SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. - 20549
_________________________
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended June 30, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission File No. 0-12588
_________________________
SALIENT 3 COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 23-2280922
(State of Incorporation) (IRS Employer Identification No.)
P.O. Box 1498, Reading, Pennsylvania 19603
(Mailing address of principal executive offices) (Zip Code)
(610) 856-5500
________________________________________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Class A Class B
------- -------
Number of shares of each class of
common stock outstanding as of
June 30, 2000 (excluding 2,846,352
Class A treasury shares): 5,650,726 488,222
--------- -------
<PAGE>
SALIENT 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
INDEX
Part I. Financial Information Pages
Item 1.
Statement of Net Assets in Liquidation (Liquidation Basis)at
June 30, 2000 (unaudited)
Statement of Changes in Net Assets in Liquidation
(Liquidation Basis) for the three months ended
June 30, 2000 (unaudited)
Consolidated Condensed Balance Sheet (Going-Concern
Basis) at December 31, 1999
Consolidated Condensed Statements of Operations (Going-
Concern Basis) for the three month periods ended
March 31, 2000 and April 2, 1999 (unaudited)
Consolidated Condensed Statements of Cash Flows (Going-
Concern Basis) for the three month periods ended
March 31, 2000 and April 2, 1999 (unaudited)
Notes to Financial Statements
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
Part I. Financial Information
<TABLE>
Salient 3 Communications, Inc. and Subsidiaries
Statement of Net Assets in Liquidation (Liquidation Basis)
June 30, 2000
(Unaudited)
(000's except for share and per share information)
June 30,
2000
--------
ASSETS
<S> <C>
Cash and cash equivalents $ 273
Investments in liquidation 162,660
Other assets 8,006
-------
Total Assets 170,939
-------
LIABILITIES
Accrued and other liabilities $ 54,795
Income taxes 22,000
------
Total Liabilities 76,795
------
Net assets in liquidation $ 94,144
======
Number of common shares outstanding 6,138,948
=========
Net assets in liquidation per outstanding share $ 15.34
=====
The accompanying notes are an integral part of this financial statement.
</TABLE>
<PAGE>
<TABLE>
Salient 3 Communications, Inc. and Subsidiaries
Statement of Changes in Net Assets in Liquidation (Liquidation Basis)
Three Months Ended June 30, 2000
(Unaudited)
(000's except for share and per share information)
<S> <C>
Net assets in liquidation, March 31, 2000 $ 93,985
------
Changes in estimated liquidation values:
Cash and cash equivalents 137
Investments (935)
Other assets 1,130
Liabilities (173)
------
Total changes in estimated liquidation values 159
------
Net assets in liquidation, June 30, 2000 $ 94,144
======
The accompanying notes are an integral part of this financial statement.
</TABLE>
<PAGE>
<TABLE>
Salient 3 Communications, Inc. and Subsidiaries
Consolidated Condensed Balance Sheet (Going-Concern Basis)
December 31, 1999
(000's)
December 31,
1999
------------
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $ 1,687
Accounts receivable, net of allowance
for doubtful accounts of $1,556 27,239
Inventories 17,425
Deferred income taxes 4,940
Other current assets 7,302
-------
Total current assets 58,593
-------
Property, plant and equipment, at cost 42,777
Less accumulated depreciation and
amortization 24,973
-------
17,804
-------
Deferred income taxes 6,470
Other assets 2,850
Software development costs 4,068
Goodwill 34,762
-------
Total Assets $ 124,547
=======
<PAGE>
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 202
Accounts payable 9,946
Salaries and wages 1,428
Income taxes, currently payable 406
Deferred revenue 2,164
Other accrued liabilities 10,446
-------
Total current liabilities 24,592
-------
Long-term debt 13,647
Other long-term liabilities 6,990
Stockholders' equity:
Common stock 8,985
Capital in excess of par value 36,974
Warrants outstanding 1,755
Retained earnings 74,178
Foreign currency translation adjustment (14)
Deferred compensation-restricted stock (1,420)
Treasury stock (41,140)
-------
79,318
-------
Total Liabilities and Stockholders' Equity $ 124,547
=======
The accompanying notes are an integral part of this financial statement.
</TABLE>
<PAGE>
<TABLE>
Salient 3 Communications, Inc. and Subsidiaries
Consolidated Condensed Statements of Operations (Going-Concern Basis)
(Unaudited)
(000's except for share and per share information)
Three Months Ended
-------------------------
March 31, April 2,
2000 1999
--------- --------
<S> <C> <C>
Sales $ 25,015 $ 28,623
Cost of goods sold 14,668 16,975
------ ------
Gross profit 10,347 11,648
Selling, general and administration 9,616 8,607
Research and development 2,161 2,421
Goodwill amortization 507 376
------ ------
Operating profit(loss) (1,937) 244
------ ------
Interest and other income 91 94
Interest expense 329 241
------ ------
Pre-tax income(loss) (2,175) 97
------ ------
Provision(benefit) for
taxes on income(loss) (827) 29
------ ------
Net income(loss) $ (1,348) $ 68
====== ======
Net income(loss) per share of common
stock (basic and diluted) $ (0.23) $ 0.01
Basic weighted average shares
outstanding 5,989,073 5,952,391
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
Salient 3 Communications, Inc. and Subsidiaries
Consolidated Condensed Statements of Cash Flows (Going-Concern Basis)
(Unaudited) Three Months Ended
(000's) ----------------------
March 31, April 2,
2000 1999
---------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (1,348) $ 68
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 2,026 1,585
Reserve provisions 711 120
Deferred income tax provision (benefit) - 300
Changes in current assets and current liabilities
net of effects from acquisition:
Accounts receivable and unbilled revenue 3,696 5,321
Inventories (1,196) (607)
Other current assets (843) (434)
Accounts payable and salaries and wages (2,142) 493
Other accrued liabilities (572) (2,799)
Income taxes, currently payable (89) 158
Other, net 47 48
----- -----
Net cash provided by operating activities 290 4,253
----- -----
Cash flows from investing activities:
Payments for acquisition, net of cash acquired (351) (3,967)
Payments for property, plant and equipment (601) (859)
Software development costs (1,475) (563)
----- -----
Net cash used for investing activities (2,427) (5,389)
----- -----
Cash flows from financing activities:
Payments of long-term debt (183) (86)
Borrowings under note payable 2,995 230
Issuance of treasury stock in connection
with stock purchase plan 32 100
Payments to acquire treasury stock (103) (219)
Other, net (260) (194)
----- -----
Net cash provided by (used for) financing activities 2,481 (169)
----- -----
Net increase (decrease) in cash and cash equivalents 344 (1,305)
Cash and cash equivalents at beginning of period 1,687 2,582
----- -----
Cash and cash equivalents at end of period $ 2,031 $ 1,277
===== =====
Supplemental cash flow disclosures:
Interest paid $ 321 $ 209
===== =====
Income taxes paid, net of refunds received $ 150 $ (96)
===== =====
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
SALIENT 3 COMMUNICATIONS, INC AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
(000's except for share and per share information)
LIQUIDATION BASIS STATEMENTS
1. PLAN OF DISSOLUTION AND LIQUIDATION
On April 17, 2000, the Board of Directors of Salient 3 Communications, Inc. (the
Company) adopted a Plan of Dissolution and Liquidation. Under the Plan, the
Company will be liquidated by (i) the sale of its non-cash assets, (ii) the
payment of or providing for all of its claims, obligations and expenses, (iii)
the pro rata distribution of assets, primarily cash, to the shareholders, and
(iv) if required, the distribution of assets to one or more liquidating trusts
established for the benefit of the shareholders. The Plan was approved by
shareholders on July 21, 2000.
Prior to June 30, 2000, seven shareholders, who together control more than 51%
of the issued and outstanding Class B common stock, had agreed to vote their
shares in favor of the Plan of Dissolution and Liquidation. As a result, the
Company adopted the liquidation basis of accounting for the second quarter of
2000. Under the liquidation basis of accounting, assets are stated at their
estimated net realizable values and liabilities are stated at their anticipated
settlement amounts.
The valuation of assets and liabilities necessarily requires many estimates and
assumptions and there are substantial uncertainties in carrying out the
provisions of the Plan. The actual value of any liquidating distributions will
depend upon a variety of factors including, but not limited to, (i) the actual
proceeds from the sale of the Company's subsidiaries and other assets, (ii) the
ultimate settlement amounts of its liabilities and obligations, including
indemnifications provided in connection with subsidiary sale transactions, (iii)
actual costs incurred in connection with carrying out the plan of liquidation,
including administrative costs during the liquidation period, and (iv) the
actual timing of distributions.
The valuations presented in the Statement of Net Assets in Liquidation represent
estimates, based on present facts and circumstances, of the net realizable
values of assets and the costs associated with carrying out the provisions of
the plan of liquidation based on the assumptions set forth in the accompanying
notes. The actual values and costs are expected to differ from the amounts
shown herein and could be higher or lower than the amounts recorded.
Accordingly, it is not possible to predict with certainty the aggregate net
values ultimately distributable to shareholders and no assurance can be given
that the amount to be received in liquidation will equal or exceed the price or
prices at which the Class A common stock has generally traded or is expected to
trade in the future.
2. INVESTMENTS IN LIQUIDATION
Investments in subsidiaries are recorded at their estimated net realizable
values in liquidation. For subsidiaries where a definitive sale contract has
been negotiated, the estimated liquidation value represents the gross proceeds
identified in the sale contract, less estimated costs associated with the sale.
Where no sale contract has been negotiated, the estimated liquidation value is
based on management's estimate of the gross proceeds to be negotiated in a sale
contract, less estimated costs to be associated with the sale.
These valuations may not be reflective of actual amounts obtained when and if
the investments are sold. Because of the inherent uncertainty in closing
potential sale contracts, the amounts shown may materially differ from actual
amounts which may be received in the future. Additionally, the Company is
providing certain indemnifications to buyers under the representations and
warranties sections of the purchase agreements. It is not possible to predict
what claims could possibly be asserted by buyers or what values those potential
claims could have.
On May 11, 2000, the Company reached an agreement to sell the common stock of
SAFCO Technologies, Inc. to Agilent Technologies, Inc. for approximately
$120,000 in cash, subject to certain closing date balance sheet adjustments. On
June 8, 2000, the Company reached an agreement to sell the common stock of GAI-
Tronics Corporation for approximately $40,000 in cash, subject to certain
closing date balance sheet adjustments. On July 21, 2000, the Company's Class B
shareholders approved these sales. Investments in liquidation include the
estimated net realizable values for these subsidiaries.
Effective July 25, 2000, the Company completed the sale of SAFCO Technologies,
Inc. to Agilent Technologies, Inc. for cash of $120,000, subject to adjustment
based on the final net asset value of SAFCO on that date. $11,000 of the
purchase price has been placed into escrow for certain expenses and possible
indemnification claims. Effective on July 26, 2000, the Company completed the
sale of GAI-Tronics Corporation to Hubbell Incorporated for cash of $40,000,
subject to adjustment based on the final net asset value of GAI-Tronics on that
date.
3. INCOME TAXES
All income tax accounts have been restated to reflect the liquidation basis of
accounting. The estimated tax liability reflects income taxes, at statutory
rates, which would become payable if the assets are realized and liabilities
settled at the amounts shown. The estimate is subject to significant variation
if, among other things, the actual values of assets sold vary from current
estimates.
4. ACCRUED AND OTHER LIABILITIES
Accrued and other liabilities include estimates of costs to be incurred in
carrying out the Plan, provisions for known liabilities and provisions for
certain unasserted claims under warranties provided by the Company at June 30,
2000. The accrued costs include salaries and related expenses of officers and
employees assigned to effect the sale and carry out the Plan and legal and
accounting fees expected to be incurred during the period of liquidation. Other
liabilities include short-term borrowings and long-term debt.
The actual costs incurred could vary significantly from the related accrued
expenses due to uncertainty related to the length of time required to complete
the Plan and the outcome of certain contingencies.
5. ADJUSTMENTS FROM GOING-CONCERN TO LIQUIDATION BASIS OF ACCOUNTING
Shareholders' equity, March 31, 2000 (Going-Concern Basis) $ 77,882
------
To increase investments to estimated net realizable values 79,080
To increase estimated income taxes (34,424)
To increase liabilities to anticipated settlement amounts (28,452)
To adjust other assets (101)
------
Total adjustments 16,103
------
Net assets in liquidation, March 31, 2000 (Liquidation Basis) $ 93,985
------
The increase in accrued liabilities includes estimates of costs to be incurred
in carrying out the Plan and provisions for known liabilities. The estimated
costs include legal and accounting fees and salaries and related expenses of
officers and employees who will be assigned to complete the liquidation and
dissolution.
The actual costs incurred could vary significantly from the related provisions
due to uncertainty related to the length of time required to complete the Plan,
the timing of sales of subsidiaries, and complexities which may arise in
disposing of the remaining assets and settling certain contingencies. Interest
income on the Company's cash and short-term investments through the final
liquidation date has not been reflected.
6. OPTIONS AND WARRANTS
In April 2000, the Board of Directors authorized immediate vesting of all
outstanding restricted stock, and, effective with the first subsidiary sale,
vesting of stock options granted under the 1989 Stock Option Plan and the 1996
Long Term Incentive Plan and extension of the exercise period to the record date
of the initial liquidating distribution. The Board also added a provision to
convert all unexercised options at the record date of the initial liquidating
distribution into Limited Stock Appreciation Rights. In addition, all warrant
holders will have the opportunity to convert their warrants into Limited Stock
Appreciation Rights. These rights will entitle the holder to receive cash
payments for each share equal to the difference between the aggregate per share
liquidating distribution payable to shareholders upon liquidation and the per
share exercise price applicable to each converted option or warrant. The
estimated liability for settlement of the limited stock appreciation rights at
June 30, 2000 is $5,489 and is included in accrued liabilities in the statement
of net assets in liquidation. At June 30, 2000, there were options and warrants
outstanding for the purchase of 1,879,033 shares of the Company's common stock.
7. LINES OF CREDIT AND OTHER LONG TERM BORROWINGS
Under terms of a 1999 loan agreement with First Union National Bank, the Company
had a working capital line of credit of $12,000 and an acquisition line of
credit of $6,000. On June 30, 2000, the working capital line was reduced to
$10,000. The agreement requires the Company to pay a commitment fee of one-
quarter of one percent on the unused portion of the lines. As of June 30, 2000,
approximately $2,000 was available under the working capital line of credit
based on outstanding borrowings ($5,353), and outstanding letters of credit.
The loan agreement contains a number of financial and other covenants, the most
restrictive of which prescribes a limited ratio of funded debt to earnings
before interest and taxes. The agreement also contains a provision that limits
the working capital line to a defined borrowing base consisting of eligible
receivables and inventory amounts. As of June 30, 2000, the borrowing base was
in excess of $10,000. Although the Company was not in compliance with one of
its loan covenants as of June 30, 2000, it received a compliance waiver from its
lenders.
The working capital line of credit is available through September 30, 2000. The
Company expects that the line will not be required after that date. At June 30,
2000, $2,153 was committed for stand-by letters of credit.
The acquisition line of credit expired June 30, 2000 and the outstanding balance
of $3,267 was converted to a term loan. Monthly repayments of $58 plus interest
began in March 2000, and will continue for 60 months.
Interest charges are based, at the Company's option, on the bank's prime rate or
a function of LIBOR. The loan is collateralized by substantially all of the
Company's tangible and intangible assets.
As a result of the completion of the sales of SAFCO Technologies, Inc. and GAI-
Tronics Corporation discussed above, the working capital and acquisition lines
of credit were repaid on July 27, 2000 and subsequently cancelled. In addition,
the note payable of $10,000 was repaid with the proceeds of these sales.
GOING-CONCERN BASIS STATEMENTS
8. GENERAL
The going-concern basis financial statements furnished herein reflect all
adjustments which are, in the opinion of management, necessary for a fair
presentation of financial position and results of operations for the interim
periods. Such adjustments are of a normal recurring nature. The accompanying
financial statements are presented in accordance with the requirements of Form
10-Q and consequently do not include all of the disclosures normally required by
generally accepted accounting principles or those normally made in the Company's
annual Form 10-K filing. Accordingly, the reader of this Form 10-Q may wish to
refer to the Company's Form 10-K for the year ended December 31, 1999 for
further information.
9. EARNINGS PER SHARE
Net income (loss) per share of common stock was determined using the average
number of Class A and Class B shares outstanding excluding 156,250 shares of
restricted stock for 1999. No preferred stock was outstanding as of March 31,
2000.
Dilutive shares outstanding were determined on the assumption that all
outstanding options, warrants and shares of restricted stock with a strike price
below the average stock price for the period would be exercised and the related
shares issued. Dilutive shares outstanding for the first quarter of 2000 and
1999 were 6,083,780 and 5,954,827, respectively. These additional shares had an
immaterial effect on the Company's earnings per share calculation.
10. SPECIAL ADJUSTMENTS
In connection with the Company's actions to sell its subsidiaries, various
members of management and key employees have been offered incentives to continue
employment through the completion of the sale process. Portions of these
incentives are guaranteed to the employees subject to continued employment
through December 15, 2000, and are being recognized over the related service
period. Other incentives, including sale bonuses and severance, are dependent
on completion of sale transactions and will be recognized if and when there is a
triggering event.
In the first quarter of 2000, the Company accrued for retention bonuses of $266
and severance costs of $100. The Company also eliminated reserves of $326 due
to collection of a note receivable and receipt of credits from an insurance
company in connection with its conversion to a stock company. The net effect of
these adjustments was a $40 increase in selling, general and administration
expense.
<PAGE>
11. INVENTORIES
The components of inventories as of the balance sheet date were as follows:
Dec. 31, 1999
-------------
Raw material and components $ 9,760
Work in process 2,995
Finished goods 6,430
Reserves (1,760)
------
$17,425
======
12. OTHER ACCRUED LIABILITIES
Other accrued liabilities included an accrual primarily for workers'
compensation of $1,187 and current maturities of long-term debt of $1,115 at
December 31, 1999.
13. SOFTWARE DEVELOPMENT COSTS
The Company capitalizes costs associated with the development of software for
external use in accordance with Statement of Financial Accounting Standards No.
86 "Accounting for Cost of Computer Software to be Sold, Leased, or Otherwise
Marketed." Costs are being amortized in relation to revenue from the products,
but no less than on a straight line basis over 2 to 3 years. Capitalized
software development costs and associated amortization expense were $1,475 and
$435 respectively, in the quarter ended March 31, 2000 and $563 and $66
respectively, in the quarter ended April 2, 1999.
14. ACQUISITIONS
In November and December 1999, the Company acquired the net assets of Irmel
S.r.l. and Red Alert, Inc., respectively, for a total of $4,467, including a
deferred payment of $884 due December 31, 2000 and acquisition costs of $253.
The acquisitions were accounted for as purchases and cost was assigned to the
net assets acquired based on their estimated fair values at the dates of
acquisition. The acquisitions resulted in goodwill of $4,068 which is being
amortized on a straight-line basis over 15 years. Irmel, based in Milan, Italy,
expands the Industrial Segment's European Operations and Red Alert was merged
into its US operations.
Effective February 23, 1999, the Company acquired all of the outstanding stock
of ComOpt AB (ComOpt) for $4,098, including acquisition costs. The Company
recorded goodwill of $3,892, which is being amortized on a straight-line basis
over 10 years. In March 2000, the Company paid an additional $351 to ComOpt's
former shareholders based upon the achievement of certain performance goals.
The additional payment increased goodwill. ComOpt is part of the Company's
Wireless Segment and was merged into the operations of SAFCO Technologies, Inc.
15. SEGMENT INFORMATION
The Company had three reportable segments: Industrial, Access Products and
Wireless. The Industrial Segment developed, assembled and marketed
communication systems for industrial operations. Industrial communication
products are designed to operate under extraordinary plant conditions and
provide emergency notification. In addition, the segment includes land mobile
radio communications devices. The Access Products Segment designs and markets
voice and data transmission system products. The access products provide access
to telecommunications services and automated monitoring and maintenance of
telecommunications network performance. The Wireless Segment's products and
services focus on the measurement and analysis of signal strength, data
communications and radio frequency transmitted between the wireless phone and
cellsites. The Wireless Segment also provides radio frequency engineering
design services.
Each reportable segment operates as a separate, standalone business unit with
its own management.
The Company evaluated segment performance based on profit or loss from
continuing operations before income tax, goodwill amortization and corporate
overhead allocation. Profit or loss is determined in accordance with generally
accepted accounting principles described in the summary of significant
accounting policies. Intersegment sales are not significant.
<TABLE>
Three Months Ended
----------------------
Mar. 31, Apr. 2,
2000 1999
------------------------------------------------------
Sales
-----
<S> <C> <C>
Industrial $ 13,614 $ 16,124
Access Products 3,392 6,552
Wireless 8,009 5,947
------ ------
25,015 28,623
------ ------
Segment Profit (Loss)
---------------------
Industrial (24) 2,213
Access Products (612) (18)
Wireless 214 (652)
General interest expense (294) (222)
General corporate expenses (1,043) (941)
Goodwill amortization (507) (377)
Interest income and other 91 94
------ ------
Pre-tax income (loss) $ (2,175) $ 97
======================================================
</TABLE>
16. NEW ACCOUNTING STANDARD
The Company will adopt the Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities"(SFAS 133), in
the first quarter of 2001. SFAS 133 is not expected to have a material impact
on the Company's consolidated results of operations, financial position or cash
flows.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(000's except for share and per share information)
Introduction
On April 17, 2000, the Company's Board of Directors adopted a Plan of
Dissolution and Liquidation ("the Plan"). Under the Plan, the Company
will be liquidated by (i) the sale of its non-cash assets, (ii) the
payment of or providing for all of its claims, obligations and expenses,
(iii) the pro rata distribution of assets, primarily cash, to the
shareholders, and (iv) if required, the distribution of assets to one or
more liquidating trusts established for the benefit of the shareholders.
The Plan was approved by shareholders on July 21, 2000.
As a result of the adoption and shareholder approval of the Plan of
Dissolution and Liquidation, the Company adopted the liquidation basis of
accounting for the second quarter of 2000. Under the liquidation basis
of accounting, assets are stated at their estimated net realizable values
and liabilities are stated at their anticipated settlement amounts.
On May 11, 2000, the Company reached an agreement to sell the common
stock of SAFCO Technologies, Inc. to Agilent Technologies, Inc. for
approximately $120,000 in cash, subject to certain closing date balance
sheet adjustments. On June 8, 2000, the Company reached an agreement to
sell the common stock of GAI-Tronics Corporation for approximately
$40,000 in cash, subject to certain closing date balance sheet
adjustments. On July 21, 2000, the Company's Class B shareholders
approved these sales. The sale of SAFCO Technologies, Inc. was completed
on July 25, 2000 and the sale of GAI-Tronics Corporation was completed on
July 26, 2000.
Liquidity and Capital Resources
On June 30, 2000, the Company had cash and cash equivalents of $273. The
future cash needs of the Company will be dependent on the implementation
of the Plan. Amounts generated from operations, available cash and cash
equivalents and an existing line of credit are expected to provide
adequate working capital until sales of subsidiaries are completed.
Pursuant to the Plan, after payment or provision for payment of the
Company's indebtedness and other obligations, the cash proceeds of any
asset sales, together with other available cash, will be distributed from
time to time pro rata to the holders of the common stock. The record
dates with respect to each distribution will be selected by the Board of
Directors.
The Company believes that its cash and cash equivalents will be
sufficient to fund its working capital requirements through the
completion of the Plan. The Company also expects to be able to meet the
working capital requirements of its operating subsidiaries prior to the
sale of each subsidiary.
Under the terms of a loan agreement, the Company has a maximum working
capital line of credit of $10,000 as of June 30, 2000 with First Union
National Bank. The line expires on September 30, 2000 and will not be
renewed due to the completion of two or more subsidiary sale transactions
prior to that date. The loan agreement contains a number of financial
and other covenants, the most restrictive of which prescribes a limited
ratio of funded debt to earnings before interest and taxes. The Company
was not in compliance with this covenant at June 30, 2000; however, the
lender waived compliance. The agreement also contains a provision that
limits the line of credit to a defined borrowing base consisting of
eligible receivables and inventory amounts. As of June 30, 2000, the
availability under the line was approximately $4,000, after reductions
for outstanding borrowings of $5,353 and outstanding letters of credit.
In conjunction with the completion of the sales of SAFCO Technologies,
Inc. and GAI-Tronics Corporation, line of credit borrowings were repaid
on July 27, 2000 and subsequently cancelled. In addition, the note
payable of $10,000 was repaid with the proceeds of the sales.
The Company estimates that its total capital expenditures in 2000,
excluding acquisitions and assuming its operating businesses are owned
for the entire year, would be approximately $3,300. No restrictions on
cash transfers between the Company and its subsidiaries exist.
Results of Operations - First Quarter of 2000 versus First Quarter of 1999.
Summary
The Company reported a net loss for the first quarter of 2000 of $1,348,
or $.23 per share compared to net income of $68, or $.01 per share for
the same period of 1999. Sales decreased 13% for the quarter from
$28,623 in 1999 to $25,015 in 2000. The decline in net income was due to
decreased sales and gross margins in the Industrial and Access Products
Segments. The Wireless Segment reported improved operating income for
the first quarter of 2000.
In November and December 1999, the Company acquired the net assets of
Irmel S.r.l. and Red Alert, Inc., respectively, for a total of $4,467,
including a deferred payment of $884 due December 31, 2000 and
acquisition costs of $253. Irmel, based in Milan, Italy, expands the
Industrial Segment's European Operations and Red Alert was merged into
its US operations.
Effective February 23, 1999, the Company acquired all of the outstanding
stock of ComOpt AB (ComOpt), a Swedish wireless software company, for
$4,098, including acquisition costs. ComOpt is part of the Company's
Wireless Segment.
Sales and Gross Profit
The following is a breakdown of sales by segment:
<TABLE>
2000 1999
---- ----
<S> <C> <C>
Access Products $ 3,392 $ 6,552
Industrial 13,614 16,124
Wireless 8,009 5,947
------ ------
Total $25,015 $28,623
====== ======
</TABLE>
Access Products sales declined by 48% in 2000 compared to 1999, due to a
continuing reduction in customer demand for analog channel units and a
slowdown of orders for partnership products. Contributing to the decreases
were customer reuse programs and customer evaluation of their inventory
stocking programs. This segment also suffered from delays in completing
development of its new integrated access product, which is now planned for
production in the second quarter of 2000. Industrial sales decreased 16% in
2000 compared to 1999, primarily because of lower sales by the Reading,
Pennsylvania location due to sluggish capital spending by domestic crude oil
related industries. Sales declines in the European operations were offset by
sales by Irmel, acquired in December 1999. Wireless sales grew 35% year-over-
year due to improved hardware sales, increased demand for engineering services
and the ComOpt acquisition in February, 1999.
The consolidated gross profit percentage increased from 40.7% in 1999 to 41.4%
in 2000. The increase was due to a larger percentage of sales from the
Wireless Segment, which traditionally has higher gross profit percentages from
its software-based products. Both the Access Products and Industrial Segments
experienced declines in gross profit percentages due to their sales declines.
Selling, General and Administration
Selling, general and administration increased 12% in 2000 compared to 1999.
As a percentage of sales, selling, general and administration was 38% and 30%
in 2000 and 1999, respectively. The increases came from the Wireless Segment,
which normally has higher operating costs than the other segments, and the
Industrial Segment, where the cost increases relate to the acquisitions and to
increased selling expense. In addition, the first quarter of 2000 includes
charges of $266 for retention bonuses and $100 for severance costs and credits
of $326 for elimination of reserves due to collection of a note receivable and
receipt of credits from an insurance company in connection with its conversion
to a stock company.
Research and Development, Goodwill Amortization and Interest Expense
Research and development decreased 11% due to capitalization of software
development costs, net of amortization, of $1,040 during the first quarter of
2000 compared to $500 during the first quarter of 1999. Costs are capitalized
for the development of software for external use in accordance with Statement
of Financial Accounting Standard No. 86 "Accounting for Cost of Computer
Software to be Sold, Leased, or Otherwise Marketed." The Wireless and Access
Products Segments are responsible for most of the capitalized costs.
Goodwill amortization increased 35% due to the amortization of goodwill
related to the acquisitions of ComOpt, Irmel and Red Alert.
Interest expense increased 37% due to additional borrowings for the
acquisition of ComOpt, an increase in short-term borrowings in 2000 and
interest rate increases.
Provision for taxes on income
The effective tax rate was 38% for 2000 and 30% for 1999. The change in the
effective tax rate was due to the anticipated reduction in utilization of
research and development tax credits in 2000. Capitalized software
development costs are not eligible for the credit.
Other
In April 2000, the Board authorized immediate vesting of all outstanding
restricted stock, and, effective with the first subsidiary sale, vesting of
stock options granted under the 1989 Stock Option Plan and the 1996 Long Term
Incentive Plan and extension of the exercise period to the record date of the
initial liquidating dividend. The Board also added a provision to convert all
unexercised options at the record date of the initial liquidating dividend
into Limited Stock Appreciation Rights. These rights will entitle the holder
to receive cash payments for each share equal to the difference between the
aggregate per share liquidating distribution payable to stockholders upon
liquidation and the per share exercise price applicable to each converted
option. The estimated liability for settlement of the limited stock
appreciation rights at June 30, 2000 is $5,489.
In order to ensure continuing value in the Company and its operating
subsidiaries, various members of management and key employees have been
offered incentives to continue employment through the completion of the sale
process. Portions of these incentives are guaranteed to the employees subject
to continued employment through December 15, 2000, and are being recognized
over the related service period, including $266 charged to selling, general
and administration during the first quarter of 2000. Other incentives,
including sale bonuses and severance, are dependent on completion of sale
transactions and will be recognized if and when there is a triggering event.
Continued improvement in the Company's operations is dependent upon successful
product releases within the Wireless Segment. Continued lack of demand for
the analog products within the Access Products Segment could depress results;
however, the Company is continuing the process of entering into new technology
partnerships, which are expected to offset declining analog product sales.
Additionally, the Company completed development of a new product for the
access market and began selling the product in the second quarter of 2000.
In the second quarter of 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS 133). The Company will
adopt SFAS 133 during the first quarter of 2001. SFAS 133 is not expected to
have a material impact on the Company's consolidated results of operations,
financial position or cash flows.
During the past few years, the Company has carried out a program to identify,
assess and address issues associated with the Year 2000 problem and its
potential effects on information technology ("IT") systems. The program
considered effects on internal IT systems as well as IT systems of business
partners, including suppliers and customers. The Company has experienced no
significant problems with such issues, and anticipates that no such problems
will surface. Costs of the Year 2000 program were charged to expense as
incurred, and such costs were not material.
This Form 10-Q contains certain statements of a forward-looking nature
relating to future events or the future financial performance of the Company.
Such statements are only predictions and involve risks and uncertainties, and
actual events or performance may differ materially as expressed in any such
forward looking statements. Potential risks and uncertainties include,
without limitation: projections regarding 2000 sales, capital requirements,
product diversity, operating profitability, expected orders from contracts,
market position, expected new technology partnerships, sales from new
products, the effect of general economic conditions in the United States, Asia
and Latin America, the impact of competitive products, services and pricing,
and demand and market acceptance risks of current and new products and
services, technology change, risks of product development and
commercialization difficulties and the outcome of the process to sell the
operating units and dissolve and liquidate the company. Further information
on factors that could affect the Company's future financial performance can be
found in the Company's other filings with the Securities and Exchange
Commission. Words such as "estimates", "positioned", "yields", "should
generate", "appears", "viewed", "could", "would position",
"expected", "does not expect" and "should allow" indicate the presence of
forward looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's only financial instruments with market risk exposure are
revolving credit borrowings and variable rate term loans, which total $8,620
at June 30, 2000. Based on this balance, a change of one percent in the
interest rate would cause a change in the interest expense for the year of
approximately $86.
These financial instruments are non-trading in nature (not entered into for
trading purposes) and carry interest at either the bank's prime interest rate
or a function of London Interbank Offering Rate (LIBOR). The Company's
objective in maintaining these variable rate borrowings is the flexibility
obtained regarding early repayment without penalties and lower overall cost as
compared with fixed rate borrowings.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Salient 3 Communications, Inc. employment agreement with an
executive officer of the Company, effective January 1, 2000.
10.2 Salient 3 Communications, Inc. employment agreement with an
executive officer of the Company, effective January 1, 2000.
10.3 Salient 3 Communications, Inc. employment agreement with an
executive officer of the Company, effective January 1, 2000.
(b) Reports on Form 8-K
(1) The registrant filed Form 8-K on May 12, 2000 which announced the
sale of SAFCO Technologies, Inc.
(2) The registrant filed Form 8-K on June 8, 2000 which announced the
sale of GAI-Tronics Corporation.
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.
Salient 3 Communications, Inc.
/s/Paul H. Snyder
Paul H. Snyder
Senior Vice President and
Chief Financial Officer
Date: August 14, 2000
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of January 1, 2000,
(the "Effective Date") between Salient 3 Communications, Inc. (the "Company")
and Timothy S. Cobb (the "Employee").
WITNESSETH
WHEREAS, the Company desires to insure the availability to the Company of the
Employee's services, and the Employee is willing to render such services, all
upon and subject to the terms and conditions contained in this Agreement;
NOW THEREFORE, in consideration of the premises and the mutual covenants set
forth in this Agreement, the Company and the Employee agree as follows:
1. Employment and Employment Term.
(a) Employment.
Subject to the terms and provisions set forth in this
Agreement, the Company hereby employs the Employee
during the Employment Term (as hereinafter defined) as
the President and Chief Executive Officer of the
Company, and agrees to use its best efforts to cause
the Employee to be a director and Chairman of the Board
of Directors of the Company (the "Board") during the
Employment Term, and the Employee hereby accepts such
employment.
(b) Employment Term.
The period of employment under this Agreement (the
"Employment Term") shall be deemed to have commenced as
the Effective Date and shall continue for a period of
two years thereafter, as herein provided. On January 1,
2002 and on each January 1 thereafter, the Employment
Term shall be automatically extended by one year unless
at least ninety (90) days prior thereto the Company
shall give notice to the Employee that the Employment
Term shall not be so extended; provided that in the
event of a Change of Control, the Employment Term shall
be automatically extended for two years commencing on
such Change of Control. The Employment Term shall
continue until the expiration of all extensions
affected as aforesaid unless and until it ceases or is
terminated sooner as provided in this Agreement.
2. Positions, Responsibilities and Duties.
(a) In General.
During the Employment Term, the Employee shall be
employed as, and the Company shall at all times cause
the Employee to be, President and Chief Executive
Officer of the Company. In addition to such position,
the Company shall use its best efforts to ensure that
the Employee is at all times during the Employment Term
a director and the Chairman of the Board. In such
position, the Employee shall have the duties,
responsibilities and authority normally associated with
such offices and positions in a publicly traded
corporation. No other employee of the Company shall
have authority and responsibilities that are equal to
or greater than those of the Employee. The Employee
shall report solely and directly to the Board and all
other officers and other employees shall report
directly to the Employee or the Employee's designees.
(b) Time.
During the Employment Term, the Employee shall devote
such time as is reasonably necessary to perform the
duties associated with his office and position as set
forth herein and shall use his best efforts to perform
faithfully and efficiently the duties and
responsibilities contemplated by this Agreement;
provided, however, that the Employee shall not be
required to perform any duties and responsibilities
which would likely result in non-compliance with or
violation or breach of any applicable law or
regulation.
Notwithstanding the foregoing, the Employee may devote
reasonable time to activities other than those required
under this Agreement, including the supervision of his
personal investments and activities involving
professional, charitable, educational, religious and
similar types of organizations, to the extent that such
other activities do not materially interfere with or
prohibit the performance of the Employee's duties under
this Agreement or conflict in any material way with the
business of the Company. The Executive shall not serve
on the board of any business without the consent of the
Board.
3. Compensation and Benefits.
(a) Base Salary.
During the Employment Term, the Employee shall receive
a base salary ("Base Salary"), payable in accordance
with the Company's payroll practices generally
applicable to the Company's senior executives, of
$390,000 per annum. Such Base Salary shall be reviewed
for increase (but not decrease) in the sole discretion
of the Compensation Committee of the Board not less
frequently than annually during the Employment Term. If
so increased, such increased Base Salary shall then
constitute "Base Salary" for purposes of this Agreement
and shall not be reduced.
(b) Incentive Compensation.
(i) During the Employment Term, the Employee shall be
entitled to participate in all incentive
compensation plans and programs maintained by the
Company and applicable generally to senior
executives in accordance with the terms thereof.
Such plans and programs, in the aggregate, shall
provide the Employee with compensation
opportunities at least as favorable as the most
favorable of such opportunities provided by the
Company to the Employee under such plans and
programs as in effect at the Effective Date or,
if more favorable to the Employee, as provided at
any time thereafter to the Employee or other
senior executives of the Company.
(ii) Without limiting the foregoing, for each fiscal
year of the Company ending with or within the
Employment Term, the Employee's target annual
incentive under the Company's annual incentive
plan ("Target Annual Incentive") shall be
[seventy-five] percent (75%) of his Base Salary.
Such target may be increased, and, if so
increased, such increased target shall then
constitute the Employee's target annual incentive
for purposes of this Agreement and shall not be
reduced.
(c) Retirement Plans.
During the Employment Term, the Executive shall be
entitled to participate in all savings and retirement
plans and programs maintained by the Company and
applicable generally to senior executives in accordance
with the terms thereof (including, without limitation,
any supplemental and excess defined benefit and defined
contribution savings and retirement plans). Such plans
and programs, in the aggregate, shall provide the
Employee and/or the Employee's family, as the case may
be, with benefits at least as favorable as the most
favorable of such benefits provided by the Company to
or in respect of the Employee under such plans and
programs as in effect at the Effective Date or, if
more favorable to the Employee, as provided at any time
thereafter to or in respect of the Employee or other
senior executives of the Company.
(d) Welfare Benefit Plans.
During the Employment Term, the Executive and/or the
Executive's family, as the case may be, shall be
eligible for participation in and shall receive all
benefits under welfare benefit plans and programs
provided or by the Company and applicable generally to
senior executives in accordance with the terms thereof
(including, without limitation, medical, prescription,
dental, disability, employee life, group life,
accidental death and travel accident insurance plans
and programs). Such plans and programs, in the
aggregate, shall provide the Employee and/or the
Employee's family, as the case may be, with benefits at
least as favorable as the most favorable of such
benefits provided by the Company to or in respect of
the Employee under such plans and programs as in effect
at the Effective Date or, if more favorable to the
Employee, as provided at any time thereafter to or in
respect of the Employee or other senior executives of
the Company.
(e) Vacation and Fringe Benefits.
During the Employment Term, the Employee shall be entitled
to paid vacation and fringe benefits at least as
favorable as the most favorable plans and programs of
the Company for the Employee as in effect at the
Effective Date or, if more favorable to the Employee,
as in effect at any time thereafter for the Employee or
other senior executives of the Company.
(f) Office and Support Staff.
During the Employment Term, the Employee shall be
entitled to an office of a size and with furnishings
and other appointments, and to secretarial and other
assistance, comparable to the most favorable of the
foregoing provided to the Employee by the Company at
the Effective Date or, if more favorable to the
Employee, as provided at any time thereafter to the
Employee or other senior executives of the Company.
(g) Expense Reimbursement
During the Employment Term, the Employee shall be
entitled to receive prompt reimbursement for all usual,
customary and reasonable business-related expenses
incurred by the Employee in performing his duties and
responsibilities hereunder in accordance with the
practices and procedures of the Company as in effect at
the Effective Date, or, if more favorable to the
Employee, as in effect at any time thereafter with
respect to the Employee or other senior executives of
the Company.
(h) Indemnification.
The Company shall maintain directors and officers
liability insurance in commercially reasonable amounts
(as reasonably determined by the Board), and the
Employee shall be covered under such insurance to the
same extent as other directors and senior executives of
the Company.
4. Termination of Employment.
(a) Termination Due to Death or Disability.
The Company may terminate the Employee's employment
hereunder due to Disability (as hereinafter defined).
In the event of the Employee's death or a termination
of the Employee's employment by the Company due to
Disability, the Employee or his estate or legal
representative, as the case may be, shall be entitled
to receive:
(i) any unpaid Base Salary through the Date of
Termination (as hereinafter defined); and
(ii) any other compensation or benefits which may be
owed or provided to or in respect of the Employee
in accordance with the terms and provisions of
this Agreement or any plans and programs of the
Company.
For purposes of this Agreement, "Disability" means
disability under the Company's long-term disability
plan applicable to the Employee as in effect from time
to time or, in the absence of such a plan, the
Employee's inability to render, for a period of six
consecutive months, services hereunder by reason of
permanent disability, as determined by the written
medical opinion of an independent medical physician
mutually acceptable to the Employee and the Company. If
the Employee and the Company cannot agree as to such an
independent medical physician, each shall appoint one
medical physician and those two physicians shall
appoint a third physician who shall make such
determination.
(b) Termination by the Company for Cause.
The Company may terminate the Employee's employment
hereunder for Cause (as hereinafter defined). If the
Company terminates the Employee's employment hereunder
for Cause, the Employee shall be entitled to receive:
(i) any unpaid Base Salary through the Date of
Termination; and
(ii) any other compensation or benefits which may be
owed or provided to or in respect of the Employee
in accordance with the terms and provisions of
this Agreement or any plans and programs of the
Company.
The Employee shall be given written notice authorized
by a vote of at least a majority of the members of the
Board that the Company intends to terminate the
Employee's employment for Cause; provided, however,
that following a Change of Control (as hereinafter
defined), such written notice must be authorized by a
vote of at least 75% of the members of the Board. Such
written notice shall specify the particular act or
acts, or failure to act, which is/are the basis for the
decision to so terminate the Employee's employment for
Cause. The Employee, together with his legal counsel,
shall be given the opportunity within thirty (30)
calendar days of the receipt of such notice to meet
with the Board to defend such act or acts, or failure
to act, and, if such act or failure to act is
correctable, the Employee shall be given 30 business
days after such meeting to correct such act or failure
to act. If such act or failure to act is not
correctable or upon failure of the Employee, within
such latter thirty (30) day period, to correct such act
or failure to act, the Employee's employment by the
Company shall automatically be terminated for Cause as
of the date determined in accordance with this
Agreement. Anything herein to the contrary
notwithstanding, if, following a termination of the
Employee's employment by the Company for Cause based
upon the conviction of the Employee for a felony, such
conviction is overturned on appeal, the Employee shall
be entitled to the payments and benefits that the
Employee would have received as a result of a
termination of the Employee's employment by the Company
without Cause.
For the purposes of this Agreement, "Cause" means (A)
the Employee is convicted of a felony involving moral
turpitude or (B) the Employee, in carrying out his
duties and responsibilities under this Agreement, is
guilty of gross neglect or gross misconduct resulting,
in either case, in material economic harm to the
Company, and such conduct is not cured within thirty
(30) days of the Company providing written notice to
the Employee, unless such act or failure to act either
was believed by the Employee in good faith to be in the
best interests of the Company or resulted from the
Employee's incapacity due to physical or mental
illness.
(c) Voluntary Termination.
The Employee may effect a Voluntary Termination of his
employment hereunder. A Voluntary Termination shall not
be deemed to be a breach of this Agreement and shall
entitle the Employee to all of the rights and benefits
which the Employee would be entitled in the event of a
termination of his employment by the Company for Cause.
For purposes of this Agreement, a "Voluntary
Termination" shall mean a termination of employment by
the Employee on his own initiative other than (i) a
termination due to Disability or (ii) a termination
for Good Reason (as hereinafter defined) following a
Change of Control.
(d) Termination Without Cause Prior to Change of Control.
Prior to a Change of Control, the Company shall be
permitted to terminate the Employee's employment
hereunder without Cause, and the Employee shall be
permitted to terminate his employment hereunder for
Good Reason (as hereinafter defined). If, prior to a
Change of Control, the Company terminates the
Employee's employment hereunder without Cause, other
than due to death or Disability, the following shall
apply:
(i) Lump Sum Payment. The Employee shall be paid a
cash lump sum within thirty (30) days of the Date
of Termination equal to any unpaid Base Salary
through the Date of Termination.
(ii) Severance Payment. The Employee shall be paid
an amount equal to the Employee's Base Salary.
Such amount shall be paid in twelve (12) equal
monthly installments commencing on the first
anniversary of the Employee's Date of
Termination. In the event of the Employee's death
following such Date of Termination, any unpaid
installments shall be paid to the Employee's
estate in a single undiscounted cash lump sum.
Such lump sum shall be paid as soon as
practicable (but in no event later than thirty
(30) days) after the Company has been notified of
the Employee's death.
(iii) Non-Compete Payment. In consideration of the
Employee's covenant not to compete set forth in
Section 6 of this Agreement, the Employee shall
be paid an amount equal to two (2) times the
Employee's Base Salary. Such amount shall be paid
in equal twenty-four (24) monthly installments
commencing as soon as practicable (but in no
event later than thirty (30) days) following the
Employee's Date of Termination. In the event of
the Employee's death following such Date of
Termination, any unpaid installments shall be
paid to the Employee's estate in a single
undiscounted cash lump sum. Such lump sum shall
be paid as soon as practicable (but in no event
later than thirty (30) days) after the Company
has been notified of the Employee's death.
(iv) Benefit Continuation. For two years after the
Employee's Date of Termination or such longer
period as may be provided by the terms of the
applicable plan or program, the Company shall
continue benefits to the Employee and/or the
Employee's family at least equal to those which
would have been provided to them in accordance
with the plans and programs described in Section
3(d) of this Agreement if the Employee's
employment had not been terminated or, if more
favorable to the Employee, as in effect generally
at any time thereafter during the aforesaid
period with respect to other senior executives of
the Company and their families; provided,
however, that if the Employee becomes re-employed
with another employer and is eligible to receive
medical or other welfare benefits under another
employer-provided plan, the medical and other
welfare benefits described herein shall be
secondary to those provided under such other plan
during such applicable period of eligibility; and
for purposes of determining the eligibility of
the Employee for retiree benefits pursuant to
such plans and programs, the Employee shall be
considered to have remained employed during the
aforesaid period after the Employee's Termination
and to have retired on the last day of such
period. In the event that the Employee and/or the
Employee's family's participation in any such
plan or program is barred, the Company shall
arrange to provide the Employee and/or the
Employee's family with benefits substantially
similar to those which the Employee and/or the
Employee's family would otherwise have been
entitled to receive under such plans and programs
from which continued participation is barred.
(v) Other Amounts. Any other compensation or
benefits which may be owed or provided to or in
respect of the Employee in accordance with the
terms and provisions of this Agreement or any
plans and programs of the Company shall be paid
or provided in accordance with the terms and
provisions thereof.
(e) Termination Without Cause or Termination for Good
Reason Following a Change of Control.
Following a Change of Control, the Company shall be
permitted to terminate the Employee's employment
hereunder without Cause, and the Employee shall be
permitted to terminate his employment for Good Reason.
If, within two (2) years following a Change of Control,
the Company terminates the Employee's employment
hereunder without Cause, other than due to death or
Disability, or if the Employee effects a termination
for Good Reason, the following shall apply:
(i) Lump Sum Payment. The Employee shall be paid a
cash lump sum within thirty (30) days of the Date
of Termination equal to the aggregate of:
(A) any unpaid Base Salary through the Date of
Termination;
(B) an amount equal to the product of (x) the
higher of the Employee's (I) Target Annual
Incentive and (II) annual incentive paid or
payable under the Company's annual
incentive plan for the most recently
completed fiscal year, including any
portion thereof which has been earned but
deferred (and annualized if such fiscal
year consists of less than twelve full
months or if during which the Employee was
employed for less than twelve full months),
(such higher amount being referred to as
the "Highest Annual Incentive") and (y) a
fraction, the numerator of which is the
number of days in the current fiscal year
through the Date of Termination, and the
denominator of which is 365; and
(C) an amount equal to the Employee's Base
Salary.
(ii) Non-Compete Payment. In consideration of the
Employee's covenant not to compete set forth in
Section 6 of this Agreement, the Employee shall
be paid an amount equal to two (2) times the
Employee's Base Salary. Such amount shall be paid
in equal twenty-four (24) monthly installments
commencing as soon as practicable (but in no
event later than thirty (30) days) following the
Employee's Date of Termination. In the event of
the Employee's death following such Date of
Termination, any unpaid installments shall be
paid to the Employee's estate in a single
undiscounted cash lump sum. Such lump sum shall
be paid as soon as practicable (but in no event
later than thirty (30) days) after the Company
has been notified of the Employee's death.
(iii) Benefit Continuation. For three years after
the Employee's Date of Termination or such longer
period as may be provided by the terms of the
applicable plan or program, the Company shall
continue benefits to the Employee and/or the
Employee's family at least equal to those which
would have been provided to them in accordance
with the plans and programs described in Section
3(d) of this Agreement if the Employee's
employment had not been terminated or, if more
favorable to the Employee, as in effect generally
at any time thereafter during the aforesaid
period with respect to other senior executives of
the Company and their families; provided,
however, that if the Employee becomes re-employed
with another employer and is eligible to receive
medical or other welfare benefits under another
employer-provided plan, the medical and other
welfare benefits described herein shall be
secondary to those provided under such other plan
during such applicable period of eligibility; and
for purposes of determining the eligibility of
the Employee for retiree benefits pursuant to
such plans and programs, the Employee shall be
considered to have remained employed during the
aforesaid period after the Employee's Date of
Termination and to have retired on the last day
of such period.
(iv) Outplacement. The Company shall, at its sole
expense as incurred, provide the Executive with
outplacement services for twelve (12) months, the
scope and provider of which shall be selected by
the Employee in the Employee's sole discretion,
provided that the Company's obligation with
respect to such services shall not exceed fifteen
percent (15%) of the Employee's Base Salary.
(v) Other Amounts. Any other compensation or
benefits which may be owed or provided to or in
respect of the Employee in accordance with the
terms and provisions of this Agreement or any
plans and programs of the Company shall be paid
or provided in accordance with the terms and
provisions thereof.
(f) Certain Change of Control Provisions.
(i) Definitions.
For purposes of this Agreement, "Change of
Control" means:
(A) The acquisition by any individual, entity
or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of
twenty percent (20%) or more of either (x)
the then outstanding shares of common stock
of the Company (the "Outstanding Company
Common Stock") or (y) the combined voting
power of the then outstanding voting
securities of the Company entitled to vote
generally in the election of directors (the
"Outstanding Company Voting Securities");
provided, however, that, for purposes of
this subsection (A), the following
acquisitions shall not constitute a Change
of Control: (I) any acquisition directly
from the Company, (II) any acquisition by
the Company, (III) any acquisition by any
employee benefit plan (or related trust)
sponsored or maintained by the Company or
any corporation controlled by the Company
or (IV) any acquisition by any corporation
pursuant to a transaction which complies
with clauses (I), (II) and (III) of
subsection (C) of this Section 4(f)(i); or
(B) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent
Board") cease for any reason to constitute
at least a majority of the Board; provided,
however, that any individual becoming a
director subsequent to the date hereof
whose election, or nomination for election
by the Company's shareholders, was approved
by a vote of at least a majority of the
directors then comprising the Incumbent
Board shall be considered as though such
individual were a member of the Incumbent
Board, but excluding, for this purpose, any
such individual whose initial assumption of
office occurs as a result of an actual or
threatened election contest with respect to
the election or removal of directors or
other actual or threatened solicitation of
proxies or consents by or on behalf of a
Person other than the Board; or
(C) Consummation by the Company of a
reorganization, merger or consolidation or
sale or other disposition of all or
substantially all of the assets of the
Company or the acquisition of assets or
stock of another corporation (a "Business
Combination"), in each case, unless,
following such Business Combination, (I)
all or substantially all of the individuals
and entities who were the beneficial
owners, respectively, of the Outstanding
Company Common Stock and Outstanding
Company Voting Securities immediately prior
to such Business Combination beneficially
own, directly or indirectly, more than
fifty percent (50%) of, respectively, the
then outstanding shares of common stock and
the combined voting power of the then
outstanding voting securities entitled to
vote generally in the election of
directors, as the case may be, of the
corporation resulting from such Business
Combination (including, without limitation,
a corporation which as a result of such
transaction owns the Company or all or
substantially all of the Company's assets
either directly or through one or more
subsidiaries) in substantially the same
proportions as their ownership, immediately
prior to such Business Combination of the
Outstanding Company Common Stock and
Outstanding Company Voting Securities, as
the case may be, (II) no Person (excluding
any corporation resulting from such
Business Combination or any employee
benefit plan (or related trust) of the
Company or such corporation resulting from
such Business Combination) beneficially
owns, directly or indirectly, twenty
percent (20%) or more of, respectively, the
then outstanding shares of common stock of
the corporation resulting from such
Business Combination or the combined voting
power of the then outstanding voting
securities of such corporation except to
the extent that such ownership existed
prior to the Business Combination and (III)
at least a majority of the members of the
board of directors of the corporation
resulting from such Business Combination
were members of the Incumbent Board at the
time of the execution of the initial
agreement, or of the action of the Board,
providing for such Business Combination; or
(D) Approval by the shareholders of the Company
of a complete liquidation or dissolution of
the Company.
Notwithstanding the foregoing, unless otherwise
determined by the Board, no Change of Control
shall be deemed to have occurred (x) if the
Employee is a member of a group which first
announces a proposal which, if successful, would
result in a Change of Control, which proposal
(including any modifications thereof) is
ultimately successful; or (y) if the Employee
acquires a two percent (2%) or more equity
interest in the entity which ultimately acquires
the Company pursuant to the transaction described
in (x).
For purposes of this Agreement, "Good Reason"
means and shall be deemed to exist if, without
the prior express written consent of the
Employee, (A) the Employee suffers a reduction in
duties, responsibilities or effective authority
associated with his title and position as set
forth and described in this Agreement or is
assigned any duties or responsibilities
inconsistent in any material respect therewith;
provided that no such reduction or assignment
shall be deemed to have occurred solely as a
result of the merger or sale of all or
substantially all of the assets or stock (a
"disposition") of SAFCO Technologies, Inc., GAI-
Tronics Corporation or XEL Communications, Inc.
(a "named subsidiary") prior to the time that a
disposition shall have occurred with respect to
each such named subsidiary; (B) the Company fails
to substantially perform any material term or
provision of this Agreement; (C) the Employee's
compensation or benefits provided for hereunder
is decreased; (D) the Company's principal
executive office or the Employee's office is
relocated to a location more than twenty-five
(25) miles from its location on the Effective
Date; (E) the Company requires the Employee to
travel on Company business to a substantially
greater extent than required as of the Effective
Date; (F) the Company fails to obtain the full
assumption of this Agreement by a successor
entity in accordance with the Agreement; (G) the
Company purports to terminate the Employee's
employment for Cause and such purported
termination of employment is not effected in
accordance with the requirements of this
Agreement. Any good faith determination of Good
Reason made by the Employee shall be conclusive,
provided that a termination by the Employee for
any reason during the three-month period
commencing on the earlier of (i) the date as of
which there shall have been distributed to the
shareholders of the Company cash, securities
and/or other property having an aggregate fair
market value (determined separately at the time
of and with respect to, each such distribution)
of not less than nine times the then remaining
fair market value of the Company and (ii) the
second anniversary of a Change of Control shall
be deemed to be a termination for Good Reason for
all purposes of this Agreement. The determination
of the amount of any compensation and benefits or
other payments to be paid or provided to or in
respect of the Employee hereunder shall be
determined without regard to any reduction
therein constituting Good Reason.
(ii) Deemed Date of Termination. Anything in this
Agreement to the contrary not withstanding, if a
Change of Control occurs, and if the Employee's
employment with the Company is terminated by the
Company prior to the date on which the Change of
Control occurs, and it is reasonably demonstrated
by the Employee that such termination of
employment (I) was at the request of a third
party who has taken steps reasonably calculated
to effect a Change of Control or (II) otherwise
arose in connection with or anticipation of a
Change of Control, then for all purposes of this
Agreement, the Employee's Date of Termination
shall be deemed to have occurred following such
Change of Control.
(iii) Certain Additional Payments.
(A) Anything in this Agreement to the contrary
notwithstanding and except as set forth
below, in the event it shall be determined
that any payment or distribution by the
Company to or for the benefit of the
Employee, whether paid or payable or
distributed or distributable pursuant to
the terms of this Agreement or otherwise,
but determined without regard to any
additional payments required under this
Section 4(f)(iii) (a "Payment"), would be
subject to the excise tax imposed by
Section 4999 of the Code or any interest or
penalties are incurred by the Employee with
respect to such excise tax (such excise
tax, together with any such interest and
penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the
Employee shall be entitled to receive an
additional payment (a "Gross-Up Payment")
in an amount such that after payment by the
Employee of all taxes (including any
interest or penalties imposed with respect
to such taxes), including, without
limitation, any income taxes (and any
interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the
Gross-Up Payment, the Employee retains an
amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.
(B) Subject to the provisions of Section
4(f)(iii)(C), all determinations required
to be made under this Section, including
whether and when a Gross-Up Payment is
required and the amount of such Gross-Up
Payment and the assumptions to be utilized
in arriving at such determination, shall be
made by a nationally recognized certified
public accounting firm designated by the
Employee (the "Accounting Firm"), which
shall provide detailed supporting
calculations both to the Company and the
Employee within fifteen (15) business days
of the receipt of notice from the Employee
that there has been a Payment, or such
earlier time as is requested by the
Company. Any Gross-Up Payment, as
determined pursuant to this Section
4(f)(iii)(C), shall be paid by the Company
to the Employee within five days of the
receipt of the Accounting Firm's
determination. All fees and expenses of the
Accounting Firm shall be borne solely by
the Company. Any determination by the
Accounting Firm shall be binding upon the
Company and the Employee. As a result of
the uncertainty in the application of
Section 4999 of the Code at the time of the
initial determination by the Accounting
Firm hereunder, it is possible that
Gross-Up Payments that will not have been
made by the Company should have been made
("Underpayment"), consistent with the
calculations required to be made hereunder.
In the event that the Company exhausts its
remedies pursuant to Section 4(f)(iii)(C)
and the Employee thereafter is required to
make a payment of any Excise Tax, the
Accounting Firm shall determine the amount
of the Underpayment that has occurred and
any such Underpayment shall be promptly
paid by the Company to or for the benefit
of the Employee.
(C) The Employee shall notify the Company in
writing of any claim by the Internal
Revenue Service that, if successful, would
require the payment by the Company of the
Gross-Up Payment. Such notification shall
be given as soon as practicable but no
later than ten business days after the
Employee is informed in writing of such
claim and shall apprise the Company of the
nature of such claim and the date on which
such claim is requested to be paid. The
Employee shall not pay such claim prior to
the expiration of the 30-day period
following the date on which the Employee
gives such notice to the Company (or such
shorter period ending on the date that any
payment of taxes with respect to such claim
is due). If the Company notifies the
Employee in writing prior to the expiration
of such period that it desires to contest
such claim, the Employee shall:
(I) give the Company any information
reasonably requested by the Company
relating to such claim,
(II) take such action in connection with
contesting such claim as the Company
shall reasonably request in writing
from time to time, including,
without limitation, accepting legal
representation with respect to such
claim by an attorney reasonably
selected by the Company,
(III) cooperate with the Company in good
faith in order effectively to
contest such claim, and
(IV) permit the Company to participate
in any proceedings relating to such
claim; provided, however, that the
Company shall bear and pay directly
all costs and expenses (including
additional interest and penalties)
incurred in connection with such
contest and shall indemnify and hold
the Employee harmless, on an
after-tax basis, for any Excise Tax
or income tax (including interest
and penalties with respect thereto)
imposed as a result of such
representation and payment of costs
and expenses. Without limitation on
the foregoing provisions of this
Section, the Company shall control
all proceedings taken in connection
with such contest and, at its sole
option, may pursue or forgo any and
all administrative appeals,
proceedings, hearings and
conferences with the taxing
authority in respect of such claim
and may, at its sole option, either
direct the Employee to pay the tax
claimed and sue for a refund or
contest the claim in any permissible
manner, and the Employee agrees to
prosecute such contest to a
determination before any
administrative tribunal, in a court
of initial jurisdiction and in one
or more appellate courts, as the
Company shall determine; provided,
however, that if the Company directs
the Employee to pay such claim and
sue for a refund, the Company shall
advance the amount of such payment
to the Employee, on an interest-free
basis and shall indemnify and hold
the Employee harmless, on an
after-tax basis, from any Excise Tax
or income tax (including interest or
penalties with respect thereto)
imposed with respect to such advance
or with respect to any imputed
income with respect to such advance;
and further provided that any
extension of the statute of
limitations relating to payment of
taxes for the taxable year of the
Employee with respect to which such
contested amount is claimed to be
due is limited solely to such
contested amount. Furthermore, the
Company's control of the contest
shall be limited to issues with
respect to which a Gross-Up Payment
would be payable hereunder and the
Employee shall be entitled to settle
or contest, as the case may be, any
other issue raised by the Internal
Revenue Service or any other taxing
authority.
(D) If, after the receipt by the Employee of an
amount advanced by the Company pursuant to
Section 4(f)(iii)(C), the Employee becomes
entitled to receive any refund with respect
to such claim, the Employee shall (subject
to the Company's complying with the
requirements of such Section) promptly pay
to the Company the amount of such refund
(together with any interest paid or
credited thereon after taxes applicable
thereto). If, after the receipt by the
Executive of an amount advanced by the
Company pursuant to Section 4(f)(iii)(C), a
determination is made that the Employee
shall not be entitled to any refund with
respect to such claim and the Company does
not notify the Employee in writing of its
intent to contest such denial of refund
prior to the expiration of thirty (30) days
after such determination, then such advance
shall be forgiven and shall not be required
to be repaid and the amount of such advance
shall offset, to the extent thereof, the
amount of Gross-Up Payment required to be
paid.
(iv) Vesting of Certain Awards. Any vesting, service
or performance requirements under any outstanding
stock option or restricted stock awards or any
other equity-based or long-term cash awards shall
be deemed fully satisfied as of the Change of
Control.
(g) No Mitigation or Offset.
The Company agrees that, if the Employee's employment
with the Company terminates, the Employee is not
required to seek other employment or to attempt in any
way to reduce any amounts payable to or in respect of
the Employee by the Company pursuant to this Agreement.
Further, the amount of any payment or benefit provided
for in this Agreement shall not be reduced by any
compensation earned by the Employee as the result of
employment by another employer, by retirement benefits,
by offset against any amount claimed to be owed by the
Employee to the Company or otherwise, except as
specifically provided by Section 4(e)(iii).
(h) Notice of Termination.
(i) In General. Any termination of the Employee's
employment by the Company (other than due to
death) shall be communicated by a notice of
termination to the other party hereto given in
accordance with this Agreement (the "Notice of
Termination"). The Notice of Termination shall be
given (A) in the case of a termination for Cause,
within ninety (90) business days after a director
of the Company (excluding the Employee) has
actual knowledge of the events giving rise to
such purported termination, (B) in the case of a
termination for Good Reason, within 180 days of
the Employee's having actual knowledge of the
event or events constituting Good Reason; (C) in
the case of termination for Disability, not later
than thirty (30) days prior to the date the
Company reasonably expects the six consecutive
month period referred to in Section 4(a) to
expire; and (D) in the case of Voluntary
Termination, not later than thirty (30) days
prior to the date of termination specified in
such notice. Such notice shall (x) indicate the
specific termination provision in this Agreement
relied upon, (y) set forth in reasonable detail
the facts and circumstances claimed to provide a
basis for termination of the Employee's
employment unless the provision so indicated, as
applicable, and (Z) if the Date of Termination is
other than the date of actual receipt of such
notice, specify the date on which the Employee's
employment is to be terminated (which date shall
not be earlier than the date on which such notice
is actually received).
(ii) Dispute/Extension. If within fifteen (15) days
after any Notice of Termination is given, or, if
later, prior to the Date of Termination (as
determined without regard to this Section) the
party receiving such Notice of Termination
notifies the other party that a dispute exists
concerning the termination, the Date of
Termination shall be extended until the earlier
of (A) the date on which the Employment Term ends
or (B) the date on which the dispute is finally
resolved, either by mutual written agreement of
the parties or by a final judgment, order or
decree of an arbitrator or a court of competent
jurisdiction (which is not appealable or with
respect to which the time for appeal therefrom
has expired and no appeal has been perfected);
provided however, that the Date of Termination
shall be extended by a notice of dispute given by
the Employee only if such notice is given in good
faith and the Employee pursues the resolution of
such dispute with reasonable diligence. If the
Date of Termination is extended in accordance
with this Section, the Company shall continue to
pay the Employee his full compensation and
benefits in effect when the notice giving rise to
the dispute was given (including, but not limited
to, Base Salary) and continue the Employee's
participation in all employee benefit plans in
which the Employee was participating and, on the
same terms and conditions as, when the notice
giving rise to the dispute was given, until the
Date of Termination, as determined in accordance
with this Section. The determination of the
amount of any compensation and benefits or other
payments to be paid or provided to or in respect
of the Employee hereunder shall be determined
without regard to any reduction therein
constituting Good Reason. Amounts paid under this
Section are in addition to all other amounts due
under this Agreement and shall not be offset
against or reduce any other amounts due under
this Agreement.
(iii) Date of Termination. For purposes of this
Agreement, "Date of Termination" means (A) in the
case of a termination for which a Notice of
Termination is required, the date of actual
receipt of such Notice of Termination, or if
later, the date specified therein, as the case
may be, (B) in the case of Disability, the last
day of the six month period referred to in
Section 4(a), and (C) in all other cases, the
actual date on which the Employee's employment
terminates during the Term of Employment.
5. Enforcement of Agreement; Defense of Actions.
If the Employee determines that it is necessary or desirable
for him to retain legal counsel or incur other costs and
expenses in connection with either enforcing part or all of
his rights under this Agreement or defending against any
allegations by the Company of breach of this Agreement by
him, the Employee shall be entitled to recover from the
Company, as incurred by him, reasonable attorneys' fees,
costs and expenses in connection with such enforcement or
defense plus in each case interest on any delayed payment at
the Applicable Federal Rate provided for in Section
7872(f)(2)(A) of the Code. Such payments shall be made by the
Company to the Employee promptly following submission to the
Company of appropriate documentation evidencing the
incurrence of such attorneys' fees, costs, and expenses. The
Employee's rights to payments under this Section shall not be
affected by the final outcome of any dispute with the
Company; provided however, that to the extent that the court
shall determine that under the circumstances recovery by the
Employee of all or a part of any such fees and costs and
expenses would be unjust or inappropriate, the Employee shall
not be entitled to such recovery.
6. Protective Covenants.
(a) Non-Competition.
During the Employment Term and for a period of two (2)
years following the Date of Termination for any reason,
Employee shall not, directly or indirectly, engage or
act as an executive, employee, consultant, agent or
representative for any company or other entity that is
engaged in the business of providing equipment and/or
services with respect to access products, industrial
communications and/or wireless test equipment in any
geographic area in which the Company is conducting such
business as of the Date of Termination; provided,
however, nothing in this Agreement shall prohibit
Employee from being a stockholder in a mutual fund or a
diversified investment company or a passive owner of
not more than one percent (1%) of the outstanding stock
of any class of a corporation that has a publicly
traded class of equity securities. As consideration for
the covenants contained in this Section 6(a), which are
considered material to the Company, the Company agrees
to pay Employee all amounts owed during his employment
pursuant to this Agreement, and upon Employee's
termination in the circumstances described in Section
4(d) or 4(e) of this Agreement, to pay the amounts set
forth in Section 4(d)(iii) or Section 4(e)(ii) (as the
case may be) of this Agreement. If the Employee is
terminated for Cause or if the Employee effects a
Voluntary Termination, Employee will remain subject to
the covenants contained in this Section 6(a) but will
not be entitled to any consideration in exchange
therefor upon termination of his employment. Employee
acknowledges that if his employment with the Company
terminates for any reason, he can earn a livelihood
without violating the foregoing restrictions and that
the time period and scope of the foregoing restrictions
are reasonably required for the protection of the
Company's valid business interests.
(b) Non-Solicitation of Employees.
The Employee further agrees that during the Employment
Term and for two (2) years thereafter, he shall not, in
any manner, directly or indirectly induce or attempt to
induce any employee of the Company to terminate or
abandon his or her employment for any purpose
whatsoever.
(c) Non-Disclosure.
As used herein, "Confidential Information" means all
technical and business information of the Company and
its affiliated companies, whether protectable or not,
which is of a confidential, trade secret and/or
proprietary character and which is either developed by
the Employee (alone or with others) or to which the
Employee has had access during the Employee's
employment.
The Employee shall use the Employee's best efforts and
diligence both during and after employment by the
Company to protect the confidential, trade secret
and/or proprietary character of all Confidential
Information. The Employee shall not, directly or
indirectly, use (for the Employee or another) or
disclose any Confidential Information, for so long as
it shall remain proprietary or able to be protected as
confidential or trade secret information, except as may
be necessary for the performance of the Employee's
duties with the Company.
The Employee shall deliver promptly to the Company, at
the termination of the Employee's employment, or at any
other time at the Company's request, without retaining
any copies, all documents and other material in the
Employee's possession relating, directly or indirectly,
to any Confidential Information.
Each of the Employee's obligations in this Section 6(c)
shall also apply to the confidential, trade secret and
proprietary information learned or acquired by the
Employee during the Employee's employment from others
with whom the Company or any affiliated company has a
business relationship.
The Employee understands that the Employee is not to
disclose to the Company or any affiliated company, or
use for its benefit, any of the confidential, trade
secret or proprietary information of others.
(d) False, Defamatory or Disparaging Statements.
The Employee agrees that, while he is employed by the
Company, and after his Date of Termination, he shall
not make any false, defamatory or disparaging
statements about the Company, or the officers or
directors of the Company, that are reasonably likely to
cause material damage to the Company or the officers or
directors of the Company. While the Employee is
employed by the Company, and after his Date of
Termination, the Company agrees that neither the
officers nor the directors of the Company shall make
any false, defamatory or disparaging statements about
the Employee that are reasonably likely to cause
material damage to the Employee.
(e) Injunctions to Prevent Breaches of Protective
Covenants.
The parties hereto agree that the Company would be
damaged irreparably in the event of any provision of
subsections (a), (b), (c) or (d) of this Section 6 were
not performed by the Employee in accordance with their
respective terms or were otherwise breached and that
money damages would be an inadequate remedy for any
such nonperformance or breach. Therefore, the Company
or its successors or assigns shall be entitled, in
addition to any other rights and remedies existing in
their favor to an injunction or injunctions to prevent
any breach or threatened breach of any such provisions
and to enforce such provisions specifically (without
posting a bond or other security). The parties hereto
agree that the Employee would be damaged irreparably in
the event that any provision of Section 6(d) were not
performed by the Company in accordance with its terms
or were otherwise breached and that money damages would
be an inadequate remedy for any such nonperformance or
breach. Therefore, the Employee shall be entitled, in
addition to any other rights and remedies existing in
his favor, to an injunction or injunctions to prevent
any breach or threatened breach of any such provisions
and to enforce such provision specifically (without
posting a bond or other security).
7. Miscellaneous.
(a) Applicable Law.
This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of
Pennsylvania, applied without reference to principles
of conflict of laws.
(b) Amendments.
This Agreement may not be amended or modified otherwise
than by a written agreement executed by the parties
hereto or their respective successors and legal
representatives.
(c) Notices.
All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return
receipt requested, postage prepaid, addressed as
follows:
If to the Company:
Salient 3 Communications, Inc.
P.O. Box 1498
Reading, PA 19603
Attention: Senior Vice President and General
Counsel
If to the Employee:
Timothy S. Cobb
[ADDRESS]
or to such other address as either party shall have
furnished to the other in writing in accordance
herewith. Notices and communications shall be effective
when actually received by the addressee.
(d) Withholding.
The Company may withhold from any amounts payable under
this Agreement such federal, state, local or other
taxes as shall be required to be withheld pursuant to
any applicable law or regulation.
(e) Severability.
The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or
enforceability of any other provision of this
Agreement.
(f) Captions.
The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
(g) Beneficiaries/References.
The Employee may select a beneficiary or beneficiaries
to receive any compensation or benefit payable
hereunder following the Employee's death and may change
such election, in either case by giving the Company
written notice thereof. In the event of the Employee's
death or a judicial determination of his incompetence,
reference in this Agreement to the Employee shall be
deemed, where appropriate, to refer to other
beneficiary(ies), his estate or his legal
representative(s).
(h) Entire Agreement.
This Agreement will contain the entire agreement
between the parties concerning the subject matter
hereof and will supersede all prior agreements,
understandings, discussions, negotiations and
undertakings, whether written or oral, between the
parties with respect to the subject matter hereof,.
However, nothing in this Agreement shall adversely
affect the Employee's rights to benefits accrued prior
to the Effective Date, and, except as contemplated
hereby, the Employee's rights with respect to stock
options and restricted stock granted prior to the
Effective Date shall be governed by the respective
stock options and restricted stock agreements relating
thereto.
(i) Representation.
The Company represents and warrants that it is fully
authorized and empowered to enter into this Agreement
and that the performance of
its obligations under this Agreement will not violate
any agreement between the Company and any other person,
firm or organization or any applicable laws or
regulations.
(j) Survivorship.
The respective rights and obligations of the parties
hereunder shall survive any termination of this
Agreement or the Employee's employment hereunder to the
extent necessary to the intended preservation of such
rights and obligations.
(k) Successors.
(i) The Employee. This Agreement is personal to the
Employee and, shall not be assignable by the
Employee, except that the Employee's rights to
receive any compensation or benefits under this
Agreement may be transferred or disposed of
pursuant to testamentary disposition, intestate
succession or pursuant to a domestic relations
order of a court of competent jurisdiction. This
Agreement shall inure to the benefit of and be
enforceable by the Employee's heirs,
beneficiaries and/or legal representatives.
(ii) The Company. This Agreement shall inure to the
benefit of and be binding upon the Company and
its successors and assigns. The Company shall
require any successor to all or substantially all
of the business and/or assets of the Company,
whether direct or indirect, by purchase, merger,
consolidation, acquisition of stock, or
otherwise, by an agreement in form and substance
satisfactory to the Employee, expressly to assume
and agree to perform this
Agreement in the same manner and to the same
extent as the Company would be required to
perform if no such succession had taken place.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date set
forth opposite their signatures herein below.
Salient 3 Communications, Inc.
DATED: ____________________ By: _________________________________
Its: _________________________________
Title
DATED: ____________________ _________________________________
Timothy S. Cobb
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of January 1, 2000,
(the "Effective Date") between Salient 3 Communications, Inc. (the "Company")
and Paul H. Snyder (the "Employee").
WITNESSETH
WHEREAS, the Company desires to insure the availability to the Company of the
Employee's services, and the Employee is willing to render such services, all
upon and subject to the terms and conditions contained in this Agreement;
NOW THEREFORE, in consideration of the premises and the mutual covenants set
forth in this Agreement, the Company and the Employee agree as follows:
1. Employment and Employment Term.
(a) Employment.
Subject to the terms and provisions set forth in this
Agreement, the Company hereby employs the Employee
during the Employment Term (as hereinafter defined) as
the Senior Vice President and Chief Financial Officer
of the Company, and agrees to use its best efforts to
cause the Employee to be a member of the Board of
Directors of the Company (the "Board") during the
Employment Term, and the Employee hereby accepts such
employment.
(b) Employment Term.
The period of employment under this Agreement (the
"Employment Term") shall be deemed to have commenced as
the Effective Date and shall continue for a period of
two years thereafter, as herein provided. On January 1,
2002 and on each January 1 thereafter, the Employment
Term shall be automatically extended by one year unless
at least ninety (90) days prior thereto the Company
shall give notice to the Employee that the Employment
Term shall not be so extended; provided that in the
event of a Change of Control, the Employment Term shall
be automatically extended for two years commencing on
such Change of Control. The Employment Term shall
continue until the expiration of all extensions
affected as aforesaid unless and until it ceases or is
terminated sooner as provided in this Agreement.
2. Positions, Responsibilities and Duties.
(a) In General.
During the Employment Term, the Employee shall be
employed as, and the Company shall at all times cause
the Employee to be, Senior Vice President and Chief
Financial Officer of the Company. In addition to such
position, the Company shall use its best efforts to
ensure that the Employee is at all times during the
Employment Term a member of the Board. In such
position, the Employee shall have the duties,
responsibilities and authority normally associated with
such offices and positions in a publicly traded
corporation.
(b) Time.
During the Employment Term, the Employee shall devote
such time as is reasonably necessary to perform the
duties associated with his office and position as set
forth herein and shall use his best efforts to perform
faithfully and efficiently the duties and
responsibilities contemplated by this Agreement;
provided, however, that the Employee shall not be
required to perform any duties and responsibilities
which would likely result in non-compliance with or
violation or breach of any applicable law or
regulation.
Notwithstanding the foregoing, the Employee may devote
reasonable time to activities other than those required
under this Agreement, including the supervision of his
personal investments and activities involving
professional, charitable, educational, religious and
similar types of organizations, to the extent that such
other activities do not materially interfere with or
prohibit the performance of the Employee's duties under
this Agreement or conflict in any material way with the
business of the Company. The Executive shall not serve
on the board of any business without the consent of the
Chairman of the Board.
3. Compensation and Benefits.
(a) Base Salary.
During the Employment Term, the Employee shall receive
a base salary ("Base Salary"), payable in accordance
with the Company's payroll practices generally
applicable to the Company's senior executives, of
$220,000 per annum. Such Base Salary shall be reviewed
for increase (but not decrease) in the sole discretion
of the Compensation Committee of the Board not less
frequently than annually during the Employment Term. If
so increased, such increased Base Salary shall then
constitute "Base Salary" for purposes of this Agreement
and shall not be reduced.
(b) Incentive Compensation.
(i) During the Employment Term, the Employee shall be
entitled to participate in all incentive
compensation plans and programs maintained by the
Company and applicable generally to senior
executives in accordance with the terms thereof.
Such plans and programs, in the aggregate, shall
provide the Employee with compensation
opportunities at least as favorable as the most
favorable of such opportunities provided by the
Company to the Employee under such plans and
programs as in effect at the Effective Date or,
if more favorable to the Employee, as provided at
any time thereafter to the Employee or other
senior executives of the Company.
(ii) Without limiting the foregoing, for each fiscal
year of the Company ending with or within the
Employment Term, the Employee's target annual
incentive under the Company's annual incentive
plan ("Target Annual Incentive") shall be
[thirty-five] percent (35%) of his Base Salary.
Such target may be increased, and, if so
increased, such increased target shall then
constitute the Employee's target annual incentive
for purposes of this Agreement and shall not be
reduced.
(c) Retirement Plans.
During the Employment Term, the Executive shall be
entitled to participate in all savings and retirement
plans and programs maintained by the Company and
applicable generally to senior executives in accordance
with the terms thereof (including, without limitation,
any supplemental and excess defined benefit and defined
contribution savings and retirement plans). Such plans
and programs, in the aggregate, shall provide the
Employee and/or the Employee's family, as the case may
be, with benefits at least as favorable as the most
favorable of such benefits provided by the Company to
or in respect of the Employee under such plans and
programs as in effect at the Effective Date or, if more
favorable to the Employee, as provided at any time
thereafter to or in respect of the Employee or other
senior executives of the Company.
(d) Welfare Benefit Plans.
During the Employment Term, the Executive and/or the
Executive's family, as the case may be, shall be
eligible for participation in and shall receive all
benefits under welfare benefit plans and programs
provided for by the Company and applicable generally to
senior executives in accordance with the terms thereof
(including, without limitation, medical, prescription,
dental, disability, employee life, group life,
accidental death and travel accident insurance plans
and programs). Such plans and programs, in the
aggregate, shall provide the Employee and/or the
Employee's family, as the case may be, with benefits at
least as favorable as the most favorable of such
benefits provided by the Company to or in respect of
the Employee under such plans and programs as in effect
at the Effective Date or, if more favorable to the
Employee, as provided at any time thereafter to or in
respect of the Employee or other senior executives of
the Company.
(e) Vacation and Fringe Benefits.
During the Employment Term, the Employee shall be
entitled to paid vacation and fringe benefits at least
as favorable as the most favorable plans and programs
of the Company for the Employee as in effect at the
Effective Date or, if more favorable to the Employee,
as in effect at any time thereafter for the Employee or
other senior executives of the Company.
(f) Office and Support Staff.
During the Employment Term, the Employee shall be
entitled to an office of a size and with furnishings
and other appointments, and to secretarial and other
assistance, comparable to the most favorable of the
foregoing provided to the Employee by the Company at
the Effective Date or, if more favorable to the
Employee, as provided at any time thereafter to the
Employee or other senior executives of the Company.
(g) Expense Reimbursement
During the Employment Term, the Employee shall be
entitled to receive prompt reimbursement for all usual,
customary and reasonable business-related expenses
incurred by the Employee in performing his duties and
responsibilities hereunder in accordance with the
practices and procedures of the Company as in effect at
the Effective Date, or, if more favorable to the
Employee, as in effect at any time thereafter with
respect to the Employee or other senior executives of
the Company.
(h) Indemnification.
The Company shall maintain directors and officers
liability insurance in commercially reasonable amounts
(as reasonably determined by the Board), and the
Employee shall be covered under such insurance to the
same extent as other directors and senior executives of
the Company.
4. Termination of Employment.
(a) Termination Due to Death or Disability.
The Company may terminate the Employee's employment
hereunder due to Disability (as hereinafter defined).
In the event of the Employee's death or a termination
of the Employee's employment by the Company due to
Disability, the Employee or his estate or legal
representative, as the case may be, shall be entitled
to receive:
(i) any unpaid Base Salary through the Date of
Termination (as hereinafter defined); and
(ii) any other compensation or benefits which may
be owed or provided to or in respect of the
Employee in accordance with the terms and
provisions of this Agreement or any plans and
programs of the Company.
For purposes of this Agreement, "Disability" means
disability under the Company's long-term disability
plan applicable to the Employee as in effect from time
to time or, in the absence of such a plan, the
Employee's inability to render, for a period of six
consecutive months, services hereunder by reason of
permanent disability, as determined by the written
medical opinion of an independent medical physician
mutually acceptable to the Employee and the Company. If
the Employee and the Company cannot agree as to such an
independent medical physician, each shall appoint one
medical physician and those two physicians shall
appoint a third physician who shall make such
determination.
(b) Termination by the Company for Cause.
The Company may terminate the Employee's employment
hereunder for Cause (as hereinafter defined). If the
Company terminates the Employee's employment hereunder
for Cause, the Employee shall be entitled to receive:
(i) any unpaid Base Salary through the Date of
Termination; and
(ii) any other compensation or benefits which may
be owed or provided to or in respect of the
Employee in accordance with the terms and
provisions of this Agreement or any plans and
programs of the Company.
The Employee shall be given written notice authorized
by a vote of at least a majority of the members of the
Board that the Company intends to terminate the
Employee's employment for Cause; provided, however,
that following a Change of Control (as hereinafter
defined), such written notice must be authorized by a
vote of at least 75% of the members of the Board. Such
written notice shall specify the particular act or
acts, or failure to act, which is/are the basis for the
decision to so terminate the Employee's employment for
Cause. The Employee, together with his legal counsel,
shall be given the opportunity within thirty (30)
calendar days of the receipt of such notice to meet
with the Board to defend such act or acts, or failure
to act, and, if such act or failure to act is
correctable, the Employee shall be given 30 business
days after such meeting to correct such act or failure
to act. If such act or failure to act is not
correctable or upon failure of the Employee, within
such latter thirty (30) day period, to correct such act
or failure to act, the Employee's employment by the
Company shall automatically be terminated for Cause as
of the date determined in accordance with this
Agreement. Anything herein to the contrary
notwithstanding, if, following a termination of the
Employee's employment by the Company for Cause based
upon the conviction of the Employee for a felony, such
conviction is overturned on appeal, the Employee shall
be entitled to the payments and benefits that the
Employee would have received as a result of a
termination of the Employee's employment by the Company
without Cause.
For the purposes of this Agreement, "Cause" means (A)
the Employee is convicted of a felony involving moral
turpitude or (B) the Employee, in carrying out his
duties and responsibilities under this Agreement, is
guilty of gross neglect or gross misconduct resulting,
in either case, in material economic harm to the
Company, and such conduct is not cured within thirty
(30) days of the Company providing written notice to
the Employee, unless such act or failure to act either
was believed by the Employee in good faith to be in the
best interests of the Company or resulted from the
Employee's incapacity due to physical or mental
illness.
(c) Voluntary Termination.
The Employee may effect a Voluntary Termination of his
employment hereunder. A Voluntary Termination shall not
be deemed to be a breach of this Agreement and shall
entitle the Employee to all of the rights and benefits
which the Employee would be entitled in the event of a
termination of his employment by the Company for Cause.
For purposes of this Agreement, a "Voluntary
Termination" shall mean a termination of employment by
the Employee on his own initiative other than (i) a
termination due to Disability or (ii) a termination
for Good Reason (as hereinafter defined) following a
Change of Control.
(d) Termination Without Cause Prior to Change of Control.
Prior to a Change of Control, the Company shall be
permitted to terminate the Employee's employment
hereunder without Cause, and the Employee shall be
permitted to terminate his employment hereunder for
Good Reason (as hereinafter defined). If, prior to a
Change of Control, the Company terminates the
Employee's employment hereunder without Cause, other
than due to death or Disability, the following shall
apply:
(i) Lump Sum Payment. The Employee shall be paid a
cash lump sum within thirty (30) days of the Date
of Termination equal to any unpaid Base Salary
through the Date of Termination.
(ii) Non-Compete Payment. In consideration of the
Employee's covenant not to compete set forth in
Section 6 of this Agreement, the Employee shall
be paid an amount equal to two times the
Employee's Base Salary. Such amount shall be paid
in equal twenty-four (24) monthly installments
commencing as soon as practicable (but in no
event later than thirty (30) days) following the
Employee's Date of Termination. In the event of
the Employee's death following such Date of
Termination, any unpaid installments shall be
paid to the Employee's estate in a single
undiscounted cash lump sum. Such lump sum shall
be paid as soon as practicable (but in no event
later than thirty (30) days) after the Company
has been notified of the Employee's death.
(iii) Benefit Continuation. For two years after the
Employee's Date of Termination or such longer
period as may be provided by the terms of the
applicable plan or program, the Company shall
continue benefits to the Employee and/or the
Employee's family at least equal to those which
would have been provided to them in accordance
with the plans and programs described in Section
3(d) of this Agreement if the Employee's
employment had not been terminated or, if more
favorable to the Employee, as in effect generally
at any time thereafter during the aforesaid
period with respect to other senior executives of
the Company and their families; provided,
however, that if the Employee becomes re-employed
with another employer and is eligible to receive
medical or other welfare benefits under another
employer-provided plan, the medical and other
welfare benefits described herein shall be
secondary to those provided under such other plan
during such applicable period of eligibility; and
for purposes of determining the eligibility of
the Employee for retiree benefits pursuant to
such plans and programs, the Employee shall be
considered to have remained employed during the
aforesaid period after the Employee's Termination
and to have retired on the last day of such
period. In the event that the Employee and/or the
Employee's family's participation in any such
plan or program is barred, the Company shall
arrange to provide the Employee and/or the
Employee's family with benefits substantially
similar to those which the Employee and/or the
Employee's family would otherwise have been
entitled to receive under such plans and programs
from which continued participation is barred.
(iv) Other Amounts. Any other compensation or
benefits which may be owed or provided to or in
respect of the Employee in accordance with the
terms and provisions of this Agreement or any
plans and programs of the Company shall be paid
or provided in accordance with the terms and
provisions thereof.
(e) Termination Without Cause or Termination for Good
Reason Following a Change of Control.
Following a Change of Control, the Company shall be
permitted to terminate the Employee's employment
hereunder without Cause, and the Employee shall be
permitted to terminate his employment for Good Reason.
If, within two (2) years following a Change of Control,
the Company terminates the Employee's employment
hereunder without Cause, other than due to death or
Disability, or if the Employee effects a termination
for Good Reason, the following shall apply:
(i) Lump Sum Payment. The Employee shall be paid a
cash lump sum within thirty (30) days of the Date
of Termination equal to the aggregate of:
(A) any unpaid Base Salary through the Date of
Termination;
(B) an amount equal to the product of (x) the
higher of the Employee's (I) Target Annual
Incentive and (II) annual incentive paid or
payable under the Company's annual
incentive plan for the most recently
completed fiscal year, including any
portion thereof which has been earned but
deferred (and annualized if such fiscal
year consists of less than twelve full
months or if during which the Employee was
employed for less than twelve full months),
(such higher amount being referred to as
the "Highest Annual Incentive") and (y) a
fraction, the numerator of which is the
number of days in the current fiscal year
through the Date of Termination, and the
denominator of which is 365; and
(ii) Non-Compete Payment. In consideration of the
Employee's covenant not to compete set forth in
Section 6 of this Agreement, the Employee shall
be paid an amount equal to two times the
Employee's Base Salary. Such amount shall be paid
in equal twenty-four (24) monthly installments
commencing as soon as practicable (but in no
event later than thirty (30) days) following the
Employee's Date of Termination. In the event of
the Employee's death following such Date of
Termination, any unpaid installments shall be
paid to the Employee's estate in a single
undiscounted cash lump sum. Such lump sum shall
be paid as soon as practicable (but in no event
later than thirty (30) days) after the Company
has been notified of the Employee's death.
(iii) Benefit Continuation. For two years after the
Employee's Date of Termination or such longer
period as may be provided by the terms of the
applicable plan or program, the Company shall
continue benefits to the Employee and/or the
Employee's family at least equal to those which
would have been provided to them in accordance
with the plans and programs described in Section
3(d) of this Agreement if the Employee's
employment had not been terminated or, if more
favorable to the Employee, as in effect generally
at any time thereafter during the aforesaid
period with respect to other senior executives of
the Company and their families; provided,
however, that if the Employee becomes re-employed
with another employer and is eligible to receive
medical or other welfare benefits under another
employer-provided plan, the medical and other
welfare benefits described herein shall be
secondary to those provided under such other plan
during such applicable period of eligibility; and
for purposes of determining the eligibility of
the Employee for retiree benefits pursuant to
such plans and programs, the Employee shall be
considered to have remained employed during the
aforesaid period after the Employee's Date of
Termination and to have retired on the last day
of such period.
(iv) Outplacement. The Company shall, at its sole
expense as incurred, provide the Executive with
outplacement services for twelve (12) months, the
scope and provider of which shall be selected by
the Employee in the Employee's sole discretion,
provided that the Company's obligation with
respect to such services shall not exceed fifteen
percent (15%) of the Employee's Base Salary.
(v) Other Amounts. Any other compensation or
benefits which may be owed or provided to or in
respect of the Employee in accordance with the
terms and provisions of this Agreement or any
plans and programs of the Company shall be paid
or provided in accordance with the terms and
provisions thereof.
(f) Certain Change of Control Provisions.
(i) Definitions.
For purposes of this Agreement, "Change of
Control" means:
(A) The acquisition by any individual, entity
or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of
twenty percent (20%) or more of either (x)
the then outstanding shares of common stock
of the Company (the "Outstanding Company
Common Stock") or (y) the combined voting
power of the then outstanding voting
securities of the Company entitled to vote
generally in the election of directors (the
"Outstanding Company Voting Securities");
provided, however, that, for purposes of
this subsection (A), the following
acquisitions shall not constitute a Change
of Control: (I) any acquisition directly
from the Company, (II) any acquisition by
the Company, (III) any acquisition by any
employee benefit plan (or related trust)
sponsored or maintained by the Company or
any corporation controlled by the Company
or (IV) any acquisition by any corporation
pursuant to a transaction which complies
with clauses (I), (II) and (III) of
subsection (C) of this Section 4(f)(i); or
(B) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent
Board") cease for any reason to constitute
at least a majority of the Board; provided,
however, that any individual becoming a
director subsequent to the date hereof
whose election, or nomination for election
by the Company's shareholders, was approved
by a vote of at least a majority of the
directors then comprising the Incumbent
Board shall be considered as though such
individual were a member of the Incumbent
Board, but excluding, for this purpose, any
such individual whose initial assumption of
office occurs as a result of an actual or
threatened election contest with respect to
the election or removal of directors or
other actual or threatened solicitation of
proxies or consents by or on behalf of a
Person other than the Board; or
(C) Consummation by the Company of a
reorganization, merger or consolidation or
sale or other disposition of all or
substantially all of the assets of the
Company or the acquisition of assets or
stock of another corporation (a "Business
Combination"), in each case, unless,
following such Business Combination, (I)
all or substantially all of the individuals
and entities who were the beneficial
owners, respectively, of the Outstanding
Company Common Stock and Outstanding
Company Voting Securities immediately prior
to such Business Combination beneficially
own, directly or indirectly, more than
fifty percent (50%) of, respectively, the
then outstanding shares of common stock and
the combined voting power of the then
outstanding voting securities entitled to
vote generally in the election of
directors, as the case may be, of the
corporation resulting from such Business
Combination (including, without limitation,
a corporation which as a result of such
transaction owns the Company or all or
substantially all of the Company's assets
either directly or through one or more
subsidiaries) in substantially the same
proportions as their ownership, immediately
prior to such Business Combination of the
Outstanding Company Common Stock and
Outstanding Company Voting Securities, as
the case may be, (II) no Person (excluding
any corporation resulting from such
Business Combination or any employee
benefit plan (or related trust) of the
Company or such corporation resulting from
such Business Combination) beneficially
owns, directly or indirectly, twenty
percent (20%) or more of, respectively, the
then outstanding shares of common stock of
the corporation resulting from such
Business Combination or the combined voting
power of the then outstanding voting
securities of such corporation except to
the extent that such ownership existed
prior to the Business Combination and (III)
at least a majority of the members of the
board of directors of the corporation
resulting from such Business Combination
were members of the Incumbent Board at the
time of the execution of the initial
agreement, or of the action of the Board,
providing for such Business Combination; or
(D) Approval by the shareholders of the Company
of a complete liquidation or dissolution of
the Company.
Notwithstanding the foregoing, unless otherwise
determined by the Board, no Change of Control
shall be deemed to have occurred (x) if the
Employee is a member of a group which first
announces a proposal which, if successful, would
result in a Change of Control, which proposal
(including any modifications thereof) is
ultimately successful; or (y) if the Employee
acquires a two percent (2%) or more equity
interest in the entity which ultimately acquires
the Company pursuant to the transaction described
in (x).
For purposes of this Agreement, "Good Reason"
means and shall be deemed to exist if, without
the prior express written consent of the
Employee, (A) the Employee suffers a reduction in
duties, responsibilities or effective authority
associated with his title and position as set
forth and described in this Agreement or is
assigned any duties or responsibilities
inconsistent in any material respect therewith;
provided that no such reduction or assignment
shall be deemed to have occurred solely as a
result of the merger or sale of all or
substantially all of the assets or stock (a
"disposition") of SAFCO Technologies, Inc., GAI-
Tronics Corporation or XEL Communications, Inc.
(a "named subsidiary") prior to the time that a
disposition shall have occurred with respect to
each such named subsidiary; (B) the Company fails
to substantially perform any material term or
provision of this Agreement; (C) the Employee's
compensation or benefits provided for hereunder
is decreased; (D) the Company's principal
executive office or the Employee's office is
relocated to a location more than twenty-five
(25) miles from its location on the Effective
Date; (E) the Company requires the Employee to
travel on Company business to a substantially
greater extent than required as of the Effective
Date; (F) the Company fails to obtain the full
assumption of this Agreement by a successor
entity in accordance with the Agreement; (G) the
Company purports to terminate the Employee's
employment for Cause and such purported
termination of employment is not effected in
accordance with the requirements of this
Agreement. Any good faith determination of Good
Reason made by the Employee shall be conclusive,
provided that a termination by the Employee for
any reason during the three-month period
commencing on the earlier of (i) the date as of
which there shall have been distributed to the
shareholders of the Company cash, securities
and/or other property having an aggregate fair
market value (determined separately at the time
of and with respect to, each such distribution)
of not less than nine times the then remaining
fair market value of the Company and (ii) the
second anniversary of a Change of Control shall
be deemed to be a termination for Good Reason for
all purposes of this Agreement. The determination
of the amount of any compensation and benefits or
other payments to be paid or provided to or in
respect of the Employee hereunder shall be
determined without regard to any reduction
therein constituting Good Reason.
(ii) Deemed Date of Termination. Anything in this
Agreement to the contrary not withstanding, if a
Change of Control occurs, and if the Employee's
employment with the Company is terminated by the
Company prior to the date on which the Change of
Control occurs, and it is reasonably demonstrated
by the Employee that such termination of
employment (I) was at the request of a third
party who has taken steps reasonably calculated
to effect a Change of Control or (II) otherwise
arose in connection with or anticipation of a
Change of Control, then for all purposes of this
Agreement, the Employee's Date of Termination
shall be deemed to have occurred following such
Change of Control.
(iii) Certain Additional Payments.
(A) Anything in this Agreement to the contrary
notwithstanding and except as set forth
below, in the event it shall be determined
that any payment or distribution by the
Company to or for the benefit of the
Employee, whether paid or payable or
distributed or distributable pursuant to
the terms of this Agreement or otherwise,
but determined without regard to any
additional payments required under this
Section 4(f)(iii) (a "Payment"), would be
subject to the excise tax imposed by
Section 4999 of the Code or any interest or
penalties are incurred by the Employee with
respect to such excise tax (such excise
tax, together with any such interest and
penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the
Employee shall be entitled to receive an
additional payment (a "Gross-Up Payment")
in an amount such that after payment by the
Employee of all taxes (including any
interest or penalties imposed with respect
to such taxes), including, without
limitation, any income taxes (and any
interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the
Gross-Up Payment, the Employee retains an
amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.
(B) Subject to the provisions of Section
4(f)(iii)(C), all determinations required
to be made under this Section, including
whether and when a Gross-Up Payment is
required and the amount of such Gross-Up
Payment and the assumptions to be utilized
in arriving at such determination, shall be
made by a nationally recognized certified
public accounting firm designated by the
Employee (the "Accounting Firm"), which
shall provide detailed supporting
calculations both to the Company and the
Employee within fifteen (15) business days
of the receipt of notice from the Employee
that there has been a Payment, or such
earlier time as is requested by the
Company. Any Gross-Up Payment, as
determined pursuant to this Section
4(f)(iii)(C), shall be paid by the Company
to the Employee within five days of the
receipt of the Accounting Firm's
determination. All fees and expenses of the
Accounting Firm shall be borne solely by
the Company. Any determination by the
Accounting Firm shall be binding upon the
Company and the Employee. As a result of
the uncertainty in the application of
Section 4999 of the Code at the time of the
initial determination by the Accounting
Firm hereunder, it is possible that
Gross-Up Payments that will not have been
made by the Company should have been made
("Underpayment"), consistent with the
calculations required to be made hereunder.
In the event that the Company exhausts its
remedies pursuant to Section 4(f)(iii)(C)
and the Employee thereafter is required to
make a payment of any Excise Tax, the
Accounting Firm shall determine the amount
of the Underpayment that has occurred and
any such Underpayment shall be promptly
paid by the Company to or for the benefit
of the Employee.
(C) The Employee shall notify the Company in
writing of any claim by the Internal
Revenue Service that, if successful, would
require the payment by the Company of the
Gross-Up Payment. Such notification shall
be given as soon as practicable but no
later than ten business days after the
Employee is informed in writing of such
claim and shall apprise the Company of the
nature of such claim and the date on which
such claim is requested to be paid. The
Employee shall not pay such claim prior to
the expiration of the 30-day period
following the date on which the Employee
gives such notice to the Company (or such
shorter period ending on the date that any
payment of taxes with respect to such claim
is due). If the Company notifies the
Employee in writing prior to the expiration
of such period that it desires to contest
such claim, the Employee shall:
(I) give the Company any information
reasonably requested by the Company
relating to such claim,
(II) take such action in connection with
contesting such claim as the Company
shall reasonably request in writing
from time to time, including,
without limitation, accepting legal
representation with respect to such
claim by an attorney reasonably
selected by the Company,
(III) cooperate with the Company in good
faith in order effectively to
contest such claim, and
(IV) permit the Company to participate
in any proceedings relating to such
claim; provided, however, that the
Company shall bear and pay directly
all costs and expenses (including
additional interest and penalties)
incurred in connection with such
contest and shall indemnify and hold
the Employee harmless, on an
after-tax basis, for any Excise Tax
or income tax (including interest
and penalties with respect thereto)
imposed as a result of such
representation and payment of costs
and expenses. Without limitation on
the foregoing provisions of this
Section, the Company shall control
all proceedings taken in connection
with such contest and, at its sole
option, may pursue or forgo any and
all administrative appeals,
proceedings, hearings and
conferences with the taxing
authority in respect of such claim
and may, at its sole option, either
direct the Employee to pay the tax
claimed and sue for a refund or
contest the claim in any permissible
manner, and the Employee agrees to
prosecute such contest to a
determination before any
administrative tribunal, in a court
of initial jurisdiction and in one
or more appellate courts, as the
Company shall determine; provided,
however, that if the Company directs
the Employee to pay such claim and
sue for a refund, the Company shall
advance the amount of such payment
to the Employee, on an interest-free
basis and shall indemnify and hold
the Employee harmless, on an
after-tax basis, from any Excise Tax
or income tax (including interest or
penalties with respect thereto)
imposed with respect to such advance
or with respect to any imputed
income with respect to such advance;
and further provided that any
extension of the statute of
limitations relating to payment of
taxes for the taxable year of the
Employee with respect to which such
contested amount is claimed to be
due is limited solely to such
contested amount. Furthermore, the
Company's control of the contest
shall be limited to issues with
respect to which a Gross-Up Payment
would be payable hereunder and the
Employee shall be entitled to settle
or contest, as the case may be, any
other issue raised by the Internal
Revenue Service or any other taxing
authority.
(D) If, after the receipt by the Employee of an
amount advanced by the Company pursuant to
Section 4(f)(iii)(C), the Employee becomes
entitled to receive any refund with respect
to such claim, the Employee shall (subject
to the Company's complying with the
requirements of such Section) promptly pay
to the Company the amount of such refund
(together with any interest paid or
credited thereon after taxes applicable
thereto). If, after the receipt by the
Executive of an amount advanced by the
Company pursuant to Section 4(f)(iii)(C), a
determination is made that the Employee
shall not be entitled to any refund with
respect to such claim and the Company does
not notify the Employee in writing of its
intent to contest such denial of refund
prior to the expiration of thirty (30) days
after such determination, then such advance
shall be forgiven and shall not be required
to be repaid and the amount of such advance
shall offset, to the extent thereof, the
amount of Gross-Up Payment required to be
paid.
(iv) Vesting of Certain Awards. Any vesting,
service or performance requirements under any
outstanding stock option or restricted stock
awards or any other equity-based or long-term
cash awards shall be deemed fully satisfied as of
the Change of Control.
(g) No Mitigation or Offset.
The Company agrees that, if the Employee's employment
with the Company terminates, the Employee is not
required to seek other employment or to attempt in any
way to reduce any amounts payable to or in respect of
the Employee by the Company pursuant to this Agreement.
Further, the amount of any payment or benefit provided
for in this Agreement shall not be reduced by any
compensation earned by the Employee as the result of
employment by another employer, by retirement benefits,
by offset against any amount claimed to be owed by the
Employee to the Company or otherwise, except as
specifically provided by Section 4(e)(iii).
(h) Notice of Termination.
(i) In General. Any termination of the Employee's
employment by the Company (other than due to
death) shall be communicated by a notice of
termination to the other party hereto given in
accordance with this Agreement (the "Notice of
Termination"). The Notice of Termination shall be
given (A) in the case of a termination for Cause,
within ninety (90) business days after a director
of the Company (excluding the Employee) has
actual knowledge of the events giving rise to
such purported termination, (B) in the case of a
termination for Good Reason, within 180 days of
the Employee's having actual knowledge of the
event or events constituting Good Reason; (C) in
the case of termination for Disability, not later
than thirty (30) days prior to the date the
Company reasonably expects the six consecutive
month period referred to in Section 4(a) to
expire; and (D) in the case of Voluntary
Termination, not later than thirty (30) days
prior to the date of termination specified in
such notice. Such notice shall (x) indicate the
specific termination provision in this Agreement
relied upon, (y) set forth in reasonable detail
the facts and circumstances claimed to provide a
basis for termination of the Employee's
employment unless the provision so indicated, as
applicable, and (Z) if the Date of Termination is
other than the date of actual receipt of such
notice, specify the date on which the Employee's
employment is to be terminated (which date shall
not be earlier than the date on which such notice
is actually received).
(ii) Dispute/Extension. If within fifteen (15) days
after any Notice of Termination is given, or, if
later, prior to the Date of Termination (as
determined without regard to this Section) the
party receiving such Notice of Termination
notifies the other party that a dispute exists
concerning the termination, the Date of
Termination shall be extended until the earlier
of (A) the date on which the Employment Term ends
or (B) the date on which the dispute is finally
resolved, either by mutual written agreement of
the parties or by a final judgment, order or
decree of an arbitrator or a court of competent
jurisdiction (which is not appealable or with
respect to which the time for appeal therefrom
has expired and no appeal has been perfected);
provided however, that the Date of Termination
shall be extended by a notice of dispute given by
the Employee only if such notice is given in good
faith and the Employee pursues the resolution of
such dispute with reasonable diligence. If the
Date of Termination is extended in accordance
with this Section, the Company shall continue to
pay the Employee his full compensation and
benefits in effect when the notice giving rise to
the dispute was given (including, but not limited
to, Base Salary) and continue the Employee's
participation in all employee benefit plans in
which the Employee was participating and, on the
same terms and conditions as, when the notice
giving rise to the dispute was given, until the
Date of Termination, as determined in accordance
with this Section. The determination of the
amount of any compensation and benefits or other
payments to be paid or provided to or in respect
of the Employee hereunder shall be determined
without regard to any reduction therein
constituting Good Reason. Amounts paid under this
Section are in addition to all other amounts due
under this Agreement and shall not be offset
against or reduce any other amounts due under
this Agreement.
(iii) Date of Termination. For purposes of this
Agreement, "Date of Termination" means (A) in the
case of a termination for which a Notice of
Termination is required, the date of actual
receipt of such Notice of Termination, or if
later, the date specified therein, as the case
may be, (B) in the case of Disability, the last
day of the six month period referred to in
Section 4(a), and (C) in all other cases, the
actual date on which the Employee's employment
terminates during the Term of Employment.
5. Enforcement of Agreement; Defense of Actions.
If the Employee determines that it is necessary or desirable
for him to retain legal counsel or incur other costs and
expenses in connection with either enforcing part or all of
his rights under this Agreement or defending against any
allegations by the Company of breach of this Agreement by
him, the Employee shall be entitled to recover from the
Company, as incurred by him, reasonable attorneys' fees,
costs and expenses in connection with such enforcement or
defense plus in each case interest on any delayed payment at
the Applicable Federal Rate provided for in Section
7872(f)(2)(A) of the Code. Such payments shall be made by the
Company to the Employee promptly following submission to the
Company of appropriate documentation evidencing the
incurrence of such attorneys' fees, costs, and expenses. The
Employee's rights to payments under this Section shall not be
affected by the final outcome of any dispute with the
Company; provided however, that to the extent that the court
shall determine that under the circumstances recovery by the
Employee of all or a part of any such fees and costs and
expenses would be unjust or inappropriate, the Employee shall
not be entitled to such recovery.
6. Protective Covenants.
(a) Non-Competition.
During the Employment Term and for a period of two (2)
years following the Date of Termination for any reason,
Employee shall not, directly or indirectly, engage or
act as an executive, employee, consultant, agent or
representative for any company or other entity that is
engaged in the business of providing equipment and/or
services with respect to access products, industrial
communications and/or wireless test equipment in any
geographic area in which the Company is conducting such
business as of the Date of Termination; provided,
however, nothing in this Agreement shall prohibit
Employee from being a stockholder in a mutual fund or a
diversified investment company or a passive owner of
not more than one percent (1%) of the outstanding stock
of any class of a corporation that has a publicly
traded class of equity securities. As consideration for
the covenants contained in this Section 6(a), which are
considered material to the Company, the Company agrees
to pay Employee all amounts owed during his employment
pursuant to this Agreement, and upon Employee's
termination in the circumstances described in Section
4(d) or 4(e) of this Agreement, to pay the amounts set
forth in Section 4(d)(iii) or Section 4(e)(ii) (as the
case may be) of this Agreement. If the Employee is
terminated for Cause or if the Employee effects a
Voluntary Termination, Employee will remain subject to
the covenants contained in this Section 6(a) but will
not be entitled to any consideration in exchange
therefor upon termination of his employment. Employee
acknowledges that if his employment with the Company
terminates for any reason, he can earn a livelihood
without violating the foregoing restrictions and that
the time period and scope of the foregoing restrictions
are reasonably required for the protection of the
Company's valid business interests.
(b) Non-Solicitation of Employees.
The Employee further agrees that during the Employment
Term and for two (2) years thereafter, he shall not, in
any manner, directly or indirectly induce or attempt to
induce any employee of the Company to terminate or
abandon his or her employment for any purpose
whatsoever.
(c) Non-Disclosure.
As used herein, "Confidential Information" means all
technical and business information of the Company and
its affiliated companies, whether protectable or not,
which is of a confidential, trade secret and/or
proprietary character and which is either developed by
the Employee (alone or with others) or to which the
Employee has had access during the Employee's
employment.
The Employee shall use the Employee's best efforts and
diligence both during and after employment by the
Company to protect the confidential, trade secret
and/or proprietary character of all Confidential
Information. The Employee shall not, directly or
indirectly, use (for the Employee or another) or
disclose any Confidential Information, for so long as
it shall remain proprietary or able to be protected as
confidential or trade secret information, except as may
be necessary for the performance of the Employee's
duties with the Company.
The Employee shall deliver promptly to the Company, at
the termination of the Employee's employment, or at any
other time at the Company's request, without retaining
any copies, all documents and other material in the
Employee's possession relating, directly or indirectly,
to any Confidential Information.
Each of the Employee's obligations in this Section 6(c)
shall also apply to the confidential, trade secret and
proprietary information learned or acquired by the
Employee during the Employee's employment from others
with whom the Company or any affiliated company has a
business relationship.
The Employee understands that the Employee is not to
disclose to the Company or any affiliated company, or
use for its benefit, any of the confidential, trade
secret or proprietary information of others.
(d) False, Defamatory or Disparaging Statements.
The Employee agrees that, while he is employed by the
Company, and after his Date of Termination, he shall
not make any false, defamatory or disparaging
statements about the Company, or the officers or
directors of the Company, that are reasonably likely to
cause material damage to the Company or the officers or
directors of the Company. While the Employee is
employed by the Company, and after his Date of
Termination, the Company agrees that neither the
officers nor the directors of the Company shall make
any false, defamatory or disparaging statements about
the Employee that are reasonably likely to cause
material damage to the Employee.
(e) Injunctions to Prevent Breaches of Protective
Covenants.
The parties hereto agree that the Company would be
damaged irreparably in the event of any provision of
subsections (a), (b), (c) or (d) of this Section 6 were
not performed by the Employee in accordance with their
respective terms or were otherwise breached and that
money damages would be an inadequate remedy for any
such nonperformance or breach. Therefore, the Company
or its successors or assigns shall be entitled, in
addition to any other rights and remedies existing in
their favor to an injunction or injunctions to prevent
any breach or threatened breach of any such provisions
and to enforce such provisions specifically (without
posting a bond or other security). The parties hereto
agree that the Employee would be damaged irreparably in
the event that any provision of Section 6(d) were not
performed by the Company in accordance with its terms
or were otherwise breached and that money damages would
be an inadequate remedy for any such nonperformance or
breach. Therefore, the Employee shall be entitled, in
addition to any other rights and remedies existing in
his favor, to an injunction or injunctions to prevent
any breach or threatened breach of any such provisions
and to enforce such provision specifically (without
posting a bond or other security).
7. Miscellaneous.
(a) Applicable Law.
This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of
Pennsylvania, applied without reference to principles
of conflict of laws.
(b) Amendments.
This Agreement may not be amended or modified otherwise
than by a written agreement executed by the parties
hereto or their respective successors and legal
representatives.
(c) Notices.
All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return
receipt requested, postage prepaid, addressed as
follows:
If to the Company:
Salient 3 Communications, Inc.
P.O. Box 1498
Reading, PA 19603
Attention: Senior Vice President and General
Counsel
If to the Employee:
Paul H. Snyder
[ADDRESS]
or to such other address as either party shall have
furnished to the other in writing in accordance
herewith. Notices and communications shall be effective
when actually received by the addressee.
(d) Withholding.
The Company may withhold from any amounts payable under
this Agreement such federal, state, local or other
taxes as shall be required to be withheld pursuant to
any applicable law or regulation.
(e) Severability.
The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or
enforceability of any other provision of this
Agreement.
(f) Captions.
The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
(g) Beneficiaries/References.
The Employee may select a beneficiary or beneficiaries
to receive any compensation or benefit payable
hereunder following the Employee's death and may change
such election, in either case by giving the Company
written notice thereof. In the event of the Employee's
death or a judicial determination of his incompetence,
reference in this Agreement to the Employee shall be
deemed, where appropriate, to refer to other
beneficiary(ies), his estate or his legal
representative(s).
(h) Entire Agreement.
This Agreement will contain the entire agreement
between the parties concerning the subject matter
hereof and will supersede all prior agreements,
understandings, discussions, negotiations and
undertakings, whether written or oral, between the
parties with respect to the subject matter hereof,.
However, nothing in this Agreement shall adversely
affect the Employee's rights to benefits accrued prior
to the Effective Date, and, except as contemplated
hereby, the Employee's rights with respect to stock
options and restricted stock granted prior to the
Effective Date shall be governed by the respective
stock options and restricted stock agreements relating
thereto.
(i) Representation.
The Company represents and warrants that it is fully
authorized and empowered to enter into this Agreement
and that the performance of its obligations under this
Agreement will not violate any agreement between the
Company and any other person, firm or organization or
any applicable laws or regulations.
(j) Survivorship.
The respective rights and obligations of the parties
hereunder shall survive any termination of this
Agreement or the Employee's employment hereunder to the
extent necessary to the intended preservation of such
rights and obligations.
(k) Successors.
(i) The Employee. This Agreement is personal to the
Employee and, shall not be assignable by the
Employee, except that the Employee's rights to
receive any compensation or benefits under this
Agreement may be transferred or disposed of
pursuant to testamentary disposition, intestate
succession or pursuant to a domestic relations
order of a court of competent jurisdiction. This
Agreement shall inure to the benefit of and be
enforceable by the Employee's heirs,
beneficiaries and/or legal representatives.
(ii) The Company. This Agreement shall inure to the
benefit of and be binding upon the Company and
its successors and assigns. The Company shall
require any successor to all or substantially all
of the business and/or assets of the Company,
whether direct or indirect, by purchase, merger,
consolidation, acquisition of stock, or
otherwise, by an agreement in form and substance
satisfactory to the Employee, expressly to assume
and agree to perform this Agreement in the same
manner and to the same extent as the
Company would be required to perform if no such
succession had taken place.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date set
forth opposite their signatures herein below.
Salient 3 Communications, Inc.
DATED: ____________________ By: _________________________________
Its: _________________________________
Title
DATED: ____________________ _________________________________
Paul H. Snyder
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of January 1, 2000,
(the "Effective Date") between Salient 3 Communications, Inc. (the "Company")
and Thomas F. Hafer (the "Employee").
WITNESSETH
WHEREAS, the Company desires to insure the availability to the Company of the
Employee's services, and the Employee is willing to render such services, all
upon and subject to the terms and conditions contained in this Agreement;
NOW THEREFORE, in consideration of the premises and the mutual covenants set
forth in this Agreement, the Company and the Employee agree as follows:
1. Employment and Employment Term.
(a) Employment.
Subject to the terms and provisions set forth in this
Agreement, the Company hereby employs the Employee
during the Employment Term (as hereinafter defined) as
the Senior Vice President, General Counsel and
Secretary of the Company, and the Employee hereby
accepts such employment.
(b) Employment Term.
The period of employment under this Agreement (the
"Employment Term") shall be deemed to have commenced as
the Effective Date and shall continue for a period of
two years thereafter, as herein provided. On January 1,
2002 and on each January 1 thereafter, the Employment
Term shall be automatically extended by one year unless
at least ninety (90) days prior thereto the Company
shall give notice to the Employee that the Employment
Term shall not be so extended; provided that in the
event of a Change of Control, the Employment Term shall
be automatically extended for two years commencing on
such Change of Control. The Employment Term shall
continue until the expiration of all extensions
affected as aforesaid unless and until it ceases or is
terminated sooner as provided in this Agreement.
2. Positions, Responsibilities and Duties.
(a) In General.
During the Employment Term, the Employee shall be
employed as, and the Company shall at all times cause
the Employee to be, Senior Vice President, General
Counsel and Secretary of the Company. In such position,
the Employee shall have the duties, responsibilities
and authority normally associated with such offices and
positions in a publicly traded corporation.
(b) Time.
During the Employment Term, the Employee shall devote
such time as is reasonably necessary to perform the
duties associated with his office and position as set
forth herein and shall use his best efforts to perform
faithfully and efficiently the duties and
responsibilities contemplated by this Agreement;
provided, however, that the Employee shall not be
required to perform any duties and responsibilities
which would likely result in non-compliance with or
violation or breach of any applicable law or
regulation.
Notwithstanding the foregoing, the Employee may devote
reasonable time to activities other than those required
under this Agreement, including the supervision of his
personal investments and activities involving
professional, charitable, educational, religious and
similar types of organizations, to the extent that such
other activities do not materially interfere with or
prohibit the performance of the Employee's duties under
this Agreement or conflict in any material way with the
business of the Company. The Executive shall not serve
on the board of any business without the consent of the
Chairman of the Board of Directors of the Company (the
"Board").
3. Compensation and Benefits.
(a) Base Salary.
During the Employment Term, the Employee shall receive
a base salary ("Base Salary"), payable in accordance
with the Company's payroll practices generally
applicable to the Company's senior executives, of
$215,000 per annum. Such Base Salary shall be reviewed
for increase (but not decrease) in the sole discretion
of the Compensation Committee of the Board not less
frequently than annually during the Employment Term. If
so increased, such increased Base Salary shall then
constitute "Base Salary" for purposes of this Agreement
and shall not be reduced.
(b) Incentive Compensation.
(i) During the Employment Term, the Employee shall be
entitled to participate in all incentive
compensation plans and programs maintained by the
Company and applicable generally to senior
executives in accordance with the terms thereof.
Such plans and programs, in the aggregate, shall
provide the Employee with compensation
opportunities at least as favorable as the most
favorable of such opportunities provided by the
Company to the Employee under such plans and
programs as in effect at the Effective Date or,
if more favorable to the Employee, as provided at
any time thereafter to the Employee or other
senior executives of the Company.
(ii) Without limiting the foregoing, for each fiscal
year of the Company ending with or within the
Employment Term, the Employee's target annual
incentive under the Company's annual incentive
plan ("Target Annual Incentive") shall be
[thirty-five] percent (35%) of his Base Salary.
Such target may be increased, and, if so
increased, such increased target shall then
constitute the Employee's target annual incentive
for purposes of this Agreement and shall not be
reduced.
(c) Retirement Plans.
During the Employment Term, the Executive shall be
entitled to participate in all savings and retirement
plans and programs maintained by the Company and
applicable generally to senior executives in accordance
with the terms thereof (including, without limitation,
any supplemental and excess defined benefit and defined
contribution savings and retirement plans). Such plans
and programs, in the aggregate, shall provide the
Employee and/or the Employee's family, as the case may
be, with benefits at least as favorable as the most
favorable of such benefits provided by the Company to
or in respect of the Employee under such plans and
programs as in effect at the Effective Date or, if more
favorable to the Employee, as provided at any time
thereafter to or in respect of the Employee or other
senior executives of the Company.
(d) Welfare Benefit Plans.
During the Employment Term, the Executive and/or the
Executive's family, as the case may be, shall be
eligible for participation in and shall receive all
benefits under welfare benefit plans and programs
provided for by the Company and applicable generally to
senior executives in accordance with the terms thereof
(including, without limitation, medical, prescription,
dental, disability, employee life, group life,
accidental death and travel accident insurance plans
and programs). Such plans and programs, in the
aggregate, shall provide the Employee and/or the
Employee's family, as the case may be, with benefits at
least as favorable as the most favorable of such
benefits provided by the Company to or in respect of
the Employee under such plans and programs as in effect
at the Effective Date or, if more favorable to the
Employee, as provided at any time thereafter to or in
respect of the Employee or other senior executives of
the Company.
(e) Vacation and Fringe Benefits.
During the Employment Term, the Employee shall be
entitled to paid vacation and fringe benefits at least
as favorable as the most favorable plans and programs
of the Company for the Employee as in effect at the
Effective Date or, if more favorable to the Employee,
as in effect at any time thereafter for the Employee or
other senior executives of the Company.
(f) Office and Support Staff.
During the Employment Term, the Employee shall be
entitled to an office of a size and with furnishings
and other appointments, and to secretarial and other
assistance, comparable to the most favorable of the
foregoing provided to the Employee by the Company at
the Effective Date or, if more favorable to the
Employee, as provided at any time thereafter to the
Employee or other senior executives of the Company.
(g) Expense Reimbursement
During the Employment Term, the Employee shall be
entitled to receive prompt reimbursement for all usual,
customary and reasonable business-related expenses
incurred by the Employee in performing his duties and
responsibilities hereunder in accordance with the
practices and procedures of the Company as in effect at
the Effective Date, or, if more favorable to the
Employee, as in effect at any time thereafter with
respect to the Employee or other senior executives of
the Company.
(h) Indemnification.
The Company shall maintain directors and officers
liability insurance in commercially reasonable amounts
(as reasonably determined by the Board), and the
Employee shall be covered under such insurance to the
same extent as other senior executives of the Company.
4. Termination of Employment.
(a) Termination Due to Death or Disability.
The Company may terminate the Employee's employment
hereunder due to Disability (as hereinafter defined).
In the event of the Employee's death or a termination
of the Employee's employment by the Company due to
Disability, the Employee or his estate or legal
representative, as the case may be, shall be entitled
to receive:
(i) any unpaid Base Salary through the Date of
Termination (as hereinafter defined); and
(ii) any other compensation or benefits which may
be owed or provided to or in respect of the
Employee in accordance with the terms and
provisions of this Agreement or any plans and
programs of the Company.
For purposes of this Agreement, "Disability" means
disability under the Company's long-term disability
plan applicable to the Employee as in effect from time
to time or, in the absence of such a plan, the
Employee's inability to render, for a period of six
consecutive months, services hereunder by reason of
permanent disability, as determined by the written
medical opinion of an independent medical physician
mutually acceptable to the Employee and the Company. If
the Employee and the Company cannot agree as to such an
independent medical physician, each shall appoint one
medical physician and those two physicians shall
appoint a third physician who shall make such
determination.
(b) Termination by the Company for Cause.
The Company may terminate the Employee's employment
hereunder for Cause (as hereinafter defined). If the
Company terminates the Employee's employment hereunder
for Cause, the Employee shall be entitled to receive:
(i) any unpaid Base Salary through the Date of
Termination; and
(ii) any other compensation or benefits which may
be owed or provided to or in respect of the
Employee in accordance with the terms and
provisions of this Agreement or any plans and
programs of the Company.
The Employee shall be given written notice authorized
by a vote of at least a majority of the members of the
Board that the Company intends to terminate the
Employee's employment for Cause; provided, however,
that following a Change of Control (as hereinafter
defined), such written notice must be authorized by a
vote of at least 75% of the members of the Board. Such
written notice shall specify the particular act or
acts, or failure to act, which is/are the basis for the
decision to so terminate the Employee's employment for
Cause. The Employee, together with his legal counsel,
shall be given the opportunity within thirty (30)
calendar days of the receipt of such notice to meet
with the Board to defend such act or acts, or failure
to act, and, if such act or failure to act is
correctable, the Employee shall be given 30 business
days after such meeting to correct such act or failure
to act. If such act or failure to act is not
correctable or upon failure of the Employee, within
such latter thirty (30) day period, to correct such act
or failure to act, the Employee's employment by the
Company shall automatically be terminated for Cause as
of the date determined in accordance with this
Agreement. Anything herein to the contrary
notwithstanding, if, following a termination of the
Employee's employment by the Company for Cause based
upon the conviction of the Employee for a felony, such
conviction is overturned on appeal, the Employee shall
be entitled to the payments and benefits that the
Employee would have received as a result of a
termination of the Employee's employment by the Company
without Cause.
For the purposes of this Agreement, "Cause" means (A)
the Employee is convicted of a felony involving moral
turpitude or (B) the Employee, in carrying out his
duties and responsibilities under this Agreement, is
guilty of gross neglect or gross misconduct resulting,
in either case, in material economic harm to the
Company, and such conduct is not cured within thirty
(30) days of the Company providing written notice to
the Employee, unless such act or failure to act either
was believed by the Employee in good faith to be in the
best interests of the Company or resulted from the
Employee's incapacity due to physical or mental
illness.
(c) Voluntary Termination.
The Employee may effect a Voluntary Termination of his
employment hereunder. A Voluntary Termination shall not
be deemed to be a breach of this Agreement and shall
entitle the Employee to all of the rights and benefits
which the Employee would be entitled in the event of a
termination of his employment by the Company for Cause.
For purposes of this Agreement, a "Voluntary
Termination" shall mean a termination of employment by
the Employee on his own initiative other than (i) a
termination due to Disability or (ii) a termination
for Good Reason (as hereinafter defined) following a
Change of Control.
(d) Termination Without Cause Prior to Change of Control.
Prior to a Change of Control, the Company shall be
permitted to terminate the Employee's employment
hereunder without Cause, and the Employee shall be
permitted to terminate his employment hereunder for
Good Reason (as hereinafter defined). If, prior to a
Change of Control, the Company terminates the
Employee's employment hereunder without Cause, other
than due to death or Disability, the following shall
apply:
(i) Lump Sum Payment. The Employee shall be paid a
cash lump sum within thirty (30) days of the Date
of Termination equal to any unpaid Base Salary
through the Date of Termination.
(ii) Non-Compete Payment. In consideration of the
Employee's covenant not to compete set forth in
Section 6 of this Agreement, the Employee shall
be paid an amount equal to two times the
Employee's Base Salary. Such amount shall be paid
in equal twenty-four (24) monthly installments
commencing as soon as practicable (but in no
event later than thirty (30) days) following the
Employee's Date of Termination. In the event of
the Employee's death following such Date of
Termination, any unpaid installments shall be
paid to the Employee's estate in a single
undiscounted cash lump sum. Such lump sum shall
be paid as soon as practicable (but in no event
later than thirty (30) days) after the Company
has been notified of the Employee's death.
(iii) Benefit Continuation. For two years after the
Employee's Date of Termination or such longer
period as may be provided by the terms of the
applicable plan or program, the Company shall
continue benefits to the Employee and/or the
Employee's family at least equal to those which
would have been provided to them in accordance
with the plans and programs described in Section
3(d) of this Agreement if the Employee's
employment had not been terminated or, if more
favorable to the Employee, as in effect generally
at any time thereafter during the aforesaid
period with respect to other senior executives of
the Company and their families; provided,
however, that if the Employee becomes re-employed
with another employer and is eligible to receive
medical or other welfare benefits under another
employer-provided plan, the medical and other
welfare benefits described herein shall be
secondary to those provided under such other plan
during such applicable period of eligibility; and
for purposes of determining the eligibility of
the Employee for retiree benefits pursuant to
such plans and programs, the Employee shall be
considered to have remained employed during the
aforesaid period after the Employee's Termination
and to have retired on the last day of such
period. In the event that the Employee and/or the
Employee's family's participation in any such
plan or program is barred, the Company shall
arrange to provide the Employee and/or the
Employee's family with benefits substantially
similar to those which the Employee and/or the
Employee's family would otherwise have been
entitled to receive under such plans and programs
from which continued participation is barred.
(iv) Other Amounts. Any other compensation or
benefits which may be owed or provided to or in
respect of the Employee in accordance with the
terms and provisions of this Agreement or any
plans and programs of the Company shall be paid
or provided in accordance with the terms and
provisions thereof.
(e) Termination Without Cause or Termination for Good
Reason Following a Change of Control.
Following a Change of Control, the Company shall be
permitted to terminate the Employee's employment
hereunder without Cause, and the Employee shall be
permitted to terminate his employment for Good Reason.
If, within two (2) years following a Change of Control,
the Company terminates the Employee's employment
hereunder without Cause, other than due to death or
Disability, or if the Employee effects a termination
for Good Reason, the following shall apply:
(i) Lump Sum Payment. The Employee shall be paid a
cash lump sum within thirty (30) days of the Date
of Termination equal to the aggregate of:
(A) any unpaid Base Salary through the Date of
Termination;
(B) an amount equal to the product of (x) the
higher of the Employee's (I) Target Annual
Incentive and (II) annual incentive paid or
payable under the Company's annual
incentive plan for the most recently
completed fiscal year, including any
portion thereof which has been earned but
deferred (and annualized if such fiscal
year consists of less than twelve full
months or if during which the Employee was
employed for less than twelve full months),
(such higher amount being referred to as
the "Highest Annual Incentive") and (y) a
fraction, the numerator of which is the
number of days in the current fiscal year
through the Date of Termination, and the
denominator of which is 365; and
(ii) Non-Compete Payment. In consideration of the
Employee's covenant not to compete set forth in
Section 6 of this Agreement, the Employee shall
be paid an amount equal to two times the
Employee's Base Salary. Such amount shall be paid
in equal twenty-four (24) monthly installments
commencing as soon as practicable (but in no
event later than thirty (30) days) following the
Employee's Date of Termination. In the event of
the Employee's death following such Date of
Termination, any unpaid installments shall be
paid to the Employee's estate in a single
undiscounted cash lump sum. Such lump sum shall
be paid as soon as practicable (but in no event
later than thirty (30) days) after the Company
has been notified of the Employee's death.
(iii) Benefit Continuation. For two years after the
Employee's Date of Termination or such longer
period as may be provided by the terms of the
applicable plan or program, the Company shall
continue benefits to the Employee and/or the
Employee's family at least equal to those which
would have been provided to them in accordance
with the plans and programs described in Section
3(d) of this Agreement if the Employee's
employment had not been terminated or, if more
favorable to the Employee, as in effect generally
at any time thereafter during the aforesaid
period with respect to other senior executives of
the Company and their families; provided,
however, that if the Employee becomes re-employed
with another employer and is eligible to receive
medical or other welfare benefits under another
employer-provided plan, the medical and other
welfare benefits described herein shall be
secondary to those provided under such other plan
during such applicable period of eligibility; and
for purposes of determining the eligibility of
the Employee for retiree benefits pursuant to
such plans and programs, the Employee shall be
considered to have remained employed during the
aforesaid period after the Employee's Date of
Termination and to have retired on the last day
of such period.
(iv) Outplacement. The Company shall, at its sole
expense as incurred, provide the Executive with
outplacement services for twelve (12) months, the
scope and provider of which shall be selected by
the Employee in the Employee's sole discretion,
provided that the Company's obligation with
respect to such services shall not exceed fifteen
percent (15%) of the Employee's Base Salary.
(v) Other Amounts. Any other compensation or
benefits which may be owed or provided to or in
respect of the Employee in accordance with the
terms and provisions of this Agreement or any
plans and programs of the Company shall be paid
or provided in accordance with the terms and
provisions thereof.
(f) Certain Change of Control Provisions.
(i) Definitions.
For purposes of this Agreement, "Change of
Control" means:
(A) The acquisition by any individual, entity
or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of
twenty percent (20%) or more of either (x)
the then outstanding shares of common stock
of the Company (the "Outstanding Company
Common Stock") or (y) the combined voting
power of the then outstanding voting
securities of the Company entitled to vote
generally in the election of directors (the
"Outstanding Company Voting Securities");
provided, however, that, for purposes of
this subsection (A), the following
acquisitions shall not constitute a Change
of Control: (I) any acquisition directly
from the Company, (II) any acquisition by
the Company, (III) any acquisition by any
employee benefit plan (or related trust)
sponsored or maintained by the Company or
any corporation controlled by the Company
or (IV) any acquisition by any corporation
pursuant to a transaction which complies
with clauses (I), (II) and (III) of
subsection (C) of this Section 4(f)(i); or
(B) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent
Board") cease for any reason to constitute
at least a majority of the Board; provided,
however, that any individual becoming a
director subsequent to the date hereof
whose election, or nomination for election
by the Company's shareholders, was approved
by a vote of at least a majority of the
directors then comprising the Incumbent
Board shall be considered as though such
individual were a member of the Incumbent
Board, but excluding, for this purpose, any
such individual whose initial assumption of
office occurs as a result of an actual or
threatened election contest with respect to
the election or removal of directors or
other actual or threatened solicitation of
proxies or consents by or on behalf of a
Person other than the Board; or
(C) Consummation by the Company of a
reorganization, merger or consolidation or
sale or other disposition of all or
substantially all of the assets of the
Company or the acquisition of assets or
stock of another corporation (a "Business
Combination"), in each case, unless,
following such Business Combination, (I)
all or substantially all of the individuals
and entities who were the beneficial
owners, respectively, of the Outstanding
Company Common Stock and Outstanding
Company Voting Securities immediately prior
to such Business Combination beneficially
own, directly or indirectly, more than
fifty percent (50%) of, respectively, the
then outstanding shares of common stock and
the combined voting power of the then
outstanding voting securities entitled to
vote generally in the election of
directors, as the case may be, of the
corporation resulting from such Business
Combination (including, without limitation,
a corporation which as a result of such
transaction owns the Company or all or
substantially all of the Company's assets
either directly or through one or more
subsidiaries) in substantially the same
proportions as their ownership, immediately
prior to such Business Combination of the
Outstanding Company Common Stock and
Outstanding Company Voting Securities, as
the case may be, (II) no Person (excluding
any corporation resulting from such
Business Combination or any employee
benefit plan (or related trust) of the
Company or such corporation resulting from
such Business Combination) beneficially
owns, directly or indirectly, twenty
percent (20%) or more of, respectively, the
then outstanding shares of common stock of
the corporation resulting from such
Business Combination or the combined voting
power of the then outstanding voting
securities of such corporation except to
the extent that such ownership existed
prior to the Business Combination and (III)
at least a majority of the members of the
board of directors of the corporation
resulting from such Business Combination
were members of the Incumbent Board at the
time of the execution of the initial
agreement, or of the action of the Board,
providing for such Business Combination; or
(D) Approval by the shareholders of the Company
of a complete liquidation or dissolution of
the Company.
Notwithstanding the foregoing, unless otherwise
determined by the Board, no Change of Control
shall be deemed to have occurred (x) if the
Employee is a member of a group which first
announces a proposal which, if successful, would
result in a Change of Control, which proposal
(including any modifications thereof) is
ultimately successful; or (y) if the Employee
acquires a two percent (2%) or more equity
interest in the entity which ultimately acquires
the Company pursuant to the transaction described
in (x).
For purposes of this Agreement, "Good Reason"
means and shall be deemed to exist if, without
the prior express written consent of the
Employee, (A) the Employee suffers a reduction in
duties, responsibilities or effective authority
associated with his title and position as set
forth and described in this Agreement or is
assigned any duties or responsibilities
inconsistent in any material respect therewith;
provided that no such reduction or assignment
shall be deemed to have occurred solely as a
result of the merger or sale of all or
substantially all of the assets or stock (a
"disposition") of SAFCO Technologies, Inc., GAI-
Tronics Corporation or XEL Communications, Inc.
(a "named subsidiary") prior to the time that a
disposition shall have occurred with respect to
each such named subsidiary; (B) the Company fails
to substantially perform any material term or
provision of this Agreement; (C) the Employee's
compensation or benefits provided for hereunder
is decreased; (D) the Company's principal
executive office or the Employee's office is
relocated to a location more than twenty-five
(25) miles from its location on the Effective
Date; (E) the Company requires the Employee to
travel on Company business to a substantially
greater extent than required as of the Effective
Date; (F) the Company fails to obtain the full
assumption of this Agreement by a successor
entity in accordance with the Agreement; (G) the
Company purports to terminate the Employee's
employment for Cause and such purported
termination of employment is not effected in
accordance with the requirements of this
Agreement. Any good faith determination of Good
Reason made by the Employee shall be conclusive,
provided that a termination by the Employee for
any reason during the three-month period
commencing on the earlier of (i) the date as of
which there shall have been distributed to the
shareholders of the Company cash, securities
and/or other property having an aggregate fair
market value (determined separately at the time
of and with respect to, each such distribution)
of not less than nine times the then remaining
fair market value of the Company and (ii) the
second anniversary of a Change of Control shall
be deemed to be a termination for Good Reason for
all purposes of this Agreement. The determination
of the amount of any compensation and benefits or
other payments to be paid or provided to or in
respect of the Employee hereunder shall be
determined without regard to any reduction
therein constituting Good Reason.
(ii) Deemed Date of Termination. Anything in this
Agreement to the contrary not withstanding, if a
Change of Control occurs, and if the Employee's
employment with the Company is terminated by the
Company prior to the date on which the Change of
Control occurs, and it is reasonably demonstrated
by the Employee that such termination of
employment (I) was at the request of a third
party who has taken steps reasonably calculated
to effect a Change of Control or (II) otherwise
arose in connection with or anticipation of a
Change of Control, then for all purposes of this
Agreement, the Employee's Date of Termination
shall be deemed to have occurred following such
Change of Control.
(iii) Certain Additional Payments.
(A) Anything in this Agreement to the contrary
notwithstanding and except as set forth
below, in the event it shall be determined
that any payment or distribution by the
Company to or for the benefit of the
Employee, whether paid or payable or
distributed or distributable pursuant to
the terms of this Agreement or otherwise,
but determined without regard to any
additional payments required under this
Section 4(f)(iii) (a "Payment"), would be
subject to the excise tax imposed by
Section 4999 of the Code or any interest or
penalties are incurred by the Employee with
respect to such excise tax (such excise
tax, together with any such interest and
penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the
Employee shall be entitled to receive an
additional payment (a "Gross-Up Payment")
in an amount such that after payment by the
Employee of all taxes (including any
interest or penalties imposed with respect
to such taxes), including, without
limitation, any income taxes (and any
interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the
Gross-Up Payment, the Employee retains an
amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.
(B) Subject to the provisions of Section
4(f)(iii)(C), all determinations required
to be made under this Section, including
whether and when a Gross-Up Payment is
required and the amount of such Gross-Up
Payment and the assumptions to be utilized
in arriving at such determination, shall be
made by a nationally recognized certified
public accounting firm designated by the
Employee (the "Accounting Firm"), which
shall provide detailed supporting
calculations both to the Company and the
Employee within fifteen (15) business days
of the receipt of notice from the Employee
that there has been a Payment, or such
earlier time as is requested by the
Company. Any Gross-Up Payment, as
determined pursuant to this Section
4(f)(iii)(C), shall be paid by the Company
to the Employee within five days of the
receipt of the Accounting Firm's
determination. All fees and expenses of the
Accounting Firm shall be borne solely by
the Company. Any determination by the
Accounting Firm shall be binding upon the
Company and the Employee. As a result of
the uncertainty in the application of
Section 4999 of the Code at the time of the
initial determination by the Accounting
Firm hereunder, it is possible that
Gross-Up Payments that will not have been
made by the Company should have been made
("Underpayment"), consistent with the
calculations required to be made hereunder.
In the event that the Company exhausts its
remedies pursuant to Section 4(f)(iii)(C)
and the Employee thereafter is required to
make a payment of any Excise Tax, the
Accounting Firm shall determine the amount
of the Underpayment that has occurred and
any such Underpayment shall be promptly
paid by the Company to or for the benefit
of the Employee.
(C) The Employee shall notify the Company in
writing of any claim by the Internal
Revenue Service that, if successful, would
require the payment by the Company of the
Gross-Up Payment. Such notification shall
be given as soon as practicable but no
later than ten business days after the
Employee is informed in writing of such
claim and shall apprise the Company of the
nature of such claim and the date on which
such claim is requested to be paid. The
Employee shall not pay such claim prior to
the expiration of the 30-day period
following the date on which the Employee
gives such notice to the Company (or such
shorter period ending on the date that any
payment of taxes with respect to such claim
is due). If the Company notifies the
Employee in writing prior to the expiration
of such period that it desires to contest
such claim, the Employee shall:
(I) give the Company any information
reasonably requested by the Company
relating to such claim,
(II) take such action in connection with
contesting such claim as the Company
shall reasonably request in writing
from time to time, including,
without limitation, accepting legal
representation with respect to such
claim by an attorney reasonably
selected by the Company,
(III) cooperate with the Company in good
faith in order effectively to
contest such claim, and
(IV) permit the Company to participate
in any proceedings relating to such
claim; provided, however, that the
Company shall bear and pay directly
all costs and expenses (including
additional interest and penalties)
incurred in connection with such
contest and shall indemnify and hold
the Employee harmless, on an
after-tax basis, for any Excise Tax
or income tax (including interest
and penalties with respect thereto)
imposed as a result of such
representation and payment of costs
and expenses. Without limitation on
the foregoing provisions of this
Section, the Company shall control
all proceedings taken in connection
with such contest and, at its sole
option, may pursue or forgo any and
all administrative appeals,
proceedings, hearings and
conferences with the taxing
authority in respect of such claim
and may, at its sole option, either
direct the Employee to pay the tax
claimed and sue for a refund or
contest the claim in any permissible
manner, and the Employee agrees to
prosecute such contest to a
determination before any
administrative tribunal, in a court
of initial jurisdiction and in one
or more appellate courts, as the
Company shall determine; provided,
however, that if the Company directs
the Employee to pay such claim and
sue for a refund, the Company shall
advance the amount of such payment
to the Employee, on an interest-free
basis and shall indemnify and hold
the Employee harmless, on an
after-tax basis, from any Excise Tax
or income tax (including interest or
penalties with respect thereto)
imposed with respect to such advance
or with respect to any imputed
income with respect to such advance;
and further provided that any
extension of the statute of
limitations relating to payment of
taxes for the taxable year of the
Employee with respect to which such
contested amount is claimed to be
due is limited solely to such
contested amount. Furthermore, the
Company's control of the contest
shall be limited to issues with
respect to which a Gross-Up Payment
would be payable hereunder and the
Employee shall be entitled to settle
or contest, as the case may be, any
other issue raised by the Internal
Revenue Service or any other taxing
authority.
(D) If, after the receipt by the Employee of an
amount advanced by the Company pursuant to
Section 4(f)(iii)(C), the Employee becomes
entitled to receive any refund with respect
to such claim, the Employee shall (subject
to the Company's complying with the
requirements of such Section) promptly pay
to the Company the amount of such refund
(together with any interest paid or
credited thereon after taxes applicable
thereto). If, after the receipt by the
Executive of an amount advanced by the
Company pursuant to Section 4(f)(iii)(C), a
determination is made that the Employee
shall not be entitled to any refund with
respect to such claim and the Company does
not notify the Employee in writing of its
intent to contest such denial of refund
prior to the expiration of thirty (30) days
after such determination, then such advance
shall be forgiven and shall not be required
to be repaid and the amount of such advance
shall offset, to the extent thereof, the
amount of Gross-Up Payment required to be
paid.
(iv) Vesting of Certain Awards. Any vesting,
service or performance requirements under any
outstanding stock option or restricted stock
awards or any other equity-based or long-term
cash awards shall be deemed fully satisfied as of
the Change of Control.
(v) Benefit Equalization Plan. Upon termination of
the Employee's employment with the Company for
whatever reason following a Change of Control,
anything in this Agreement or in the Company's
Benefit Equalization Plan as in effect of the
Effective Date (the "BEP") to the contrary
notwithstanding, the amount of the benefit
payable under the BEP to or in respect of the
Employee shall be equal to the benefit payable
under the BEP to or in respect of Paul H. Snyder
("Snyder") were Snyder to terminate employment
with the Company on the Employee's Date of
Termination.
(g) No Mitigation or Offset.
The Company agrees that, if the Employee's employment
with the Company terminates, the Employee is not
required to seek other employment or to attempt in any
way to reduce any amounts payable to or in respect of
the Employee by the Company pursuant to this Agreement.
Further, the amount of any payment or benefit provided
for in this Agreement shall not be reduced by any
compensation earned by the Employee as the result of
employment by another employer, by retirement benefits,
by offset against any amount claimed to be owed by the
Employee to the Company or otherwise, except as
specifically provided by Section 4(e)(iii).
(h) Notice of Termination.
(i) In General. Any termination of the Employee's
employment by the Company (other than due to
death) shall be communicated by a notice of
termination to the other party hereto given in
accordance with this Agreement (the "Notice of
Termination"). The Notice of Termination shall be
given (A) in the case of a termination for Cause,
within ninety (90) business days after a director
of the Company has actual knowledge of the events
giving rise to such purported termination, (B) in
the case of a termination for Good Reason, within
180 days of the Employee's having actual
knowledge of the event or events constituting
Good Reason; (C) in the case of termination for
Disability, not later than thirty (30) days prior
to the date the Company reasonably expects the
six consecutive month period referred to in
Section 4(a) to expire; and (D) in the case of
Voluntary Termination, not later than thirty (30)
days prior to the date of termination specified
in such notice. Such notice shall (x) indicate
the specific termination provision in this
Agreement relied upon, (y) set forth in
reasonable detail the facts and circumstances
claimed to provide a basis for termination of the
Employee's employment unless the provision so
indicated, as applicable, and (Z) if the Date of
Termination is other than the date of actual
receipt of such notice, specify the date on which
the Employee's employment is to be terminated
(which date shall not be earlier than the date on
which such notice is actually received).
(ii) Dispute/Extension. If within fifteen (15) days
after any Notice of Termination is given, or, if
later, prior to the Date of Termination (as
determined without regard to this Section) the
party receiving such Notice of Termination
notifies the other party that a dispute exists
concerning the termination, the Date of
Termination shall be extended until the earlier
of (A) the date on which the Employment Term ends
or (B) the date on which the dispute is finally
resolved, either by mutual written agreement of
the parties or by a final judgment, order or
decree of an arbitrator or a court of competent
jurisdiction (which is not appealable or with
respect to which the time for appeal therefrom
has expired and no appeal has been perfected);
provided however, that the Date of Termination
shall be extended by a notice of dispute given by
the Employee only if such notice is given in good
faith and the Employee pursues the resolution of
such dispute with reasonable diligence. If the
Date of Termination is extended in accordance
with this Section, the Company shall continue to
pay the Employee his full compensation and
benefits in effect when the notice giving rise to
the dispute was given (including, but not limited
to, Base Salary) and continue the Employee's
participation in all employee benefit plans in
which the Employee was participating and, on the
same terms and conditions as, when the notice
giving rise to the dispute was given, until the
Date of Termination, as determined in accordance
with this Section. The determination of the
amount of any compensation and benefits or other
payments to be paid or provided to or in respect
of the Employee hereunder shall be determined
without regard to any reduction therein
constituting Good Reason. Amounts paid under this
Section are in addition to all other amounts due
under this Agreement and shall not be offset
against or reduce any other amounts due under
this Agreement.
(iii) Date of Termination. For purposes of this
Agreement, "Date of Termination" means (A) in the
case of a termination for which a Notice of
Termination is required, the date of actual
receipt of such Notice of Termination, or if
later, the date specified therein, as the case
may be, (B) in the case of Disability, the last
day of the six month period referred to in
Section 4(a), and (C) in all other cases, the
actual date on which the Employee's employment
terminates during the Term of Employment.
5. Enforcement of Agreement; Defense of Actions.
If the Employee determines that it is necessary or desirable
for him to retain legal counsel or incur other costs and
expenses in connection with either enforcing part or all of
his rights under this Agreement or defending against any
allegations by the Company of breach of this Agreement by
him, the Employee shall be entitled to recover from the
Company, as incurred by him, reasonable attorneys' fees,
costs and expenses in connection with such enforcement or
defense plus in each case interest on any delayed payment at
the Applicable Federal Rate provided for in Section
7872(f)(2)(A) of the Code. Such payments shall be made by the
Company to the Employee promptly following submission to the
Company of appropriate documentation evidencing the
incurrence of such attorneys' fees, costs, and expenses. The
Employee's rights to payments under this Section shall not be
affected by the final outcome of any dispute with the
Company; provided however, that to the extent that the court
shall determine that under the circumstances recovery by the
Employee of all or a part of any such fees and costs and
expenses would be unjust or inappropriate, the Employee shall
not be entitled to such recovery.
6. Protective Covenants.
(a) Non-Competition.
During the Employment Term and for a period of two (2)
years following the Date of Termination for any reason,
Employee shall not, directly or indirectly, engage or
act as an executive, employee, consultant, agent or
representative for any company or other entity that is
engaged in the business of providing equipment and/or
services with respect to access products, industrial
communications and/or wireless test equipment in any
geographic area in which the Company is conducting such
business as of the Date of Termination; provided,
however, nothing in this Agreement shall prohibit
Employee from being a stockholder in a mutual fund or a
diversified investment company or a passive owner of
not more than one percent (1%) of the outstanding stock
of any class of a corporation that has a publicly
traded class of equity securities. As consideration for
the covenants contained in this Section 6(a), which are
considered material to the Company, the Company agrees
to pay Employee all amounts owed during his employment
pursuant to this Agreement, and upon Employee's
termination in the circumstances described in Section
4(d) or 4(e) of this Agreement, to pay the amounts set
forth in Section 4(d)(iii) or Section 4(e)(ii) (as the
case may be) of this Agreement. If the Employee is
terminated for Cause or if the Employee effects a
Voluntary Termination, Employee will remain subject to
the covenants contained in this Section 6(a) but will
not be entitled to any consideration in exchange
therefor upon termination of his employment. Employee
acknowledges that if his employment with the Company
terminates for any reason, he can earn a livelihood
without violating the foregoing restrictions and that
the time period and scope of the foregoing restrictions
are reasonably required for the protection of the
Company's valid business interests.
(b) Non-Solicitation of Employees.
The Employee further agrees that during the Employment
Term and for two (2) years thereafter, he shall not, in
any manner, directly or indirectly induce or attempt to
induce any employee of the Company to terminate or
abandon his or her employment for any purpose
whatsoever.
(c) Non-Disclosure.
As used herein, "Confidential Information" means all
technical and business information of the Company and
its affiliated companies, whether protectable or not,
which is of a confidential, trade secret and/or
proprietary character and which is either developed by
the Employee (alone or with others) or to which the
Employee has had access during the Employee's
employment.
The Employee shall use the Employee's best efforts and
diligence both during and after employment by the
Company to protect the confidential, trade secret
and/or proprietary character of all Confidential
Information. The Employee shall not, directly or
indirectly, use (for the Employee or another) or
disclose any Confidential Information, for so long as
it shall remain proprietary or able to be protected as
confidential or trade secret information, except as may
be necessary for the performance of the Employee's
duties with the Company.
The Employee shall deliver promptly to the Company, at
the termination of the Employee's employment, or at any
other time at the Company's request, without retaining
any copies, all documents and other material in the
Employee's possession relating, directly or indirectly,
to any Confidential Information.
Each of the Employee's obligations in this Section 6(c)
shall also apply to the confidential, trade secret and
proprietary information learned or acquired by the
Employee during the Employee's employment from others
with whom the Company or any affiliated company has a
business relationship.
The Employee understands that the Employee is not to
disclose to the Company or any affiliated company, or
use for its benefit, any of the confidential, trade
secret or proprietary information of others.
(d) False, Defamatory or Disparaging Statements.
The Employee agrees that, while he is employed by the
Company, and after his Date of Termination, he shall
not make any false, defamatory or disparaging
statements about the Company, or the officers or
directors of the Company, that are reasonably likely to
cause material damage to the Company or the officers or
directors of the Company. While the Employee is
employed by the Company, and after his Date of
Termination, the Company agrees that neither the
officers nor the directors of the Company shall make
any false, defamatory or disparaging statements about
the Employee that are reasonably likely to cause
material damage to the Employee.
(e) Injunctions to Prevent Breaches of Protective
Covenants.
The parties hereto agree that the Company would be
damaged irreparably in the event of any provision of
subsections (a), (b), (c) or (d) of this Section 6 were
not performed by the Employee in accordance with their
respective terms or were otherwise breached and that
money damages would be an inadequate remedy for any
such nonperformance or breach. Therefore, the Company
or its successors or assigns shall be entitled, in
addition to any other rights and remedies existing in
their favor to an injunction or injunctions to prevent
any breach or threatened breach of any such provisions
and to enforce such provisions specifically (without
posting a bond or other security). The parties hereto
agree that the Employee would be damaged irreparably in
the event that any provision of Section 6(d) were not
performed by the Company in accordance with its terms
or were otherwise breached and that money damages would
be an inadequate remedy for any such nonperformance or
breach. Therefore, the Employee shall be entitled, in
addition to any other rights and remedies existing in
his favor, to an injunction or injunctions to prevent
any breach or threatened breach of any such provisions
and to enforce such provision specifically (without
posting a bond or other security).
7. Miscellaneous.
(a) Applicable Law.
This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of
Pennsylvania, applied without reference to principles
of conflict of laws.
(b) Amendments.
This Agreement may not be amended or modified otherwise
than by a written agreement executed by the parties
hereto or their respective successors and legal
representatives.
(c) Notices.
All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return
receipt requested, postage prepaid, addressed as
follows:
If to the Company:
Salient 3 Communications, Inc.
P.O. Box 1498
Reading, PA 19603
Attention: Senior Vice President and General
Counsel
If to the Employee:
Thomas F. Hafer
[ADDRESS]
or to such other address as either party shall have
furnished to the other in writing in accordance
herewith. Notices and communications shall be effective
when actually received by the addressee.
(d) Withholding.
The Company may withhold from any amounts payable under
this Agreement such federal, state, local or other
taxes as shall be required to be withheld pursuant to
any applicable law or regulation.
(e) Severability.
The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or
enforceability of any other provision of this
Agreement.
(f) Captions.
The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
(g) Beneficiaries/References.
The Employee may select a beneficiary or beneficiaries
to receive any compensation or benefit payable
hereunder following the Employee's death and may change
such election, in either case by giving the Company
written notice thereof. In the event of the Employee's
death or a judicial determination of his incompetence,
reference in this Agreement to the Employee shall be
deemed, where appropriate, to refer to other
beneficiary(ies), his estate or his legal
representative(s).
(h) Entire Agreement.
This Agreement will contain the entire agreement
between the parties concerning the subject matter
hereof and will supersede all prior agreements,
understandings, discussions, negotiations and
undertakings, whether written or oral, between the
parties with respect to the subject matter hereof,.
However, nothing in this Agreement shall adversely
affect the Employee's rights to benefits accrued prior
to the Effective Date, and, except as contemplated
hereby, the Employee's rights with respect to stock
options and restricted stock granted prior to the
Effective Date shall be governed by the respective
stock options and restricted stock agreements relating
thereto.
(i) Representation.
The Company represents and warrants that it is fully
authorized and empowered to enter into this Agreement
and that the performance of its obligations under this
Agreement will not violate any agreement between the
Company and any other person, firm or organization or
any applicable laws or regulations.
(j) Survivorship.
The respective rights and obligations of the parties
hereunder shall survive any termination of this
Agreement or the Employee's employment hereunder to the
extent necessary to the intended preservation of such
rights and obligations.
(k) Successors.
(i) The Employee. This Agreement is personal to the
Employee and, shall not be assignable by the
Employee, except that the Employee's rights to
receive any compensation or benefits under this
Agreement may be transferred or disposed of
pursuant to testamentary disposition, intestate
succession or pursuant to a domestic relations
order of a court of competent jurisdiction. This
Agreement shall inure to the benefit of and be
enforceable by the Employee's heirs,
beneficiaries and/or legal representatives.
(ii) The Company. This Agreement shall inure to the
benefit of and be binding upon the Company and
its successors and assigns. The Company shall
require any successor to all or substantially all
of the business and/or assets of the Company,
whether direct or indirect, by purchase, merger,
consolidation, acquisition of stock, or
otherwise, by an agreement in form and substance
satisfactory to the Employee, expressly to assume
and agree to perform this Agreement in the same
manner and to the same extent as the
Company would be required to perform if no such
succession had taken place.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date set
forth opposite their signatures herein below.
Salient 3 Communications, Inc.
DATED: ____________________ By: _________________________________
Its: _________________________________
Title
DATED: ____________________ _________________________________
Thomas F. Hafer
