement with the Company as to the
Fair Market Value of the Class B Units (the "Agreed Fair Market
Value"). All selling Class B Unit holders are then bound to sell
at such Agreed Fair Market Value.
(b) If the parties cannot reach agreement as to the Fair
Market Value of the Class B Units within thirty (30) days after the
date the Company's notice is given under Section 5.1, any selling
party or the Company may request that the Fair Market Value of the
Class B Units to be purchased be determined by appraisal according
to the procedure set forth in Section 5.3, below (the "Appraised
Fair Market Value"); provided, however, that only one appraisal of
the Class B Units shall be performed if there are multiple sellers
of the Class B Units that request an appraisal.
5.3. Appraisal. The Appraised Fair Market Value shall be
determined by an appraiser which (i) shall be an investment banking
firm which has a seat on the New York Stock Exchange and (ii) shall
be approved by the Company and the holders of a majority of the
Class B Units to be sold. If the parties cannot agree upon an
appraiser within fifteen (15) days after the expiration of the
thirty (30) day period for determining the Agreed Fair Market Value
under Section 5.2(a), above, the Company and the holders of a
majority of the Class B Units to be sold shall each select an
appraiser which shall be an investment banking firm which has a
seat on the New York Stock Exchange, and the two (2) appraisers so
selected shall select an appraiser meeting the same criteria who
shall determine the Appraised Fair Market Value for purposes of
this Section 5.3. The determination of such appraiser shall be
binding and conclusive on the parties concerned for purposes
hereof. Such appraisal shall be performed as soon as practicable,
and the Company will bear the cost of the appraisal. In valuing
the Class B Units, the appraiser shall appraise the Company on the
basis of the sale of all of the equity interests in the Company to
a single purchaser and then determine a value for the Class B Units
by first taking into account the terms of the Operating Agreement.
5.4. Closing for Purchase. The closing of any purchase of
Class B Units pursuant hereto shall occur at the Company's
principal office on such day as the Company shall select, but not
more one hundred and twenty (120) days after the date on which the
Company's notice is given under Section 5.1. At the closing, the
seller or sellers shall deliver to the Company the Class B Units to
be purchased, free and clear of any liens, security interests,
encumbrances, charges or other restrictions, and all such
instruments or documents of conveyance as shall be reasonably
required by the Company in connection with the purchase of such
Class B Units.
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5.5. Payment for Purchase and Adjustment of Purchase Price.
The Company may pay the entire purchase price to the selling
parties at the closing. Alternatively, the Company may pay
one-third of the purchase price in cash at the closing, with the
remaining two-thirds of the payments to be made on the first and
second anniversaries of the closing unless the Company chooses to
accelerate said payments. The deferred payments will bear interest
at a rate of 10% per annum until paid. If there is a Triggering
Event within six months after the date as of which the Fair Market
Value is determined, the Executive will receive an additional
payment equal to the excess, if any, of the amount that would have
been paid based as a result of the Triggering Event transaction
(net of expenses reasonably appropriate thereto) over the initial
Appraised or Agreed Fair Market Value. Payment will be made in the
form of consideration given in the transaction. In addition, the
deferred payments shall be accelerated and paid upon the occurrence
of a Triggering Event.
6. Right to Convert Class B Units Into Common Stock of
Diana. If the cumulative pre-tax profits of the Company for four
consecutive quarters shall have been at least $15 million, then the
Company and all the holders of Class B Units shall have the right,
and shall be obligated to convert their Class B Units into common
stock of Diana on the basis of 500 shares of common stock of Diana
for each Class B Unit. If there are changes in the number of
outstanding shares of common stock of Diana through the declaration
of stock dividends, stock splits or the like, the number of shares
of common stock into which the Class B Units are converted shall be
automatically and proportionately adjusted. In the event of a
merger, consolidation or stock exchange, or the like, as a result
of which common stock of Diana is changed into securities of
another person, cash or other property, the consideration to be
received upon conversion of the Class B Units shall be adjusted as
deemed equitable by the Company in its sole discretion.
7. Definitions. As used in this Agreement, the following
words have the meanings specified:
(a) "Proprietary Ideas" means ideas, suggestions,
Inventions and work relating in any way to the business and
activities of the Company which may be subjects of protection under
applicable laws, including common law, respecting patents,
copyrights, trade secrets, trademarks, service marks or other
intellectual property rights.
(b) "Inventions" means inventions, designs,
discoveries, improvements and ideas, whether or not patentable,
including without limitation upon the generality of the foregoing,
novel or improved products, processes, machines, software,
promotional and advertising materials, business data processing
programs and systems, and other manufacturing and sales techniques,
which either (a) relate to (i) the business of the Company as
conducted from time to time or (ii) the Company's actual or
demonstrably
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anticipated research or development, or (b) result from any work
performed by Executive for the Company.
(c) "Confidential Information" means Proprietary Ideas
and also information related to the Company's business, whether or
not in written or printed form, not generally known in the trade or
industry of which Executive has or will become informed during the
period of employment by the Company or its predecessors, which may
include but is not limited to product specifications, manufacturing
procedures, methods, equipment, compositions, technology, formulas,
trade secrets, know-how, research and development programs, sales
methods, customer lists, mailing lists, customer usages and
requirements, software and other confidential technical or business
information and data; provided, however, that Confidential
Information shall not include any information which is in the
public domain by means other than disclosure by Executive.
(d) In the event of a transfer of the assets and
business of the Company to another entity, "Company" thereafter
will refer to that entity.
8. Disclosure and Assignment of Inventions. Executive
agrees to disclose to the Company, and hereby assigns to Company
all of Executive's rights in and, if requested to do so, provide a
written description of, any Inventions conceived or reduced to
practice at any time during Executive's employment by the Company
or a predecessor of the Company, either solely or jointly with
others and whether or not developed on Executive's own time or with
Company's resources. Executive agrees that Inventions first
reduced to practice within one (1) year after termination of
Executive's employment by Company shall be treated as if conceived
during such employment unless Executive can establish specific
events giving rise to the conception which occurred after such
employment. Further, Executive disclaims and will not assert any
rights in Inventions as having been made, conceived or acquired
prior to employment by the Company. Executive shall cooperate with
the Company and shall execute and deliver such documents and do
such other acts and things as the Company may request, at the
Company's expense, to obtain and maintain letters patent or
registrations covering any Inventions and to vest in the Company
all rights therein free of all encumbrances and adverse claims.
9. Confidential Information. Executive shall not disclose
to the Company or induce the Company to use any secret or
confidential information belonging to persons not affiliated with
the Company, including any former employer of Executive. In
addition to all duties of loyalty imposed on Executive by law,
Executive shall maintain Confidential Information in strict
confidence and secrecy and shall not at any time, during or at any
time after termination of employment with the Company, directly or
indirectly, use or disclose to others any Confidential Information,
or use it for the benefit of any person or entity (including
Executive) other than the Company, without the prior written
consent of any authorized officer of the Company (except for
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disclosures to persons acting on the Company's behalf with a need
to know such information). Executive shall carefully preserve any
documents, records, tangible data relating to Inventions or
Confidential Information coming into the Executive's possession and
shall deliver the same and any copies thereof to the Company upon
request and, in any event, upon termination of Executive's
employment by Company.
10. Non-Competition; Non-Solicitation of Employees.
(a) Non-Competition.
(1) At all times during Executive's employment
with the Company and for a period of one (1) year following the
termination of such employment, Executive shall not within the
counties of Alameda, Alpine, Amador, Butte, Calaveras, Colusa,
Contra Costa, Del Norte, El Dorado, Fresno, Glenn, Humboldt,
Imperial, Inyo, Kern, Kings, Lake, Lassen, Los Angeles, Madera,
Marin, Mariposa, Mendocino, Merced, Modoc, Mono, Monterey, Napa,
Nevada, Orange, Placer, Plumas, Riverside, Sacramento, San Benito,
San Bernardino, San Diego, San Francisco, San Joaquin, San Luis
Obispo, San Mateo, Santa Barbara, Santa Clara, Santa Cruz, Shasta,
Sierra, Siskiyou, Solano, Sonoma, Stanislaus, Sutter, Tehama,
Trinity, Tulare, Tuolumne, Ventura, Yolo, Yuba, or any other county
in the State of California, or in any other state within the United
States, or in any other geographical area covered by the operations
of the Company, whether within or outside of the boundaries of the
United States of America, directly or indirectly, participate in or
assist in, the ownership, management, operation or control, or have
any beneficial interest in, or provide employment, consulting or
other services for, any corporation, partnership, association or
other person or entity ("Competitive Business") which is engaged in
the development, manufacture, marketing, distribution, service
and/or sale of products incorporating technology by which fax,
voice and data traffic can be transmitted by means of T1 and other
similar transmission cables, and which directly competes or is
planning to directly compete with the Company's products or
services (including products and services under development). If
the Competitive Business is multi-faceted, this restriction shall
apply only to that part of the business which is competitive with
the Company. The Company and the Executive intend that the
covenant contained in the preceding portion of this paragraph shall
be construed as a series of separate covenants, one for each of the
separate Counties and states listed above, and each other
geographical area specified in this paragraph. Except for the
geographical coverage, each separate covenant shall be deemed
identical to the terms of the covenants set forth above. If in any
proceeding any court or other judicial or administrative body shall
refuse to enforce any of the separate
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covenants deemed included in this paragraph, each such
unenforceable covenant shall be eliminated from these provisions
for the purpose of those proceedings and to the extent necessary to
permit the remaining separate covenants to be enforced against the
Executive to the fullest extent possible.
(2) In furtherance of the foregoing, but as an
independent obligation of Executive, Executive agrees that he will
not, during the one (1) year period following termination of his
employment with Company, be connected in any way with the
solicitation of any then current or potential customers or
suppliers of Company if such solicitation is likely to result in a
loss of business to the Company.
(3) In the event the covenants set forth in this
Section 10(a) are found to be unenforceable or invalid by reason of
being overly broad, the parties hereto intend that such covenants
shall be limited to such scope, geographic area and duration as
shall make such covenants valid and enforceable.
(b) Non-Solicitation of Employees. Executive further
agrees that he will not, for a period of two (2) years following
his termination of employment with the Company, directly or
indirectly, on his own behalf or on behalf of any other person or
entity, solicit for employment, employ or be involved in the
employment by another person or entity, or engage as a consultant
or be involved in any such engagement by another person or entity,
any person who is an employee of the Company or has been an
employee of the Company within the preceding one-year period.
11. Enforcement of Sections 8, 9 and 10. Recognizing that
compliance with the provisions of Sections 8, 9 and 10 of this
Agreement is necessary to protect the goodwill and other
proprietary interests of the Company, and that breach of
Executive's agreements thereunder will result in irreparable and
continuing damages to the Company for which there will be no
adequate remedy at law, Executive hereby agrees that in the event
of any breach of such agreements, the Company shall be entitled to
injunctive relief and such other and further relief, including
damages, as may be proper.
12. Government Laws, Regulations and Contracts. Executive
agrees to comply, and to do all things necessary for the Company to
comply, with all federal, state, local and foreign laws and
regulations which may be applicable to the business and operations
of the Company, and with any contractual obligations, including,
without limitation, confidentiality obligations, which may be
applicable to the Company or Executive under any contracts between
the Company and its customers, suppliers or third parties.
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13. Miscellaneous. Any amendment to this agreement must be
in a writing signed by the Company and the Executive. This
Agreement shall be governed by the laws of the State of California
without application of choice of law principles. All pronouns and
variations thereof shall be deemed to refer to the masculine,
feminine, neuter, singular or plural as the context may require.
This Agreement constitutes the entire agreement among the parties
hereto pertaining to the subject matter hereof and supersedes all
prior agreements and understandings (oral or written) of the
parties in connection with any matter covered hereby, including any
prior commitments, whether oral or written, for equity interests,
real or phantom, in the business of the Company.
14. Notices. All notices required or permitted to be given
pursuant to this Agreement shall be in writing and shall be
considered as properly given or made if delivered personally or if
mailed by certified mail (return receipt requested), with proper
postage, to the addresses of the parties set forth beneath their
respective signature lines of this Agreement. All notices shall be
deemed effective on the date when delivered personally, or five
business days after having been mailed. Any party hereto may
change its address by like notice stating its new address to the
other party.
15. Assignment of Employment Agreement. The Executive
acknowledges that the Employment Agreement between the Executive
and Sattel Communications Company has been assigned to the Company
and agrees that references in such agreement to Sattel
Communications Company shall be deemed to refer to the Company and
that references to the Committee in such agreement shall be deemed
to refer to the Board of Directors of the Company.
16. Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled
by arbitration conducted before a single arbitrator in accordance
with the Commercial Arbitration rules of the American Arbitration
Association, and judgment upon the award entered by the arbitrator
may be entered in any court having jurisdiction thereof. In the
event the controversy or claim arises out of Sections 7, 8, 9, 10,
or 11 hereof, such arbitration shall be conducted in accordance
with the Expedited Procedures under such rules.
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Executed as of the day and year first above written.
SATTEL COMMUNICATIONS LLC
By: /s/ Daniel W. Latham
President and
Chief Operating Officer
Address:
26025 Mureau Road
Calabasas, CA 91302
EXECUTIVE:
/s/ James J. Fiedler
Address:
24905 Ariella Drive
Calabasas, CA 91302
AMENDED AND RESTATED
AGREEMENT REGARDING AWARD OF CLASS B UNITS
This Agreement is dated as of the 11th day of November,
1996, by and between Daniel W. Latham (the "Executive") and
Sattel Communications LLC, a California limited liability company
(the "Company"). All capitalized terms used herein and not
otherwise defined have the same meaning as set forth in the
Operating Agreement of Sattel Communications LLC dated as of
April 1, 1996 (the "Operating Agreement"). This Agreement
amends, restates, and supersedes that certain Agreement Regarding
Award of Class B Units dated April 1, 1996, by and between
Executive and the Company.
1. Award of Class B Units. In consideration for the
services rendered or to be rendered by the Executive to the
Company or for other consideration, the Executive is the holder
of 250 Class B Units in the Company (the "Units"), subject to the
terms and conditions of this Agreement and the Operating
Agreement.
1.1. Forfeiture. Notwithstanding anything contained
in this Agreement to the contrary, if (i) the Executive's
employment with the Company, or with an assignee (an
"Assignee") of the Company's rights with respect to
Executive's Employment Agreement with Sattel Communications
Company as currently in effect or as contained in a
subsequent employment agreement with the Company or an
Assignee, is terminated upon the occurrence of any of the
events specified in Section 2.2 of such Employment Agreement
(referred to below as a termination for "Cause"), (ii) the
Executive violates the disclosure and assignment,
confidentiality or non-compete provisions contained in
Sections 8, 9 or 10, hereof, or (iii) the Executive
voluntarily leaves the employ of the Company or of an
Assignee other than for Good Reason as defined herein, then
the Executive will forfeit a portion of the Units on the
following basis:
90 Class B Units will be forfeited upon the
occurrence of any such event on or before April 1,
1997;
45 Class B Units will be forfeited upon the
occurrence of any such event after April 1, 1997, and
on or before April 1, 1998;
provided, however, that if the Executive's employment is
terminated for Cause based solely on performance, then the
number of Units forfeited will equal 90 multiplied by a
fraction, the numerator of which is the number of full
months remaining as of the date of termination until April
1, 1998, and the denominator of which is 24. Upon the
forfeiture of any Units, such Units will be treated as no
longer outstanding for any purpose. "Good
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Reason" means a material reduction in either the Executive's
duties with the Company or an Assignee or his cash
compensation from the Company or an Assignee.
1.2. Termination of Forfeiture Provisions. If (i) the
Class B Units are converted into common stock of The Diana
Corporation ("Diana") in accordance with Section 6 hereof,
(ii) Diana sells or transfers, directly or indirectly, all
or a portion of its interest in the Company with the result
that it reduces Diana's interest to a level which would not
allow it to consolidate with the Company for financial
accounting purposes, (iii) the Company sells or transfers
all or substantially all of its assets other than to an
Affiliate of Diana, or (iv) Diana is a party to a
consummated merger, consolidation or share exchange and as a
result of such merger, consolidation or share exchange (A)
stockholders of Diana no longer hold equity securities
registered under the Securities Exchange Act of 1934, as
amended or (B) less than 50% of the outstanding voting
securities of the surviving or resulting entity shall be
owned in the aggregate by the former stockholders of Diana,
in each case as the same shall have existed immediately
prior to such merger, consolidation or share exchange
(individually, a "Triggering Event" and jointly, the
"Triggering Events") then from and after the date of the
Triggering Event, Section 1.1 will no longer apply.
1.3 Cooperation If a Triggering Event Occurs. In the
event of a Triggering Event, the Executive (and his
Permitted Transferees) will be entitled, and required, to
participate in such Triggering Event on the same terms (in
the event of a sale after sharing expenses reasonably
appropriate to the sale) as Diana or its Affiliate owning
the equity interests in the Company, except as otherwise
specifically modified by this Agreement.
2. Consent to Terms of Operating Agreement. The Executive
acknowledges receipt of a copy of the Operating Agreement. By
his execution of this Agreement, the Executive agrees to be bound
by all of the terms and provisions of the Operating Agreement.
3. Transferability. The transferability of Class B Units
is restricted by Article VII of the Operating Agreement and
Section 4 of this Agreement. Any transfer in violation of the
Operating Agreement or this Agreement shall be void and of no
legal effect.
4. Permitted Transfers.
4.1. Permitted Transfers. The Executive may transfer
any Class B Units which are not subject to forfeiture to (i)
the Company, (ii) Sattel or (iii) a group consisting of
Executive's spouse, issue or a trust created for the benefit
of his spouse or issue (such spouse, issue or trust being
hereinafter referred to as a "Permitted Transferee");
provided however, that the Executive may not transfer
pursuant to this Section 4.1 more than fifty
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<PAGE>
percent (50%) of the number of Units awarded to him and not
subject to forfeiture from time to time; and provided,
further, that (i) any such Permitted Transferee shall agree
in writing to be bound by the terms and conditions of this
Agreement, (ii) if the proposed transfer is to a trust,
prior to the transfer the Board of Directors shall have
approved the trustee thereof in writing and (iii) any
transfer to a Permitted Transferee shall only be of the
economic interest, as defined in Section 17001(n) of the
California Act, attributable to the transferred Class B
Units. Thus, the Executive still retains the right to vote
and to exercise all rights and decisions under this
Agreement and the Operating Agreement as regards the Class B
Units transferred to the Permitted Transferee unless said
Permitted Transferee is admitted to the Company as a Member
as provided in Article VII of the Operating Agreement.
4.2. Subsequent Transfers. A Permitted Transferee may
transfer all or any portion of the Class B Units transferred
to such Permitted Transferee only to the Company, Sattel,
the Executive or another Permitted Transferee of the
Executive in accordance with Section 4.1.
5. Purchase of Interest on Termination of Employment. If
the Executive's employment with the Company terminates, the
provisions of this Section 5 shall govern the Company's option to
purchase any Class B Units then held by the Executive or a
Permitted Transferee.
5.1. Option to Purchase. Upon and following the
Executive's termination of employment with the Company, the
Company will have the continuing right, but not the
obligation, to purchase all, but not less than all, of the
Class B Units held by the Executive and all Permitted
Transferees for their Fair Market Value as determined below.
Such right shall be exercised by written notice given by the
Company to the Executive and shall apply to all Units held
at the time the notice is given. Prior to any such
purchase, the Class B Units shall remain subject in all
respects to this Agreement and the Operating Agreement.
Notwithstanding the foregoing, if the Executive's employment
terminates because of death or disability, the Company's
option to purchase the Class B Units will not become
effective until one year after the termination of
employment.
5.2. Determination of Fair Market Value. For purposes
of this Agreement, the "Fair Market Value" (which shall mean
the "Agreed Fair Market Value" and the "Appraised Fair
Market Value," as applicable) of the Class B Units to be
purchased pursuant to Section 5.1 hereof shall be determined
as of the close of the fiscal quarter immediately preceding
the date the Company's notice is given. The Fair Market
Value shall be determined pursuant to the following
procedure:
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(a) The holders of a majority of the Class B Units
which are to be purchased may reach agreement with the
Company as to the Fair Market Value of the Class B Units
(the "Agreed Fair Market Value"). All selling Class B Unit
holders are then bound to sell at such Agreed Fair Market
Value.
(b) If the parties cannot reach agreement as to the
Fair Market Value of the Class B Units within thirty (30)
days after the date the Company's notice is given under
Section 5.1, any selling party or the Company may request
that the Fair Market Value of the Class B Units to be
purchased be determined by appraisal according to the
procedure set forth in Section 5.3, below (the "Appraised
Fair Market Value"); provided, however, that only one
appraisal of the Class B Units shall be performed if there
are multiple sellers of the Class B Units that request an
appraisal.
5.3. Appraisal. The Appraised Fair Market Value shall
be determined by an appraiser which (i) shall be an
investment banking firm which has a seat on the New York
Stock Exchange and (ii) shall be approved by the Company and
the holders of a majority of the Class B Units to be sold.
If the parties cannot agree upon an appraiser within fifteen
(15) days after the expiration of the thirty (30) day period
for determining the Agreed Fair Market Value under Section
5.2(a), above, the Company and the holders of a majority of
the Class B Units to be sold shall each select an appraiser
which shall be an investment banking firm which has a seat
on the New York Stock Exchange, and the two (2) appraisers
so selected shall select an appraiser meeting the same
criteria who shall determine the Appraised Fair Market Value
for purposes of this Section 5.3. The determination of such
appraiser shall be binding and conclusive on the parties
concerned for purposes hereof. Such appraisal shall be
performed as soon as practicable, and the Company will bear
the cost of the appraisal. In valuing the Class B Units,
the appraiser shall appraise the Company on the basis of the
sale of all of the equity interests in the Company to a
single purchaser and then determine a value for the Class B
Units by first taking into account the terms of the
Operating Agreement.
5.4. Closing for Purchase. The closing of any
purchase of Class B Units pursuant hereto shall occur at the
Company's principal office on such day as the Company shall
select, but not more one hundred and twenty (120) days after
the date on which the Company's notice is given under
Section 5.1. At the closing, the seller or sellers shall
deliver to the Company the Class B Units to be purchased,
free and clear of any liens, security interests,
encumbrances, charges or other restrictions, and all such
instruments or documents of conveyance as shall be
reasonably required by the Company in connection with the
purchase of such Class B Units.
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<PAGE>
5.5. Payment for Purchase and Adjustment of Purchase
Price. The Company may pay the entire purchase price to the
selling parties at the closing. Alternatively, the Company
may pay one-third of the purchase price in cash at the
closing, with the remaining two-thirds of the payments to be
made on the first and second anniversaries of the closing
unless the Company chooses to accelerate said payments. The
deferred payments will bear interest at a rate of 10% per
annum until paid. If there is a Triggering Event within six
months after the date as of which the Fair Market Value is
determined, the Executive will receive an additional payment
equal to the excess, if any, of the amount that would have
been paid based as a result of the Triggering Event
transaction (net of expenses reasonably appropriate thereto)
over the initial Appraised or Agreed Fair Market Value.
Payment will be made in the form of consideration given in
the transaction. In addition, the deferred payments shall
be accelerated and paid upon the occurrence of a Triggering
Event.
6. Right to Convert Class B Units Into Common Stock of
Diana. If the cumulative pre-tax profits of the Company for four
consecutive quarters shall have been at least $15 million, then
the Company and all the holders of Class B Units shall have the
right, and shall be obligated to convert their Class B Units into
common stock of Diana on the basis of 500 shares of common stock
of Diana for each Class B Unit. If there are changes in the
number of outstanding shares of common stock of Diana through the
declaration of stock dividends, stock splits or the like, the
number of shares of common stock into which the Class B Units are
converted shall be automatically and proportionately adjusted.
In the event of a merger, consolidation or stock exchange, or the
like, as a result of which common stock of Diana is changed into
securities of another person, cash or other property, the
consideration to be received upon conversion of the Class B Units
shall be adjusted as deemed equitable by the Company in its sole
discretion.
7. Definitions. As used in this Agreement, the following
words have the meanings specified:
(a) "Proprietary Ideas" means ideas, suggestions,
Inventions and work relating in any way to the business and
activities of the Company which may be subjects of
protection under applicable laws, including common law,
respecting patents, copyrights, trade secrets, trademarks,
service marks or other intellectual property rights.
(b) "Inventions" means inventions, designs,
discoveries, improvements and ideas, whether or not
patentable, including without limitation upon the generality
of the foregoing, novel or improved products, processes,
machines, software, promotional and advertising materials,
business data processing programs and systems, and other
manufacturing and sales techniques, which either (a) relate
to (i) the business of the Company as conducted from time to
time or (ii) the Company's actual or demonstrably
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<PAGE>
anticipated research or development, or (b) result from any
work performed by Executive for the Company.
(c) "Confidential Information" means Proprietary Ideas
and also information related to the Company's business,
whether or not in written or printed form, not generally
known in the trade or industry of which Executive has or
will become informed during the period of employment by the
Company or its predecessors, which may include but is not
limited to product specifications, manufacturing procedures,
methods, equipment, compositions, technology, formulas,
trade secrets, know-how, research and development programs,
sales methods, customer lists, mailing lists, customer
usages and requirements, software and other confidential
technical or business information and data; provided,
however, that Confidential Information shall not include any
information which is in the public domain by means other
than disclosure by Executive.
(d) In the event of a transfer of the assets and
business of the Company to another entity, "Company"
thereafter will refer to that entity.
8. Disclosure and Assignment of Inventions. Executive
agrees to disclose to the Company, and hereby assigns to Company
all of Executive's rights in and, if requested to do so, provide
a written description of, any Inventions conceived or reduced to
practice at any time during Executive's employment by the Company
or a predecessor of the Company, either solely or jointly with
others and whether or not developed on Executive's own time or
with Company's resources. Executive agrees that Inventions first
reduced to practice within one (1) year after termination of
Executive's employment by Company shall be treated as if
conceived during such employment unless Executive can establish
specific events giving rise to the conception which occurred
after such employment. Further, Executive disclaims and will not
assert any rights in Inventions as having been made, conceived or
acquired prior to employment by the Company. Executive shall
cooperate with the Company and shall execute and deliver such
documents and do such other acts and things as the Company may
request, at the Company's expense, to obtain and maintain letters
patent or registrations covering any Inventions and to vest in
the Company all rights therein free of all encumbrances and
adverse claims.
9. Confidential Information. Executive shall not disclose
to the Company or induce the Company to use any secret or
confidential information belonging to persons not affiliated with
the Company, including any former employer of Executive. In
addition to all duties of loyalty imposed on Executive by law,
Executive shall maintain Confidential Information in strict
confidence and secrecy and shall not at any time, during or at
any time after termination of employment with the Company,
directly or indirectly, use or disclose to others any
Confidential Information, or use it for the benefit of any person
or entity (including Executive) other than the Company, without
the prior written consent of any authorized officer of the
Company (except for
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<PAGE>
disclosures to persons acting on the Company's behalf with a need
to know such information). Executive shall carefully preserve
any documents, records, tangible data relating to Inventions or
Confidential Information coming into the Executive's possession
and shall deliver the same and any copies thereof to the Company
upon request and, in any event, upon termination of Executive's
employment by Company.
10. Non-Competition; Non-Solicitation of Employees.
(a) Non-Competition.
(1) At all times during Executive's employment
with the Company and for a period of one (1) year
following the termination of such employment, Executive
shall not within the counties of Alameda, Alpine,
Amador, Butte, Calaveras, Colusa, Contra Costa, Del
Norte, El Dorado, Fresno, Glenn, Humboldt, Imperial,
Inyo, Kern, Kings, Lake, Lassen, Los Angeles, Madera,
Marin, Mariposa, Mendocino, Merced, Modoc, Mono,
Monterey, Napa, Nevada, Orange, Placer, Plumas,
Riverside, Sacramento, San Benito, San Bernardino, San
Diego, San Francisco, San Joaquin, San Luis Obispo, San
Mateo, Santa Barbara, Santa Clara, Santa Cruz, Shasta,
Sierra, Siskiyou, Solano, Sonoma, Stanislaus, Sutter,
Tehama, Trinity, Tulare, Tuolumne, Ventura, Yolo, Yuba,
or any other county in the State of California, or in
any other state within the United States, or in any
other geographical area covered by the operations of
the Company, whether within or outside of the
boundaries of the United States of America, directly or
indirectly, participate in or assist in, the ownership,
management, operation or control, or have any
beneficial interest in, or provide employment,
consulting or other services for, any corporation,
partnership, association or other person or entity
("Competitive Business") which is engaged in the
development, manufacture, marketing, distribution,
service and/or sale of products incorporating
technology by which fax, voice and data traffic can be
transmitted by means of T1 and other similar
transmission cables, and which directly competes or is
planning to directly compete with the Company's
products or services (including products and services
under development). If the Competitive Business is
multi-faceted, this restriction shall apply only to
that part of the business which is competitive with the
Company. The Company and the Executive intend that the
covenant contained in the preceding portion of this
paragraph shall be construed as a series of separate
covenants, one for each of the separate Counties and
states listed above, and each other geographical area
specified in this paragraph. Except for the
geographical coverage, each separate covenant shall be
deemed identical to the terms of the covenants set
forth above. If in any proceeding any court or other
judicial or administrative body shall refuse to enforce
any of the separate
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covenants deemed included in this paragraph, each such
unenforceable covenant shall be eliminated from these
provisions for the purpose of those proceedings and to
the extent necessary to permit the remaining separate
covenants to be enforced against the Executive to the
fullest extent possible.
(2) In furtherance of the foregoing, but as an
independent obligation of Executive, Executive agrees
that he will not, during the one (1) year period
following termination of his employment with Company,
be connected in any way with the solicitation of any
then current or potential customers or suppliers of
Company if such solicitation is likely to result in a
loss of business to the Company.
(3) In the event the covenants set forth in this
Section 10(a) are found to be unenforceable or invalid
by reason of being overly broad, the parties hereto
intend that such covenants shall be limited to such
scope, geographic area and duration as shall make such
covenants valid and enforceable.
(b) Non-Solicitation of Employees. Executive further
agrees that he will not, for a period of two (2) years
following his termination of employment with the Company,
directly or indirectly, on his own behalf or on behalf of
any other person or entity, solicit for employment, employ
or be involved in the employment by another person or
entity, or engage as a consultant or be involved in any such
engagement by another person or entity, any person who is an
employee of the Company or has been an employee of the
Company within the preceding one-year period.
11. Enforcement of Sections 8, 9 and 10. Recognizing that
compliance with the provisions of Sections 8, 9 and 10 of this
Agreement is necessary to protect the goodwill and other
proprietary interests of the Company, and that breach of
Executive's agreements thereunder will result in irreparable and
continuing damages to the Company for which there will be no
adequate remedy at law, Executive hereby agrees that in the event
of any breach of such agreements, the Company shall be entitled
to injunctive relief and such other and further relief, including
damages, as may be proper.
12. Government Laws, Regulations and Contracts. Executive
agrees to comply, and to do all things necessary for the Company
to comply, with all federal, state, local and foreign laws and
regulations which may be applicable to the business and
operations of the Company, and with any contractual obligations,
including, without limitation, confidentiality obligations, which
may be applicable to the Company or Executive under any contracts
between the Company and its customers, suppliers or third
parties.
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13. Miscellaneous. Any amendment to this agreement must be
in a writing signed by the Company and the Executive. This
Agreement shall be governed by the laws of the State of
California without application of choice of law principles. All
pronouns and variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural as the context
may require. This Agreement constitutes the entire agreement
among the parties hereto pertaining to the subject matter hereof
and supersedes all prior agreements and understandings (oral or
written) of the parties in connection with any matter covered
hereby, including any prior commitments, whether oral or written,
for equity interests, real or phantom, in the business of the
Company.
14. Notices. All notices required or permitted to be given
pursuant to this Agreement shall be in writing and shall be
considered as properly given or made if delivered personally or
if mailed by certified mail (return receipt requested), with
proper postage, to the addresses of the parties set forth beneath
their respective signature lines of this Agreement. All notices
shall be deemed effective on the date when delivered personally,
or five business days after having been mailed. Any party hereto
may change its address by like notice stating its new address to
the other party.
15. Assignment of Employment Agreement. The Executive
acknowledges that the Employment Agreement between the Executive
and Sattel Communications Company has been assigned to the
Company and agrees that references in such agreement to Sattel
Communications Company shall be deemed to refer to the Company
and that references to the Committee in such agreement shall be
deemed to refer to the Board of Directors of the Company.
16. Arbitration. Any controversy or claim arising out of
or relating to this Agreement, or the breach thereof, shall be
settled by arbitration conducted before a single arbitrator in
accordance with the Commercial Arbitration rules of the American
Arbitration Association, and judgment upon the award entered by
the arbitrator may be entered in any court having jurisdiction
thereof. In the event the controversy or claim arises out of
Sections 7, 8, 9, 10, or 11 hereof, such arbitration shall be
conducted in accordance with the Expedited Procedures under such
rules.
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Executed as of the day and year first above written.
SATTEL COMMUNICATIONS LLC
/s/ James J. Fiedler,
Chairman of the Board and
Chief Executive Officer
Address:
26025 Mureau Road
Calabasas, CA 91302
EXECUTIVE:
/s/ Daniel W. Latham
Address:
26026 Mureau Road
Calabasas, CA 91302
AMENDMENT TO STOCK OPTION AGREEMENTS
THIS AMENDMENT TO STOCK OPTION AGREEMENTS is made this 20th
day of November, 1996 by and between THE DIANA CORPORATION
("Diana") and RICHARD Y. FISHER ("Grantee").
RECITAL
Diana has granted Grantee stock options (the "Outstanding
Options") for an aggregate of 275,378 shares (after stock
dividends) of common stock (the "Diana Shares"), consisting of
121,550 Diana Shares subject to an option originally granted on
December 11, 1986 (the "1986 Option"), 141,673 Diana Shares subject
to an option originally granted on May 11, 1988 (the "1988 Option")
and 12,155 Diana Shares subject to an option originally granted on
October 18, 1991 (the "1991 Option").
AGREEMENTS
In consideration of the recital above and for good and
valuable consideration, the receipt and sufficiency of which are
hereby knowledged, and subject to the amendments which follow, the
parties agree as follows:
1. Amendment to Outstanding Options.
(a) The following paragraph shall be added to the 1986
Option and 1991 Option:
The Company agrees to maintain effectiveness of the Form S-8
registration statement currently in effect covering the exercise of
the stock options and to permit delivery by a broker of the
proceeds from the sale of the underlying stock to pay the option
exercise price and satisfy the Company's tax withholding
obligations. In connection with any such option exercise and sale
of stock, the Company agrees to execute any agreements, documents
and certificates requested by Grantee or his broker which are
reasonably necessary or desirable to effectuate the exercise and
sale. The Company agrees to deliver the underlying stock
certificates upon exercise of the stock options, free and clear of
any restrictive legends, registered as designated by Grantee, no
later than the third business day after Grantee's notice of
exercise. The Company further agrees that in connection with the
proposed spinoff currently
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contemplated by Diana, the adjustment to stock options held by
Grantee will be in accordance with the adjustments set forth in the
proxy statement filed with the Securities and Exchange Commission
on November 22, 1996. The stock issuable upon exercise of the
stock option shall be entitled to the Registration Rights attached
hereto as Schedule A.
(b) The following paragraph shall be added to the 1988
Option:
Diana agrees to maintain effectiveness of the Form S-8
registration statement currently in effect covering the exercise of
the stock options and to permit delivery by a broker of the
proceeds form the sale of the underlying stock to pay the option
exercise price and satisfy Diana's tax withholding obligations. In
connection with any such option exercise and sale of stock, Diana
agrees to execute any agreements, documents and certificates
requested by Fisher or his broker which are reasonably necessary or
desirable to effectuate the exercise and sale. Diana agrees to
deliver the underlying stock certificates upon exercise of the
stock options, free and clear of any restrictive legends,
registered as designated by Fisher, no later than the third
business day after Fisher's notice of exercise. The Company
further agrees that in connection with the proposed spinoff
currently contemplated by Diana, the adjustment to stock options
held by Grantee will be in accordance with the adjustments set
forth in the proxy statement filed with the Securities and Exchange
Commission on November 22, 1996. The stock issuable upon exercise
of the stock option shall be entitled to the Registration Rights
attached hereto as Schedule A.
(c) All stock issuable upon exercise of stock options
held by Grantee will be entitled to the registration rights
attached hereto as Schedule A which rights shall supersede all
previously granted registration rights. All of such previous
registration rights will be of no further force and effect.
2. Representations, Warranties and Covenants. Diana
represents and warrants to Grantee and agrees, as follows:
(a) A Form S-8 Registration Statement is currently in
effect covering the sale of stock to Grantee upon exercise of the
Outstanding Options under the 1986 Option, the 1988 Option and the
1991 Option.
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(b) Diana currently satisfies the Registrant
Requirements to file a Form S-3 Registration Statement with the
Securities and Exchange Commission and will take all actions
necessary to continue to meet such requirements at all times while
Grantee holds any options, or common stock received upon exercise
of any options, under the 1986 Option, the 1988 Option or the 1991
Option.
(c) Diana has taken all corporate and other action
necessary to amend the 1986 Option, 1988 Option and 1991 Option to
conform with the provisions of this Amendment and to permit
exercise of the Outstanding Options until December 31, 1997.
3. Construction. If any provision of this Amendment to
Stock Option Agreements conflicts with the provisions of any
Outstanding Options or of Diana's 1986 Nonqualified Stock Option
Plan, the terms of this Amendment to Stock Option Agreements shall
control.
Executed as of the date first above written.
THE DIANA CORPORATION
BY /s/ Sydney B. Lilly
Executive Vice President
GRANTEE:
/s/ Richard Y. Fisher
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SCHEDULE A
AMENDMENT TO STOCK OPTION
REGISTRATION RIGHTS
1. Initial Registration. Promptly (but in no event later
than 20 days after request from Grantee submitted at any time on or
after March 1, 1997, Diana shall file with the Securities and
Exchange Commission (the "Commission") and use its reasonable best
efforts to cause to become effective a Registration Statement or
post-effective amendment (the "Registration Statement") on Form S-3
or Form S-8, in Diana's sole discretion, (or if Form S-3 or Form
S-8 is unavailable, a proper form to be selected by Diana with the
consent of Grantee, which consent shall not be unreasonably
withheld, under and complying with the Securities Act of 1933 as
amended (the "Securities Act")) with respect to the offering by
Grantee of the Diana Shares. Diana shall keep the Registration
Statement effective until the earlier of the date on which Grantee
has transferred all of the Diana Shares or the date on which
Grantee could freely sell all of the Diana Shares which he then
holds or has the option to purchase without any restriction under
applicable securities laws. Grantee shall not be entitled to sell
his shares in an underwritten transaction. Notwithstanding the
foregoing, Grantee shall notify Diana of, and obtain confirmation
from Diana of the absence of any Blackout Condition prior to, any
offers or sales by Grantee under the Registration Statement of
Diana Shares. If Diana determines, in its reasonable good faith
judgment based on an opinion of its attorneys, that because of the
existence of, or in anticipation of, any material acquisition or
financing activity not then disclosed to the public, the
unavailability of any required financial statements as the result
of an actual, or proposed, acquisition or disposition, or the
existence of any other material non-public information (a "Blackout
Condition"), it would be materially adverse to Diana for the
registration of the Diana Shares to be maintained effective, or to
be filed and become effective, or for the Diana Shares to be sold
under the Registration Statement, then Diana shall be entitled,
until such Blackout Condition no longer exists, or is terminated as
provided herein, to (i) if required by law, cause the Registration
Statement to be withdrawn and the effectiveness of the Registration
Statement to be delayed or terminated; (ii) direct that Grantee not
make any public sales of Diana Shares under the Registration
Statement; or (iii) in the event the Registration Statement has not
yet been filed, to delay or not file the Registration Statement.
Diana shall have one business day after the receipt of notice from
Grantee to declare the existence of a Blackout Condition. Diana's
response shall be communicated via personal delivery, telecopy or
overnight courier. If no timely response is received by Grantee
from Diana, Diana shall be
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deemed to have permitted such sale. In the event Diana causes the
Registration Statement to be withdrawn, delayed or terminated
pursuant to clause (i) or clause (iii), of the preceding sentence
as a result of a Blackout Condition, Diana shall file and use its
reasonable best efforts to cause the Registration Statement to
become effective promptly after a Blackout Condition ceases to
exist. In all other cases, Diana shall use its reasonable best
efforts to cause the Blackout Condition to be terminated at the
earliest date possible. For purposes hereof, a Blackout Condition
other than the unavailability of any required financial statements
shall be deemed to terminate on the earlier of (i) the date such
Blackout Condition ceases to exist or (ii) 30 days after Diana's
initial determination that the Blackout Condition existed, and a
Blackout Condition which is the unavailability of any required
financial statements as the result of an actual or proposed
acquisition shall be deemed to terminate on the earlier of (i) the
date such Blackout Condition ceases to exist or (ii) 75 days after
the closing date of such acquisition or disposition. Grantee shall
not make any offers or sales of Diana Shares to the public under
the Registration Statement until the Blackout Condition no longer
exists or is terminated and shall comply with any prospectus
delivery requirements in connection with Grantee's offer and sale
of Diana Shares under the Registration Statement. Grantee shall
offer and sell the Diana Shares only in accordance with the plan of
distribution described in the Registration Statement.
2. Registration Procedures. Promptly after Grantee's
request for registration hereunder, Diana shall:
(a) Prepare and file with the Commission the
Registration Statement, and use its reasonable best efforts to
cause such Registration Statement to become and remain effective
all as set forth in paragraph 1;
(b) Prepare and file with the Commission such amendments
to such Registration Statement and supplements to the prospectus
contained therein as may be necessary to keep such Registration
Statement effective for such period as may be reasonably necessary
to effect the sale of such securities;
(c) [Reserved];
(d) Use its best efforts to register or qualify the
securities covered by such Registration Statement under such state
securities or blue sky laws of such jurisdictions as Grantee may
reasonably request in writing except that Diana shall not for any
purpose be required to execute a general consent to service or
process or to qualify to do business as a foreign corporation in
any jurisdiction wherein it is not so qualified;
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<PAGE>
(e) Notify Grantee promptly after it shall receive
notice thereof, of the time when such Registration Statement has
become effective or a supplement to any prospectus forming a part
of such Registration Statement has been filed;
(f) Notify Grantee promptly of any request by the
Commission for the amending or supplementing of such Registration
Statement or prospectus or for additional information;
(g) Prepare and file with the Commission, promptly upon
the request of Grantee, any amendments or supplements to such
Registration Statement or prospectus which, in the opinion of
counsel for Grantee, is required under the Securities Act or the
rules and regulations thereunder in connection with the
distribution of the Diana Shares of Grantee, including any
amendments or supplements requested by Grantee related to a change
in the plan of distribution of securities by Grantee;
(h) Prepare and promptly file with the Commission and
promptly notify Grantee of the filing of such amendment or
supplement to such Registration Statement or prospectus as may be
necessary to correct any statements or omissions if, at the time
when a prospectus relating to such securities is required to be
delivered under the Securities Act, any event shall have occurred
as the result of which any such prospectus or any other prospectus
as then in effect would include an untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they
were made, not misleading;
(i) Advise Grantee promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop
order by the Commission suspending the effectiveness of such
Registration Statement or the initiation or threatening of any
proceeding for that purpose and promptly use its reasonable best
efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued;
(j) Not file any amendment or supplement to such
Registration Statement or prospectus to which Grantee shall have
reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the
requirements of the Securities Act or the rules and regulations
thereunder, after having been furnished with a copy thereof at
least five business days prior to the filing thereof, unless in the
opinion of counsel for Diana the filing of such amendment or
supplement is reasonably necessary to
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<PAGE>
protect Diana from any liabilities under any applicable federal or
state law and such filing will not violate applicable law; and
3. Expenses. With respect to the registration of the Diana
Shares pursuant to the Registration Statement, Diana shall bear the
following fees, costs and expenses: all registration and filing
fees, printing expenses, fees and disbursements of counsel and
accountants for Diana, all internal Diana expenses, all legal fees
and disbursements and other expenses of complying with state
securities or blue sky laws of any jurisdictions in which the
securities to be offered are to be registered or qualified, and the
premiums and other costs of policies of insurance against liability
(if any) arising out of such public offering. Fees and
disbursements of counsel and accountants for Grantee, underwriting
discounts and commissions and transfer taxes relating to Diana
Shares and any other expenses incurred by Grantee not expressly
included above, shall be borne by Grantee.
4. Indemnification. Pursuant to the registration of the
Diana Shares hereunder:
(a) Diana will indemnify and hold harmless Grantee and
any underwriter (as defined in the Securities Act) for Grantee and
each person, if any, who controls Grantee or such underwriter
within the meaning of the Securities Act, from and against, and
will reimburse Grantee and each such underwriter and controlling
person with respect to, any and all loss, damage, liability, cost
and expense to which Grantee or any such underwriter or controlling
person may become subject under the Securities Act or otherwise,
insofar as such losses, damages, liabilities, costs or expenses are
caused by any untrue statement or alleged untrue statement of any
material fact contained in such Registration Statement, any
prospectus contained therein or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading;
provided, however, that Diana will not be liable in any such case
to the extent that any such loss, damage, liability, cost or
expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by Grantee, such underwriter
or such controlling person in writing specifically for use in the
preparation thereof; provided, however, that the foregoing
indemnity with respect to any preliminary prospectus shall not
inure to the benefit of any underwriter from whom the person
asserting any such loss, damage, liability, cost or expense
purchased Diana Shares, or any persons controlling such
underwriter, if a copy of the prospectus (as then amended or
supplemented if Diana shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of
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such underwriter to such person at or prior to the written
confirmation of the sale of Diana Shares to such person and if the
prospectus (as so amended or supplemented) would have cured the
defect giving rise to such loss, damage, liability, cost or
expense.
(b) Grantee will indemnify and hold harmless Diana, its
directors and officers, any controlling person and any underwriter
from and against, and will reimburse Diana, its directors and
officers, any controlling person and any underwriter with respect
to, any and all loss, damage, liability, cost or expense to which
Diana or any controlling person and/or any underwriter may become
subject under the Securities Act or otherwise, insofar as such
losses damages, liabilities, costs or expenses are caused by any
untrue or alleged untrue statement of any material fact contained
in such Registration Statement, any prospectus contained therein or
any amendment or supplement thereto, or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they
were made, not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was so made in reliance upon
written information furnished by Grantee specifically for use in
the preparation thereof.
(c) Promptly after receipt by an indemnified party
pursuant to the provisions of paragraph (a) or (b) of this
paragraph 4 of notice of the commencement of any action involving
the subject matter of the foregoing indemnity provisions such
indemnified party will, if a claim thereof is to be made against
the indemnifying party pursuant to the provisions of said paragraph
(a) or (b), promptly notify the indemnifying party of the
commencement thereof; but the omission to so notify the
indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than hereunder nor will
it relieve the indemnifying party from liability hereunder except
to the extent the indemnifying party is prejudiced by the failure
to so notify and then only to the extent of the prejudice caused by
the delay in notice. In case such action is brought against any
indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall have the right
to participate in, and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel reasonably satisfactory to such
indemnified party, provided, however, if the defendants in any
action include both the indemnified party and the indemnifying
party and if there is a conflict of interest which would prevent
counsel for the indemnifying party from also representing the
indemnified party, the indemnified party or parties shall have the
right to select separate counsel to participate in the defense of
such action
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on behalf of such indemnified party or parties, at the indemnifying
party's cost, but in no event shall the indemnifying parties be
responsible for more than one such additional firm for all
indemnified parties unless the rights of more than one indemnified
party are adverse. After notice from the indemnifying party to
such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such
indemnified party pursuant to the provisions of said paragraph (a)
or (b) for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation, unless (i) the indemnified party
shall have employed counsel in accordance with the proviso of the
preceding sentence, (ii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after the notice of
the commencement of the action, or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at
the expense of the indemnifying party.
(d) If the indemnification provided for in this
paragraph 4 is unavailable or insufficient to hold harmless an
indemnified party under paragraph (a) or (b) above, then each
indemnifying party shall contribute to the amount paid or payable
to such indemnified party as a result of the losses, claims,
damages or liabilities referred to in paragraph (a) or (b) above,
in such proportion as is appropriate to reflect the relative fault
of Diana, Grantee and the underwriters in connection with the
statements or omissions that resulted in such losses, claims,
damages or liabilities, as well as any other relevant equitable
considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied
by Diana, Grantee or the underwriters and the parties' relevant
intent, knowledge, access to information and opportunity to correct
or prevent such untrue statement or omission. Diana, Grantee and
the underwriters agree that it would not be just and equitable if
contributions pursuant to this paragraph (d) were to be determined
by pro rata allocation (even if the underwriters were treated as
one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations
referred to in the first and second sentence of this paragraph (d).
The amount paid by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the first sentence of
this paragraph (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in
connection with investigating or defending against any action or
claim which is the subject of this paragraph (d). No person guilty
of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
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5. Grantee Cooperation. Diana may require Grantee to
furnish Diana in a timely manner such information with respect to
Grantee and the distribution of Diana Shares as Diana may from time
to time reasonably request. In connection with the registration of
Diana Shares, Grantee will (a) cooperate with Diana, if any, in
preparing the Registration Statement, (b) promptly supply Diana
with all information and documents as the underwriter or Diana may
deem reasonably necessary, (c) discontinue sales of Diana Shares
under the Registration Statement upon notification of any stop
order or suspension of the effectiveness of the Registration
Statement, (d) notify Diana immediately upon any change in the plan
of distribution or other information concerning Grantee described
in the prospectus, (e) discontinue use of any prospectus following
notification by Diana that the prospectus must be amended or
supplemented, (f) comply with the applicable requirements of Rules
10b-5 and 10b-6 under the Securities Exchange Act of 1934, as
amended, (g) not use any prospectus other than the most recent
prospectus included in the Registration Statement, (h) dispose of
the Diana shares only in accordance with the Plan of Distribution
described in the Registration Statement and so certify to Diana
upon request and (i) otherwise comply with the prospectus delivery
requirements under the Securities Act.
6. Assignment. Grantee's rights under this agreement may be
assigned, in whole or in part, to any subsequent transferee of the
Diana Shares, including, without limitation, any pledgee of such
Diana Shares.
7. Notices. All notices hereunder shall be in writing and
shall be deemed to have been duly given upon delivery if delivered
personally, 24 hours after transmission by telecopy with
answerback, 12 p.m. (noon) of the next business day after being
sent via overnight courier, and five days after being mailed,
certified return receipt requested. Actual notice, however given,
shall always be effective.
8. Defined Terms. The term "Grantee" shall refer to Richard
Y. Fisher. The term "Diana" shall refer to The Diana Corporation.
The term "Diana Shares" shall refer to the shares of common stock
Diana issued upon exercise of the stock options to which this
Schedule A relates.
7
SEPARATION AGREEMENT
THIS SEPARATION AGREEMENT is dated as of November 20, 1996 by
and between THE DIANA CORPORATION, a Delaware corporation (the
"Company"), and RICHARD Y. FISHER ("Employee").
AGREEMENTS
In consideration of the mutual agreements which follow, the
Company and Employee agree as follows:
1. Date of Separation and Compensation. Employee's
employment with the Company shall terminate effective only upon
receipt by the Company of the Acknowledgment Form (the
"Acknowledgment Form") set forth on Exhibit A, duly executed by
Employee at least seven days after execution hereof (the "Effective
Date"). Effective as of the Effective Date, Employee shall resign
from each office which he currently holds and from the Board of
Directors of the Company and of each of its subsidiaries. Employee
acknowledges and agrees that through the Effective Date, he shall
receive the same compensation and fringe benefits which he is
currently receiving from the Company in accordance with the same
terms and conditions as is currently being applied. The Amended
and Restated Employment Agreement dated April 2, 1995 by and
between the Company and Employee (the "Employment Agreement") shall
terminate as of the Effective Date. On the Effective Date, the
Company shall pay to Employee $749,189 in settlement of all
deferred compensation previously earned by Employee under the
Employment Agreement or otherwise. On the Effective Date, the
Company shall pay to Employee a severance settlement of $342,692.
The Company and Employee agree that the rights of Employee and his
spouse to receive medical benefits pursuant to section 6 of the
Employment Agreement have vested and are subject to no further
conditions or obligations on behalf of Employee and his spouse.
Accordingly, the Company shall pay all medical expenses, including
but not limited to medical, dental, hospital, optometrical,
nursing, nursing home and drugs, for the employee and his spouse
for the remainder of each of their lives provided that, insofar as
the spouse is concerned, such benefit is applicable only during the
marriage and after the death of the Employee, provided that they
are married at the time of Employee's death.
2. Personal Property. On the Effective Date and in
accordance with Employee's rights under the Employment Agreement,
Employee shall purchase the office furniture listed on Exhibit B
for $1.00.
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3. Stock Options. The Company agrees that all options to
purchase stock of the Company shall remain exercisable until
December 31, 1997 and shall not be affected by Employee's
termination of employment or the resignations provided in paragraph
1. The Company and Employee agree that for purposes of such
options and the Employment Agreement, Employee shall not be deemed
to have voluntarily terminated employment and shall not be deemed
to have been terminated for cause.
4. Indemnification. As partial consideration for the
agreements provided herein, Employee and the Company shall execute
the Indemnification Agreement attached as Exhibit C hereto.
5. Return of Company Property. At the Effective Date,
Employee shall deliver to the Company all Company keys, credit
cards, phone cards and all other Company property, documents and
copies thereof then held by Employee.
6. Mutual Release. In consideration of the benefits
provided to Employee under this Agreement, the sufficiency of which
he acknowledges, Employee releases and discharges the Company, its
predecessors, successors and assigns, insurers, officers,
directors, employees and agents, from and against any and all
claims, demands, actions, causes of action, obligations, damages
and/or liabilities, both known or unknown, asserted or unasserted,
that he has or ever had against the Company or any of the other
individuals being released herein by reason of any fact, matter or
thing whatsoever occurring on or prior to the date hereof,
including, but not limited to, claims associated with or pertaining
to Employee's past employment and his termination of employment and
claims for bonuses or other benefits under the Employment Agreement
or otherwise (except as specified in the next sentence).
Notwithstanding the foregoing, Employee specifically does not
release or discharge and shall be entitled to all benefits under
(i) section 6 of the Employment Agreement, (ii) all stock options
previously granted to the Employee including the rights and
benefits under all applicable stock option agreements and the
Amendment to Stock Option Agreements of even date, and (iii) this
Agreement.
Without limitation to the foregoing, Employee
specifically releases, waives and forever discharges the
above-listed entities and persons from and against any and all
claims and damages which arise under the Age Discrimination in
Employment Act ("ADEA"), Title VII of the Civil Rights Act of 1964,
the Americans With Disabilities Act, or the Wisconsin Fair
Employment
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Act, or which arise out of the common law pertaining to wrongful
discharge, breach of contract (express or implied) or other tort or
common law cause of action.
In consideration of the promises made by Employee herein
and other good and valuable consideration, the sufficiency of which
the Company acknowledges, the Company releases and discharges
Employee, his spouse and their heirs, successors and assigns,
insurers and agents from any and all claims, demands, actions,
causes of actions, obligations, damages and/or liabilities, both
known or unknown, asserted or unasserted, that the Company has or
ever had against Employee or any of the other individuals being
released herein, by reason of any fact, matter or thing whatsoever
occurring on or prior to the date hereof, including, but not
limited to, claims associated with or pertaining to Employee's past
employment and services as an officer and director of the Company
and his termination of employment and such services.
This waiver does not cover rights or claims arising from
matters first occurring after its execution.
7. Repayment of Debt. On the Effective Date, Employee shall
repay in full his promissory note to the Company dated April 11,
1988 in the principal amount of $42,468.75.
8. Breach of Agreement. In the event of any breach of this
Agreement by any signing party, the non-breaching party shall be
entitled to recover any damages, costs and expenses it may incur,
including actual attorneys' fees, costs and expenses in preparing
the defense, defending against or pursuing an action to enforce the
terms of this Agreement, or establishing or maintaining the
applicability or validity of this Agreement or any provision
thereof.
9. Applicable Dates for Signing Agreement. It is
acknowledged by the Company and Employee that Employee has 21
calendar days from the date he first receives this Agreement to
review it and decide whether to sign it. It is further
acknowledged that Employee has an additional seven calendar days
after he had signed this Agreement to revoke it as to the waiver
and/or release of any claim or claims alleging age discrimination
by contacting the Company in person or in writing. If the
Effective Date does not occur within 10 days after execution
hereof, this Agreement shall be of no force and effect and shall
terminate without liability of any party hereto.
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10. Right to Consult Attorney and Acknowledgment of Parties.
The parties acknowledge that they have read the foregoing
Agreement, understand its contents, have signed the Agreement as
their free and voluntary act and acknowledge that prior to signing
the Agreement they had the opportunity to discuss any terms in the
Agreement with each other and that any questions asked have been
answered to their satisfaction. Employee also acknowledges that he
has been advised by the Company to consult, and has consulted, with
an attorney of his choice, at his own expense, to review the
Agreement before signing it.
11. Severability. If any portion of this Agreement is held
to be invalid or unenforceable for any reason, the parties agree
that such invalidity or unenforceability shall not affect the other
provisions of this Agreement and that the remaining covenants,
terms and conditions or portions thereof shall remain in full force
and effect, and any court of competent jurisdiction may so modify
or amend the objectionable provisions so as to make it valid,
reasonable and enforceable.
12. Counterparts. This Agreement may be executed in
counter-parts, each of which shall be deemed an original but both
of which together shall constitute one and the same agreement.
13. Specific Performance. The parties acknowledge and agree
that breach of the provisions of this Agreement by the Company
would cause irreparable damage to the Employee and that monetary
damages alone would not provide the Employee with adequate remedies
for such breach. Therefore, if any controversy arises concerning
Company's obligations under this Agreement, such obligations may be
specifically enforced by an injunction order or an order of
specific performance issued by a court of competent jurisdiction.
Such remedy shall be cumulative and nonexclusive and shall be in
addition to any other remedy to which the Employee may be entitled.
14. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Wisconsin
(regardless of the laws that might be applicable under principles
of conflicts of laws).
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Employee acknowledges that he first received a copy of this
Agreement on November 20, 1996.
This Agreement is executed November 20, 1996.
/s/ Richard Y. Fisher
THE DIANA CORPORATION
BY /s/ Sydney B. Lilly
Its Executive Vice President
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EXHIBIT A
SEVEN-DAY RIGHT TO REVOCATION
ACKNOWLEDGMENT FORM
I, Richard Y. Fisher, acknowledge that The Diana Corporation
has tendered a Separation Agreement offer which I voluntarily
agreed to accept on November 20, 1996.
By this writing, I certify that seven calendar days have
elapsed since my voluntary acceptance of the above-referenced offer
and that I have voluntarily chosen not to revoke my acceptance of
the above-referenced Separation Agreement.
Signed this 28th day of November, 1996, at Milwaukee,
Wisconsin.
/s/ Richard Y. Fisher
<PAGE>
EXHIBIT B
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT between The Diana Corporation, a
Delaware corporation (the "Company"), and Richard Y. Fisher, an
officer and/or director of the Company (the "Indemnitee"), dated as
of November 26, 1996.
WHEREAS, the Indemnitee has served, is serving or may serve as
an officer or director of the Company; and
WHEREAS, the Amended and Restated Certificate of Incorporation
(the "Certificate of Incorporation") and the Bylaws of the Company
provide for certain indemnification of the officers and directors
of the Company.
NOW, THEREFORE, in consideration of the foregoing and of other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company has agreed to the
covenants set forth herein for the purpose of further securing to
the Indemnitee the indemnification provided by the Certificate of
Incorporation and the Bylaws:
Section 1. In the event that the Indemnitee was or is made a
party or is threatened to be made a party to or is involved in any
action, suit, or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that the Indemnitee or a person of whom the
Indemnitee is the legal representative is or was a director,
officer or employee of the Company or is or was serving at the
request of the Company as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or
other enterprise, including service with respect to employee
benefit plans, whether the basis of such actual or threatened
proceeding is alleged action in any official capacity as a
director, officer, employee or agent or in any other capacity while
serving as a director, officer, employee or agent, the Indemnitee
shall be indemnified and held harmless by the Company to the
fullest extent authorized by the General Corporation Law of the
State of Delaware (the "GCL") as the same exists or may hereafter
be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to
provide prior to such amendment), against all expense, liability
and loss (including, without limitation, attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid
or to be paid in settlement) reasonably incurred or suffered by the
Indemnitee in connection therewith and such indemnification shall
continue as to the Indemnitee if the Indemnitee ceases to be a
director, officer, employee or agent and shall inure to the benefit
of the Indemnitee's heirs, executors
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and administrators; provided, however, that except as provided in
Section 2 of this Agreement with respect to proceedings seeking to
enforce rights to indemnification, the Company shall indemnify the
Indemnitee in connection with a proceeding (or part thereof)
initiated by the Indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Company.
Section 2. If a claim under Section 1 of this Agreement is
not paid in full by the Company within thirty days after a written
claim has been received by the Company, the Indemnitee may at any
time thereafter bring suit against the Company to recover the
unpaid amount of the claim and, if successful in whole or in part,
the Indemnitee shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses
incurred in defending any actual or threatened proceeding in
advance of its final disposition where the required undertaking, if
any is required, has been tendered to the Company) that the
Indemnitee has not met the standards of conduct which make it
permissible under the GCL for the Company to indemnify the
Indemnitee for the amount claimed, but the burden of proving such
defense shall be on the Company. Neither the failure of the
Company (including its Board of Directors, independent legal
counsel or stockholders) to have made a determination prior to the
commencement of such action that indemnification of the Indemnitee
is proper in the circumstances because the Indemnitee has met the
applicable standard of conduct set forth in the GCL, nor an actual
determination by the Company (including its Board of Directors,
independent legal counsel or stockholders) that the Indemnitee has
not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that the Indemnitee has not met
the applicable standard of conduct.
Section 3. Following any "change in control" of the Company
of the type required to be reported under Item 1 of Form 8-K
promulgated under the Securities Exchange Act of 1934, as amended,
any determination as to entitlement to indemnification shall be
made by independent legal counsel selected by the Indemnitee, which
such independent legal counsel shall be retained by the Board of
Directors on behalf of the Company.
Section 4. The right to indemnification and the payment of
expenses incurred in defending any actual or threatened proceeding
in advance of its final disposition conferred in this Agreement
shall not be exclusive of any other right which the Indemnitee may
have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, Bylaws, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 5. The Company shall maintain in full force and
effect for a period of at least six years following the date of
this Agreement, fiduciary liability and
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directors and officers liability insurance policies in an amount
not less than $10,000,000 (or, if such amount is not reasonably
available, such other lower amount as is available to the Company
on reasonable terms) covering the Company, any Company subsidiary
or any of such parties' current or former directors, officers,
employees or agents, which will include coverage of Indemnitee for
all actions previously taken or to be taken in connection with his
services to the Company and its subsidiaries. In the event that
the Company maintains insurance, whether pursuant to the foregoing
provision or otherwise, to protect itself and any director or
officer of the Company against any expenses, liability or loss,
such insurance shall cover the Indemnitee to at least the same
extent as any other director or officer of the Company.
Section 6. The right to indemnification conferred by this
Agreement shall include the right to be paid by the Company the
expenses incurred in defending any actual or threatened proceeding
in advance of its final disposition; provided, however, that if the
GCL requires, the payment of such expenses incurred by the
Indemnitee in the Indemnitee's capacity as a director or officer
(and not in any other capacity in which service was or is rendered
by the Indemnitees while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the
final disposition of any actual or threatened proceeding, shall be
made only upon delivery to the Company of an undertaking by or on
behalf of the Indemnitee, to repay all amounts so advanced if it
shall ultimately be determined that the Indemnitee is not entitled
to be indemnified under this Agreement or otherwise.
IN WITNESS WHEREOF, the Company and the Indemnitee have
executed this Indemnification Agreement in duplicate on the day and
year first above written.
THE DIANA CORPORATION
By: /s/ Sydney B. Lilly
Executive Vice President
/s/ Richard Y. Fisher
Signature of Officer or Director
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AMENDMENT TO STOCK OPTION AGREEMENTS
THIS AMENDMENT TO STOCK OPTION AGREEMENTS is made this 20th
day of November, 1996 by and between THE DIANA CORPORATION
("Diana") and SYDNEY B. LILLY ("Grantee").
RECITAL
Diana has granted Grantee stock options (the "Outstanding
Options") for an aggregate of 125,231 shares (after stock
dividends) of common stock (the "Diana Shares"), consisting of
30,388 Diana Shares subject to an option originally granted on
April 27, 1989 (the "1989 Option"), 12,155 Diana Shares subject to
an option originally granted on October 18, 1991 (the "1991
Option") and 82,688 Diana Shares subject to an option originally
granted on April 2, 1995 (the "1995 Option").
AGREEMENTS
In consideration of the recital above and for good and
valuable consideration, the receipt and sufficiency of which are
hereby knowledged, and subject to the amendments which follow, the
parties agree as follows:
1. Amendment to Outstanding Options.
(a) The following paragraph shall be added to the 1989
Option and 1991 Option:
The Company agrees to maintain effectiveness of the Form S-8
registration statement currently in effect covering the exercise of
the stock options and to permit delivery by a broker of the
proceeds from the sale of the underlying stock to pay the option
exercise price and satisfy the Company's tax withholding
obligations. In connection with any such option exercise and sale
of stock, the Company agrees to execute any agreements, documents
and certificates requested by Grantee or his broker which are
reasonably necessary or desirable to effectuate the exercise and
sale. The Company agrees to deliver the underlying stock
certificates upon exercise of the stock options, free and clear of
any restrictive legends, registered as designated by Grantee, no
later than the third business day after Grantee's notice of
exercise. The Company further agrees that in connection with the
proposed spinoff currently
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contemplated by Diana, the adjustment to stock options held by
Grantee will be in accordance with the adjustments set forth in the
proxy statement filed with the Securities and Exchange Commission
on November 22, 1996. The stock issuable upon exercise of the
stock option shall be entitled to the Registration Rights attached
hereto as Schedule A.
(b) The following paragraph shall be added to the 1995
Option:
Diana agrees to maintain effectiveness of the Form S-8
registration statement currently in effect covering the exercise of
the stock options and to permit delivery by a broker of the
proceeds form the sale of the underlying stock to pay the option
exercise price and satisfy Diana's tax withholding obligations. In
connection with any such option exercise and sale of stock, Diana
agrees to execute any agreements, documents and certificates
requested by Grantee or his broker which are reasonably necessary
or desirable to effectuate the exercise and sale. Diana agrees to
deliver the underlying stock certificates upon exercise of the
stock options, free and clear of any restrictive legends,
registered as designated by Grantee, no later than the third
business day after Grantee's notice of exercise. The Company
further agrees that in connection with the proposed spinoff
currently contemplated by Diana, the adjustment to stock options
held by Grantee will be in accordance with the adjustments set
forth in the proxy statement filed with the Securities and Exchange
Commission on November 22, 1996. The stock issuable upon exercise
of the stock option shall be entitled to the Registration Rights
attached hereto as Schedule A.
(c) All stock issuable upon exercise of stock options
held by Grantee will be entitled to the registration rights
attached hereto as Schedule A which rights shall supersede all
previously granted registration rights. All of such previous
registration rights will be of no further force and effect.
2. Representations, Warranties and Covenants. Diana
represents and warrants to Grantee and agrees, as follows:
(a) A Form S-8 Registration Statement is currently in
effect covering the sale of stock to Grantee upon exercise of the
Outstanding Options under the 1989 Option, the 1991 Option and the
1995 Option.
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(b) Diana currently satisfies the Registrant
Requirements to file a Form S-3 Registration Statement with the
Securities and Exchange Commission and will take all actions
necessary to continue to meet such requirements at all times while
Grantee holds any options, or common stock received upon exercise
of any options, under the 1989 Option, the 1991 Option or the 1995
Option.
(c) Diana has taken all corporate and other action
necessary to amend the 1989 Option, 1991 Option and 1995 Option to
conform with the provisions of this Amendment and to permit
exercise of the Outstanding Options until December 31, 1997.
3. Construction. If any provision of this Amendment to
Stock Option Agreements conflicts with the provisions of any
Outstanding Options or of Diana's 1986 Nonqualified Stock Option
Plan, the terms of this Amendment to Stock Option Agreements shall
control.
Executed as of the date first above written.
THE DIANA CORPORATION
BY /s/ Richard Y. Fisher
President
GRANTEE:
/s/ Sydney B. Lilly
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SCHEDULE A
AMENDMENT TO STOCK OPTION
REGISTRATION RIGHTS
1. Initial Registration. Promptly (but in no event later
than 20 days after request from Grantee submitted at any time on or
after March 1, 1997, Diana shall file with the Securities and
Exchange Commission (the "Commission") and use its reasonable best
efforts to cause to become effective a Registration Statement or
post-effective amendment (the "Registration Statement") on Form S-3
or Form S-8, in Diana's sole discretion, (or if Form S-3 or Form
S-8 is unavailable, a proper form to be selected by Diana with the
consent of Grantee, which consent shall not be unreasonably
withheld, under and complying with the Securities Act of 1933 as
amended (the "Securities Act")) with respect to the offering by
Grantee of the Diana Shares. Diana shall keep the Registration
Statement effective until the earlier of the date on which Grantee
has transferred all of the Diana Shares or the date on which
Grantee could freely sell all of the Diana Shares which he then
holds or has the option to purchase without any restriction under
applicable securities laws. Grantee shall not be entitled to sell
his shares in an underwritten transaction. Notwithstanding the
foregoing, Grantee shall notify Diana of, and obtain confirmation
from Diana of the absence of any Blackout Condition prior to, any
offers or sales by Grantee under the Registration Statement of
Diana Shares. If Diana determines, in its reasonable good faith
judgment based on an opinion of its attorneys, that because of the
existence of, or in anticipation of, any material acquisition or
financing activity not then disclosed to the public, the
unavailability of any required financial statements as the result
of an actual, or proposed, acquisition or disposition, or the
existence of any other material non-public information (a "Blackout
Condition"), it would be materially adverse to Diana for the
registration of the Diana Shares to be maintained effective, or to
be filed and become effective, or for the Diana Shares to be sold
under the Registration Statement, then Diana shall be entitled,
until such Blackout Condition no longer exists, or is terminated as
provided herein, to (i) if required by law, cause the Registration
Statement to be withdrawn and the effectiveness of the Registration
Statement to be delayed or terminated; (ii) direct that Grantee not
make any public sales of Diana Shares under the Registration
Statement; or (iii) in the event the Registration Statement has not
yet been filed, to delay or not file the Registration Statement.
Diana shall have one business day after the receipt of notice from
Grantee to declare the existence of a Blackout Condition. Diana's
response shall be communicated via personal delivery, telecopy or
overnight courier. If no timely response is received by Grantee
from Diana, Diana shall be
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deemed to have permitted such sale. In the event Diana causes the
Registration Statement to be withdrawn, delayed or terminated
pursuant to clause (i) or clause (iii), of the preceding sentence
as a result of a Blackout Condition, Diana shall file and use its
reasonable best efforts to cause the Registration Statement to
become effective promptly after a Blackout Condition ceases to
exist. In all other cases, Diana shall use its reasonable best
efforts to cause the Blackout Condition to be terminated at the
earliest date possible. For purposes hereof, a Blackout Condition
other than the unavailability of any required financial statements
shall be deemed to terminate on the earlier of (i) the date such
Blackout Condition ceases to exist or (ii) 30 days after Diana's
initial determination that the Blackout Condition existed, and a
Blackout Condition which is the unavailability of any required
financial statements as the result of an actual or proposed
acquisition shall be deemed to terminate on the earlier of (i) the
date such Blackout Condition ceases to exist or (ii) 75 days after
the closing date of such acquisition or disposition. Grantee shall
not make any offers or sales of Diana Shares to the public under
the Registration Statement until the Blackout Condition no longer
exists or is terminated and shall comply with any prospectus
delivery requirements in connection with Grantee's offer and sale
of Diana Shares under the Registration Statement. Grantee shall
offer and sell the Diana Shares only in accordance with the plan of
distribution described in the Registration Statement.
2. Registration Procedures. Promptly after Grantee's
request for registration hereunder, Diana shall:
(a) Prepare and file with the Commission the
Registration Statement, and use its reasonable best efforts to
cause such Registration Statement to become and remain effective
all as set forth in paragraph 1;
(b) Prepare and file with the Commission such amendments
to such Registration Statement and supplements to the prospectus
contained therein as may be necessary to keep such Registration
Statement effective for such period as may be reasonably necessary
to effect the sale of such securities;
(c) [Reserved];
(d) Use its best efforts to register or qualify the
securities covered by such Registration Statement under such state
securities or blue sky laws of such jurisdictions as Grantee may
reasonably request in writing except that Diana shall not for any
purpose be required to execute a general consent to service or
process or to qualify to do business as a foreign corporation in
any jurisdiction wherein it is not so qualified;
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(e) Notify Grantee promptly after it shall receive
notice thereof, of the time when such Registration Statement has
become effective or a supplement to any prospectus forming a part
of such Registration Statement has been filed;
(f) Notify Grantee promptly of any request by the
Commission for the amending or supplementing of such Registration
Statement or prospectus or for additional information;
(g) Prepare and file with the Commission, promptly upon
the request of Grantee, any amendments or supplements to such
Registration Statement or prospectus which, in the opinion of
counsel for Grantee, is required under the Securities Act or the
rules and regulations thereunder in connection with the
distribution of the Diana Shares of Grantee, including any
amendments or supplements requested by Grantee related to a change
in the plan of distribution of securities by Grantee;
(h) Prepare and promptly file with the Commission and
promptly notify Grantee of the filing of such amendment or
supplement to such Registration Statement or prospectus as may be
necessary to correct any statements or omissions if, at the time
when a prospectus relating to such securities is required to be
delivered under the Securities Act, any event shall have occurred
as the result of which any such prospectus or any other prospectus
as then in effect would include an untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they
were made, not misleading;
(i) Advise Grantee promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop
order by the Commission suspending the effectiveness of such
Registration Statement or the initiation or threatening of any
proceeding for that purpose and promptly use its reasonable best
efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued;
(j) Not file any amendment or supplement to such
Registration Statement or prospectus to which Grantee shall have
reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the
requirements of the Securities Act or the rules and regulations
thereunder, after having been furnished with a copy thereof at
least five business days prior to the filing thereof, unless in the
opinion of counsel for Diana the filing of such amendment or
supplement is reasonably necessary to
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protect Diana from any liabilities under any applicable federal or
state law and such filing will not violate applicable law; and
3. Expenses. With respect to the registration of the Diana
Shares pursuant to the Registration Statement, Diana shall bear the
following fees, costs and expenses: all registration and filing
fees, printing expenses, fees and disbursements of counsel and
accountants for Diana, all internal Diana expenses, all legal fees
and disbursements and other expenses of complying with state
securities or blue sky laws of any jurisdictions in which the
securities to be offered are to be registered or qualified, and the
premiums and other costs of policies of insurance against liability
(if any) arising out of such public offering. Fees and
disbursements of counsel and accountants for Grantee, underwriting
discounts and commissions and transfer taxes relating to Diana
Shares and any other expenses incurred by Grantee not expressly
included above, shall be borne by Grantee.
4. Indemnification. Pursuant to the registration of the
Diana Shares hereunder:
(a) Diana will indemnify and hold harmless Grantee and
any underwriter (as defined in the Securities Act) for Grantee and
each person, if any, who controls Grantee or such underwriter
within the meaning of the Securities Act, from and against, and
will reimburse Grantee and each such underwriter and controlling
person with respect to, any and all loss, damage, liability, cost
and expense to which Grantee or any such underwriter or controlling
person may become subject under the Securities Act or otherwise,
insofar as such losses, damages, liabilities, costs or expenses are
caused by any untrue statement or alleged untrue statement of any
material fact contained in such Registration Statement, any
prospectus contained therein or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading;
provided, however, that Diana will not be liable in any such case
to the extent that any such loss, damage, liability, cost or
expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by Grantee, such underwriter
or such controlling person in writing specifically for use in the
preparation thereof; provided, however, that the foregoing
indemnity with respect to any preliminary prospectus shall not
inure to the benefit of any underwriter from whom the person
asserting any such loss, damage, liability, cost or expense
purchased Diana Shares, or any persons controlling such
underwriter, if a copy of the prospectus (as then amended or
supplemented if Diana shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of
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such underwriter to such person at or prior to the written
confirmation of the sale of Diana Shares to such person and if the
prospectus (as so amended or supplemented) would have cured the
defect giving rise to such loss, damage, liability, cost or
expense.
(b) Grantee will indemnify and hold harmless Diana, its
directors and officers, any controlling person and any underwriter
from and against, and will reimburse Diana, its directors and
officers, any controlling person and any underwriter with respect
to, any and all loss, damage, liability, cost or expense to which
Diana or any controlling person and/or any underwriter may become
subject under the Securities Act or otherwise, insofar as such
losses damages, liabilities, costs or expenses are caused by any
untrue or alleged untrue statement of any material fact contained
in such Registration Statement, any prospectus contained therein or
any amendment or supplement thereto, or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they
were made, not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was so made in reliance upon
written information furnished by Grantee specifically for use in
the preparation thereof.
(c) Promptly after receipt by an indemnified party
pursuant to the provisions of paragraph (a) or (b) of this
paragraph 4 of notice of the commencement of any action involving
the subject matter of the foregoing indemnity provisions such
indemnified party will, if a claim thereof is to be made against
the indemnifying party pursuant to the provisions of said paragraph
(a) or (b), promptly notify the indemnifying party of the
commencement thereof; but the omission to so notify the
indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than hereunder nor will
it relieve the indemnifying party from liability hereunder except
to the extent the indemnifying party is prejudiced by the failure
to so notify and then only to the extent of the prejudice caused by
the delay in notice. In case such action is brought against any
indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall have the right
to participate in, and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel reasonably satisfactory to such
indemnified party, provided, however, if the defendants in any
action include both the indemnified party and the indemnifying
party and if there is a conflict of interest which would prevent
counsel for the indemnifying party from also representing the
indemnified party, the indemnified party or parties shall have the
right to select separate counsel to participate in the defense of
such action
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on behalf of such indemnified party or parties, at the indemnifying
party's cost, but in no event shall the indemnifying parties be
responsible for more than one such additional firm for all
indemnified parties unless the rights of more than one indemnified
party are adverse. After notice from the indemnifying party to
such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such
indemnified party pursuant to the provisions of said paragraph (a)
or (b) for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation, unless (i) the indemnified party
shall have employed counsel in accordance with the proviso of the
preceding sentence, (ii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after the notice of
the commencement of the action, or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at
the expense of the indemnifying party.
(d) If the indemnification provided for in this
paragraph 4 is unavailable or insufficient to hold harmless an
indemnified party under paragraph (a) or (b) above, then each
indemnifying party shall contribute to the amount paid or payable
to such indemnified party as a result of the losses, claims,
damages or liabilities referred to in paragraph (a) or (b) above,
in such proportion as is appropriate to reflect the relative fault
of Diana, Grantee and the underwriters in connection with the
statements or omissions that resulted in such losses, claims,
damages or liabilities, as well as any other relevant equitable
considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied
by Diana, Grantee or the underwriters and the parties' relevant
intent, knowledge, access to information and opportunity to correct
or prevent such untrue statement or omission. Diana, Grantee and
the underwriters agree that it would not be just and equitable if
contributions pursuant to this paragraph (d) were to be determined
by pro rata allocation (even if the underwriters were treated as
one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations
referred to in the first and second sentence of this paragraph (d).
The amount paid by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the first sentence of
this paragraph (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in
connection with investigating or defending against any action or
claim which is the subject of this paragraph (d). No person guilty
of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
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5. Grantee Cooperation. Diana may require Grantee to
furnish Diana in a timely manner such information with respect to
Grantee and the distribution of Diana Shares as Diana may from time
to time reasonably request. In connection with the registration of
Diana Shares, Grantee will (a) cooperate with Diana, if any, in
preparing the Registration Statement, (b) promptly supply Diana
with all information and documents as the underwriter or Diana may
deem reasonably necessary, (c) discontinue sales of Diana Shares
under the Registration Statement upon notification of any stop
order or suspension of the effectiveness of the Registration
Statement, (d) notify Diana immediately upon any change in the plan
of distribution or other information concerning Grantee described
in the prospectus, (e) discontinue use of any prospectus following
notification by Diana that the prospectus must be amended or
supplemented, (f) comply with the applicable requirements of Rules
10b-5 and 10b-6 under the Securities Exchange Act of 1934, as
amended, (g) not use any prospectus other than the most recent
prospectus included in the Registration Statement, (h) dispose of
the Diana shares only in accordance with the Plan of Distribution
described in the Registration Statement and so certify to Diana
upon request and (i) otherwise comply with the prospectus delivery
requirements under the Securities Act.
6. Assignment. Grantee's rights under this agreement may be
assigned, in whole or in part, to any subsequent transferee of the
Diana Shares, including, without limitation, any pledgee of such
Diana Shares.
7. Notices. All notices hereunder shall be in writing and
shall be deemed to have been duly given upon delivery if delivered
personally, 24 hours after transmission by telecopy with
answerback, 12 p.m. (noon) of the next business day after being
sent via overnight courier, and five days after being mailed,
certified return receipt requested. Actual notice, however given,
shall always be effective.
8. Defined Terms. The term "Grantee" shall refer to Sydney
B. Lilly. The term "Diana" shall refer to The Diana Corporation.
The term "Diana Shares" shall refer to the shares of common stock
Diana issued upon exercise of the stock options to which this
Schedule A relates.
7
SEPARATION AGREEMENT
THIS SEPARATION AGREEMENT is dated as of November 20, 1996 by
and between THE DIANA CORPORATION, a Delaware corporation (the
"Company"), and SYDNEY B. LILLY ("Employee").
AGREEMENTS
In consideration of the mutual agreements which follow, the
Company and Employee agree as follows:
1. Date of Separation and Compensation. Employee's
employment with the Company shall terminate effective only upon
receipt by the Company of the Acknowledgment Form (the
"Acknowledgment Form") set forth on Exhibit A, duly executed by
Employee at least seven days after execution hereof (the "Effective
Date"). Effective as of the Effective Date, Employee shall resign
from each office which he currently holds with the Company and of
each of its subsidiaries; provided, however, Employee shall not
resign as a director of the Company. Employee acknowledges and
agrees that through the Effective Date, he shall receive the same
compensation and fringe benefits which he is currently receiving
from the Company in accordance with the same terms and conditions
as is currently being applied. The Amended and Restated Employment
Agreement dated April 2, 1995 by and between the Company and
Employee (the "Employment Agreement") shall terminate as of the
Effective Date. On the Effective Date, the Company shall pay to
Employee a severance settlement of $72,692. The Company shall also
reimburse Employee for all costs associated with his relocation to
Las Vegas, Nevada. The Company shall pay all medical expenses,
including but not limited to medical, dental, hospital,
optometrical, nursing, nursing home and drugs, for the employee and
his spouse from the Effective Date until March 31, 2000 provided
that, insofar as the spouse is concerned, such benefit is
applicable only during the marriage and after the death of the
Employee, provided that they are married at the time of Employee's
death.
2. Stock Options. The Company agrees that all options to
purchase stock of the Company shall remain exercisable until
December 31, 1997 (April 2, 2000 with respect to the options
granted on April 2, 1995) and shall not be affected by Employee's
termination of employment or the resignations provided in paragraph
1. The Company and Employee agree that for purposes of such
options and the Employment Agreement, Employee shall not be deemed
to have
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voluntarily terminated employment and shall not be deemed to have
been terminated for cause.
3. Indemnification. As partial consideration for the
agreements provided herein, Employee and the Company shall execute
the Indemnification Agreement attached as Exhibit B hereto.
4. Return of Company Property. At the Effective Date,
Employee shall deliver to the Company all Company keys, credit
cards, phone cards and all other Company property, documents and
copies thereof then held by Employee.
5. Mutual Release. In consideration of the benefits
provided to Employee under this Agreement, the sufficiency of which
he acknowledges, Employee releases and discharges the Company, its
predecessors, successors and assigns, insurers, officers,
directors, employees and agents, from and against any and all
claims, demands, actions, causes of action, obligations, damages
and/or liabilities, both known or unknown, asserted or unasserted,
that he has or ever had against the Company or any of the other
individuals being released herein by reason of any fact, matter or
thing whatsoever occurring on or prior to the date hereof,
including, but not limited to, claims associated with or pertaining
to Employee's past employment and his termination of employment and
claims for bonuses or other benefits under the Employment Agreement
or otherwise (except as specified in the next sentence).
Notwithstanding the foregoing, Employee specifically does not
release or discharge and shall be entitled to all benefits under
(i) section 6 of the Employment Agreement, (ii) all stock options
previously granted to the Employee including the rights and
benefits under all applicable stock option agreements and the
Amendment to Stock Option Agreements of even date, and (iii) this
Agreement.
Without limitation to the foregoing, Employee
specifically releases, waives and forever discharges the
above-listed entities and persons from and against any and all
claims and damages which arise under the Age Discrimination in
Employment Act ("ADEA"), Title VII of the Civil Rights Act of 1964,
the Americans With Disabilities Act, or the Wisconsin Fair
Employment Act, or which arise out of the common law pertaining to
wrongful discharge, breach of contract (express or implied) or
other tort or common law cause of action.
In consideration of the promises made by Employee herein
and other good and valuable consideration, the sufficiency of which
the Company
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acknowledges, the Company releases and discharges Employee, his
spouse and their heirs, successors and assigns, insurers and agents
from any and all claims, demands, actions, causes of actions,
obligations, damages and/or liabilities, both known or unknown,
asserted or unasserted, that the Company has or ever had against
Employee or any of the other individuals being released herein, by
reason of any fact, matter or thing whatsoever occurring on or
prior to the date hereof, including, but not limited to, claims
associated with or pertaining to Employee's past employment and
services as an officer and director of the Company and his
termination of employment and such services.
This waiver does not cover rights or claims arising from
matters first occurring after its execution.
6. Breach of Agreement. In the event of any breach of this
Agreement by any signing party, the non-breaching party shall be
entitled to recover any damages, costs and expenses it may incur,
including actual attorneys' fees, costs and expenses in preparing
the defense, defending against or pursuing an action to enforce the
terms of this Agreement, or establishing or maintaining the
applicability or validity of this Agreement or any provision
thereof.
7. Applicable Dates for Signing Agreement. It is
acknowledged by the Company and Employee that Employee has 21
calendar days from the date he first receives this Agreement to
review it and decide whether to sign it. It is further
acknowledged that Employee has an additional seven calendar days
after he had signed this Agreement to revoke it as to the waiver
and/or release of any claim or claims alleging age discrimination
by contacting the Company in person or in writing. If the
Effective Date does not occur within 10 days after execution
hereof, this Agreement shall be of no force and effect and shall
terminate without liability of any party hereto.
8. Right to Consult Attorney and Acknowledgment of Parties.
The parties acknowledge that they have read the foregoing
Agreement, understand its contents, have signed the Agreement as
their free and voluntary act and acknowledge that prior to signing
the Agreement they had the opportunity to discuss any terms in the
Agreement with each other and that any questions asked have been
answered to their satisfaction. Employee also acknowledges that he
has been advised by the Company to consult, and has consulted, with
an attorney of his choice, at his own expense, to review the
Agreement before signing it.
9. Severability. If any portion of this Agreement is held
to be invalid or unenforceable for any reason, the parties agree
that such invalidity or
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unenforceability shall not affect the other provisions of this
Agreement and that the remaining covenants, terms and conditions or
portions thereof shall remain in full force and effect, and any
court of competent jurisdiction may so modify or amend the
objectionable provisions so as to make it valid, reasonable and
enforceable.
10. Counterparts. This Agreement may be executed in
counter-parts, each of which shall be deemed an original but both
of which together shall constitute one and the same agreement.
11. Specific Performance. The parties acknowledge and agree
that breach of the provisions of this Agreement by the Company
would cause irreparable damage to the Employee and that monetary
damages alone would not provide the Employee with adequate remedies
for such breach. Therefore, if any controversy arises concerning
Company's obligations under this Agreement, such obligations may be
specifically enforced by an injunction order or an order of
specific performance issued by a court of competent jurisdiction.
Such remedy shall be cumulative and nonexclusive and shall be in
addition to any other remedy to which the Employee may be entitled.
12. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Wisconsin
(regardless of the laws that might be applicable under principles
of conflicts of laws).
Employee acknowledges that he first received a copy of this
Agreement on November 20, 1996.
This Agreement is executed as of November 20, 1996.
/s/ Sydney B. Lilly
THE DIANA CORPORATION
BY /s/ Richard Y. Fisher
Its President
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EXHIBIT A
SEVEN-DAY RIGHT TO REVOCATION
ACKNOWLEDGMENT FORM
I, Sydney B. Lilly, acknowledge that The Diana Corporation has
tendered a Separation Agreement offer which I voluntarily agreed to
accept on November 20, 1996.
By this writing, I certify that seven calendar days have
elapsed since my voluntary acceptance of the above-referenced offer
and that I have voluntarily chosen not to revoke my acceptance of
the above-referenced Separation Agreement.
Signed this 28th day of November, 1996, at Milwaukee,
Wisconsin.
/s/ Sydney B. Lilly
<PAGE>
EXHIBIT A
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT between The Diana Corporation, a
Delaware corporation (the "Company"), and Sydney B. Lilly, an
officer and/or director of the Company (the "Indemnitee"), dated as
of November 26, 1996.
WHEREAS, the Indemnitee has served, is serving or may serve as
an officer or director of the Company; and
WHEREAS, the Amended and Restated Certificate of Incorporation
(the "Certificate of Incorporation") and the Bylaws of the Company
provide for certain indemnification of the officers and directors
of the Company.
NOW, THEREFORE, in consideration of the foregoing and of other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company has agreed to the
covenants set forth herein for the purpose of further securing to
the Indemnitee the indemnification provided by the Certificate of
Incorporation and the Bylaws:
Section 1. In the event that the Indemnitee was or is made a
party or is threatened to be made a party to or is involved in any
action, suit, or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that the Indemnitee or a person of whom the
Indemnitee is the legal representative is or was a director,
officer or employee of the Company or is or was serving at the
request of the Company as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or
other enterprise, including service with respect to employee
benefit plans, whether the basis of such actual or threatened
proceeding is alleged action in any official capacity as a
director, officer, employee or agent or in any other capacity while
serving as a director, officer, employee or agent, the Indemnitee
shall be indemnified and held harmless by the Company to the
fullest extent authorized by the General Corporation Law of the
State of Delaware (the "GCL") as the same exists or may hereafter
be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to
provide prior to such amendment), against all expense, liability
and loss (including, without limitation, attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid
or to be paid in settlement) reasonably incurred or suffered by the
Indemnitee in connection therewith and such indemnification shall
continue as to the Indemnitee if the Indemnitee ceases to be a
director, officer, employee or agent and shall inure to the benefit
of the Indemnitee's heirs, executors
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and administrators; provided, however, that except as provided in
Section 2 of this Agreement with respect to proceedings seeking to
enforce rights to indemnification, the Company shall indemnify the
Indemnitee in connection with a proceeding (or part thereof)
initiated by the Indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Company.
Section 2. If a claim under Section 1 of this Agreement is
not paid in full by the Company within thirty days after a written
claim has been received by the Company, the Indemnitee may at any
time thereafter bring suit against the Company to recover the
unpaid amount of the claim and, if successful in whole or in part,
the Indemnitee shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses
incurred in defending any actual or threatened proceeding in
advance of its final disposition where the required undertaking, if
any is required, has been tendered to the Company) that the
Indemnitee has not met the standards of conduct which make it
permissible under the GCL for the Company to indemnify the
Indemnitee for the amount claimed, but the burden of proving such
defense shall be on the Company. Neither the failure of the
Company (including its Board of Directors, independent legal
counsel or stockholders) to have made a determination prior to the
commencement of such action that indemnification of the Indemnitee
is proper in the circumstances because the Indemnitee has met the
applicable standard of conduct set forth in the GCL, nor an actual
determination by the Company (including its Board of Directors,
independent legal counsel or stockholders) that the Indemnitee has
not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that the Indemnitee has not met
the applicable standard of conduct.
Section 3. Following any "change in control" of the Company
of the type required to be reported under Item 1 of Form 8-K
promulgated under the Securities Exchange Act of 1934, as amended,
any determination as to entitlement to indemnification shall be
made by independent legal counsel selected by the Indemnitee, which
such independent legal counsel shall be retained by the Board of
Directors on behalf of the Company.
Section 4. The right to indemnification and the payment of
expenses incurred in defending any actual or threatened proceeding
in advance of its final disposition conferred in this Agreement
shall not be exclusive of any other right which the Indemnitee may
have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, Bylaws, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 5. The Company shall maintain in full force and
effect for a period of at least six years following the date of
this Agreement, fiduciary liability and
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directors and officers liability insurance policies in an amount
not less than $10,000,000 (or, if such amount is not reasonably
available, such other lower amount as is available to the Company
on reasonable terms) covering the Company, any Company subsidiary
or any of such parties' current or former directors, officers,
employees or agents, which will include coverage of Indemnitee for
all actions previously taken or to be taken in connection with his
services to the Company and its subsidiaries. In the event that
the Company maintains insurance, whether pursuant to the foregoing
provision or otherwise, to protect itself and any director or
officer of the Company against any expenses, liability or loss,
such insurance shall cover the Indemnitee to at least the same
extent as any other director or officer of the Company.
Section 6. The right to indemnification conferred by this
Agreement shall include the right to be paid by the Company the
expenses incurred in defending any actual or threatened proceeding
in advance of its final disposition; provided, however, that if the
GCL requires, the payment of such expenses incurred by the
Indemnitee in the Indemnitee's capacity as a director or officer
(and not in any other capacity in which service was or is rendered
by the Indemnitees while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the
final disposition of any actual or threatened proceeding, shall be
made only upon delivery to the Company of an undertaking by or on
behalf of the Indemnitee, to repay all amounts so advanced if it
shall ultimately be determined that the Indemnitee is not entitled
to be indemnified under this Agreement or otherwise.
IN WITNESS WHEREOF, the Company and the Indemnitee have
executed this Indemnification Agreement in duplicate on the day and
year first above written.
THE DIANA CORPORATION
By: /s/ Richard Y. Fisher
President
/s/ Sydney B. Lilly
Signature of Officer or Director
3
AMENDMENT TO STOCK OPTION AGREEMENTS
THIS AMENDMENT TO STOCK OPTION AGREEMENTS is made this 20th
day of November, 1996 by and between THE DIANA CORPORATION
("Diana") and DONALD E. RUNGE ("Grantee").
RECITAL
Diana has granted Grantee stock options (the "Outstanding
Options") for an aggregate of 275,378 shares (after stock
dividends) of common stock (the "Diana Shares"), consisting of
121,550 Diana Shares subject to an option originally granted on
December 11, 1986 (the "1986 Option"), 141,673 Diana Shares subject
to an option originally granted on May 11, 1988 (the "1988 Option")
and 12,155 Diana Shares subject to an option originally granted on
October 18, 1991 (the "1991 Option").
AGREEMENTS
In consideration of the recital above and for good and
valuable consideration, the receipt and sufficiency of which are
hereby knowledged, and subject to the amendments which follow, the
parties agree as follows:
1. Amendment to Outstanding Options.
(a) The following paragraph shall be added to the 1986
Option and 1991 Option:
The Company agrees to maintain effectiveness of the Form S-8
registration statement currently in effect covering the exercise of
the stock options and to permit delivery by a broker of the
proceeds from the sale of the underlying stock to pay the option
exercise price and satisfy the Company's tax withholding
obligations. In connection with any such option exercise and sale
of stock, the Company agrees to execute any agreements, documents
and certificates requested by Grantee or his broker which are
reasonably necessary or desirable to effectuate the exercise and
sale. The Company agrees to deliver the underlying stock
certificates upon exercise of the stock options, free and clear of
any restrictive legends, registered as designated by Grantee, no
later than the third business day after Grantee's notice of
exercise. The Company further agrees that in connection with the
proposed spinoff currently
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contemplated by Diana, the adjustment to stock options held by
Grantee will be in accordance with the adjustments set forth in the
proxy statement filed with the Securities and Exchange Commission
on November 22, 1996. The stock issuable upon exercise of the
stock option shall be entitled to the Registration Rights attached
hereto as Schedule A.
(b) The following paragraph shall be added to the 1988
Option:
Diana agrees to maintain effectiveness of the Form S-8
registration statement currently in effect covering the exercise of
the stock options and to permit delivery by a broker of the
proceeds form the sale of the underlying stock to pay the option
exercise price and satisfy Diana's tax withholding obligations. In
connection with any such option exercise and sale of stock, Diana
agrees to execute any agreements, documents and certificates
requested by Grantee or his broker which are reasonably necessary
or desirable to effectuate the exercise and sale. Diana agrees to
deliver the underlying stock certificates upon exercise of the
stock options, free and clear of any restrictive legends,
registered as designated by Grantee, no later than the third
business day after Grantee's notice of exercise. The Company
further agrees that in connection with the proposed spinoff
currently contemplated by Diana, the adjustment to stock options
held by Grantee will be in accordance with the adjustments set
forth in the proxy statement filed with the Securities and Exchange
Commission on November 22, 1996. The stock issuable upon exercise
of the stock option shall be entitled to the Registration Rights
attached hereto as Schedule A.
(c) All stock issuable upon exercise of stock options
held by Grantee will be entitled to the registration rights
attached hereto as Schedule A which rights shall supersede all
previously granted registration rights. All of such previous
registration rights will be of no further force and effect.
2. Representations, Warranties and Covenants. Diana
represents and warrants to Grantee and agrees, as follows:
(a) A Form S-8 Registration Statement is currently in
effect covering the sale of stock to Grantee upon exercise of the
Outstanding Options under the 1986 Option, the 1988 Option and the
1991 Option.
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(b) Diana currently satisfies the Registrant
Requirements to file a Form S-3 Registration Statement with the
Securities and Exchange Commission and will take all actions
necessary to continue to meet such requirements at all times while
Grantee holds any options, or common stock received upon exercise
of any options, under the 1986 Option, the 1988 Option or the 1991
Option.
(c) Diana has taken all corporate and other action
necessary to amend the 1986 Option, 1988 Option and 1991 Option to
conform with the provisions of this Amendment and to permit
exercise of the Outstanding Options until December 31, 1997.
3. Construction. If any provision of this Amendment to
Stock Option Agreements conflicts with the provisions of any
Outstanding Options or of Diana's 1986 Nonqualified Stock Option
Plan, the terms of this Amendment to Stock Option Agreements shall
control.
Executed as of the date first above written.
THE DIANA CORPORATION
BY /s/ Richard Y. Fisher
President
GRANTEE:
/s/ Donald E. Runge
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SCHEDULE A
AMENDMENT TO STOCK OPTION
REGISTRATION RIGHTS
1. Initial Registration. Promptly (but in no event later
than 20 days after request from Grantee submitted at any time on or
after March 1, 1997, Diana shall file with the Securities and
Exchange Commission (the "Commission") and use its reasonable best
efforts to cause to become effective a Registration Statement or
post-effective amendment (the "Registration Statement") on Form S-3
or Form S-8, in Diana's sole discretion, (or if Form S-3 or Form
S-8 is unavailable, a proper form to be selected by Diana with the
consent of Grantee, which consent shall not be unreasonably
withheld, under and complying with the Securities Act of 1933 as
amended (the "Securities Act")) with respect to the offering by
Grantee of the Diana Shares. Diana shall keep the Registration
Statement effective until the earlier of the date on which Grantee
has transferred all of the Diana Shares or the date on which
Grantee could freely sell all of the Diana Shares which he then
holds or has the option to purchase without any restriction under
applicable securities laws. Grantee shall not be entitled to sell
his shares in an underwritten transaction. Notwithstanding the
foregoing, Grantee shall notify Diana of, and obtain confirmation
from Diana of the absence of any Blackout Condition prior to, any
offers or sales by Grantee under the Registration Statement of
Diana Shares. If Diana determines, in its reasonable good faith
judgment based on an opinion of its attorneys, that because of the
existence of, or in anticipation of, any material acquisition or
financing activity not then disclosed to the public, the
unavailability of any required financial statements as the result
of an actual, or proposed, acquisition or disposition, or the
existence of any other material non-public information (a "Blackout
Condition"), it would be materially adverse to Diana for the
registration of the Diana Shares to be maintained effective, or to
be filed and become effective, or for the Diana Shares to be sold
under the Registration Statement, then Diana shall be entitled,
until such Blackout Condition no longer exists, or is terminated as
provided herein, to (i) if required by law, cause the Registration
Statement to be withdrawn and the effectiveness of the Registration
Statement to be delayed or terminated; (ii) direct that Grantee not
make any public sales of Diana Shares under the Registration
Statement; or (iii) in the event the Registration Statement has not
yet been filed, to delay or not file the Registration Statement.
Diana shall have one business day after the receipt of notice from
Grantee to declare the existence of a Blackout Condition. Diana's
response shall be communicated via personal delivery, telecopy or
overnight courier. If no timely response is received by Grantee
from Diana, Diana shall be
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deemed to have permitted such sale. In the event Diana causes the
Registration Statement to be withdrawn, delayed or terminated
pursuant to clause (i) or clause (iii), of the preceding sentence
as a result of a Blackout Condition, Diana shall file and use its
reasonable best efforts to cause the Registration Statement to
become effective promptly after a Blackout Condition ceases to
exist. In all other cases, Diana shall use its reasonable best
efforts to cause the Blackout Condition to be terminated at the
earliest date possible. For purposes hereof, a Blackout Condition
other than the unavailability of any required financial statements
shall be deemed to terminate on the earlier of (i) the date such
Blackout Condition ceases to exist or (ii) 30 days after Diana's
initial determination that the Blackout Condition existed, and a
Blackout Condition which is the unavailability of any required
financial statements as the result of an actual or proposed
acquisition shall be deemed to terminate on the earlier of (i) the
date such Blackout Condition ceases to exist or (ii) 75 days after
the closing date of such acquisition or disposition. Grantee shall
not make any offers or sales of Diana Shares to the public under
the Registration Statement until the Blackout Condition no longer
exists or is terminated and shall comply with any prospectus
delivery requirements in connection with Grantee's offer and sale
of Diana Shares under the Registration Statement. Grantee shall
offer and sell the Diana Shares only in accordance with the plan of
distribution described in the Registration Statement.
2. Registration Procedures. Promptly after Grantee's
request for registration hereunder, Diana shall:
(a) Prepare and file with the Commission the
Registration Statement, and use its reasonable best efforts to
cause such Registration Statement to become and remain effective
all as set forth in paragraph 1;
(b) Prepare and file with the Commission such amendments
to such Registration Statement and supplements to the prospectus
contained therein as may be necessary to keep such Registration
Statement effective for such period as may be reasonably necessary
to effect the sale of such securities;
(c) [Reserved];
(d) Use its best efforts to register or qualify the
securities covered by such Registration Statement under such state
securities or blue sky laws of such jurisdictions as Grantee may
reasonably request in writing except that Diana shall not for any
purpose be required to execute a general consent to service or
process or to qualify to do business as a foreign corporation in
any jurisdiction wherein it is not so qualified;
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(e) Notify Grantee promptly after it shall receive
notice thereof, of the time when such Registration Statement has
become effective or a supplement to any prospectus forming a part
of such Registration Statement has been filed;
(f) Notify Grantee promptly of any request by the
Commission for the amending or supplementing of such Registration
Statement or prospectus or for additional information;
(g) Prepare and file with the Commission, promptly upon
the request of Grantee, any amendments or supplements to such
Registration Statement or prospectus which, in the opinion of
counsel for Grantee, is required under the Securities Act or the
rules and regulations thereunder in connection with the
distribution of the Diana Shares of Grantee, including any
amendments or supplements requested by Grantee related to a change
in the plan of distribution of securities by Grantee;
(h) Prepare and promptly file with the Commission and
promptly notify Grantee of the filing of such amendment or
supplement to such Registration Statement or prospectus as may be
necessary to correct any statements or omissions if, at the time
when a prospectus relating to such securities is required to be
delivered under the Securities Act, any event shall have occurred
as the result of which any such prospectus or any other prospectus
as then in effect would include an untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they
were made, not misleading;
(i) Advise Grantee promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop
order by the Commission suspending the effectiveness of such
Registration Statement or the initiation or threatening of any
proceeding for that purpose and promptly use its reasonable best
efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued;
(j) Not file any amendment or supplement to such
Registration Statement or prospectus to which Grantee shall have
reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the
requirements of the Securities Act or the rules and regulations
thereunder, after having been furnished with a copy thereof at
least five business days prior to the filing thereof, unless in the
opinion of counsel for Diana the filing of such amendment or
supplement is reasonably necessary to
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protect Diana from any liabilities under any applicable federal or
state law and such filing will not violate applicable law; and
3. Expenses. With respect to the registration of the Diana
Shares pursuant to the Registration Statement, Diana shall bear the
following fees, costs and expenses: all registration and filing
fees, printing expenses, fees and disbursements of counsel and
accountants for Diana, all internal Diana expenses, all legal fees
and disbursements and other expenses of complying with state
securities or blue sky laws of any jurisdictions in which the
securities to be offered are to be registered or qualified and the
premiums and other costs of policies of insurance against liability
(if any) arising out of such public offering. Fees and
disbursements of counsel and accountants for Grantee, underwriting
discounts and commissions and transfer taxes relating to Diana
Shares and any other expenses incurred by Grantee not expressly
included above, shall be borne by Grantee.
4. Indemnification. Pursuant to the registration of the
Diana Shares hereunder:
(a) Diana will indemnify and hold harmless Grantee and
any underwriter (as defined in the Securities Act) for Grantee and
each person, if any, who controls Grantee or such underwriter
within the meaning of the Securities Act, from and against, and
will reimburse Grantee and each such underwriter and controlling
person with respect to, any and all loss, damage, liability, cost
and expense to which Grantee or any such underwriter or controlling
person may become subject under the Securities Act or otherwise,
insofar as such losses, damages, liabilities, costs or expenses are
caused by any untrue statement or alleged untrue statement of any
material fact contained in such Registration Statement, any
prospectus contained therein or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading;
provided, however, that Diana will not be liable in any such case
to the extent that any such loss, damage, liability, cost or
expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by Grantee, such underwriter
or such controlling person in writing specifically for use in the
preparation thereof; provided, however, that the foregoing
indemnity with respect to any preliminary prospectus shall not
inure to the benefit of any underwriter from whom the person
asserting any such loss, damage, liability, cost or expense
purchased Diana Shares, or any persons controlling such
underwriter, if a copy of the prospectus (as then amended or
supplemented if Diana shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of
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such underwriter to such person at or prior to the written
confirmation of the sale of Diana Shares to such person and if the
prospectus (as so amended or supplemented) would have cured the
defect giving rise to such loss, damage, liability, cost or
expense.
(b) Grantee will indemnify and hold harmless Diana, its
directors and officers, any controlling person and any underwriter
from and against, and will reimburse Diana, its directors and
officers, any controlling person and any underwriter with respect
to, any and all loss, damage, liability, cost or expense to which
Diana or any controlling person and/or any underwriter may become
subject under the Securities Act or otherwise, insofar as such
losses damages, liabilities, costs or expenses are caused by any
untrue or alleged untrue statement of any material fact contained
in such Registration Statement, any prospectus contained therein or
any amendment or supplement thereto, or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they
were made, not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was so made in reliance upon
written information furnished by Grantee specifically for use in
the preparation thereof.
(c) Promptly after receipt by an indemnified party
pursuant to the provisions of paragraph (a) or (b) of this
paragraph 4 of notice of the commencement of any action involving
the subject matter of the foregoing indemnity provisions such
indemnified party will, if a claim thereof is to be made against
the indemnifying party pursuant to the provisions of said paragraph
(a) or (b), promptly notify the indemnifying party of the
commencement thereof; but the omission to so notify the
indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than hereunder nor will
it relieve the indemnifying party from liability hereunder except
to the extent the indemnifying party is prejudiced by the failure
to so notify and then only to the extent of the prejudice caused by
the delay in notice. In case such action is brought against any
indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall have the right
to participate in, and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel reasonably satisfactory to such
indemnified party, provided, however, if the defendants in any
action include both the indemnified party and the indemnifying
party and if there is a conflict of interest which would prevent
counsel for the indemnifying party from also representing the
indemnified party, the indemnified party or parties shall have the
right to select separate counsel to participate in the defense of
such action
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on behalf of such indemnified party or parties, at the indemnifying
party's cost, but in no event shall the indemnifying parties be
responsible for more than one such additional firm for all
indemnified parties unless the rights of more than one indemnified
party are adverse. After notice from the indemnifying party to
such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such
indemnified party pursuant to the provisions of said paragraph (a)
or (b) for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation, unless (i) the indemnified party
shall have employed counsel in accordance with the proviso of the
preceding sentence, (ii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after the notice of
the commencement of the action, or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at
the expense of the indemnifying party.
(d) If the indemnification provided for in this
paragraph 4 is unavailable or insufficient to hold harmless an
indemnified party under paragraph (a) or (b) above, then each
indemnifying party shall contribute to the amount paid or payable
to such indemnified party as a result of the losses, claims,
damages or liabilities referred to in paragraph (a) or (b) above,
in such proportion as is appropriate to reflect the relative fault
of Diana, Grantee and the underwriters in connection with the
statements or omissions that resulted in such losses, claims,
damages or liabilities, as well as any other relevant equitable
considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied
by Diana, Grantee or the underwriters and the parties' relevant
intent, knowledge, access to information and opportunity to correct
or prevent such untrue statement or omission. Diana, Grantee and
the underwriters agree that it would not be just and equitable if
contributions pursuant to this paragraph (d) were to be determined
by pro rata allocation (even if the underwriters were treated as
one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations
referred to in the first and second sentence of this paragraph (d).
The amount paid by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the first sentence of
this paragraph (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in
connection with investigating or defending against any action or
claim which is the subject of this paragraph (d). No person guilty
of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
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5. Grantee Cooperation. Diana may require Grantee to
furnish Diana in a timely manner such information with respect to
Grantee and the distribution of Diana Shares as Diana may from time
to time reasonably request. In connection with the registration of
Diana Shares, Grantee will (a) cooperate with Diana, in preparing
the Registration Statement, (b) promptly supply Diana with all
information and documents as the underwriter or Diana may deem
reasonably necessary, (c) discontinue sales of Diana Shares under
the Registration Statement upon notification of any stop order or
suspension of the effectiveness of the Registration Statement, (d)
notify Diana immediately upon any change in the plan of
distribution or other information concerning Grantee described in
the prospectus, (e) discontinue use of any prospectus following
notification by Diana that the prospectus must be amended or
supplemented, (f) comply with the applicable requirements of Rules
10b-5 and 10b-6 under the Securities Exchange Act of 1934, as
amended, (g) not use any prospectus other than the most recent
prospectus included in the Registration Statement, (h) dispose of
the Diana shares only in accordance with the Plan of Distribution
described in the Registration Statement and so certify to Diana
upon request and (i) otherwise comply with the prospectus delivery
requirements under the Securities Act.
6. Assignment. Grantee's rights under this agreement may be
assigned, in whole or in part, to any subsequent transferee of the
Diana Shares, including, without limitation, any pledgee of such
Diana Shares.
7. Notices. All notices hereunder shall be in writing and
shall be deemed to have been duly given upon delivery if delivered
personally, 24 hours after transmission by telecopy with
answerback, 12 p.m. (noon) of the next business day after being
sent via overnight courier, and five days after being mailed,
certified return receipt requested. Actual notice, however given,
shall always be effective.
8. Defined Terms. The term "Grantee" shall refer to Donald
E. Runge. The term "Diana" shall refer to The Diana Corporation.
The term "Diana Shares" shall refer to the shares of common stock
Diana issued upon exercise of the stock options to which this
Schedule A relates.
7
SEPARATION AGREEMENT
THIS SEPARATION AGREEMENT is dated as of November 20, 1996 by
and between THE DIANA CORPORATION, a Delaware corporation (the
"Company"), and DONALD E. RUNGE ("Employee").
AGREEMENTS
In consideration of the mutual agreements which follow, the
Company and Employee agree as follows:
1. Date of Separation and Compensation. Employee's
employment with the Company shall terminate effective only upon
receipt by the Company of the Acknowledgment Form (the
"Acknowledgment Form") set forth on Exhibit A, duly executed by
Employee at least seven days after execution hereof (the "Effective
Date"). Effective as of the Effective Date, Employee shall resign
from each office which he currently holds and from the Board of
Directors of the Company and of each of its subsidiaries. Employee
acknowledges and agrees that through the Effective Date, he shall
receive the same compensation and fringe benefits which he is
currently receiving from the Company in accordance with the same
terms and conditions as is currently being applied. The Amended
and Restated Employment Agreement dated April 2, 1995 by and
between the Company and Employee (the "Employment Agreement") shall
terminate as of the Effective Date. On the Effective Date, the
Company shall pay to Employee $186,625 in settlement of all
deferred compensation previously earned by Employee under the
Employment Agreement or otherwise. On the Effective Date, the
Company shall pay to Employee a severance settlement of $82,692.
The Company and Employee agree that the rights of Employee and his
spouse to receive medical benefits pursuant to section 6 of the
Employment Agreement have vested and are subject to no further
conditions or obligations on behalf of Employee and his spouse.
Accordingly, the Company shall pay all medical expenses, including
but not limited to medical, dental, hospital, optometrical,
nursing, nursing home and drugs, for the employee and his spouse
for the remainder of each of their lives provided that, insofar as
the spouse is concerned, such benefit is applicable only during the
marriage and after the death of the Employee, provided that they
are married at the time of Employee's death.
2. Stock Options. The Company agrees that all options to
purchase stock of the Company shall remain exercisable until
December 31, 1997 and shall not be affected by Employee's
termination of employment or the resignations provided in paragraph
1. The Company and Employee agree that for purposes of such
options and the Employment Agreement, Employee shall not be
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deemed to have voluntarily terminated employment and shall not be
deemed to have been terminated for cause.
3. Indemnification. As partial consideration for the
agreements provided herein, Employee and the Company shall execute
the Indemnification Agreement attached as Exhibit B hereto.
4. Return of Company Property. At the Effective Date,
Employee shall deliver to the Company all Company keys, credit
cards, phone cards and all other Company property, documents and
copies thereof then held by Employee.
5. Mutual Release. In consideration of the benefits
provided to Employee under this Agreement, the sufficiency of which
he acknowledges, Employee releases and discharges the Company, its
predecessors, successors and assigns, insurers, officers,
directors, employees and agents, from and against any and all
claims, demands, actions, causes of action, obligations, damages
and/or liabilities, both known or unknown, asserted or unasserted,
that he has or ever had against the Company or any of the other
individuals being released herein by reason of any fact, matter or
thing whatsoever occurring on or prior to the date hereof,
including, but not limited to, claims associated with or pertaining
to Employee's past employment and his termination of employment and
claims for bonuses or other benefits under the Employment Agreement
or otherwise (except as specified in the next sentence).
Notwithstanding the foregoing, Employee specifically does not
release or discharge and shall be entitled to all benefits under
(i) section 6 of the Employment Agreement, (ii) all stock options
previously granted to the Employee including the rights and
benefits under all applicable stock option agreements and the
Amendment to Stock Option Agreements of even date, and (iii) this
Agreement.
Without limitation to the foregoing, Employee
specifically releases, waives and forever discharges the
above-listed entities and persons from and against any and all
claims and damages which arise under the Age Discrimination in
Employment Act ("ADEA"), Title VII of the Civil Rights Act of 1964,
the Americans With Disabilities Act, or the Wisconsin Fair
Employment Act, or which arise out of the common law pertaining to
wrongful discharge, breach of contract (express or implied) or
other tort or common law cause of action.
In consideration of the promises made by Employee herein
and other good and valuable consideration, the sufficiency of which
the Company acknowledges, the Company releases and discharges
Employee, his spouse and their heirs, successors and assigns,
insurers and agents from any and all claims,
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demands, actions, causes of actions, obligations, damages and/or
liabilities, both known or unknown, asserted or unasserted, that
the Company has or ever had against Employee or any of the other
individuals being released herein, by reason of any fact, matter or
thing whatsoever occurring on or prior to the date hereof,
including, but not limited to, claims associated with or pertaining
to Employee's past employment and services as an officer and
director of the Company and his termination of employment and such
services.
This waiver does not cover rights or claims arising from
matters first occurring after its execution.
6. Breach of Agreement. In the event of any breach of this
Agreement by any signing party, the non-breaching party shall be
entitled to recover any damages, costs and expenses it may incur,
including actual attorneys' fees, costs and expenses in preparing
the defense, defending against or pursuing an action to enforce the
terms of this Agreement, or establishing or maintaining the
applicability or validity of this Agreement or any provision
thereof.
7. Applicable Dates for Signing Agreement. It is
acknowledged by the Company and Employee that Employee has 21
calendar days from the date he first receives this Agreement to
review it and decide whether to sign it. It is further
acknowledged that Employee has an additional seven calendar days
after he had signed this Agreement to revoke it as to the waiver
and/or release of any claim or claims alleging age discrimination
by contacting the Company in person or in writing. If the
Effective Date does not occur within 10 days after execution
hereof, this Agreement shall be of no force and effect and shall
terminate without liability of any party hereto.
8. Right to Consult Attorney and Acknowledgment of Parties.
The parties acknowledge that they have read the foregoing
Agreement, understand its contents, have signed the Agreement as
their free and voluntary act and acknowledge that prior to signing
the Agreement they had the opportunity to discuss any terms in the
Agreement with each other and that any questions asked have been
answered to their satisfaction. Employee also acknowledges that he
has been advised by the Company to consult, and has consulted, with
an attorney of his choice, at his own expense, to review the
Agreement before signing it.
9. Severability. If any portion of this Agreement is held
to be invalid or unenforceable for any reason, the parties agree
that such invalidity or unenforceability shall not affect the other
provisions of this Agreement and that the remaining covenants,
terms and conditions or portions thereof shall remain in full force
and effect, and any court of competent jurisdiction may so modify
or
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amend the objectionable provisions so as to make it valid,
reasonable and enforceable.
10. Counterparts. This Agreement may be executed in
counter-parts, each of which shall be deemed an original but both
of which together shall constitute one and the same agreement.
11. Specific Performance. The parties acknowledge and agree
that breach of the provisions of this Agreement by the Company
would cause irreparable damage to the Employee and that monetary
damages alone would not provide the Employee with adequate remedies
for such breach. Therefore, if any controversy arises concerning
Company's obligations under this Agreement, such obligations may be
specifically enforced by an injunction order or an order of
specific performance issued by a court of competent jurisdiction.
Such remedy shall be cumulative and nonexclusive and shall be in
addition to any other remedy to which the Employee may be entitled.
12. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Wisconsin
(regardless of the laws that might be applicable under principles
of conflicts of laws).
Employee acknowledges that he first received a copy of this
Agreement on November 20, 1996.
This Agreement is executed November 20, 1996.
/s/ Donald E. Runge
THE DIANA CORPORATION
BY /s/ Richard Y. Fisher
Its President
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EXHIBIT A
SEVEN-DAY RIGHT TO REVOCATION
ACKNOWLEDGMENT FORM
I, Donald E. Runge, acknowledge that The Diana Corporation has
tendered a Separation Agreement offer which I voluntarily agreed to
accept on November 20, 1996.
By this writing, I certify that seven calendar days have
elapsed since my voluntary acceptance of the above-referenced offer
and that I have voluntarily chosen not to revoke my acceptance of
the above-referenced Separation Agreement.
Signed this 28th day of November, 1996, at Milwaukee,
Wisconsin.
/s/ Donald E. Runge
<PAGE>
EXHIBIT B
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT between The Diana Corporation, a
Delaware corporation (the "Company"), and Donald E. Runge, an
officer and/or director of the Company (the "Indemnitee"), dated as
of November 26, 1996.
WHEREAS, the Indemnitee has served, is serving or may serve as
an officer or director of the Company; and
WHEREAS, the Amended and Restated Certificate of Incorporation
(the "Certificate of Incorporation") and the Bylaws of the Company
provide for certain indemnification of the officers and directors
of the Company.
NOW, THEREFORE, in consideration of the foregoing and of other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company has agreed to the
covenants set forth herein for the purpose of further securing to
the Indemnitee the indemnification provided by the Certificate of
Incorporation and the Bylaws:
Section 1. In the event that the Indemnitee was or is made a
party or is threatened to be made a party to or is involved in any
action, suit, or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that the Indemnitee or a person of whom the
Indemnitee is the legal representative is or was a director,
officer or employee of the Company or is or was serving at the
request of the Company as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or
other enterprise, including service with respect to employee
benefit plans, whether the basis of such actual or threatened
proceeding is alleged action in any official capacity as a
director, officer, employee or agent or in any other capacity while
serving as a director, officer, employee or agent, the Indemnitee
shall be indemnified and held harmless by the Company to the
fullest extent authorized by the General Corporation Law of the
State of Delaware (the "GCL") as the same exists or may hereafter
be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to
provide prior to such amendment), against all expense, liability
and loss (including, without limitation, attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid
or to be paid in settlement) reasonably incurred or suffered by the
Indemnitee in connection therewith and such indemnification shall
continue as to the Indemnitee if the Indemnitee ceases to be a
director, officer, employee or agent and shall inure to the benefit
of the Indemnitee's heirs, executors
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and administrators; provided, however, that except as provided in
Section 2 of this Agreement with respect to proceedings seeking to
enforce rights to indemnification, the Company shall indemnify the
Indemnitee in connection with a proceeding (or part thereof)
initiated by the Indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Company.
Section 2. If a claim under Section 1 of this Agreement is
not paid in full by the Company within thirty days after a written
claim has been received by the Company, the Indemnitee may at any
time thereafter bring suit against the Company to recover the
unpaid amount of the claim and, if successful in whole or in part,
the Indemnitee shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses
incurred in defending any actual or threatened proceeding in
advance of its final disposition where the required undertaking, if
any is required, has been tendered to the Company) that the
Indemnitee has not met the standards of conduct which make it
permissible under the GCL for the Company to indemnify the
Indemnitee for the amount claimed, but the burden of proving such
defense shall be on the Company. Neither the failure of the
Company (including its Board of Directors, independent legal
counsel or stockholders) to have made a determination prior to the
commencement of such action that indemnification of the Indemnitee
is proper in the circumstances because the Indemnitee has met the
applicable standard of conduct set forth in the GCL, nor an actual
determination by the Company (including its Board of Directors,
independent legal counsel or stockholders) that the Indemnitee has
not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that the Indemnitee has not met
the applicable standard of conduct.
Section 3. Following any "change in control" of the Company
of the type required to be reported under Item 1 of Form 8-K
promulgated under the Securities Exchange Act of 1934, as amended,
any determination as to entitlement to indemnification shall be
made by independent legal counsel selected by the Indemnitee, which
such independent legal counsel shall be retained by the Board of
Directors on behalf of the Company.
Section 4. The right to indemnification and the payment of
expenses incurred in defending any actual or threatened proceeding
in advance of its final disposition conferred in this Agreement
shall not be exclusive of any other right which the Indemnitee may
have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, Bylaws, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 5. The Company shall maintain in full force and
effect for a period of at least six years following the date of
this Agreement, fiduciary liability and
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directors and officers liability insurance policies in an amount
not less than $10,000,000 (or, if such amount is not reasonably
available, such other lower amount as is available to the Company
on reasonable terms) covering the Company, any Company subsidiary
or any of such parties' current or former directors, officers,
employees or agents, which will include coverage of Indemnitee for
all actions previously taken or to be taken in connection with his
services to the Company and its subsidiaries. In the event that
the Company maintains insurance, whether pursuant to the foregoing
provision or otherwise, to protect itself and any director or
officer of the Company against any expenses, liability or loss,
such insurance shall cover the Indemnitee to at least the same
extent as any other director or officer of the Company.
Section 6. The right to indemnification conferred by this
Agreement shall include the right to be paid by the Company the
expenses incurred in defending any actual or threatened proceeding
in advance of its final disposition; provided, however, that if the
GCL requires, the payment of such expenses incurred by the
Indemnitee in the Indemnitee's capacity as a director or officer
(and not in any other capacity in which service was or is rendered
by the Indemnitees while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the
final disposition of any actual or threatened proceeding, shall be
made only upon delivery to the Company of an undertaking by or on
behalf of the Indemnitee, to repay all amounts so advanced if it
shall ultimately be determined that the Indemnitee is not entitled
to be indemnified under this Agreement or otherwise.
IN WITNESS WHEREOF, the Company and the Indemnitee have
executed this Indemnification Agreement in duplicate on the day and
year first above written.
THE DIANA CORPORATION
By: /s/ Richard Y. Fisher
President
/s/ Donald E. Runge
Signature of Officer or Director
3
Employment Agreement
This Agreement is entered into this 27th day of November,
1996, by and between THE DIANA CORPORATION, a Delaware corporation
(the "Company"), and R. SCOTT MISWALD ("Employee").
WHEREAS, Employee has served the Company in an executive
capacity for more than ten (10) years pursuant to previously
existing oral agreements;
WHEREAS, the Company recognizes that the Employee's experience
has been and is expected to continue to be of great value to the
Company;
WHEREAS, the Company wishes this Agreement to be an incentive
for the Employee to continue with the Company secure in the
knowledge that he will be compensated for his efforts and his
accomplishments during the Term hereof;
WHEREAS, the Employee is willing to commit the performance of
his services for the Company upon the terms and conditions herein
set forth;
NOW THEREFORE, in consideration of the mutual covenants
contained herein, the Company hereby agrees to employ the Employee
and the Employee hereby agrees to accept such employment upon the
following terms and conditions:
1. Term. The term of Employee's employment (the "Term")
under this Agreement shall commence as of the date hereof and
continue until January 31, 1998. The word "Term" as used herein
includes any extensions thereof.
2. Duties and Responsibilities. During the Term the
Employee is engaged and shall perform such duties and
responsibilities for the Company as may be assigned to him by the
Chief Executive Officer of the Company consistent with the duties
previously performed by Employee. Employee's employment shall be
within 25 miles of Milwaukee, Wisconsin. The Employee may involve
himself in private investments and activities which do not
significantly conflict with his duties under this Agreement and may
serve as a director of such companies on whose board he elects to
serve providing said directorships do not significantly conflict
with his obligations as an Employee hereunder. After the Term,
neither the Company nor the Employee shall have any further
obligations hereunder.
3. Compensation During the Term. The Company agrees to pay
to the Employee during the Term a guaranteed minimum annual salary
at a rate of $125,000 per year. The guaranteed minimum salary
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hereunder shall be payable at intervals not less often than bi-
weekly and subject to usual payroll deductions. During the Term,
the Employee shall not be discriminated against with respect to any
other Company bonus plans or with respect to medical, hospital and
life insurance programs, pension program, and other similar welfare
benefit programs from time to time, in each case, made available to
the Company's officers as a class. The Company shall provide
Employee six (6) week's paid vacation. In addition, nothing herein
shall in any way cancel, reduce or otherwise affect the Employee's
rights to any stock options granted to him in the past or in the
future by the Board of Directors of the Company. During the Term,
the Company shall provide the Employee with office space,
secretarial assistance and other facilities, as may be required in
the proper performance of his duties and responsibilities and shall
reimburse him for expenses reasonably incurred by him the
performance of his duties.
4. Board of Directors
Employee shall during the Term of this contract, if requested,
serve on the Board of Directors of the Company at no additional
charge.
5. Termination By Company.
(a) Disability. During the Term in the event that Employee
shall, because of physical or mental incapacity, be unable
substantially to perform his duties for a period of at least three
(3) successive months and at the end of such period a physician
selected by the Company certifies that it appears unlikely that
Employee will be able to substantially perform his duties for an
indefinite additional period of time because of such physical or
mental incapacity, the Company shall have the right to terminate
the active employment of Employee and end the Term according to the
provision stated herein; provided, however, that in the event that
Employee shall not agree with the certification of disability made
by the physician selected by the Company, to which the Employee
will make himself available for and submit to such examination as
and when requested, Employee may select his own physician who shall
make a determination as to Employee's disability; in the event that
the physician so selected by Employee shall disagree with the
physician selected by the Company, the two physicians shall, within
thirty (30) days, select a third physician whose determination
shall be conclusive and binding on all parties hereto.
Notwithstanding anything herein to the contrary, the Company
may terminate the active employment of Employee and end the Term at
any time after Employee shall have been absent from his employment
for whatever cause, for a continuous period of more than four (4)
months.
In the event of any such termination pursuant to this
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paragraph 5(a), the Company shall continue to pay to the Employee,
through the end of the Term, a salary on a semi-monthly basis at a
rate equal to three-quarters of the guaranteed minimum annual
salary in effect on the date of such termination.
(b) Death. In the event of the death of the Employee, the
Term shall end and the Company shall make, until the end of the
Term, semi-monthly payments at a rate equal to three-quarters of
the guaranteed minimum annual salary in effect on the date of
death. The payments to be made under this Section 5(b) shall not
be reduced by reason of any insurance proceeds payable directly to
the Employee's beneficiaries or estate pursuant to insurance
carried or provided by the Company, and shall be made to such
beneficiary as the Employee may designate for that purpose in
written notice given to the Secretary of the Company prior to his
death, or if the Employee has not so designated, then to the
personal representative of his estate.
(c) Office Location. If Employee is required to travel more
than 25 miles from Milwaukee on a regular basis to perform his
duties hereunder, Employee may terminate this Agreement and receive
in full settlement thereof, the remaining unpaid balance of his
compensation due under paragraph 3 hereof.
6. Mitigation.
The Employee shall not be required to mitigate the amount of
any payments provided for in this Agreement by seeking other
employment or otherwise, and no payments required pursuant to this
Agreement shall be reduced as a result of any other income of
Employee, and any amounts due hereunder shall be absolute.
The Company shall maintain in full force and effect, for the
continued benefit of the Employee for the full Term of this
Agreement, all employee benefit plans and programs in which the
Employee was entitled to participate immediately prior to the date
of termination provided, that if the Employee's continued
participation in any such plan or program is barred by reason of
the operation of law, the Employee shall be entitled to receive an
amount equal to the contributions, payments, credits or allocations
made by the Company to him, to his account or on his behalf under
such plans and programs from which his continued participation is
barred.
7. Successors. The Company will require any successor to
all or substantially all of the business and/or assets of the
Company, to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place.
Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Employee to compensation from the
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Company in the same amount and on the same terms as he would be
entitled to hereunder.
8. Notices. Any notice required or permitted to be given
under this Agreement shall be in writing and shall be deemed to
have been given when delivered personally or deposited in the U.S.
Mail in a registered, postage prepaid envelope addressed, if to the
Employee at his address set forth below, and if to the Company, c/o
Secretary, at the principal executive office of the Company, or to
such other addresses as either party shall designate by written
notice to the other.
9. Assignment. The Employee may not assign his rights or
obligations hereunder. The rights and obligations of the Company
hereunder shall inure to the benefit of and shall be binding upon
its respective successors and assigns.
10. Miscellaneous.
(a) This Agreement shall be subject to and governed by the
laws of the State of Wisconsin.
(b) The Company agrees to reimburse the Employee for all
costs and expenses incurred by him (including the reasonable fees
for his counsel) in enforcing any of his rights under this
Agreement, including the fees of any arbitrator.
(c) Failure to insist upon strict compliance with any
provisions hereof shall not be deemed a waiver of such provisions
or any other provision hereof.
(d) This Agreement constitutes and expresses the whole
Agreement of parties hereto in reference to any employment of
Employee by the Company, and in reference to any of the matters or
things herein provided for, or hereinbefore discussed or mentioned
in reference to such employment, all promises, representations and
understandings relative thereto herein merged. This Agreement may
not be modified except by an agreement in written executed by the
parties hereto.
(e) The invalidity or unenforceability of any provision
hereof shall not affect the validity or enforceability of any other
provisions.
(f) Any controversy or claim which shall arise between the
parties herein arising out of or relating to this Agreement, or the
breach thereof, may be settled by arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration
Association at the election of either party hereto. All such
arbitration proceedings shall be had in the City of Milwaukee,
State of Wisconsin. In the event of such arbitration, judgment
upon the award rendered by the arbitrator, may be entered in any
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court having jurisdiction thereof.
(g) The Company shall not be permitted to withhold any
payments due hereunder when such payments are due and any such
amounts due hereunder may not be withheld as set-off from any
obligations claimed against the Employee. In the event of any
dispute hereunder, all sums due hereunder shall be paid by the
Company in the amount and manner, and at the time or times,
provided for herein, subject to expedient resolution of such
disputes between the parties, and shall not be withheld pending
such resolution. Time is of the essence with respect to any and
all payments due hereunder.
(h) Nothing herein contained shall reduce or otherwise affect
any benefits previously earned and due to Employee at any time
hereafter under prior employment contracts with the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
THE DIANA CORPORATION
By: /s/ Richard Y. Fisher
Chairman of the Board
EMPLOYEE
/s/ R. Scott Miswald
5
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT between The Diana Corporation, a
Delaware corporation (the "Company"), and ________________, an
officer and/or director of the Company (the "Indemnitee"), dated as
of November __, 1996.
WHEREAS, the Indemnitee has served, is serving or may serve as
an officer or director of the Company; and
WHEREAS, the Amended and Restated Certificate of Incorporation
(the "Certificate of Incorporation") and the Bylaws of the Company
provide for certain indemnification of the officers and directors
of the Company.
NOW, THEREFORE, in consideration of the foregoing and of other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company has agreed to the
covenants set forth herein for the purpose of further securing to
the Indemnitee the indemnification provided by the Certificate of
Incorporation and the Bylaws:
Section 1. In the event that the Indemnitee was or is made a
party or is threatened to be made a party to or is involved in any
action, suit, or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that the Indemnitee or a person of whom the
Indemnitee is the legal representative is or was a director,
officer or employee of the Company or is or was serving at the
request of the Company as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or
other enterprise, including service with respect to employee
benefit plans, whether the basis of such actual or threatened
proceeding is alleged action in any official capacity as a
director, officer, employee or agent or in any other capacity while
serving as a director, officer, employee or agent, the Indemnitee
shall be indemnified and held harmless by the Company to the
fullest extent authorized by the General Corporation Law of the
State of Delaware (the "GCL") as the same exists or may hereafter
be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to
provide prior to such amendment), against all expense, liability
and loss (including, without limitation, attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid
or to be paid in settlement) reasonably incurred or suffered by the
Indemnitee in connection therewith and such indemnification shall
continue as to the Indemnitee if the Indemnitee ceases to be a
director, officer, employee or agent and shall inure to the benefit
of the Indemnitee's heirs, executors
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and administrators; provided, however, that except as provided in
Section 2 of this Agreement with respect to proceedings seeking to
enforce rights to indemnification, the Company shall indemnify the
Indemnitee in connection with a proceeding (or part thereof)
initiated by the Indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Company.
Section 2. If a claim under Section 1 of this Agreement is
not paid in full by the Company within thirty days after a written
claim has been received by the Company, the Indemnitee may at any
time thereafter bring suit against the Company to recover the
unpaid amount of the claim and, if successful in whole or in part,
the Indemnitee shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses
incurred in defending any actual or threatened proceeding in
advance of its final disposition where the required undertaking, if
any is required, has been tendered to the Company) that the
Indemnitee has not met the standards of conduct which make it
permissible under the GCL for the Company to indemnify the
Indemnitee for the amount claimed, but the burden of proving such
defense shall be on the Company. Neither the failure of the
Company (including its Board of Directors, independent legal
counsel or stockholders) to have made a determination prior to the
commencement of such action that indemnification of the Indemnitee
is proper in the circumstances because the Indemnitee has met the
applicable standard of conduct set forth in the GCL, nor an actual
determination by the Company (including its Board of Directors,
independent legal counsel or stockholders) that the Indemnitee has
not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that the Indemnitee has not met
the applicable standard of conduct.
Section 3. Following any "change in control" of the Company
of the type required to be reported under Item 1 of Form 8-K
promulgated under the Securities Exchange Act of 1934, as amended,
any determination as to entitlement to indemnification shall be
made by independent legal counsel selected by the Indemnitee, which
such independent legal counsel shall be retained by the Board of
Directors on behalf of the Company.
Section 4. The right to indemnification and the payment of
expenses incurred in defending any actual or threatened proceeding
in advance of its final disposition conferred in this Agreement
shall not be exclusive of any other right which the Indemnitee may
have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, Bylaws, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 5. The Company shall maintain in full force and
effect for a period of at least six years following the date of
this Agreement, fiduciary liability and
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directors and officers liability insurance policies in an amount
not less than $10,000,000 (or, if such amount is not reasonably
available, such other lower amount as is available to the Company
on reasonable terms) covering the Company, any Company subsidiary
or any of such parties' current or former directors, officers,
employees or agents, which will include coverage of Indemnitee for
all actions previously taken or to be taken in connection with his
services to the Company and its subsidiaries. In the event that
the Company maintains insurance, whether pursuant to the foregoing
provision or otherwise, to protect itself and any director or
officer of the Company against any expenses, liability or loss,
such insurance shall cover the Indemnitee to at least the same
extent as any other director or officer of the Company.
Section 6. The right to indemnification conferred by this
Agreement shall include the right to be paid by the Company the
expenses incurred in defending any actual or threatened proceeding
in advance of its final disposition; provided, however, that if the
GCL requires, the payment of such expenses incurred by the
Indemnitee in the Indemnitee's capacity as a director or officer
(and not in any other capacity in which service was or is rendered
by the Indemnitees while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the
final disposition of any actual or threatened proceeding, shall be
made only upon delivery to the Company of an undertaking by or on
behalf of the Indemnitee, to repay all amounts so advanced if it
shall ultimately be determined that the Indemnitee is not entitled
to be indemnified under this Agreement or otherwise.
IN WITNESS WHEREOF, the Company and the Indemnitee have
executed this Indemnification Agreement in duplicate on the day and
year first above written.
THE DIANA CORPORATION
By: /s/ Richard Y. Fisher
President
/s/ ___________________________
Signature of Officer or Director
3
DIANA LOAN AGREEMENT
This Agreement is made this 11th day of November, 1996 by and
between The Diana Corporation ("Diana") and James J. Fiedler
("Fiedler").
1. Agreement for Loan. Diana hereby loans to Fiedler
$300,000 on an unsecured basis, upon the terms and to be repaid as
set forth in the note (the "Note") executed by Fiedler
contemporaneously herewith.
2. Surrender of Stock Option. As further consideration for
the loan by Diana, Fiedler hereby agrees to surrender to Diana for
cancellation, and hereby releases, discharges and terminates any
obligation of Diana with respect to, that certain option agreement
dated March 29, 1996 relating to 150,000 shares of common stock of
Diana and any rights to receive the same.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
THE DIANA CORPORATION
By: /s/ Richard Y. Fisher
President
/s/ James J. Fiedler
<PAGE>
PROMISSORY NOTE
$300,000 November 11, 1996
Milwaukee, Wisconsin
FOR VALUE RECEIVED, the undersigned, James J. Fiedler
("Maker"), hereby promises to pay to the order of The Diana
Corporation ("Payee"), at Milwaukee, Wisconsin, or at such other
place as Payee shall from time to time direct, the principal amount
of Three Hundred Thousand Dollars ($300,000) on November 1, 1999.
Interest shall accrue on the unpaid principal balance at a rate
equal to 6.07% per annum, compounded annually on the anniversaries
of the date hereof, and shall be payable on November 1, 1999.
Notwithstanding the foregoing, the unpaid principal balance hereof
and accrued interest shall be due and payable in full (a) upon any
transfer of Maker's Class B Units in Sattel Communications LLC
(other than to a Permitted Transferee, as defined in Maker's
Agreement Regarding Award of Class B Units dated November __, 1996
(the "Award Agreement")), by Maker or by any such Permitted
Transferee (including without limitation any transfer contemplated
by Section 5 of the Award Agreement), (b) upon any exchange or
conversion of Class B Units for or into securities registered under
the Securities Exchange Act of 1934, as amended, in accordance with
Section 6 of the Award Agreement or otherwise, or (c) if Maker
shall (i) admit in writing his inability to pay his debts generally
as they become due, (ii) file a petition to answer seeking
reorganization or arrangement of the federal bankruptcy laws or any
other applicable law or statute of the United States of America or
any state thereof, or any other jurisdiction, (iii) make an
assignment or other arrangement for the benefit of his creditors
generally, (iv) consent to the appointment of a receiver for
himself or for the whole or any substantial part of this property,
or (v) have an order for relief in bankruptcy entered against or
with respect to him, provided such order shall not be vacated, set
aside or stayed within thirty (30) days after the date of entry
thereof.
Maker reserves and shall have the right at any time to prepay
without penalty all or any portion of the unpaid principal balance
of this Note. All payments made hereunder prior to a due date
shall first be applied to the payment of accrued interest on the
amount being prepaid and then tothe payment of principal.
If payment of this Note is not made when due, interest shall
accrue on the unpaid amounts at a rate per annum equal to the prime
rate in effect from time to time, as published in the Midwest
edition of the Wall Street Journal, plus 4%. Any change in such
interest rate resulting from a change in such prime rate shall
become effective as of the opening of business on the day on which
such changed prime rate was so published.
Maker agrees to pay all costs of collection or enforcement of
this Note, including without limitation, reasonable attorneys' fees
and court costs.
Interest hereunder shall be caluclated on the basis of a 360-
day year for the actual days elapsed.
<PAGE>
No delay or omission on the part of Payee in exercising any
right given herein or by law to Payee shall impair such right or be
considered as a waiver thereof or as a waiver or acquiescence in
any default hereunder.
Maker waives presentment, demand, notice of dishonor and
protest and consents to any and all extensions or renewals hereof
without notice.
This Note shall be governed by and construed in accordance
with the laws of the State of California.
/s/ James J. Fiedler
DIANA LOAN AGREEMENT
This Agreement is made this 11th day of November, 1996 by and
between The Diana Corporation ("Diana") and Daniel W. Latham
("Latham").
1. Agreement for Loan. Diana hereby loans to Latham $300,000
on an unsecured basis, upon the terms and to be repaid as set forth
in the note (the "Note") executed by Latham contemporaneously
herewith.
2. Surrender of Stock Option. As further consideration for
the loan by Diana, Latham hereby agrees to surrender to Diana for
cancellation, and hereby releases, discharges and terminates any
obligation of Diana with respect to, that certain option agreement
dated March 29, 1996 relating to 150,000 shares of common stock of
Diana and any rights to receive the same.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
THE DIANA CORPORATION
By: /s/ Richard Y. Fisher
President
/s/ Daniel W. Latham
<PAGE>
PROMISSORY NOTE
$300,000 November 11, 1996
Milwaukee, Wisconsin
FOR VALUE RECEIVED, the undersigned, Daniel W. Latham
("Maker"), hereby promises to pay to the order of The Diana
Corporation ("Payee"), at Milwaukee, Wisconsin, or at such other
place as Payee shall from time to time direct, the principal amount
of Three Hundred Thousand Dollars ($300,000) on November 1, 1999.
Interest shall accrue on the unpaid principal balance at a rate
equal to 6.07% per annum, compounded annually on the anniversaries
of the date hereof, and shall be payable on November 1, 1999.
Notwithstanding the foregoing, the unpaid principal balance hereof
and accrued interest shall be due and payable in full (a) upon any
transfer of Maker's Class B Units in Sattel Communications LLC
(other than to a Permitted Transferee, as defined in Maker's
Agreement Regarding Award of Class B Units dated November __, 1996
(the "Award Agreement)), by Maker or by any such Permitted
Transferee (including without limitation any transfer contemplated
by Section 5 of the Award Agreement), (b) upon any exchange or
conversion of Class B Units for or into securities registered under
the Securities Exchange Act of 1934, as amended, in accordance with
Section 6 of the Award Agreement or otherwise, or (c) if Maker
shall (i) admit in writing his inability to pay his debts generally
as they become due, (ii) file a petition or answer seeking
reorganization or arrangement of the federal bankruptcy laws or any
other applicable law or statute of the United States of America or
any state thereof, or any other jurisdiction, (iii) make an
assignment or other arrangement for the benefit of his creditors
generally, (iv) consent to the appointment of a receiver for
himself or for the whole or any substantial part of this property,
or (v) have an order for relief in bankruptcy entered against or
with respect to him, provided such order shall not be vacated, set
aside or stayed within thirty (30) days after the date of entry
thereof.
Maker reserves and shall have the right at any time to prepay
without penalty all or any portion of the unpaid principal balance
of this Note. All payments made hereunder prior to a due date
shall first be applied to the payment of accrued interest on the
amount being prepaid and then to the payment of principal.
If payment of this Note is not made when due, interest shall
accrue on the unpaid amounts at a rate per annum equal to the prime
rate in effect from time to time, as published in the Midwest
edition of the Wall Street Journal, plus 4%. Any change in such
interest rate resulting from a change in such prime rate shall
become effective as of the opening of business on the day on which
such changed prime rate was so published.
Maker agrees to pay all costs of collection or enforcement of
this Note, including without limitation, reasonable attorneys' fees
and court costs.
Interest hereunder shall be calculated on the basis of a 360-
day year for the actual days elapsed.
<PAGE>
No delay or omission on the part of Payee in exercising any
right given herein or by law to Payee shall impair such right or be
considered as a waiver thereof or as a waiver or acquiescence in
any default hereunder.
Maker waives presentment, demand, notice of dishonor and
protest and consents to any and all extensions or renewals hereof
without notice.
This Note shall be governed by and construed in accordance
with the laws of the State of California.
/s/ Daniel W. Latham
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of this 11th day of September, 1995,
by and between SATTEL COMMUNICATIONS COMPANY, a general partnership
(the "Company"), and JAMES J. FIEDLER (the "Executive").
R E C I T A L S
WHEREAS, Executive is willing to be employed by Company upon
the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in order to set forth the terms and conditions
of Executive's employment with Company and in consideration of the
covenants and agreements of the parties herein contained, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Employment Services. Subject to the terms and upon the
conditions hereinafter set forth, Company hereby employs Executive
to serve in such position or positions as company's Executive
Committee or similar controlling body (the "Committee") shall
determine from time to time and to perform all duties incident
thereto. Executive's title and duties may change from time to time
as determined by the committee in its sole discretion. Executive
shall perform all duties in a conscientious, reasonable and
competent manner and shall devote his best efforts and his entire
business time and attention to the performance of such duties.
Executive accepts such employment and agrees to devote his full
time and use his best efforts to perform his duties pursuant to
this Agreement and to further the business of the Company.
Executive shall not, without the prior written consent of Company,
engage directly or indirectly in any other business or occupation
during his employment under this Agreement.
2. Term and Termination.
2.1 Term. Subject to Section 2.2 hereof, the employment of
Executive under this Agreement will continue until the occurrence
of the first of the following:
(a) December 31, 1996
(b) Executive's death; or
(c) Executive's illness, physical or mental disability
or other incapacity resulting in Executive's inability to
effectively perform his duties under this Agreement for an
aggregate of thirty (30) days during any period of six (6)
consecutive months.
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2.2 Termination. The employment of Executive under this
Agreement may also be terminated at the option of the Committee
upon the occurrence of any of the following:
(a) Executive's conduct involving fraud or moral
turpitude or Executive's dishonesty involving Company's business,
(b) Executive's chronic absence from work other than by
reason of illness or injury,
(c) conviction of any felony,
(d) Executive's conviction of any misdemeanor which is
substantially related to Executive's services hereunder,
(e) Executive's continuing use of illegal drugs or other
illegal substance (whether or not on the job) after receiving a
written notice from the Company to halt such usage or Executive's
conviction of a crime involving illegal drugs or other illegal
substance,
(f) Executive's continuing use of alcohol (whether or
not on the job) after receiving a written notice from the Company
to halt such usage or Executive's conviction of a crime involving
alcohol, which impairs Executive's ability to perform Executive's
duties under this Agreement or has an adverse effect (other than an
insignificant effect) on the reputation of the Company or its
relationship with any customer or supplier of the Company,
(g) conduct either within or outside the scope of
Executive's employment which has an adverse effect (other than an
insignificant effect) on the reputation of the Company or its
relationship with any customer or supplier of the Company,
(h) Executive's making of any statement, publicly or
privately, about the Company, any executive of the Company, any
supplier or customer of the Company, which in the sole judgment of
committee is detrimental to the Company,
(i) a breach by Executive of his obligations under
Sections 7, 8 or 9 hereof, or
(j) a breach of any other provision of this Agreement by
Executive.
2.3 Effect of Termination. Executive's obligations in
Section 7, 8, 9 and 10 hereof shall survive the termination of
Executive's employment hereunder for any reason.
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3. Salary. As compensation for his services hereunder and
in consideration of the covenants of Executive herein, Executive
shall be entitled to a salary at a rate of Two Hundred Thousand
Dollars ($200,000) per year or any proration thereof. Such salary
to be paid in equal semi-monthly installments or with such other
frequency as Company shall elect (but not less frequently than
semi-monthly) and shall be subject to withholding and other
deductions by reason of federal or state law.
4. Reimbursement For Expenses. Company agrees to reimburse
Executive for all reasonable business expenses incurred by him in
connection with the performance of his obligations under this
Agreement, subject to established reimbursement policies of the
Company in effect from time to time regarding expense
reimbursement.
5. Fringe Benefits. Executive shall be entitled to the
following fringe benefits during the term of his employment under
this Agreement.
5.1 Vacation. Executive shall be allowed three (3) weeks of
vacation per year, with full pay and without loss of any other
compensation of benefits, during the term of this Agreement.
Executive shall coordinate the schedule of his vacations with other
executives and the personnel of Company and it partners and
affiliates so as to avoid any adverse effects on the Company's
operations.
5.2 Bonuses. At the conclusion of each of the Company's
calendar years covered by this contract, the Executive shall
receive a bonus equal to 10% of the Company's pre-tax profits for
said year not to exceed the amount of salary received in said
calendar year.
5.3 Other Fringe Benefits. Executive may receive such other
fringe benefits, if any, as the Committee may from time to time
make available to Executive in the Committee's sole discretion.
6. Definitions. As used in this Agreement, the following
words have the meanings specified:
(a) "Proprietary Ideas" means ideas, suggestions,
inventions and work relating in any way to the business and
activities of Company which may be subjects of protection under
applicable laws, including common law, respecting patents,
copyrights, tradesecrets, trademarks, service marks or other
intellectual property rights.
(b) "Invention" means inventions, designs, discoveries,
improvements and ideas, whether or not patentable, including
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<PAGE>
without limitation, upon the generality of the foregoing, novel or
improved products, processes, machines, software, promotional and
advertising materials, business data processing programs and
systems, and other manufacturing and sales techniques, which either
(a) relate to (i) the business of Company as conducted from time to
time or (ii) the Company's actual or demonstrably anticipated
research or development, or (b) result from any work performed by
Executive for Company.
(c) "Confidential Information" means Proprietary Ideas
and also information related to Company's business, whether or not
in written or printed form, not generally known in the trade or
industry of which Executive has or will become informed during the
period of employment by Diana or Company, which may include but is
not limited to product specifications, manufacturing procedures,
methods, equipment, compositions, technology, formulas, trade
secrets, know-how, research and development programs, sales
methods, customer lists, mailing lists, customer usages and
requirements, software and other confidential technical or business
information and data; provided, however, that Confidential
Information shall not include any information which is in the
public domain by means other than disclosure by Executive.
(d) As used in Paragraph 7, 8, 9 and 10 only, the term
"Company" shall include all entities affiliated with the Company.
7. Disclosure and Assignment of Inventions. Executive
agrees to disclose to Company, and hereby assigns to Company all of
Executive's rights in and, if requested to do so, provide a written
description of, any Inventions conceived or reduced to practice at
any time during Executive's employment by Company, either solely or
jointly with others and whether or not developed on Executive's own
time or with Company's resources. Executive agrees that Inventions
first reduced to practice within one (1) year after termination of
Executive's employment by Company shall be treated as if conceived
during such employment unless Executive can establish specific
events giving rise to the conception which Occurred after such
employment. Further, Executive disclaims and will not assert any
rights in Inventions as having been made, conceived or acquired
prior to employment by Company except such as are specifically
listed at the conclusion of this Agreement. Executive shall
cooperate with Company and shall execute and deliver such documents
and do such other acts and things as Company may request, at
Company's expense, to obtain and maintain letters patent or
registrations covering any Inventions and to vest in Company all
rights therein free of all encumbrances and adverse claims.
8. Confidential Information. Executive shall not disclose
to Company or induce Company to use any secret or confidential
information belonging to persons not affiliated with Company,
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<PAGE>
including any former employer of Executive. In addition to all
duties of loyalty imposed on Executive by law, Executive shall
maintain Confidential Information in strict confidence and secrecy
and shall not at any time, during or at any time after termination
of employment with Company, directly or indirectly, use or disclose
to others any Confidential Information, or use it for the benefit
of any person or entity (including Executive) other than Company,
without the prior written consent of any authorized officer of
company (except for disclosures to persons acting on Company's
behalf with a need to know such information). Executive shall
carefully preserve any documents, records, tangible data relating
to Inventions or Confidential Information coming into Executive's
possession and shall deliver the same and any copies thereof to
Company upon request and, in any event, upon termination of
Executive's employment by Company.
9. Non-Competition.
At all, times during Executive's employment by the
Company (whether pursuant to this Agreement or otherwise) and for
a period of twelve (12) months following the termination of such
employment:
(a) Executive will not, in any capacity whatsoever, in
any state in the United States or in any other country, directly or
indirectly, participate in or assist in, the ownership management,
operation or control, or have any beneficial interest in, or
provide employment, consulting or other services for, any
corporation, partnership, association or other person or entity
("Competitive Business") which is engaged in the development,
manufacture, marketing, distribution, service and/or sale of
products incorporating technology by which fax, voice and data
traffic can be transmitted by means of T1 and other similar
transmission cables and which directly competes or is planning to
directly compete with the Company's products or services (including
products and services under development). If the business is
multi-faceted, this restriction shall apply to only that part of
the business which is competitive to Company.
(b) In furtherance of the foregoing, but as an
independent obligation of Executive, Executive agrees that he will
not, during the 1-year period following termination of his
employment with Company, be connected in any way with the
solicitation of any then current or potential customers or
suppliers of Company if such solicitation is likely to result in a
loss of business for Company.
(c) In furtherance of the foregoing, but as an
independent obligation of the Executive, Executive agrees that he
will not solicit for employment, employ or engage as a consultant
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<PAGE>
any person who had been an employee of the Company at any time in
the two year period prior to termination of employment with
Company.
(d) In the event the covenants set forth in this Section
9 are found to be unenforceable or invalid by reason of being
overly broad, the parties hereto intend that such covenants shall
be limited to such scope, geographic area and duration as shall
make such covenants valid and enforceable.
10. Enforcement of Section 7, 8 and 9. Recognizing that
compliance with the provisions of Sections 7, 8 and 9 of this
Agreement is necessary to protect the goodwill and other
proprietary interests of Company, and that breach of Executive's
agreements thereunder will result in irreparable and continuing
damages to Company for which there will be no adequate remedy at
law, Executive hereby agrees that in the event of any breach of
such agreements, Company shall be entitled to injunctive relief and
such other and further relief, including damages, as may be proper.
11. Government Laws Regulations and Contracts. Executive
agrees to comply, and to do all things necessary for Company to
comply, with all federal, state, local and foreign laws and
regulations which may be applicable to the business and operations
of Company, and with any contractual obligations, including,
without limitation, confidentiality obligations, which may be
applicable to Company or Executive under any contracts between
Company and its customers, suppliers or third parties.
12. Miscellaneous.
12.1 Amendment and Modification. Company (by action of its
Committee) and Executive may amend, modify and supplement this
Agreement only in such manner as may be agreed upon by Company and
Executive in writing.
12.2 Entire Agreement. This instrument embodies the entire
agreement between the parties hereto with respect to the employment
relationship created hereby and supersedes and discharges any prior
agreements pertaining to employment between Executive and the
Company. There have been and are no agreements, representations or
warranties between the parties other than those set forth or
provided for herein relating to such employment relationship.
12.3 Assignment. This Agreement shall not be assigned by
Executive without the written consent of Company. Any
attempted assignment without such written consent shall be null and
void and without legal effect. This Agreement may be assigned by
Company and any such assignment shall not terminate or modify this
Agreement, except that the employing party to which Executive shall
6
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have been transferred shall, for the purposes of this Agreement, be
construed as standing in the same place and stead as Company as of
the date of the assignment.
12.4 Binding. Subject to Section 12.2 hereof, this Agreement
shall be binding upon and inure to the benefit of the respective
parties hereto and their successors, assigns, heirs, executors,
administrators and personal representatives. The parties hereto
shall be entitled, at their option, to the remedy of specific
performance to enforce any of the provisions of this Agreement.
12.5 Arbitration. Any dispute, controversy or claim arising
out of or relating to this Agreement, or the breach hereof, shall
be settled by binding arbitration in Las Vegas, Nevada administered
by the American Arbitration Association under its Commercial
Arbitration Rules, and judgment on the award rendered by the
arbitrators may be entered in any court having jurisdiction
thereof.
12.6 Agreement Severable; Waiver. This is a severable
Agreement and in the event that any part of this Agreement shall be
held to be unenforceable, all other parts of this Agreement shall
remain valid and fully enforceable as if the unenforceable part or
parts had not been included herein. No waiver of any provision of
this Agreement shall be binding unless executed in writing by the
party to be bound thereby. No waiver of a breach of any of the
provisions of this Agreement shall be deemed to be or shall
constitute a waiver of a breach of any other provision of this
Agreement, whether or not similar, nor shall such waiver constitute
a continuing waiver of such breach unless otherwise expressly
provided. No failure or delay in exercising any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or remedy
preclude any other or further exercise thereof or the exercise of
any other right, power or remedy.
12.7 Notices. For purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in
writing and shall be deemed to have been duly given when delivered
or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
If to Executive, to: James J. Fiedler
9145 Deering Avenue
Chatsworth, CA 91311
If to Company, to: Sattel Communications Company
Attn: George Weischadle
9145 Deering Avenue
Chatsworth, CA 91311
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or to such other address as either party may have furnished to the
other in writing in accordance herewith except that notices of a
change of address shall be effective only upon receipt.
EXECUTIVE ACKNOWLEDGES HAVING READ, EXECUTED AND RECEIVED A
COPY OF THIS AGREEMENT, INCLUDING THE FOLLOWING NOTICE, AND AGREES
THAT, WITH RESPECT TO THE SUBJECT MATTER HEREOF, IT CONSTITUTES
EXECUTIVE'S ENTIRE AGREEMENT WITH COMPANY, SUPERSEDING ANY PREVIOUS
ORAL OR WRITTEN COMMUNICATIONS, REPRESENTATIONS, UNDERSTANDINGS OR
AGREEMENTS WITH DIANA, COMPANY OR ANY OF THEIR OFFICIALS OR
REPRESENTATIVES.
Notwithstanding anything to the contrary in Section 7 hereof,
this Agreement does not apply to an Invention for which no
equipment, supplies, facility, or trade secret information of the
Company was used and which was developed entirely on Executive's
own time, unless (a) the Invention relates (i) to the business of
the Company as conducted from time to time or (ii) to the Company's
actual or demonstrably anticipated research or development, or (b)
the Invention results from any work performed by the Executive for
the Company.
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the day and year first above written.
SATTEL COMMUNICATIONS COMPANY
("Company")
By: /s/ Keith R. Steffel
Chief Financial Officer
/s/ James J. Fiedler
("Executive")
(SEAL)
List of Inventions Excepted From Section 7 Above:
None
9
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of this 13th day of September, 1995,
by and between SATTEL COMMUNICATIONS COMPANY, a general partnership
(the "Company"), and DANIEL W. LATHAM (the "Executive").
R E C I T A L S
WHEREAS, Executive is willing to be employed by Company upon
the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in order to set forth the terms and conditions
of Executive's employment with Company and in consideration of the
covenants and agreements of the parties herein contained, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Employment Services. Subject to the terms and upon the
conditions hereinafter set forth, Company hereby employs Executive
to serve in such position or positions as company's Executive
Committee or similar controlling body (the "Committee") shall
determine from time to time and to perform all duties incident
thereto. Executive's title and duties may change from time to time
as determined by the committee in its sole discretion. Executive
shall perform all duties in a conscientious, reasonable and
competent manner and shall devote his best efforts and his entire
business time and attention to the performance of such duties.
Executive accepts such employment and agrees to devote his full
time and use his best efforts to perform his duties pursuant to
this Agreement and to further the business of the Company.
Executive shall not, without the prior written consent of Company,
engage directly or indirectly in any other business or occupation
during his employment under this Agreement.
2. Term and Termination.
2.1 Term. Subject to Section 2.2 hereof, the employment of
Executive under this Agreement will continue until the occurrence
of the first of the following:
(a) December 31, 1996
(b) Executive's death; or
(c) Executive's illness, physical or mental disability
or other incapacity resulting in Executive's inability to
effectively perform his duties under this Agreement for an
aggregate of thirty (30) days during any period of six (6)
consecutive months (unless otherwise provided by law).
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2.2 Termination. The employment of Executive under this
Agreement may also be terminated at the option of the Committee
upon the occurrence of any of the following:
(a) Executive's conduct involving fraud or moral
turpitude or Executive's dishonesty involving Company's business,
(b) Executive's chronic absence from work other than by
reason of illness or injury,
(c) conviction of any felony,
(d) Executive's conviction of any misdemeanor which is
substantially related to Executive's services hereunder,
(e) Executive's continuing use of illegal drugs or other
illegal substance (whether or not on the job) after receiving a
written notice from the Company to halt such usage or Executive's
conviction of a crime involving illegal drugs or other illegal
substance,
(f) Executive's continuing use of alcohol (whether or
not on the job) after receiving a written notice from the Company
to halt such usage or Executive's conviction of a crime involving
alcohol, which impairs Executive's ability to perform Executive's
duties under this Agreement or has an adverse effect (other than an
insignificant effect) on the reputation of the Company or its
relationship with any customer or supplier of the Company,
(g) conduct either within or outside the scope of
Executive's employment which has an adverse effect (other than an
insignificant effect) on the reputation of the Company or its
relationship with any customer or supplier of the Company,
(h) Executive's making of any statement, publicly or
privately, about the Company, any executive of the Company, any
supplier or customer of the Company, which in the sole judgment of
committee is detrimental to the Company,
(i) a breach by Executive of his obligations under
Sections 7, 8 or 9 hereof, or
(j) a breach of any other provision of this Agreement by
Executive.
(k) Executive's unsatisfactory perfromance in the sole
discretion of the committee.
2.3 Effect of Termination. Executive's obligations in
Section 6, 7, 8, 9 and 10 hereof shall survive the termination of
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<PAGE>
Executive's employment hereunder for any reason.
3. Salary. As compensation for his services hereunder and
in consideration of the covenants of Executive herein, Executive
shall be entitled to a salary at a rate of One Hundred Seventy-Five
Thousand Dollars ($175,000) per year or any proration thereof.
Such salary to be paid in equal semi-monthly installments or with
such other frequency as Company shall elect (but not less
frequently than semi-monthly) and shall be subject to withholding
and other deductions by reason of federal or state law.
4. Reimbursement For Expenses. Company agrees to reimburse
Executive for all reasonable business expenses incurred by him in
connection with the performance of his obligations under this
Agreement, subject to established reimbursement policies of the
Company in effect from time to time regarding expense
reimbursement.
5. Fringe Benefits. Executive shall be entitled to the
following fringe benefits during the term of his employment under
this Agreement.
5.1 Vacation. Executive shall be allowed three (3) weeks of
vacation per year, with full pay and without loss of any other
compensation of benefits, during the term of this Agreement.
Executive shall coordinate the schedule of his vacations with other
executives and the personnel of Company and it partners and
affiliates so as to avoid any adverse effects on the Company's
operations.
5.2 Bonuses. At the conclusion of each of the Company's
calendar years covered by this contract, the Executive shall
receive a bonus equal to 5% of the Company's pre-tax profits for
said year not to exceed the amount of salary received in said
calendar year. One-half of the bonuses, if any, due hereunder will
be paid to the Executive quarterly with a year-to-date adjustment
at the end of each quarter.
5.3 Other Fringe Benefits. Executive may receive such other
fringe benefits, if any, as the Committee may from time to time
make available to Executive in the Committee's sole discretion.
6. Definitions. As used in this Agreement, the following
words have the meanings specified:
(a) "Proprietary Ideas" means ideas, suggestions,
inventions and work relating in any way to the business and
activities of Company which may be subjects of protection under
applicable laws, including common law, respecting patents,
copyrights, tradesecrets, trademarks, service marks or other
3
<PAGE>
intellectual property rights.
(b) "Invention" means inventions, designs, discoveries,
improvements and ideas, whether or not patentable, including
without limitation, upon the generality of the foregoing, novel or
improved products, processes, machines, software, promotional and
advertising materials, business data processing programs and
systems, and other manufacturing and sales techniques, which either
(a) relate to (i) the business of Company as conducted from time to
time or (ii) the Company's actual or demonstrably anticipated
research or development, or (b) result from any work performed by
Executive for Company.
(c) "Confidential Information" means Proprietary Ideas
and also information related to Company's business, whether or not
in written or printed form, not generally known in the trade or
industry of which Executive has or will become informed during the
period of employment by Diana or Company, which may include but is
not limited to product specifications, manufacturing procedures,
methods, equipment, compositions, technology, formulas, trade
secrets, know-how, research and development programs, sales
methods, customer lists, mailing lists, customer usages and
requirements, software and other confidential technical or business
information and data; provided, however, that Confidential
Information shall not include any information which is in the
public domain by means other than disclosure by Executive.
(d) As used in Paragraph 7, 8, 9 and 10 only, the term
"Company" shall include all entities affiliated with the Company.
7. Disclosure and Assignment of Inventions. Executive
agrees to disclose to Company, and hereby assigns to Company all of
Executive's rights in and, if requested to do so, provide a written
description of, any Inventions conceived or reduced to practice at
any time during Executive's employment by Company, either solely or
jointly with others and whether or not developed on Executive's own
time or with Company's resources. Executive agrees that Inventions
first reduced to practice within one (1) year after termination of
Executive's employment by Company shall be treated as if conceived
during such employment unless Executive can establish specific
events giving rise to the conception which Occurred after such
employment. Further, Executive disclaims and will not assert any
rights in Inventions as having been made, conceived or acquired
prior to employment by Company except such as are specifically
listed at the conclusion of this Agreement. Executive shall
cooperate with Company and shall execute and deliver such documents
and do such other acts and things as Company may request, at
Company's expense, to obtain and maintain letters patent or
registrations covering any Inventions and to vest in Company all
rights therein free of all encumbrances and adverse claims.
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<PAGE>
8. Confidential Information. Executive shall not disclose
to Company or induce Company to use any secret or confidential
information belonging to persons not affiliated with Company,
including any former employer of Executive. In addition to all
duties of loyalty imposed on Executive by law, Executive shall
maintain Confidential Information in strict confidence and secrecy
and shall not at any time, during or at any time after termination
of employment with Company, directly or indirectly, use or disclose
to others any Confidential Information, or use it for the benefit
of any person or entity (including Executive) other than Company,
without the prior written consent of any authorized officer of
company (except for disclosures to persons acting on Company's
behalf with a need to know such information). Executive shall
carefully preserve any documents, records, tangible data relating
to Inventions or Confidential Information coming into Executive's
possession and shall deliver the same and any copies thereof to
Company upon request and, in any event, upon termination of
Executive's employment by Company.
9. Non-Competition.
At all, times during Executive's employment by the
Company (whether pursuant to this Agreement or otherwise) and for
a period of twelve (12) months following the termination of such
employment:
(a) Executive will not, in any capacity whatsoever, in
any state in the United States or in any other country, directly or
indirectly, participate in or assist in, the ownership management,
operation or control, or have any beneficial interest in, or
provide employment, consulting or other services for, any
corporation, partnership, association or other person or entity
("Competitive Business") which is engaged in the development,
manufacture, marketing, distribution, service and/or sale of
products incorporating technology by which fax, voice and data
traffic can be transmitted by means of T1 and other similar
transmission cables and which directly competes or is planning to
directly compete with the Company's products or services (including
products and services under development). If the business is
multi-faceted, this restriction shall apply to only that part of
the business which is competitive to Company.
(b) In furtherance of the foregoing, but as an
independent obligation of Executive, Executive agrees that he will
not, during the 1-year period following termination of his
employment with Company, be connected in any way with the
solicitation of any then current or potential customers or
suppliers of Company if such solicitation is likely to result in a
loss of business for Company.
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<PAGE>
(c) In furtherance of the foregoing, but as an
independent obligation of the Executive, Executive agrees that he
will not solicit for employment, employ or engage as a consultant
any person who had been an employee of the Company at any time in
the two year period prior to termination of employment with
Company.
(d) In the event the covenants set forth in this Section
9 are found to be unenforceable or invalid by reason of being
overly broad, the parties hereto intend that such covenants shall
be limited to such scope, geographic area and duration as shall
make such covenants valid and enforceable.
10. Enforcement of Section 7, 8 and 9. Recognizing that
compliance with the provisions of Sections 7, 8 and 9 of this
Agreement is necessary to protect the goodwill and other
proprietary interests of Company, and that breach of Executive's
agreements thereunder will result in irreparable and continuing
damages to Company for which there will be no adequate remedy at
law, Executive hereby agrees that in the event of any breach of
such agreements, Company shall be entitled to injunctive relief and
such other and further relief, including damages, as may be proper.
11. Government Laws Regulations and Contracts. Executive
agrees to comply, and to do all things necessary for Company to
comply, with all federal, state, local and foreign laws and
regulations which may be applicable to the business and operations
of Company, and with any contractual obligations, including,
without limitation, confidentiality obligations, which may be
applicable to Company or Executive under any contracts between
Company and its customers, suppliers or third parties.
12. Miscellaneous.
12.1 Amendment and Modification. Company (by action of its
Committee) and Executive may amend, modify and supplement this
Agreement only in such manner as may be agreed upon by Company and
Executive in writing.
12.2 Entire Agreement. This instrument embodies the entire
agreement between the parties hereto with respect to the employment
relationship created hereby and supersedes and discharges any prior
agreements pertaining to employment between Executive and the
Company. There have been and are no agreements, representations or
warranties between the parties other than those set forth or
provided for herein relating to such employment relationship.
12.3 Assignment. This Agreement shall not be assigned by
Executive without the written consent of Company. Any
attempted assignment without such written consent shall be null and
6
<PAGE>
void and without legal effect. This Agreement may be assigned by
Company and any such assignment shall not terminate or modify this
Agreement, except that the employing party to which Executive shall
have been transferred shall, for the purposes of this Agreement, be
construed as standing in the same place and stead as Company as of
the date of the assignment.
12.4 Binding. Subject to Section 12.2 hereof, this Agreement
shall be binding upon and inure to the benefit of the respective
parties hereto and their successors, assigns, heirs, executors,
administrators and personal representatives. The parties hereto
shall be entitled, at their option, to the remedy of specific
performance to enforce any of the provisions of this Agreement.
12.5 Arbitration. Any dispute, controversy or claim arising
out of or relating to this Agreement, or the breach hereof, shall
be settled by binding arbitration in Las Vegas, Nevada administered
by the American Arbitration Association under its Commercial
Arbitration Rules, and judgment on the award rendered by the
arbitrators may be entered in any court having jurisdiction
thereof.
12.6 Agreement Severable; Waiver. This is a severable
Agreement and in the event that any part of this Agreement shall be
held to be unenforceable, all other parts of this Agreement shall
remain valid and fully enforceable as if the unenforceable part or
parts had not been included herein. No waiver of any provision of
this Agreement shall be binding unless executed in writing by the
party to be bound thereby. No waiver of a breach of any of the
provisions of this Agreement shall be deemed to be or shall
constitute a waiver of a breach of any other provision of this
Agreement, whether or not similar, nor shall such waiver constitute
a continuing waiver of such breach unless otherwise expressly
provided. No failure or delay in exercising any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or remedy
preclude any other or further exercise thereof or the exercise of
any other right, power or remedy.
12.7 Notices. For purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in
writing and shall be deemed to have been duly given when delivered
or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
7
<PAGE>
If to Executive, to: Daniel W. Latham
9145 Deering Avenue
Chatsworth, CA 91311
If to Company, to: Sattel Communications Company
Attn: George Weischadle
9145 Deering Avenue
Chatsworth, CA 91311
or to such other address as either party may have furnished to the
other in writing in accordance herewith except that notices of a
change of address shall be effective only upon receipt.
EXECUTIVE ACKNOWLEDGES HAVING READ, EXECUTED AND RECEIVED A
COPY OF THIS AGREEMENT, INCLUDING THE FOLLOWING NOTICE, AND AGREES
THAT, WITH RESPECT TO THE SUBJECT MATTER HEREOF, IT CONSTITUTES
EXECUTIVE'S ENTIRE AGREEMENT WITH COMPANY, SUPERSEDING ANY PREVIOUS
ORAL OR WRITTEN COMMUNICATIONS, REPRESENTATIONS, UNDERSTANDINGS OR
AGREEMENTS WITH DIANA, COMPANY OR ANY OF THEIR OFFICIALS OR
REPRESENTATIVES.
Notwithstanding anything to the contrary in Section 7 hereof,
this Agreement does not apply to an Invention for which no
equipment, supplies, facility, or trade secret information of the
Company was used and which was developed entirely on Executive's
own time, unless (a) the Invention relates (i) to the business of
the Company as conducted from time to time or (ii) to the Company's
actual or demonstrably anticipated research or development, or (b)
the Invention results from any work performed by the Executive for
the Company.
8
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the day and year first above written.
SATTEL COMMUNICATIONS COMPANY
("Company")
By: /s/ James J. Fiedler
/s/ Daniel W. Latham
("Executive")
(SEAL)
List of Inventions Excepted From Section 7 Above:
None
9
