<PAGE> 1
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 April 3, 1999
-------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period to
--------------- -------------------
Commission file number: 0-14275
Edac Technologies Corporation
-----------------------------
(Exact name of registrant as specified in its charter)
Wisconsin 39-1515599
--------- ----------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) Identification No.)
1806 New Britain Avenue, Farmington, CT 06032
---------------------------------------------
(Address of principal executive offices)
(860) 677-2603
--------------
(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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
On May 5, 1999 there were outstanding 4,269,080 shares of the
Registrant's Common Stock, $0.0025 par value per share.
<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
EDAC TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 3 January 2
1999 1999
(Unaudited) (Note)
----------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 112,511 $ 229,480
Trade accounts receivable 6,112,723 6,745,433
Inventories 11,617,297 12,418,181
Prepaid expenses and other 335,978 321,730
Deferred income taxes 1,166,469 1,166,469
----------- -----------
TOTAL CURRENT ASSETS 19,344,978 20,881,293
----------- -----------
PROPERTY, PLANT, AND EQUIPMENT 28,030,358 27,822,375
less-accumulated depreciation 9,231,961 8,630,371
----------- -----------
18,798,397 19,192,004
----------- -----------
OTHER ASSETS:
Goodwill 11,163,308 11,234,420
Other 1,252,128 1,300,146
----------- -----------
$50,558,811 $52,607,863
=========== ===========
</TABLE>
Note: The balance sheet at January 2, 1999 has been derived from the audited
financial statements at that date.
The accompanying notes are an integral part of these financial statements.
<PAGE> 3
EDAC TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 3 January 2
1999 1999
(Unaudited) (Note)
----------- -------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving line of credit $ 7,034,637 $ 7,512,407
Current portion of long-term debt 5,102,058 4,759,750
Trade accounts payable 3,248,750 3,623,598
Employee compensation and
amounts withheld 1,820,457 2,134,176
Accrued expenses 1,394,107 2,215,100
------------ ------------
TOTAL CURRENT LIABILITIES 18,600,009 20,245,031
------------ ------------
LONG-TERM DEBT,
less current portion 20,886,241 21,606,043
------------ ------------
OTHER LIABILITIES 6,000 6,000
------------ ------------
DEFERRED INCOME TAXES 1,168,000 1,168,000
------------ ------------
SHAREHOLDERS' EQUITY:
Common stock, par value $.0025 per
share; 10,000,000 shares authorized;
issued and outstanding--4,269,080
on April 3, 1999 and 4,261,580
on January 2, 1999 10,673 10,654
Additional paid-in-capital 9,043,482 9,033,162
Retained earnings 1,267,051 981,062
------------ ------------
10,321,206 10,024,878
Less deferred ESOP compensation
expense (19,445) (38,889)
Less accumulated other
comprehensive loss (403,200) (403,200)
------------ ------------
9,898,561 9,582,789
------------ ------------
$ 50,558,811 $ 52,607,863
============ ============
</TABLE>
Note: The balance sheet at January 2, 1999 has been derived from the audited
financial statements at that date.
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
EDAC TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
For the quarter ended
---------------------
April 3, April 4,
1999 1998
------------ ---------------
<S> <C> <C>
Sales $ 15,170,285 $ 12,706,125
Cost of sales 12,776,383 10,395,937
------------ ------------
Gross Profit 2,393,902 2,310,188
Selling, general and
administrative expenses 1,356,876 1,115,361
------------ ------------
INCOME FROM OPERATIONS 1,037,026 1,194,827
Non-operating income
(expense):
Interest expense (635,392) (227,045)
Other 25,156 9,904
------------ ------------
(610,236) (217,141)
INCOME BEFORE INCOME TAXES 426,790 977,686
Provision for income taxes 140,800 312,000
------------ ------------
NET INCOME $ 285,990 $ 665,686
============ ============
Basic earnings per common share (Note A) $ 0.07 $ 0.16
Diluted earnings per common share (Note A) $ 0.06 $ 0.15
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
EDAC TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the quarter ended
---------------------
April 3, April 4,
1999 1998
----------- -----------
<S> <C> <C>
Operating Activities:
Net income $ 285,990 $ 665,686
Depreciation and amortization 731,363 322,068
Changes in working capital items (90,214) (427,392)
Other (2,465) (6,905)
----------- -----------
Net cash provided by
operating activities 924,674 553,457
Investing Activities:
Additions to property, plant
and equipment (209,183) (3,294,461)
Proceeds from sales of property
plant and equipment 2,465 23,000
Other 10,000 272,585
----------- -----------
Net cash used in investing
activities (196,718) (2,998,876)
Financing Activities:
(Decrease) increase in revolving
line of credit (477,770) 368,532
Issuance of long term debt -- 2,587,530
Payments of long term debt (377,494) (550,102)
Proceeds from exercise of options
for common stock 10,339 --
----------- -----------
Net cash (used in) provided by
financing activities (844,925) 2,405,960
Decrease in cash (116,969) (39,459)
Cash at the beginning of year 229,480 137,620
----------- -----------
Cash at end of period $ 112,511 $ 98,161
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
EDAC TECHNOLOGIES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
APRIL 3, 1999
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals and adjustments to previously established loss
provisions) considered necessary for a fair presentation have been included.
Operating results for the quarter ending April 3, 1999 are not necessarily
indicative of the results that may be expected for the year ending January 1,
2000. For further information, refer to the financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the year ended
January 2, 1999.
On June 29, 1998, the Company consummated its acquisition of certain assets and
liabilities of Apex Machine Tool Company, Inc. (Apex). The unaudited pro forma
consolidated financial information for the quarter ended April 4, 1998 as though
the acquisition of Apex had been consummated at the beginning of the period is
as follows:
April 4,
1998
-------------
Sales $17,899,000
Net income 1,038,000
Average shares (basic) 4,218,005
Basic income per share $0.25
Average shares diluted 4,477,724
Diluted income per share $0.23
The unaudited information above includes proforma adjustments related to the
amortization of intangible assets, interest expense, certain operating expenses
and income taxes necessary to present the information had the acquisition been
consummated as of January 1, 1998.
Comprehensive Income: Comprehensive income is the same as net income for the
quarters ended April 3, 1999 and April 4, 1998.
<PAGE> 7
Earnings Per Share: The number of shares used in the earnings per common share
computation for the quarters ended April 3, 1999 and April 4, 1998 are as
follows:
<TABLE>
<CAPTION>
For the quarter ended
---------------------
April 3, April 4,
1999 1998
--------- ---------
<S> <C> <C>
Basic:
Average common
shares outstanding 4,266,580 4,218,005
Diluted:
Dilutive effect of
stock options 167,824 259,719
---------- ---------
Average shares diluted 4,434,404 4,477,724
========== =========
</TABLE>
On July 1, 1998, the Company paid a 10% stock dividend to all shareholders of
record as of June 16, 1998. Prior period common share information has been
retroactively restated to reflect the effect of the stock dividend.
NOTE B -- SEGMENT INFORMATION
The following amounts are in thousands:
<TABLE>
<CAPTION>
For the quarter ended April 3, 1999
-----------------------------------
Engineered Precision Precision Apex
Precision Engineered Large Machine
Components Technologies Machining Tool Co. Total
---------- ------------ --------- -------- -----
<S> <C> <C> <C> <C> <C>
Sales from
external customers $ 4,608 $ 3,041 $ 2,553 $ 4,968 $15,170
Intersegment
Sales -- -- -- 32 32
------- ------- ------- ------- -------
Total sales 4,608 3,041 2,553 5,000 15,202
------- ------- ------- ------- -------
Allocated interest 83 108 76 368 635
expense
Allocated
Depreciation
and amortization 151 154 158 268 731
Income tax
expense 20 48 62 11 141
Segment
profit 40 98 126 22 286
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
For the quarter ended April 4, 1998
-----------------------------------
Engineered Precision Precision
Precision Engineered Large
Components Technologies Machining Total
---------- ------------ --------- -----
<S> <C> <C> <C> <C>
Sales from
external
customers $5,814 $3,683 $3,209 $12,706
Intersegment Sales
-- -- -- --
Allocated
interest expense 87 85 55 227
Allocated
depreciation and
amortization 106 103 113 322
Income tax expense 106 39 167 312
Segment
Profit 227 84 355 666
</TABLE>
Asset information is unavailable by segment.
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Sales. The Company's sales in the first quarter of 1999 increased $2,464,000
or 19% compared to the first quarter of 1998. This increase is due to sales of
$4,968,000 in the 1999 period attributable to Apex, which was acquired in June
1998, offset by sales decreases of $1,206,000, $656,000 and $642,000 in the
Engineered Precision Components, Large Turning and the Engineered Solutions
areas, respectively. Sales for 1999 in the Engineered Precision Components and
Large Turning areas are expected to be off 20% to 25% from 1998 levels due to
the soft aerospace market. The Company is continuing on its diversification
program designed to diversify its sales into other markets and reduce its
dependence on the aerospace industry.
Cost of Sales. Cost of sales as a percentage of sales increased in the 1999
period to 84.2% from 81.8% in the first quarter of 1998. Fixed manufacturing
costs spread over the lower non-Apex sales levels resulted in an increased cost
of sales percentage.
Selling, General & Administrative. Selling, general and administrative costs
increased by $241,515 or 22% compared to the first quarter of 1998. This is due
to an additional $452,000 in expenses attributable to Apex offset by reductions
in compensation expense and professional expense.
Interest. Interest expense increased by $408,347 or 180% for the first quarter
of 1999 compared to the first quarter of 1998. This was due to the additional
debt incurred for the acquisition of Apex.
Liquidity and Capital Expenditures. Working capital as of April 3, 1999 has
increased by $108,707 since January 2, 1999. Capital expenditures of $209,183
have been funded by the Company's bank.
Management believes that the funds generated from operations and its credit
facilities will be sufficient to meet the Company's cash requirements for 1999.
Other Matters
The "Year 2000" ("Y2K") issue affects computer and information technology ("IT")
systems, as well as non-IT systems which include embedded technology such as
micro-processors and micro-controllers (or micro-chips) that have date sensitive
programs that do not properly recognize the year 2000. Systems that do not
properly recognize such information could generate inaccurate data or cause a
system to fail, resulting in a business interruption.
The Company has completed a comprehensive inventory and assessment of its
existing IT and non-IT systems and those of the Company's suppliers. This
assessment included obtaining written assurances from key vendors and suppliers
if possible. Costs incurred to date have been minimal.
<PAGE> 10
The Company believes, based on preliminary information, that the costs
associated with remediation and verification to become Y2K compliant will not
exceed $150,000.
Although the Company has taken steps to address the Y2K problem, there can be no
assurance that the failure of the Company and/or its material third parties to
timely attain Y2K compliance or that the failures and/or impacts of broader
compliance failures by telephone, mail, data transfer or other utility or
general service providers of government or private entities will not have a
material adverse effect on the Company.
All statements other than historical statements contained in this report on Form
10-Q constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Without limitation, these forward
looking statements include statements regarding the Company's business strategy
and plans, statements about the adequacy of the Company's working capital and
other financial resources, statements about the Company's Year 2000 compliance
and other statements herein that are not of a historical nature. These
forward-looking statements rely on a number of assumptions concerning future
events and are subject to a number of uncertainties and other factors, many of
which are outside of the Company's control, that could cause actual results to
differ materially from such statements. These include, but are not limited to
factors which could affect demand for the Company's products and services such
as general economic conditions and economic conditions in the aerospace industry
and the other industries in which the Company competes; competition from the
Company's competitors; the integration of the Company's Apex operations; the
ability of the Company's customers and suppliers to adequately address their
Year 2000 issues; and the Company's continued ability to attract and retain
qualified employees. The Company disclaims any intention or obligation to update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
<PAGE> 11
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Edac's Amended and Restated Articles of
Incorporation
3.2 Edac's By-laws
10.1 Change of Control Agreement between Edac Technologies
Corporation and Edward J. McNerney
10.2 Change of Control Agreement between Edac Technologies
Corporation and Ronald G. Popolizio
27 Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE> 12
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.
EDAC TECHNOLOGIES CORPORATION
May 14, 1999 By /s/ Ronald G. Popolizio
---------------------------------
Ronald G. Popolizio, Chief Financial
Officer and duly authorized officer
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
Page Number
in Sequential
NUMBER DESCRIPTION Numbering System
- ------ ----------- ----------------
<S> <C> <C>
3.1 Edac's Amended and Restated Articles of (1)
Incorporation
3.2 Edac's By-laws (2)
10.1 Change of Control Agreement between Edac Technologies
Corporation and Edward J. McNerney
10.2 Change of Control Agreement between Edac Technologies
Corporation and Ronald G. Popolizio
27 Financial Data Schedule
(1) Exhibit incorporated by reference to the Company's registration
statement on Form S-1 dated August 6, 1985, commission file No.
2-99491, Amendment No.1.
(2) Exhibit incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995.
</TABLE>
<PAGE> 1
EXHIBIT 10.1
CHANGE OF CONTROL AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT is dated as of January 29,
1999 by and between EDAC TECHNOLOGIES CORPORATION, a Wisconsin corporation (the
"Company"), and Edward McNerney (the "Executive").
RECITALS
A. The Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its shareholders
to assure that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company.
B. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks created by a pending or threatened Change of Control and to encourage
the Executive's full attention and dedication to the Company currently and in
the event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefit arrangements upon a Change of Control
which ensure that the compensation and benefit expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
C. In order to accomplish the objectives of the Board
summarized in these recitals, the Board has caused the Company to enter into
this Agreement.
AGREEMENTS
In consideration of the recitals and the mutual covenants and
agreements set forth in this Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, the
parties agree as follows:
1. Definitions. For the sole and exclusive purposes of this
Agreement, the following terms have the following meanings:
(a) Effective Date. The "Effective Date" means the first
date during the Change of Control Period on which a Change of Control occurs.
Notwithstanding anything in this Agreement to the contrary, if a Change of
<PAGE> 2
Control occurs and Executive's employment with the Company or this Agreement
was terminated prior to the date on which the Change of Control occurs, and if
it is reasonably demonstrated by the Executive that such termination of
employment or of this Agreement (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 "Effective Date" shall mean the date
immediately prior to the date of such termination of employment or purported
termination of this Agreement.
(b) Change of Control Period. The "Change of Control
Period" means the period commencing on the date of a Change of Control and
ending on the third anniversary thereafter.
(c) Change of Control. "Change of Control" means:
(i) 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 20% or more of either [a] the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or [b] 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 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 [a], [b] and [c] of
subsection (iii) of this section 1.
(ii) 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
2
<PAGE> 3
of directors or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board.
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation (a "Business Combination"), in each
case, unless, following such Business Combination, [a] 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 60% 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 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, [b] no Person (excluding any employee benefit plan (or related
trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 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 [c] 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.
(iv) Approval by the shareholders of the Company of
[a] a complete liquidation or dissolution of the Company or [b] the sale or
other disposition of all or substantially all of the assets of the Company,
other than to a corporation, with respect to which following such sale or other
disposition, [i] more than 60% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and outstanding
Company Voting Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately prior to such
sale or other disposition, of the Outstanding Company Common Stock and
Outstanding
3
<PAGE> 4
Company Voting Securities, as the case may be, [ii] less than 20% of,
respectively, the then outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by any Person (excluding any
employee benefit plan (or related trust) of the Company or such corporation),
except to the extent that such Person owned substantially the same percent of
the Outstanding Company Common Stock or Outstanding Company Voting Securities
prior to the sale or disposition, and [iii] at least a majority of the members
of the board of directors of such corporation 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 sale or other disposition of assets of the Company
or were elected, appointed or nominated by the Board.
(d) Disability. "Disability" means a physical or mental
sickness or injury which renders the Executive incapable of performing the
services required of him as an employee of the Company and which does or which
may be expected to continue for more than three months during any 12-month
period. The Executive and the Company shall determine the existence of a
Disability and the date upon which it occurred. If a dispute regarding whether
or when a Disability occurred arises, the matter shall be referred to a medical
doctor selected by the Company and the Executive. If they fail to agree upon
such a medical doctor, the Company and the Executive shall each select a medical
doctor and the two doctors so selected shall together select a third medical
doctor who shall make the determination. The determination by the selected
medical doctor shall be conclusive and binding upon the parties.
(e) Cause. "Cause" shall have the same meaning as
contained in the employment agreement between the Company and the Executive in
effect at the time of termination or, if no such employment agreement is in
effect at that time, "Cause" shall mean:
(i) the willful and continued failure of the Executive
to perform substantially the Executive's duties with the Company or its
affiliates (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial performance
is delivered to the Executive by the Board which specifically identifies the
manner in which the Board believes that the Executive has not substantially
performed the Executive's duties and after the Executive is given a reasonable
period of time to rectify or eliminate such failure;
4
<PAGE> 5
(ii) the willful engaging by the Executive in illegal
conduct or gross misconduct which is materially and demonstrably injurious to
the Company; or
(iii) the commission by the Executive of fraud or
dishonesty with respect to the Company or a material misrepresentation by the
Executive to the Company's shareholders or directors.
Notwithstanding anything herein to the contrary, no act or failure to act, on
the part of the Executive, shall be considered "willful" unless it is done, or
omitted to be done, by the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best interests of the
Company. Any act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or upon the instructions of a more senior
officer of the Company or based upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company. The cessation of employment
of the Executive shall not be deemed to be for Cause unless and until there
shall have been delivered to the Executive a copy of a resolution duly adopted
by the affirmative vote of not less than a majority of the entire membership of
the Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel, to be heard before the Board), finding that,
in the good faith opinion of the Board, the Executive is guilty of the conduct
described in subparagraph (i), (ii) or (iii) above, and specifying the
particulars thereof in detail.
(f) Good Reason. "Good Reason" means:
(i) any action by the Company which results in a
material diminution in Executive's position, authority, duties or
responsibilities as contemplated by section 3(a) of this Agreement, excluding
for this purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(ii) any failure by the Company to comply with any of
the provisions of section 3(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
5
<PAGE> 6
(iii) the Company's requiring the Executive to be
based at any office or location other than as provided in section 3(a)(i)(b)
hereof or the Company's requiring the Executive to travel on Company business to
a substantially greater extent than required immediately prior to the Effective
Date;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this Agreement;
or
(v) any failure by the Company to comply with and
satisfy section 10(c) of this Agreement.
(f) Date of Termination. "Date of Termination" means (i)
if the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination, and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
2. Employment Period. The Company agrees to continue the
Executive in its employ, and the Executive agrees to remain in the employ of the
Company subject to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the third anniversary of such
date (the "Employment Period").
3. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, [a] the Executive's
position (including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least commensurate in all
material respects with those held, exercised or assigned at any time during the
120-day period immediately preceding the Effective Date and [b] the Executive's
services shall be performed at the location where the Executive was employed
immediately preceding the Effective Date or any office or location less than 35
miles from such location.
6
<PAGE> 7
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to [a] serve on corporate, civic or charitable
boards or committees, [b] deliver lectures, fulfill speaking engagements or
teach at educational institutions and/or [c] manage personal investments, so
long as such activities do not significantly interfere with the performance of
the Executive's responsibilities as an employee of the Company in accordance
with this Agreement. It is expressly understood and agreed that to the extent
that any such activities have been conducted by the Executive prior to the
Effective Date, the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the Effective Date
shall not thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), at least
equal to twelve times the highest monthly base salary paid or payable, including
any base salary which has been earned but deferred, to the Executive by the
Company and its affiliated companies in respect of the 12-month period
immediately preceding the month in which the Effective Date occurs. During the
Employment Period, the Annual Base Salary shall be reviewed no more than 12
months after the last salary increase awarded to the Executive prior to the
Effective Date and thereafter at least annually and shall be first increased no
more than 12 months after the last salary increase awarded to the Executive
prior to the Effective Date and thereafter at least annually by the higher of
[a] the average increase (excluding promotional increases) in base salary
awarded to the Executive for each of the three full fiscal years (annualized in
the case of any fiscal year consisting of less than twelve full months or during
which the Executive was employed for less than twelve months) prior to the
Effective Date, and [b] the percentage increase (excluding promotional
increases) in base salary generally awarded to peer executives of the Company
and its affiliated companies for the year of determination. Any increase in
Annual Base Salary shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. Annual Base Salary shall not be reduced
after any such increase and the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so
7
<PAGE> 8
increased. As used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under common control with the
Company. As used in this Agreement, the term "Monthly Base Salary" shall mean
the Annual Base Salary in effect at the time of the Executives termination of
employment divided by 12.
(ii) Annual Bonus. In addition to Annual Base Salary,
the Executive shall be awarded, for each fiscal year ending during the
Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal
to the higher of [a] the average of the three highest bonuses paid or payable,
including any bonus or portion thereof which has been earned but deferred, to
the Executive by the Company and its affiliated companies in respect of the five
fiscal years (or such shorter period during which the Executive has been
employed by the Company) immediately preceding the fiscal year in which the
Effective Date occurs (annualized for any fiscal year during such period
consisting of less than twelve full months or with respect to which the
Executive has been employed by the Company for less than twelve full months) and
[b] the bonus paid or payable (annualized as described above), including any
bonus or portion thereof which has been earned but deferred, to the Executive by
the Company and its affiliated companies in respect of the most recently
completed fiscal year prior to the Effective Date (such higher amount being
referred to as the "Recent Annual Bonus"). Each such Annual Bonus shall be paid
no later than the end of the third month of the fiscal year next following the
fiscal year for which the Annual Bonus is awarded, unless the Executive shall
elect to defer the receipt of such Annual Bonus. As used in this Agreement, the
term "Monthly Bonus" shall mean the Recent Annual Bonus determined on the date
of termination of Executive's employment divided by 12.
(iii) Incentive, Savings and Retirement Plans. During
the Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its affiliated companies for the
Executive under such plans, practices, policies and programs as in effect at any
time during the 120-day period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
8
<PAGE> 9
(iv) Welfare Benefit Plans. During the Employment
Period, 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, practices, policies and programs provided by the Company and its
affiliated companies (including, without limitation, medical, prescription,
dental, disability, salary continuance, employee life, group life, accidental
death and travel accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with benefits which are less favorable, in the aggregate, than the
most favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the Company and
its affiliated companies.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most favorable
policies, practices and procedures of the Company and the affiliated companies
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to fringe benefits, including, without limitation,
tax and financial planning services, payment of club dues, and, if applicable,
use of automobile and payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the Employment
Period, the Executive shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to exclusive personal secretarial
and other assistance, at least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated companies at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable
9
<PAGE> 10
to the Executive, as provided generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the most
favorable plans, policies, programs and practices of the Company and its
affiliated companies as in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
4. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment Period.
If the Company determines in good faith that a Disability of the Executive has
occurred during the Employment Period, it may terminate the Executive's
employment as specified in and pursuant to the terms of the employment agreement
in effect between the Company and the Executive at the time of such termination
and, on such a termination, the Executive shall receive the consideration set
forth in such employment agreement. If no such employment agreement is in effect
at the time of the Executive's Disability, the Company shall give to the
Executive written notice in accordance with section 11(b) of this Agreement of
its intention to terminate the Executive's employment. In the event such notice
is delivered pursuant to this Agreement, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within the 30
days after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause.
(c) Good Reason. During the Employment Period, the
Executive's employment may be terminated by the Executive for Good Reason. For
purposes of this section 4(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the Executive for any reason during
the 180-day period immediately following the Effective Date shall be deemed to
be a termination for Good Reason for all purposes of this Agreement.
10
<PAGE> 11
(d) Notice of Termination. Any termination by the Company
for Cause, or by the Executive for Good Reason, shall be communicated by Notice
of Termination to the other party hereto given in accordance with section 11(b)
of this Agreement. For purposes of this Agreement, a "Notice of Termination"
means a written notice which (i) indicates the specific termination provision in
this Agreement or the Executive's then effective employment agreement with the
Company, if any, relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated, and
(iii) if the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date shall be not
more than thirty days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the Company's rights hereunder.
5. Obligations of the Company upon Termination.
(a) Termination by the Executive for Good Reason or by the
Company for Other than Cause, Death or Disability. If, during the Employment
Period, the Company shall terminate the Executive's employment other than for
Cause, death or Disability or the Executive shall terminate employment for Good
Reason then, in lieu of any payments which the Executive would be entitled to
under his then effective employment agreement with the Company, if any:
(i) The Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination or, at the Executive's
election, over the remaining portion of the Employment Period, the aggregate of
the following amounts:
[a] the sum of [i] the Executive's Annual Base
Salary through the Date of Termination to the extent not theretofore paid, [ii]
the product of [A] the higher of [1] the Recent Annual Bonus and [2] the Annual
Bonus paid or payable, including any bonus or portion thereof which has been
earned but deferred (and annualized for any fiscal year consisting of less than
12 full months or during which the Executive was employed for less than 12 full
months), for the most recently completed fiscal year during the Employment
Period, if any (such higher amount being referred to as the "Highest Annual
Bonus") and [B] a fraction, the numerator of which is the number of days in the
11
<PAGE> 12
current fiscal year through the Date of Termination, and the denominator of
which is 365 and [iii] any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore paid (the sum of the
amounts described in clauses [i], [ii] and [iii] shall be hereinafter referred
to as the "Accrued Obligations"); and
[b] the amount equal to the greater of [i] the
product of [A] the number of months remaining in the Employment Period after the
Date of Termination (the "Remaining Employment Period") multiplied by [B] the
sum of [1] the Executive's Monthly Base Salary and [2] the Monthly Bonus (e.g.,
if the Date of Termination occurs 15 months after the Effective Date, the
Remaining Employment Period would be 21 (i.e., 36 months minus 15 months)), and
[ii] Executive's Annual Base Salary.
(ii) During the Remaining Employment Period, or such
longer period as may be provided by the terms of the appropriate plan, program,
practice or policy, the Company shall continue benefits to the Executive and/or
the Executive's family at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and policies described in
sections 3(b)(iii) and (iv) of this Agreement had the Executive's employment not
been terminated, in accordance with the most favorable plans, practices,
programs or policies of the Company and its affiliated companies applicable
generally to other peer executives and their families during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies and their families,
provided, however, that if the Executive 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. For purposes of determining eligibility (but
not the time of commencement of benefits) of the Executive for retiree benefits
pursuant to such plans, practices, programs and policies, the Executive shall be
considered to have remained employed until three years after the Date of
Termination and to have retired on the last day of such period.
(iii) The Company shall, at its sole expense as
incurred, provide the Executive with outplacement services the scope and
provider of which shall be selected by the Executive in his sole discretion.
12
<PAGE> 13
(iv) To the extent not theretofore paid or provided,
the Company shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is eligible to
receive under any plan, program, policy or practice or contract or agreement of
the Company and its affiliated companies (such other amounts and benefits shall
be hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days after the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this section 5(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive, benefits
at least equal to the most favorable benefits provided by the Company and
affiliated companies to the estates and beneficiaries of peer executives of the
Company and such affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and its affiliated companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated
by reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive
hereunder, other than for payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days after the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this section 5(c) shall include, and the Executive shall be entitled
after the Disability Effective Date to receive, disability and other benefits at
least equal to the most favorable of those generally provided by the Company and
its affiliated companies to disabled executives and/or their families in
accordance with such plans, programs, practices and policies relating to
disability, if any, as in effect generally with respect to other peer executives
and their families at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter
13
<PAGE> 14
generally with respect to other peer executives of the Company and its
affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive (i) his Annual Base Salary through
the Date of Termination, (ii) the amount of any compensation previously deferred
by the Executive, and (iii) Other Benefits, in each case to the extent
theretofore unpaid. If the Executive voluntarily terminates employment during
the Employment Period, excluding a termination for Good Reason, this Agreement
shall terminate without further obligations to the Executive, other than for
Accrued Obligations and the timely payment or provision of Other Benefits. In
such case, all Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days after the Date of Termination.
6. Nonexclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice or program of or any contract or
agreement with the Company or any of its affiliated companies at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
7. Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive reasonably incurs as a result of any
contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in
14
<PAGE> 15
each case interest on any delayed payment at the applicable Federal rate (the
"Applicable Federal Rate") provided for in section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").
8. Reduction of Payments in Certain Events.
(a) Anything in this Agreement to the contrary
notwithstanding, if it is determined that any payment or distribution by the
Company to or for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") would be subject to the excise tax imposed by section
4999 of the Code, the Payment shall be reduced so that it equals the greatest
amount which the Company reasonably determines can be paid to the Executive
without resulting in any excise tax under section 4999 of the Code. If a Payment
is inadvertently made to the Executive which results in an excise tax under
section 4999 of the Code and such excise tax can be avoided by the Executive's
return to the Company of the amount of the Payment which causes the Payment to
result in such excise tax (the "Excess Amount"), the Executive shall return to
the Company the Excess Amount, together with interest from the date the amount
was received by the Executive to the date of the repayment, at an interest rate
equal to the Applicable Federal Rate. It being the parties' intention that the
Executive receive no more than the maximum amount which can be paid without
resulting in an excise tax under section 4999 of the Code.
(b) Subject to the provisions of section 8(c), all
determinations required to be made under this section 8, and the assumptions to
be utilized in arriving at such determinations, shall be made by the certified
public accounting firm designated by the Company (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Company and the
Executive. All fees and expenses of the Accounting Firm shall be borne solely by
the Company. If the Accounting Firm determines that no excise tax is payable by
the Executive, it shall furnish the Executive with a written opinion that
failure to report the excise tax on the Executive's applicable federal income
tax return would not result in the imposition of a negligence or similar
penalty. Any determination by the Accounting Firm shall be binding upon the
Company and the Executive.
(c) The Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful, would result in
an excise tax under section 4999 of the Code. Such notification shall be given
as soon as practicable but no later than ten business days after the Executive
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
15
<PAGE> 16
Company will use its reasonable efforts, at the Company's sole cost and
expense, to contest the imposition of such excise tax unless the Company in good
faith, after receiving advice from its independent public accountants,
determines that the Internal Revenue Service's claim is accurate and contesting
the claim would not likely be successful. The Executive 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 Executive 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.
9. Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it. In no event shall an asserted violation of the
provisions of this section 9 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
16
<PAGE> 17
10. Successors.
(a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
11. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Wisconsin, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. 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.
(b) 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 Executive, to his address appearing on the records of the Company.
17
<PAGE> 18
If to the Company:
Edac Technologies Corporation
1806 New Britain Avenue
Farmington, CT 06032
Attn: Chief Executive Officer
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to
insist upon strict compliance with any provision hereof or any other provision
of this Agreement or the failure to assert any right the Executive or the
Company may have hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to section
4(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that,
except as may otherwise be provided under any other written agreement between
the Executive and the Company, the employment of the Executive by the Company is
"at will" and, prior to the Effective Date, the Executive's employment and this
Agreement may be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall have no further
rights under this Agreement. From and after the Effective Date, except as
otherwise explicitly set forth herein, this Agreement shall supersede any other
agreement, including any employment agreement, between the parties with respect
to the subject matter hereof.
18
<PAGE> 19
Dated as of the date first above written.
EXECUTIVE:
/s/ Edward McNerney
--------------------------------------
EDAC TECHNOLOGIES CORPORATION
BY /s/ Robert Gilchrist
-----------------------------------
Its Chairman Compensation Committee
-------------------------------
Edac Board
<PAGE> 1
EXHIBIT 10.2
Exhibit 10.2 is omitted because it is sustantially identical to Exhibit 10.1
except that it is between Edac Technologies Corporation and Ronald G. Popolizio.
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