SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the fiscal year ended December 31, 1996
Commission File Number 0-20078
THE PEAK TECHNOLOGIES GROUP, INC.
(Exact name of registrant as specified in its charter)
22-302-8807
(IRS Employer Identification No.)
Delaware
(State or other jurisdiction of incorporation or organization)
600 Madison Avenue, New York NY 10022
(Address of principal offices) (Zip Code)
Registrant's telephone number, include area code 212-832-2833
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock par value $0.01 per share
(Title of Class)
The Company's common stock trades on The Nasdaq Stock Market
under the symbol PEAK.
Indicate by check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (g) 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
------------ -----------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated, by reference in Part III of
this Form 10-K or any amendment to this Form 10-K (X)
The aggregate market value of registrant's Common Stock held by
non-affiliates as of March 31, 1997 based on the last reported sales
price of the Common Stock as reported on Nasdaq/NMS for such
date, was $97,706,542.50.
At March 31, 1997, there were 9,305,385 outstanding shares of
the registrant's Common Stock.
Documents Incorporated By Reference
The registrant's definitive proxy statement for its 1996 Annual
Meeting of Stockholders to be held on August 8, 1997, which the
registrant intends to file with the Securities and Exchange Commission
within 120 days of the close of its fiscal year ended December 31,
1996, is incorporated by reference in Part III of this Annual Report
on Form 10-K from the date of filing such document.
<PAGE 2>
THE PEAK TECHNOLOGIES GROUP, INC.
TABLE OF CONTENTS
PART I Page Number
Item 1 Business 3
Item 2 Properties 15
Item 3 Legal Proceedings 16
Item 4 Submission of Matters to a Vote of Security
Holders 16
PART II
Item 5 Market for Registrant's Common Equity
and Related Stockholder Matters 17
Item 6 Selected Financial Data 18
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations 19
Item 8 Financial Statements and Supplementary Data. 23
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 23
PART III
Item 10 Directors and Executive Officers of the Registrant 45
Item 11 Executive Compensation 45
Item 12 Security Ownership of Certain Beneficial
Owners and Management 45
Item 13 Certain Relationships and Related
Transactions 45
PART IV
Item 14 Exhibits, Financial Statement Schedule and
Reports on Form 8-K 47
<PAGE 3>
THE PEAK TECHNOLOGIES GROUP, INC.
PART l
ITEM 1. BUSINESS
THE COMPANY
The Peak Technologies Group, Inc. ("Peak" or the "Company") is the
largest systems integrator and full service value added distributor of bar
code based data capture and wireless data communications systems. The
Company focuses principally on industrial applications, including
warehousing, manufacturing and distribution. The Company's customers
are principally end-users, typically large companies and government
agencies. Sales of bar code related systems, products and service
accounted for approximately 62% of the Company's equipment and
systems sales in 1996. The Company markets the products and systems
of approximately 50 manufacturers as well as its own proprietary
software products and systems. Peak is currently the largest customer of
Zebra Technologies and Symbol Technologies, and the largest reseller for
Printronix, Norand, Welch Allyn and United Barcode Industries. The
Company also distributes consumable supplies and accessories, as well as
a broad line of printing systems, which accounted for the remaining 38%
of the Company's equipment and systems sales in 1996. Peak provides
maintenance, technical support and consulting services covering all of the
products and systems which the Company sells.
The Company's net sales increased from $81,800,000 in 1992 to
$215,700,000 in 1996, a compound annual growth rate of 27.4%. This
expansion has been driven both by the internal growth and by acquisitions
of complementary distributors and systems integrators. Since its August
1992 initial public offering, the Company has completed sixteen
acquisitions. The Company currently provides its services across North
America and in Europe from its locations throughout the United States,
Canada, the United Kingdom, France, Germany, Switzerland, the
Netherlands and Norway. In 1996, the Company served more than
30,000 customers.
The Company expects future expansion from both internal growth and
selective, complementary acquisitions. The Company anticipates that its
internal growth of bar code related sales will be enhanced by four
continuing trends: (i) the increasing use of bar code based automatic
identification and data capture systems driven by world-wide demand for
improved productivity and quality; (ii) the rapidly expanding use of
mobile wireless computing to handle data communications; (iii) the
growing number of industries mandating the use of specific bar code
labels on products supplies to them; and (iv) the increasing preference of
manufacturers of bar code related equipment to use distributors, such as
the Company, who are capable of offering complete design, supply,
integration, installation and maintenance services to customers
throughout North America and increasingly into Europe.
The Company completed an initial public offering ("IPO") for 2,200,000
shares of its common stock in August 1992 and along with certain selling
shareholders completed a second public offering for 1,552,129 shares of
its common stock in May 1995. The Company's principal offices are
located at 600 Madison Avenue, New York, New York 10022, telephone
number 212-832-2833. Certain factors should be carefully considered in
evaluating the Company and its business. See "Business - Certain
Factors".
<PAGE 4>
BUSINESS STRATEGY
The Company's business strategy is to become the dominant systems
integrator and full service value added distributor of bar code based data
capture and wireless data communications equipment systems to select
markets worldwide by continuing to develop a national and international
distribution and service network for its product lines, both through
internal growth and through the selected acquisition of complementary
distributors and integrators. The Company seeks to be viewed as a
systems integrator and full service value added distributor that provides a
broad range of service to those national and multi-national customers
seeking a single source for their data capture needs, while providing to the
Company's principal suppliers an efficient means of access to this
customer base. By strategically combining companies with substantially
similar businesses in geographically complementary territories,
management believes it can continue to: (i) introduce cross-fertilization of
products, applications and areas of specialization among the regions; (ii)
create economies of scale through a more efficient organizational
structure, elimination of duplicative administrative and personnel
functions, reductions in working capital requirements and consolidation
of inventory holdings; and (iii) derive the benefits of critical mass,
including (a) the resources necessary to develop and integrate applications
solutions using the most sophisticated data capture technologies, and (b)
the ability to distribute to and service the largest customers on a broad
geographic basis and the opportunity to develop strong relationships with,
and obtain the best terms from, significant suppliers.
In its relationship with customers, the Company focuses on providing a
complete range of services, thus adding significant value to the equipment
it distributes. Such services including advising customers on the options
available to meet their specific needs, providing technical advice on
specialized applications, designing, assembling and installing complete
systems on-site, providing consumable supplies, as required, and
providing repair and post sale hardware and software maintenance
services. In addition, the Company supplies add-on equipment and
services as the customer's system grows. Management believes that
equipment manufacturers of higher performance products generally
choose to build relationships with value added resellers, distributors and
integrators capable of offering a high level of advisory services, technical
support, maintenance and other support services. As a result of its
technical skills and knowledge of the marketplace and its access to and
detailed understanding of the capabilities of the latest products, the
Company believes it is perceived as a market leader by both suppliers and
customers.
DEVELOPMENT OF BUSINESS
The Company was founded in May 1988, and has grown internally and
through a series of twenty-one strategic acquisitions of complementary
businesses through December 31, 1996. The following table lists the
names and dates of the Company's acquisitions.
Company Date
- ---------------------------------------------------------- -------------
Logon, Inc. (Logon) May 1988
Peak Technologies, Inc. (PTI) January 1990
<PAGE 5>
Telpar, Inc. (Telpar) May 1990
Distribution & Service Division of
MESA Technology Corp. (MESA) October 1991
Gentry Associates, Inc. (Gentry) April 1992
Group Three Electronics Corporation (Group Three) April 1993
Concord Technologies, Inc. (Concord) July 1993
NACO Electronics Corporation (NACO) July 1994
Endata Group Limited (Peak UK formerly Endata) October 1994
Innovative Products & Peripherals Corporation (IPPC) January 1995
ISF - France (ISF) May 1995
Datapen Systems Limited (Datapen) June 1995
AccuScan, Inc. (Accuscan) September 1995
Mandata A/S (Mandata) September 1995
Numeric Arts Limited (Numeric Arts) October 1995
Dytec, Inc. (Dytec) December 1995
Combitrading International B.V. (Combitrading) January 1996
Syntest Corp. (Syntest) March 1996
Acquidata SA (Acquidata) April 1996
Barcode BC Systeme AG (Barcode) April 1996
SASS Computer GmbH (SASS) June 1996
INTEGRATION OF OPERATIONS AND RESTRUCTURING
During 1996, Dytec was fully integrated into Peak's North American
operating infrastructure. Prior to 1996, the Company had integrated the
operations of Accuscan, IPPC, NACO, Group Three, Concord, Logon,
PTI, MESA and Gentry into its North American operating infrastructure.
The previously existing corporate infrastructure of each company has
been consolidated, resulting in integrated inventory and purchasing
control, maintenance dispatch and logistics coordination, data processing,
human resources, risk and facilities management and accounting.
The Company's European expansion also continued during 1996 with the
acquisitions of Combitrading in the Netherlands, Acquidata in France,
Barcode Systems in Switzerland, and SASS in Germany. Headquartered
in the United Kingdom, the European operating infrastructure will, to the
extent appropriate, consolidate certain functions, while remaining
sensitive to the legal requirements, customs and cultures of each European
country and region.
The Company initiated a plan to restructure its operations in the fourth
quarter of 1996 in order to reduce expense levels to be in line with revenue
expectations. The restructuring plan includes actions designed to improve
operational efficiencies, which the Company believes will enhance its
future financial performance. The target of the plan is to improve
operational efficiencies by centralizing functional areas, reducing or
closing facilities, and eliminating assets no longer useful to the Company.
The plan's implementation is scheduled to be substantially completed by
the end of 1997.
<PAGE 6>
PRODUCTS AND SERVICES
The Company's products and services consist principally of the systems
integration and value added distribution of a broad line of high
performance equipment and systems. The Company's principal focus is
on bar code based data capture and wireless data communication
equipment and systems. Peak's other major product lines include
information system printing equipment and other related equipment,
supplies and consumables. The Company markets products and systems
of other manufacturers as well as its own proprietary products and
systems. The Company also designs and assembles several lines of mini-
printers, primarily for OEM markets. The products distributed by the
Company are integrated to provide specific solutions for manufacturing,
warehousing, specialized retailing, hazardous waste tracking, certain
healthcare applications, office automation, and other business and
industrial applications. The Company provides its customers with a
complete range of services including designing a package of equipment
suitable to meet the customer's technical needs and specific application,
assembling and installing the system and providing a full factory-trained
and authorized maintenance and repair service for each product or system
the Company markets.
Bar Code and Wireless Equipment - The largest components of the
Company's business is the distribution and integration of a broad range of
bar code and wireless equipment and systems principally for industrial
applications, accounting for approximately 62% of the Company's
equipment and system sales in 1996. Bar code labeling and scanning
systems consist of: (i) machine-readable labeling systems (typically bar
code labeling systems) designed to create and affix labels that carry data
(such as products supplied by Zebra Technologies, Printronix, Eltron,
Datasouth, and Dataproducts); (ii) reading devices such as laser scanners
or light pens that transfer the scanned information to a decoder for
processing (such as products supplied by Symbol Technologies, Intermec,
Norand, UBI, and Welch Allyn); and (iii) hard wired and wireless data
transmission devices that store, process and forward the scanned
information to a host computer (such as products supplied by Symbol
Technologies, Intermec, Norand, PSC, UBI, and Welch Allyn).
The Company also designs and develops proprietary products based on
bar code labeling, scanning, and data communications technology.
Among the Company's proprietary bar code products are: (i)
Incredibar(trademark), which provides customers with a Windows-NT
based bar code label generation package compatible with all of the
Company's bar code printer lines, which has proven successful in allowing
Peak to sell solution packages which include software as well as printers,
scanners, and other bar code related products; and (ii)
PDTpal(trademark), is a multi-line communications tool, which uses
industry standard protocols, enabling a variety of data capture devices to
communicate efficiently with the host computer using any major operating
systems and running on either a portable or host platform. In addition, the
Company has developed a variety of proprietary software systems
including: (i) ScreenShaper, a seamless software integration system, that
allows a business to integrate their existing software applications to a
wireless handheld terminal without modification, creating the opportunity
to capture and validate data in real-time; (ii) the Wireless
Warehouse(trademark), a total warehouse management system, which
handles receiving, cross-docking, stocking, picking, shipping and other
inventory control management functions in a single integrated package;
(iii) Nucleus Stock Audit(trademark), designed to run on Symbol hand-
held terminals, which enables retailers to manage their in-store
<PAGE 7>
inventory more effectively by quickly and accurately executing physical
counts on inventory held for retail sale, in back room storage areas, or in
transit from or to a distribution warehouse, price check inventory, and
effect markdowns and transfers, with minimal disruption to retail
operations; and (iv) The Peak Advantage(trademark) /Data Harvester
(trademark) Series which consists of a comprehensive suite of
inventory/asset management modules for use primarily with Symbol
Technologies data capture terminals operating in either batch or RF
modes under Windows, Windows NT or DOS environments.
During 1996, the Company continued to invest significantly in its RF
wireless capabilities. As a result of this investment Peak offers a
complete range of wireless services, including needs assessment, system
design, project management, site surveys, system testing, actual physical
installation, system installation, system initialization, training and on-site
and remote technical support.
The Company employs engineers experienced in the specialty disciplines
of mechanical, electronic, software and materials engineering. Its
engineering staff enables the Company to develop and design new
proprietary systems for specific industry applications in-house.
Supplies and Consumables - Peak also provides a wide variety of supplies
and consumables, including labels for bar coding, printer heads, printer
ribbons, laser printer toner cartridges and spare parts, which constituted
approximately 16% of equipment and system sales in 1996. Over the last
four years, the Company has focused substantial efforts to increase the
sales of supplies and consumables, including the introduction of a line of
Peak private label supplies. As a result of these ongoing programs, sales
of supplies and consumables increased from $5,680,000 in 1992 to
$28,600,000 in 1996.
Information Systems Printing Equipment - The Company's information
systems printing product offerings include both non-impact and impact
printers and systems, accounting for approximately 12% of the
Company's equipment and system sales in 1996. These printers are
utilized principally in large MIS applications as well as in general office
and business environments. The Company's impact printer lines consist
principally of high performance line matrix and band printers capable of
printing up to 1200 lines per minute. The Company is a leading
distributor of Printronix, Dataproducts, Printek, and Datasouth printers.
The Company generally provides technical advice and support to its
customers at the selection and installation stages and is also able to meet
their needs for ongoing consumables along with repair and maintenance
services. High performance printers, and particularly color printers,
require significant maintenance service. Mid-range and high speed
sophisticated printers offer the Company greater sales opportunities often
associated with attaching such printers to existing computer systems. The
Company's ability to solve the particular problems of individual
customers' requirements, by among other things, writing its own software
integration packages is one of the key elements in effectively selling high
speed printers. The technical difficulties associated with these printers
include various issues concerning the compatibility of particular printers
and computers, as well as the complexities of connecting printers to local
area networks. Importantly, information systems printing increases the
potential equipment base for the Company's consumables products and
maintenance services.
<PAGE 8>
Mini-Printers and Controller Boards - The Company's Telpar subsidiary
designs, manufacturers, assembles, customizes and distributes a wide
variety of microprocessor driven mini-printers,
including custom designed proprietary controller boards, accounting for
approximately 10% of the Company's equipment and system sales in
1996. Telpar is an authorized value added distributor of Epson, DH
Print, Citizen Seiko and C. Itoh for their respective mini-printer lines. It
also markets thermal mini-printers made by Fujitsu. Telpar is in the
process of shifting its focus toward supplying mini-printers for kiosk and
bar code applications, particularly in RF and mobile environments.
Consulting and Maintenance Services - The sales strategy of the
Company is based on providing its customers with a full range of services
designed to provide a total solution to their data capture needs. These
services can include: (i) consulting on the selection of a package of
equipment suitable for a specific application, considering both the
physical environment in which the system will operate and the particular
capabilities the customer will require; (ii) designing and assembling an
entire system to meet a customer's specific requirements, including
proprietary systems involving software as well as hardware; (iii) assisting
in the installation of the system, including linking it to the host data
processing system; (iv) offering factory-trained and authorized
maintenance and repair service for products the Company markets, up to
24 hours a day, seven days a week, with as little as two hour response
time; and, (v) providing technical support, including a telephone hot-line
for use by customers as well as the Company's sales and maintenance
personnel.
In addition, the factory warranty typically provided on new equipment
requires that a faulty product must be returned to the factory for repair or
replacement, which creates a significant downtime during the repair
turnaround cycle. The Company is often authorized to carry out repairs
under the manufacturer's warranty on the customers premises thus
minimizing downtime.
In total, the Company has over 8,000 maintenance customers with
approximately 42,500 pieces of equipment under maintenance contracts.
Sales personnel aim to sell a one-year maintenance contract at the time of
each equipment sale. Follow-up calls are made to those customers that do
not purchase maintenance contracts at the time of the sale. Additional
opportunities to sell maintenance contracts occur when a customer calls
for service on a time and materials basis on equipment purchased without
a maintenance contract or from a source other than the Company.
Historically, approximately 85% of all maintenance contracts have been
renewed each year, with growth provided by new contracts.
In 1996, maintenance sales totaled approximately $36,900,000 or
approximately 17% of the Company's net sales. Approximately 85% of
the Company's maintenance sales are derived from maintenance contracts,
which generally have a 12-month term and typically are paid annually in
advance, although, for accounting purposes, such sales are recognized
ratably over the life of the contract. The remainder of the maintenance
sales are derived principally from billings for work done on a time and
materials basis.
PRINCIPAL SUPPLIERS
Management believes that the Company is not dependent on any particular
supplier. The products that the Company distributes are generally
characterized by a large number of rival models
<PAGE 9>
manufactured by a variety of companies. The Company deals with
numerous suppliers, and management believes the Company has a strong
relationship with each of its existing key suppliers.
Furthermore, if a new product is introduced by a particular manufacturer,
the Company generally seeks to distribute the latest technology available.
Over time, as certain suppliers have lost their technological lead to other
manufacturers, the Company's supplier profile has changed accordingly.
During 1994, 1995, and 1996, approximately 17%, 11% and 9% of the
Company's equipment and system sales were derived form the sale of
Printronix products; 19%, 19% and 18% from the sales of Zebra
Technologies products; and 8%, 11% and 16% from the sale of Symbol
Technologies products. Printronix supplies principally high speed impact
and mid-range non-impact printers used in both bar code and information
systems printing applications. Zebra Technologies supplies thermal
transfer bar code printers and related supplies. Symbol Technologies
supplies a wide array of wireless terminal and scanning equipment. In
addition, certain suppliers, important to one or more specialized areas,
include: Intermec, Norand, United Barcode Industries and Welch Allyn,
which supply bar code scanning and terminal equipment, including, in the
case of Intermec and Norand, wireless terminal equipment; Eltron,
Dataproducts, Printek, and Datasouth which supply printers; Vertex, Inc.,
which supplies readers; Vertex and Sterling Software which supply
software tools for access control systems; and Epson, DH Print, Citizen
Seiko and C. Itoh, which supply mini-printer products.
Generally, the Company operates under standard non-exclusive distributor
agreements with its suppliers. However, in the case of Printronix, the
Company does have limited protection for certain of the geographic
regions where its constituent companies have traditionally sold such
products. This protection takes the form of an understanding that the
manufacturer will refer sales within a particular region to the Company
and provide technical support for the Company's service engineers sales
personnel. In October 1993, Zebra Technologies and Peak signed an
exclusive agreement for Peak to become Zebra's only National Sales and
Service Center which provides for, among other things, sales support, lead
referrals and technical support on a national basis. Peak is currently the
largest customer for Zebra Technologies and Symbol Technologies, the
largest reseller for Printronix, Norand, Welch Allyn, and United Barcode
Industries, and one of three national distributors for Dataproducts and the
only one which offers nationwide service.
Through stock rotation rights and price protection arrangements with most
of its major suppliers, including Printronix and Zebra, the Company is
able to reduce the risk of holding obsolete or over-priced product. Stock
rotation rights allow distributors to return a certain proportion of their
purchases in the event that the equipment does not sell. A price protection
program gives the distributor a rebate on purchases during a specified
past period when the manufacturer subsequently lowers its prices. The
price protection period generally covers any purchase made within the
most recent 60 to 90 day period prior to the manufacturer's price
reduction.
Deliveries of the Company's products range from one week to
approximately 90 eays. The Company's objective is to minimize lead
times for its customers without financing excess stock levels or risking
technological obsolescence. The Company's backlog of customer orders
totaled approximately $14,700,000 and $15,600,000 at December 31,
1995 and 1996. The Company strives to ship customer orders upon
receipt unless the customer request shipment at a specific forward date.
The Company expects to ship substantially all of its current backlog
during 1996.
<PAGE 10>
SALES AND MARKETING
As of December 31, 1996, the Company operated through its international
network of over 100 sales and maintenance locations throughout the
United States, Canada, the United Kingdom, France, Germany,
Switzerland, the Netherlands and Norway. As of December 31, 1996, the
Company employed 432 sales, marketing, and systems integration
personnel. In most cases, the local offices operate as both a local sales
office and a maintenance center.
The Company's sales offices and maintenance centers are currently
organized on a regional basis with a regional head office responsible for
organizing the local sales force and maintenance engineers, many of whom
have extensive knowledge of the local markets. The regional sales
managers also work to identify and build relationships with local
customers, and if appropriate, expand the local relationship to a national
and international relationship through Peak's extensive network of offices.
In order to effectively meet each customer's needs, the sales force first
gains an understanding of the customer's application requirements before
recommending one or more possible solutions. The variety of products
offered by the Company often allows the sales person to suggest
integrated systems, thereby adding value, providing more complete
solutions to the customers' requirements and gaining add-on sales. Where
necessary, technical support personnel accompany sales people to the
customer's site to assist in recommending the best solution. The
Company's ability to choose a system from products of several
manufacturers combined with the strong technical skills of its sales force,
has allowed the Company to be viewed as a relatively objective
consultative source for its customers.
The field sales force has been organized so that all field sales personnel
are fully supported by inside support personnel who handle incoming
customer calls, perform bidding estimates, provide rapid response to
customer questions and assist in sales prospecting. In addition, sales force
incentive compensation is based upon gross profit generated.
Product marketing managers are appointed for each of the major market
segments including bar code, information systems printing, consumables
and supplies, and mini-printers. The product managers are responsible
for maintaining up to date knowledge about the latest technology, product
life cycles and innovative new products. The product managers
communicate to the regional offices technical information about the latest
products, as well as the particular applications and typical problems of
certain industries. These managers are responsible for providing training
for the sales personnel and for other elements of support in the sales and
technical areas. Product managers also communicate information about
particular applications for specific customers to the rest of the sales force,
so that both the concept and the technical details can be applied across the
group.
The Company's marketing operations generally include product
management, proprietary product definitions, marketing communications,
advertising and promotions, technical services, market research and
market development functions. Sales leads are typically generated by
ongoing interaction with existing customers (often facilitated by the
existence of a consumables or maintenance relationship), sales calls to
companies not currently customers, but fitting the profile
<PAGE 11>
of a target customer (a mid-sized or larger organization), advertisements
placed by suppliers, referrals from suppliers, and by the advertising and
promotional efforts described below.
The current advertising and promotion program for the Company consists
of : (i) exhibits at national, international, and regional trade shows for bar
code data capture, information systems printing, consumables and
supplies, mini-printers and other products; (ii) Company sponsored local
seminars and product demonstrations: (iii) a quarterly newsletter that is
mailed to existing and potential customers, featuring applications stories,
technical tips, new product, and industry news; (iv) advertisements in
trade publications that serve the bar code and computer industries; (v)
articles on particular applications written by Company employees and
published in trade publications; and (vi) direct mail campaigns to targeted
market niches. Working in concert with the Company's suppliers to
develop these programs allows the Company to recoup a substantial
portion of its advertising and promotional spending through manufacturer
sponsored cooperative advertising programs.
CUSTOMERS
The Company estimates that it has served more than 30,000 customers in
the past year. Approximately 80% of its equipment and system sales
(other than mini-printers and controller boards) are to end-users, typically
large companies and government agencies such as AT&T, MCI, Xerox,
General Electric, Salomon Brothers, John Deere, Motorola, Newell
Companies, G.T.E., Thorn EMI Plc., Ford Motor UK Ltd., Eastman
Kodak, Danaher Tools, Tropicana, Milliken & Co., Rubbermaid, Rohm
& Haas, Vanity Fair, Thomas Nelson Publishing, and New York State
and City agencies. Approximately 20% of the Company's equipment and
system sales are to OEM's, resellers, and other systems integrators. The
Company has concentrated all of its VAR sales through its Accuscan
business, since the merger in September 1995, while its OEM business is
concentrated through its Telpar unit. Mini-printers and related controllers
are typically sold to OEM's, including Danaher Corp., and CIBA Corning
Diagnostics. No customer represented more than 5% of the Company's
net sales in any of the three years ended December 31, 1996.
SEASONALITY
Peak's sales may vary from quarter to quarter depending on factors such
as the timing of new product announcements, acquisitions and changes in
pricing policies by the Company and its competitors, market acceptance
of new and enhanced versions of the products distributed by the Company
and the timing of significant orders. In addition to general economic
trends, much of the systems and equipment sold by the Company are part
of capital spending budgets for customers which tend to be reset and
finalized during the first quarter for expenditure later in the year. Peak
believes that quarterly, period-to-period comparisons of its financial
results are not necessarily meaningful and should not be relied upon as an
indication of future performance.
COMPETITION
The Company faces competition from a variety of companies, many of
which have greater resources than the Company, including: (i) major
computer and industrial automation companies (including IBM, the
Intermec division of Western Atlas, and DEC) which manufacture and
market equipment directly to the Company's customer base; (ii) specialist
manufacturers (including, to a
<PAGE 12>
limited extent, the Company's own suppliers), which, in some cases, sell
directly to the Company's customer base; (iii) third party vendors
(including Decision Data, Anzak, IDEA/Servcom, Wang Data Services,
Bell Atlantic Business Services, Memorex/Telex and Sand Technologies);
and (iv) other value added distributors, resellers, and systems integrators
of automatic identification equipment.
As the printer and scanner application requirements of the Company's
customers become more demanding and, in the case of printers, move
from the low end toward the high speed, high volume commercial
applications or research, scientific and technical uses, and in the case of
data capture terminals, move toward more wireless applications, the
Company's value added technical expertise becomes more of a competitive
factor.
The Company's primary focus is to compete with others on the basis of, in
management's opinion, Peak's broad national and international reach, its
"best of breed" line card, and its superior technical expertise, proprietary
software, customized solutions, and service capabilities. However, in
cases where the Company is providing equipment only, price and
availability are often the primary competitive factors.
The Company's prices may vary from those of other distributors or direct
selling manufacturers based on the level of any volume commitment from
large customers and the Company's assessment of the value of the service
provided by the Company. The consulting and installation services that
the Company provides and which differentiate it from much of the
competition are not always charged for separately.
INTELLECTUAL PROPERTY RIGHTS
The Company relies on a combination of trade secrets, contractual rights,
and in some cases, copyright laws to establish and protect its rights in its
proprietary products, such as ScreenShaper, Incredibar(trademark), the
Wireless Warehouse(trademark), Nucleus Stock Audit(trademark),
PDTpal(trademark), and Peak Advantage(trademark) / Data
Harvester(trademark). The Company does not believe the legal
protections afforded to its intellectual property rights are critical to its
success.
EMPLOYEES
As of December 31, 1996, the Company had 934 full time employees. Of
these, 432 are marketing, systems integration, and sales personnel; 303
are engineering and maintenance; 80 are purchasing, warehouse and
inventory control personnel; and 119 are in accounting, data processing
and other administrative functions. None of the employees are unionized.
The Company considers its relations with its employees to be good.
CERTAIN FACTORS
The Company would like to caution readers regarding certain forward-
looking statements in this Form 10-K. While the Company believes in the
veracity of all statements made, forward-looking statements are
necessarily based upon a number of estimates and assumptions that, while
considered reasonable by the Company, are inherently subject to
significant business, economic
<PAGE 13>
and competitive uncertainties and contingencies, many of which are
beyond the Company's control.
These uncertainties and contingencies can affect the Company's actual
results and could cause the Company's actual results to differ materially
from those expressed in any forward-looking statements made by, or on
behalf of, the Company. In addition to other information in this Annual
Report, the following factors should be carefully considered in evaluating
the Company and its business:
Acquisitions - Much of the Company's growth has been the result of
management's ability to acquire complementary businesses and to
integrate their operations into the Company's existing organization. A
principal strategy of the Company is to continue to grow in this manner.
There can be no assurance that suitable acquisition candidates will
continue to be available, or that the Company will be able to successfully
integrate future acquisitions into its existing business. Furthermore,
inability to control and manage acquisition growth effectively could have
a material adverse effect on the Company's financial condition and results
of operations. See The Company - Development of the Business.
Intangible assets arising from acquisitions represented $48,612,000 of the
Company's total assets at December 31, 1996, and amortization of
intangibles amounted to $1,999,000 for the year ended December 31,
1996.
Risk of Limited Supply Sources - The majority of the products sold by the
Company are purchased pursuant to distributor agreements with
equipment manufacturers. These agreements are typically for terms of
one year, renewable annually and terminable by either party on 30-120
days' notice. The agreements are non-exclusive and authorize the
Company to sell all or a portion of the products produced by that supplier.
The Company's ten largest suppliers accounted for approximately 54% of
the equipment and system sales in fiscal 1996, 70% in 1995, and 54% in
1994. During 1996, approximately 18% of the Company's equipment and
system sales were derived form the sale of Zebra Technologies products
and 16% from the sale of Symbol products. While management believes
that the company is not dependent on any particular supplier, the loss of
any major supplier, financial difficulty of a major supplier, or trade
restrictions affecting purchases from a major supplier, could have a
material adverse effect upon the Company's business. See 'Business -
Principal Suppliers.'
Risk of Inventory Losses - As a distributor, the Company faces the risk
of potential inventory losses due to normal product life cycles,
technological change or manufacturer price reductions. During the fourth
quarter of 1996, the Company wrote down inventory by $4,500,000. The
primary exposure exists in equipment inventory, which totaled
$18,750,000 at December 31, 1996. The Company's equipment inventory
turned over at an approximate rate of 7.7 times per year during the year
ended December 31, 1996. The Company continually monitors the level
of individual equipment lines in inventory in relation to expected product
life cycles and technological change. The Company attempts to protect
against such loses through certain provisions in its distribution
agreements, which (assuming the Company complies with certain
conditions) generally require suppliers to credit the Company for
inventory losses incurred through reductions of the manufacturer's list
price of the items. In addition, under the terms of many such agreements,
the Company generally has the right to return to the manufacturer, for
credit, a specified portion of such inventory items purchased within a
designated period of time. A manufacturer who elects to terminate a
distribution agreement without cause is generally required to purchase
from the distributor the products of such manufacturer carried in the
distributor's inventory. While such
<PAGE 14>
agreements do not protect the Company completely from inventory losses,
such agreements do, in management's opinion, provide substantial
protection from such losses. No assurance can be given
that such price protection and return policies will continue to be effective
in protecting the Company.
Competition - The Company faces competition from a variety of sources
including (i) major computer and industrial automation companies who
also manufacture and market equipment directly to the Company's
customer base; (ii) specialist manufacturers (including, to a limited extent,
the Company's own suppliers) who, in some cases, sell directly to the
Company's customer base; (iii) third party vendors; and (iv) other value
added distributors, resellers, and systems integrators of computer
peripheral equipment. Several of the Company's principal competitors are
considerably larger than the Company and possess greater financial,
technical and marketing resources and, in certain circumstances, pricing
advantages over the Company. Such competition could result in price
reductions, reduced margins and loss of market share, all of which could
materially adversely affect the Company. There can be no assurance that
the Company will be able to compete successfully against current and
future competitors or that competitive pressures faced by the Company
will not materially adversely affect its business, operating results and
financial condition in the future. There can also be no assurance that the
Company's suppliers will not seek to expand their distribution capabilities
and become more substantial competitors to the Company. See 'Business
- - Competition'
Potential Fluctuations in Quarterly Results - The Company's quarterly
earnings have experienced material variations between the strongest and
weakest quarters in prior fiscal years, and may vary significantly in the
future depending on factors such as the timing of new product
announcements and changes in pricing policies by the Company and its
competitors, market acceptance of new and enhanced versions of the
products distributed by the Company and the timing of significant orders.
A substantial portion of the Company's revenue in each quarter results
from orders booked in that quarter. If revenue levels are below
expectations, operating results are likely to be adversely affected. Net
income may be disproportionately affected by a reduction in revenue,
because to a significant degree the Company's selling, general, engineering
and administrative expenses do not vary directly with its revenue. The
Company's expense levels are based, in part, on it expectations as to
future revenue. There can be no assurance that the Company will be able
to grow in future periods or that it will be able to be to sustain
profitability on a quarterly basis. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations'.
General Economic Conditions - The Company's business is affected by
the cyclical nature of capital expenditures by businesses and by other
trends in the general economy. See 'Business - Seasonality.' In addition,
the Company may be affected by industry-wide product shortages or
supply excesses which might occur from time to time.
International Sales - Net sales generated from sales to international
customers were approximately 19% in 1996 and 9% in 1995 and the
Company expects this percentage to increase in the future. In connection
with international sales, fluctuations in currency conversion rates can
expose the Company's products to price competition from products
produced at lower costs in foreign countries. The Company is also
subject to certain other risks inherent in international business generally,
including risks of trade embargoes, political instability and the possibility
of war or other hostility.
<PAGE 15>
Management Information Systems - The Company's success is in part
dependent on the accuracy and proper utilization of its management
information systems. The Company's ability to analyze data derived from
its management information systems to increase product promotions,
manage inventory and accounts receivable collections, to purchase, sell
and ship products efficiently and on a timely basis, and to maintain cost-
efficient operations are each dependent upon the quality and utilization of
the information generated by its management information systems. The
Company recently converted to a new management information system in
the United States and discontinued implementation of a centralized
computer system in Europe. The Company anticipates adding additional
capacity to its management information systems on a regular basis.
Shareholding - As of December 31, 1996, the Company's officers,
management and directors, and certain of their affiliates, in the aggregate
beneficially own approximately 10% of Peak's outstanding shares of
common stock. Certain provisions of Peak's Bylaws and Certificate of
Incorporation could have the effect of delaying, deferring or preventing
change in control of the Company. In March 1997, the Company
implemented a shareholder Rights Plan which could have the effect of
delaying, deferring or preventing a change in control of the Company.
See Note 13 in the Notes to Consolidated Financial Statements for a
description of the Rights distributed pursuant to this plan.
Possible Volatility of Stock Price - Historically, the market price of the
Company's Common Stock has fluctuated significantly. There can be no
assurance that the market price of the Company's Common Stock will not
continue to be subject to wide fluctuations in response to quarterly
variations in operating results and other events or factors. See 'Market for
the Registrant's Common Stock and Related Stockholder Matters'.
ITEM 2. PROPERTIES
As of December 31, 1996, the Company operates from over 100 sales and
maintenance locations. All of the Company's facilities are leased. The
following table sets forth the location, square footage and lease expiration
date of each property in excess of 10,000 square feet. The other facilities
aggregate approximately 160,000 square feet and have expiration dates
ranging from 1996 to 2006.
Location Sq. Ft Expiring Date
- ----------- ---------- ------------------
Columbia, MD * 47,500 December 2001
Addison, TX * 24,000 November 2001
St. Paul, MN * 23,000 January 2000
Orlando, FL * 15,000 January 1999
Honeoye Falls, NY * 11,000 June 1997
*combined warehouse and office facility
<PAGE 16>
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in litigation, as a defendant, incidental to the
conduct of its business. It is the opinion of management, after
consultation with counsel, that the outcome of such litigation will not have
a material adverse effect on the Company's financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES
HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1996.
<PAGE 17>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED
STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is publicly traded on the NASDAQ Stock
Market under the symbol PEAK. The following tables sets forth the range
of high and low closing prices for the past two years ended December 31,
1996, by quarter, as reported in the NASDAQ National Market System.
Fiscal Year Ended: High Low
------ -----
December 31, 1995
------------------------
First Quarter $21.25 $14.75
Second Quarter $20.75 $16.75
Third Quarter $30.50 $25.25
Fourth Quarter $34.75 $20.00
December 31, 1996
------------------------
First Quarter $30.75 $18.25
Second Quarter $27.25 $17.50
Third Quarter $24.00 $19.50
Fourth Quarter $21.75 $10.50
On March 31, 1997, the closing price of the Company's Common Stock
was $10.50.
As of March 31, 1997, there were 120 holders of record of the Company's
Common Stock. Including shares held in street name by numerous
brokerage firms, as of March 31, 1997, there are approximately 4,000
beneficial stockholders.
The Company has never declared nor paid any cash dividends or
distributions on its capital stock. The Company currently intends to retain
its earnings to finance future growth and therefore does not presently
anticipate paying any cash dividends in the foreseeable future. In
addition, Peak's long-term loan facility includes provisions that may
restrict the payment of dividends to shareholders.
<PAGE 18>
ITEM 6. SELECTED FINANCIAL DATA
Set forth below are selected financial data for the last five years ended
December 31, 1996, which have been derived from the consolidated
financial statements of Peak. The selected financial data should be read in
conjunction with the financial statements, related notes and other financial
information included herein.
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------
1992 1993 1994 1995 1996
---------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Income Statement Data: (1) (In thousands, except per share data)
Net Sales $81,788 $104,825 $136,481 $184,624 $215,681
Cost of Sales 54,829 71,597 93,410 122,281 147,950
---------- -------- --------- ------- --------
Gross Profit 26,959 33,228 43,071 62,343 67,731
Selling, General, Engineering, and
Administrative Expenses 20,207 25,499 31,900 47,230 70,962
Amortization of Intangibles 914 1,051 949 1,027 1,999
Merger Charges (2) - - - 2,120 -
Restructuring Charges (3),(4) - 7,700 - - 6,964
-------- -------- -------- -------- --------
Income (Loss) from Operations 5,838 (1,022) 10,222 11,966 (12,194)
Interest and Other Expenses, Net 2,441 1,667 1,770 1,037 1,479
-------- -------- -------- -------- --------
Income (Loss) from Continuing
Operations before Income Taxes 3,397 (2,689) 8,452 10,929 (13,673)
Income Taxes 1,257 663 3,602 4,579 (1,114)
------- -------- -------- -------- --------
Income (Loss) from Continuing
Operations before Extraordinary Item 2,140 (3,352) 4,850 6,350 (12,559)
Income (Loss) from Discontinued
Operations, Net of Taxes (6) (3,149) - - -
Extraordinary Item, Net of Taxes - (212) - - -
------- ------- -------- -------- -------
Net Income (Loss) $ 2,134 $(6,713) $ 4,850 $ 6,350 $(12,559)
====== ====== ====== ====== =======
Per Share Data:
Income (Loss) from Continuing
Operations before Extraordinary Item $ .43 $ (.52) $ .71 $ .74 $ (1.37)
Discontinued Operations - (.49) - - -
Extraordinary Item - (.03) - - -
------- ------- -------- -------- -------
Net Income (Loss) $ .43 $ (1.04) $ .71 $ .74 $ (1.37)
====== ====== ====== ====== ======
Average Shares Outstanding 4,978 6,436 6,824 8,526 9,189
Balance Sheet Data:
Working Capital $10,361 $15,409 $20,518 $34,392 $32,166
Total Assets 58,305 66,305 80,604 103,777 136,402
Long-term Debt, Preferred Stock,
and Revolving Loans 14,197 16,388 18,824 2,476 24,928
Total Stockholders' Equity 23,841 18,752 28,220 66,663 60,070
<FN>
(1) Comparability of the Income Statement Data is impacted by acquisitions occurring throughout
the periods presented. See "Development of Business".
(2) Reflects merger charges related to IPPC, Accuscan, and Dytec, having an after-tax impact of
$1,638,000 or $0.19 per share. See Note 3 in the Notes to Consolidated Financial Statements and
"Management's Discussion and Analysis of Financial Condition and Results of Operations".
(3) Reflects 1996 restructuring charges with an after-tax impact of $4,790,000 or $0.52 per share.
See Note 4 in the Notes to Consolidated Financial Statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
(4) Reflects 1993 restructuring charges with an after-tax impact of $6,097,000 or $0.95 per share,
substantially relating to the write down of Telpar's intangible assets, elimination of product line
redundancies, consolidation of office and warehouse facilities, and reduction of the Company's
workforce.
</TABLE>
<PAGE 19>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Company's Consolidated Financial Statements included elsewhere. The
discussion and analysis set forth below is affected by acquisitions
occurring throughout the periods presented. The following table sets forth
certain income statement data expressed as a percentage of net sales and
the percentage increase of such items compared to the corresponding prior
period.
<TABLE>
<CAPTION>
% of Net Sales
--------------------------------------------
For the Years Ended December 31, % Increase/(Decrease)
------------------------------- -----------------------
1994 to 1995 to
1994 1995 1996 1995 1996
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 35.3% 16.8%
Cost of Sales 68.4 66.2 68.6 30.9 21.0
----- ----- -----
Gross Profit 31.6 33.8 31.4 44.7 8.6
Selling, General, Engineering
and Administrative Expenses 23.4 25.6 32.9 48.1 50.2
Amortization of Intangibles 0.7 0.6 0.9 8.2 94.6
Restructuring Charges -- -- 3.2 N/M N/M
Merger and Integration Charges -- 1.1 -- N/M N/M
----- ----- -----
Income (Loss) from Operations 7.5 6.5 (5.6) 17.1 N/M
Interest and Other Expenses, net 1.3 0.6 0.7 (41.4) 42.6
----- ----- -----
Income (Loss) before
Income Taxes 6.2 5.9 (6.3) 29.3 N/M
===== ===== =====
<FN>
N/M - Not Meaningful
</TABLE>
RESULTS OF OPERATIONS
Year Ended December 31, 1996 Compared to Year Ended
December 31, 1995
- ----------------------------------------------------------------------
Net sales for 1996 increased to $215,681,000 from $184,624,000 in
1995, an increase of 16.8%. During 1996, equipment and systems sales
increased 16.8% to $178,790,000 and maintenance service sales increased
16.8% to $36,891,000. ISF was acquired in May 1995, Datapen was
acquired in June 1995, Mandata was acquired in September 1995,
Numeric Arts was acquired in October 1995, Combitrading was acquired
in January 1996, Syntest was acquired in March 1996,
<PAGE 20>
Acquidata and Barcode Systems were acquired in April 1996, and SASS
was acquired in June 1996. Sales and results of operations for these
acquisitions are included with those of the Company from their respective
dates of acquisition. Accuscan, which was merged with the Company in
September 1995 in a pooling-of interests transaction, has been included
for the full year of 1995. Exclusive of the sales contributed from these
acquisitions, net sales increased by 3.1% in 1996 over 1995, due
primarily to increased unit sales. Sales performance in the second half of
1996 was below expectation, primarily in the Company's European
operations and to a lesser extent in the United States during the fourth
quarter of 1996.
The Company's gross profit margins were 31.4% in 1996 compared to
33.8% in 1995. Equipment and systems gross profit margin rates were
28.4% in 1996 compared to 30.6% in 1995. Maintenance gross profit
margins were 46.1% in 1996 compared to 49.4% in 1995. Although the
Company continues to focus on the sale of bar code systems which
incorporate Peak's proprietary software and professional services with
related hardware, that generally generate higher gross profit margins, the
Company's gross profit margins were negatively impacted by an increase
of $4,500,000 inventory write down in the fourth quarter of 1996 in
connection with the initiation of the Company's realignment of its product
line focus, which reduced overall gross profit margins by 2.1 margin
points.
Selling, General, Engineering and Administrative ("SGE&A") expenses
increased to 32.9% of net sales in 1996 compared with 25.6% of net sales
in 1995. The increases result primarily from lower than expected sales in
the second half of 1996 together with increased spending for marketing
and technical and other personnel costs, as well as higher SGE&A to sales
ratios in the Company's European operations.
The Company initiated a plan to restructure its operations in the fourth
quarter of 1996 in order to reduce expense levels to be in line with revenue
expectations. The restructuring plan includes actions designed to improve
operational efficiencies, which the Company believes will enhance its
future financial performance. The restructuring charge totaled
$6,964,0000.
Interest costs increased to $1,479,000 in 1996 from $1,037,000 due to
increased borrowings resulting primarily from the Company's acquisition
activity.
The Company's loss before income taxes was $13,673,000 in 1996 versus
income before income taxes of $10,929,000 in 1995.
Restructuring Charges
- ---------------------------
The Company initiated a plan to restructure its operations in the fourth
quarter of 1996 in order to reduce expense levels to be in line with revenue
expectations. The restructuring plan includes actions designed to improve
operational efficiencies, which the Company believes will enhance its
future financial performance. The target of the plan is to improve
operational efficiencies by centralizing functional areas, reducing or
closing facilities, and eliminating assets no longer useful to the Company.
These actions resulted in a fourth quarter restructuring charge of
$6,964,000 ($4,790,000 after-taxes or $0.52 per share). The
restructuring charge includes $2,323,000 related to severance and related
benefits for an approximate 10% reduction of the Company's domestic
<PAGE 21>
and international workforce, $2,095,000 for the write-off of the assets and
future commitments related to a European computer system, $1,575,000
related to the disposition of ISF and $971,000 for lease costs related to the
closing or consolidation of certain facilities.
The plan's implementation began in the fourth quarter of 1996 and is
scheduled to be substantially completed by the end of 1997. Once
completed, the Company believes the plan will result in an annual cost
savings of approximately $3,000,000. However, no assurances can be
given as to the actual extent of any savings or improvements that might be
realized or that additional actions and additional charges against earnings
might not occur in the future. The primary costs related to the
restructuring charge that will require future payments beyond 1997 are
related to lease costs of consolidated or closed facilities which will
continue through June 2000. At December 31, 1996, approximately
$3,595,000 of the restructuring charge has not yet been utilized.
Year Ended December 31, 1995 Compared to Year Ended
December 31, 1994
- ----------------------------------------------------------------------
Net sales for 1995 increased to $184,624,000 from $136,481,000 in
1994, an increase of 35.3%. During 1995, equipment and system sales
increased 38.4% to $153,052,000 and maintenance service sales increased
22.1% to $31,752,000. NACO was acquired in July 1994, and Peak UK
was acquired in October 1994, ISF was acquired in May 1995, Datapen
was acquired in June 1995, Mandata was acquired in September 1995,
and Numeric Arts was acquired in October 1995. Sales and results of
operations for these acquisitions are included with those of the Company
from their respective dates of acquisition. Accuscan, which was merged
with the Company in September 1995 in a pooling-of-interests
transaction, has been included for the full year of 1995. Exclusive of the
sales contributed from these acquisitions, net sales increased by 17.1% in
1995 over 1994, due primarily to increased unit sales.
The Company's gross profit margins increased to 33.8% in 1995
compared to 31.6% in 1994. Equipment and systems gross profit margin
rates increased to 30.6% in 1995 from 28.0% in 1994. Maintenance
gross profit margins increased to 49.4% in 1995 from 46.8% in 1994.
The Company continued to focus on increasing its gross profit margins by
designing and implementing value-added solutions, which generate higher
gross profit margins.
SGE&A expenses increased to 25.6% of net sales in 1995 compared with
23.4% of net sales in 1994. The increases result primarily from additional
technical personnel and related costs required to provide an increasing
level of value added bar code solutions to the Company's customers,
thereby increasing gross profit margins, as well as increased operating
costs associated with the Company's European expansion, where the
Company experiences higher SGE&A costs relative to sales, which are
offset by higher gross profit margin rates. SGE&A costs were also
impacted by Accuscan and Dytec, which incurred higher levels of
operating costs relative to sales for 1995, as a result of these stand-alone
structures, prior to integration into the Company's overall infrastructure.
In connection with the IPPC, Accuscan and Dytec mergers in 1995, the
Company incurred merger charges totaling $2,120,000 ($1,638,000 after-
taxes or $0.19 per share). Of these charges, approximately $600,000
related to professional fees, $575,000 related to a non-cash accounting
charge for acceleration of Dytec long-term stock grants according to the
terms of a pre-existing
<PAGE 22>
plan, and the remaining $945,000 are provisions for the costs of
combining operations of the previously separate companies.
Interest costs decreased to $1,037,000 in 1995 from $1,770,000 in 1994
primarily as a result of the repayment of debt with the proceeds from the
May 1995 public offering.
Income before income taxes increased to $10,929,000 in 1995 from
$8,452,000 in 1994, an increase of 29.3%. Exclusive of merger charges,
income before income taxes increased 54.4% to $13,049,000 in 1995.
Liquidity and Capital Resources
- ---------------------------------------
Amounts available under the Company's revolving loan facilities and
funds generated from the Company's operations have been the Company's
primary source of liquidity. In July 1996, the Company and its primary
operating subsidiaries amended its existing long-term loan agreement by
increasing its maximum borrowing capability to $32,000,000 from
$25,000,000. Borrowings under the facility are unsecured and bear
interest at various rates above and below the LIBOR, Treasury Bond or
Prime interest rates. The facility expires in 2002. At December 31, 1996,
there was approximately $7,100,000 available for future borrowings. The
long-term revolving loan contains certain covenants, the more significant
of which relate to additional indebtedness, minimum tangible net worth,
and certain financial ratios. At December 31, 1996, the Company was in
compliance with such covenants as retroactively amended.
In May 1995, the Company and certain selling shareholders completed a
public offering of 1,552,129 shares of Common stock at an offering price
of $20.00 per share. The Company offered 1,150,000 shares plus
granted an over-allotment option to the Underwriters of 232,819 shares,
which was fully exercised. The Company utilized the net proceeds of
approximately $25,478,000 from the public offering to repay existing
debt under its revolving loan and the Telpar term loan, as well as for
funding of the Company's 1995 acquisitions. In November 1995, the
Company and its primary operating subsidiaries entered into a
$25,000,000 long-term loan facility with a bank, which replaced the
existing revolving loans.
Capital expenditures were approximately $4,589,000 in 1996 and
$2,389,000 in 1995. The increase in capital expenditures in 1996 was
due primarily to spending related to the Company's MIS systems, including
approximately $1,680,000 related to the European computer system which
was written off as part of the restructuring charge. The
Company anticipates that capital expenditures will be approximately
$2,500,000 in 1997.
The Company anticipates that working capital (approximately
$32,166,000 at December 31, 1996), together with funds generated from
operations and amounts available under the long-term loan facility
(approximately $7,100,000 at December 31, 1996), will be sufficient to
satisfy the cash needs of the Company during 1997.
The accompanying financial statements include a valuation reserve of
$1,852,000 substantially related to foreign net loss carryforwards of
approximately $8,000,000. These valuation allowances will be reduced
when it is more likely than not that the Company will generate income in
the respective jurisdictions for which the allowances have been provided.
The Company's results of operations have not been materially affected by
inflation.
<PAGE 23>
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
Index to Financial Statements and Supplementary Data
Page Number
Report of Independent Auditors...................................24
Consolidated Balance Sheets......................................25
Consolidated Statements of Operations............................26
Consolidated Statements of Stockholders' Equity..................27
Consolidated Statements of Cash Flows............................28
Notes to Consolidated Financial Statements.......................29
Report of Independent Auditors on Schedule.......................43
Schedule II - Valuation and Qualifying Accounts..................44
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable
<PAGE 24>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
The Peak Technologies Group, Inc.
We have audited the accompanying consolidated balance sheets of The
Peak Technologies Group, Inc. as of December 31, 1995 and 1996, and
the related consolidated statements of operations, changes in stockholders'
equity and cash flows for each of three years in the period ended
December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of The Peak Technologies Group, Inc. at December 31, 1995 and 1996,
and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles.
Ernst & Young LLP
MetroPark, New Jersey
March 26, 1997
Except for Note 13 as to which the date is,
April 8, 1997.
<PAGE 25>
<TABLE>
THE PEAK TECHNOLOGIES GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
<CAPTION>
December 31,
----------------------------
ASSETS 1995 1996
- --------------------------------------------------------------------------- ----------- --------
<S> <C> <C>
Current assets:
Cash $ 311 $ 789
Accounts receivable, less allowances for doubtful accounts
and sales returns of $ 1,014 in 1995 and $1,952 in 1996 38,949 38,924
Inventories 23,583 28,380
Refundable Income tax -- 1,371
Deferred tax asset 2,791 8,182
Prepaid expenses and other current assets 1,892 2,536
----------- -------
Total current assets 67,526 80,182
Furniture, equipment and leasehold improvements 8,205 11,416
Less accumulated depreciation 2,942 4,485
-------- -------
5,263 6,931
Customer lists, less accumulated amortization of $1,533 in 1995
and $1,802 in 1996 590 1,273
Non-competition agreements, less accumulated amortization of $397
in 1995 and $933 in 1996 517 1,987
Costs in excess of fair value of net assets acquired, less accumulated
amortization of $3,112 in 1995 and $4,204 in 1996 28,817 45,352
Deferred tax asset 535 244
Other assets 529 433
------- -------
$103,777 $136,402
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 17,057 $ 25,557
Other accrued liabilities 6,984 11,537
Income taxes payable 934 --
Deferred income - maintenance contracts 8,159 10,922
------- -------
Total current liabilities 33,134 48,016
Long-term debt 2,476 24,928
Other liabilities 1,534 3,388
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; authorized 2,000,000 shares;
none issued and outstanding -- --
Common stock, $.01 par value; authorized 15,000,000 shares;
issued and outstanding shares of 8,966,288 in 1995 and
9,290,906 in 1996 90 93
Capital in excess of par 59,623 65,966
Retained earnings (deficit) 6,920 (5,989)
--------- ---------
Total stockholder's equity 66,633 60,070
--------- ----------
$103,777 $136,402
======== ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE 26>
<TABLE>
THE PEAK TECHNOLOGIES GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
<CAPTION>
For the Year Ended December 31,
------------------------------------------------
1994 1995 1996
------------ ------------ ----------
<S> <C> <C> <C>
Sales:
Equipment and Systems $110,621 $153,052 $178,790
Maintenance 25,860 31,572 36,891
------------ ------------ -------
136,481 184,624 215,681
Cost of Sales:
Equipment and Systems 79,639 106,291 128,057
Maintenance 13,771 15,990 19,893
------------ ------------ --------
93,410 122,281 147,950
------------ ------------ --------
Gross Profit 43,071 62,343 67,731
Selling, general, engineering and
administrative expenses 31,900 47,230 70,962
Amortization of intangibles 949 1,027 1,999
Restructuring charges - - 6,964
Merger charges - 2,120 -
----------- ----------- ---------
Income (loss) from operations 10,222 11,966 (12,194)
Other expenses:
Interest expense, net 1,675 942 1,443
Amortization of debt issuance costs 95 95 36
----------- ----------- ------------
1,770 1,037 1,479
----------- ----------- -----------
Income (loss) before income taxes 8,452 10,929 (13,673)
Provision (benefit) for income taxes 3,602 4,579 (1,114)
------------ ----------- ------------
Net income (loss) $ 4,850 $ 6,350 $(12,559)
======= ======= =======
Per share data:
Net income (loss) $ 0.71 $ 0.74 $ (1.37)
======= ======= =======
Weighted Average Shares 6,824 8,526 9,189
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE 27>
<TABLE>
THE PEAK TECHNOLOGIES GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
<CAPTION>
Capital in Retained
Common Stock Excess Earnings
Shares Par Value of Par (Deficit) Total
----------- ------------ ----------- ------------ --------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1994 6,497,691 $ 65 $ 23,717 $ (5,030) $ 18,752
Reduction of escrowed
stock (Concord acquisition) (10,578) - (106) (106)
Issuance of stock (NACO
and Endata acquisitions) 336,167 3 4,285 4,288
Stock options, including
$236 in income tax benefits 75,929 1 645 646
Other (9) (201) (210)
Net Income 4,850 4,850
----------- ------------ ----------- ------------ ----------
Balance, December 31, 1994 6,899,209 69 28,532 (381) 28,220
Pooling-of-interests
with Accuscan 396,000 4 53 903 960
Public offering 1,382,819 14 25,478 25,492
Issuance of stock
(Debt conversion) 144,306 1 1,999 2,000
Issuance of stock
(Mandata acquisition) 71,724 1 1,990 1,991
Stock options and
warrants, including $149
in income tax benefits 65,507 1 784 785
Employee stock purchase plan 6,723 - 157 157
Issuance of stock
(Dytec employee stock plan) 575 575
Other 55 48 103
Net income 6,350 6,350
----------- ------------ ----------- ---------- -------
Balance, December 31, 1995 8,966,288 90 59,623 6,920 66,633
Issuance of stock
(Acquidata acquisition) 172,727 1 3,799 3,800
Issuance of stock
(Barcode acquisition) 52,000 1 1,247 1,248
Stock options and warrants,
including $266 in income
tax benefits 59,084 1 812 813
Employee stock purchase plan 40,807 - 485 485
Other (350) (350)
Net income (12,559) (12,559)
----------- ------------ ----------- ------------ ----------
Balance, December 31,
1996 9,290,906 $ 93 $ 65,966 $ (5,989) $ 60,070
======== =========== =========== ============ ==========
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE 28>
<TABLE>
THE PEAK TECHNOLOGIES GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<CAPTION>
For the Year Ended December 31,
-----------------------------------
1994 1995 1996
--------- ---------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 4,850 $ 6,350 $ (12,559)
Adjustments to reconcile net income (loss) to net
cash provided by (used) operating activities:
Depreciation and amortization 1,506 2,112 3,322
Imputed interest on acquisition debt 212 106 --
Accounts receivable (6,884) (7,173) 3,896
Inventories 616 (1,847) (2,880)
Refundable Income Tax -- -- (1,371)
Deferred income taxes 1,394 194 (3,297)
Accounts payable 1,054 (2,530) 5,504
Accrued interest 444 (1,870) --
Other accrued liabilities (4,516) 1,122 2,382
Income taxes payable 1,383 (119) (1,975)
Deferred income - maintenance contracts 1,088 (769) 2,042
Other assets and liabilities (884) (3,927) 463
Net cash provided by ------- ------- -------
(used for) operating activities 263 (8,351) (4,473)
Cash flows from investing activities:
Capital expenditures (1,599) (2,389) (4,589)
Purchase of businesses (616) (4,952) (12,988)
Other 32 (20) --
--------- -------- ------
Net cash used in investing activities (2,183) (7,361) (17,577)
Cash flows from financing activities:
Borrowings under revolving loan 105,383 80,697 236,551
Repayments under revolving loan (103,656) (89,633) (213,955)
Repayments of long-term debt (175) (4,068) --
Capital contribution and issuance of stock 410 27,033 1,298
Other -- (138) --
--------- --------- --------
Net cash provided by financing activities 1,962 13,891 23,894
Effect of Exchange Rate on Cash -- -- (1,366)
---------- --------- ---------
Net (decrease) increase in cash 42 (1,821) 478
Cash at beginning of year 2,090 2,132 311
---------- ---------- --------
Cash at end of year $ 2,132 $ 311 $ 789
====== ====== ======
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Income taxes $ 80 $ 4,735 $4,241
====== ===== =====
Interest $ 1,174 $ 678 $1,149
====== ===== =====
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE 29>
THE PEAK TECHNOLOGIES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31 1994, 1995, and 1996
NOTE 1 DESCRIPTION OF BUSINESS
The Peak Technologies Group, Inc. ("Peak" or the "Company") is a full
service, value added distributor and systems integrator of high
performance, computer peripheral equipment and systems focused on bar
code data capture, information systems printing, mini-printers and other
related equipment, supplies and consumables. The Company focuses
principally on industrial applications, including warehousing,
manufacturing and distribution. The Company's customers, located
worldwide, are principally end-users, typically large companies and
governmental agencies. The Company also provides maintenance services
for all the products it sells. The Company performs periodic credit
evaluations of its significant customers and generally does not require
collateral.
The Company was formed as a holding company and has since made the
following acquisitions:
Company Date
- ---------------------------------------------------------- -------------
Logon, Inc. (Logon) May 1988
Peak Technologies, Inc. (PTI) January 1990
Telpar, Inc. (Telpar) May 1990
Distribution & Service Division of
MESA Technology Corp. (MESA) October 1991
Gentry Associates, Inc. (Gentry) April 1992
Group Three Electronics Corporation (Group Three) April 1993
Concord Technologies, Inc. (Concord) July 1993
NACO Electronics Corporation (NACO) July 1994
Endata Group Limited (Peak UK formerly Endata) October 1994
Innovative Products & Peripherals Corporation (IPPC) January 1995
ISF - France (ISF) May 1995
Datapen Systems Limited (Datapen) June 1995
AccuScan, Inc. (Accuscan) September 1995
Mandata A/S (Mandata) September 1995
Numeric Arts Limited (Numeric Arts) October 1995
Dytec, Inc. (Dytec) December 1995
Combitrading International B.V. (Combitrading) January 1996
Syntest Corp. (Syntest) March 1996
Acquidata SA (Acquidata) April 1996
Barcode BC Systeme AG (Barcode) April 1996
SASS Computer GmbH (SASS) June 1996
<PAGE 30>
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The accompanying financial statements have
been prepared on a consolidated basis to include the accounts of Peak and
its wholly-owned subsidiaries. All significant intercompany amounts and
transactions have been eliminated in consolidation.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ
from those estimates.
Revenue Recognition: The Company recognizes revenue from the sale of
equipment when shipped to customers, and revenue from systems
integration, professional services and software, generally upon delivery of
the services. Revenue for equipment maintenance and repairs not covered
under the terms of extended warranty and/or service contracts is
recognized when service is performed. Revenue from extended warranty
and/or service contracts is recognized ratably over the terms of the
contract which is usually one year.
Inventories: Inventories consist of computer peripheral equipment and
related components, including demonstration equipment held for sale, and
parts used by the maintenance department. Inventories are stated
principally at the lower of cost (first-in, first-out) or market value.
Inventories consist of:
(In thousands) December 31,
-------------------------
1995 1996
Equipment: --------- ---------
Components $ 4,499 $ 5,063
Finished goods 9,869 13,687
Maintenance Parts 9,215 9,630
---------- ----------
$ 23,583 $28,380
====== ======
Furniture, Equipment and Leasehold improvements: Furniture,
equipment and leasehold improvements are recorded at cost. Depreciation
is provided principally on a straight-line basis over the estimated useful
lives of the related assets ranging from 3 to 10 years. Expenditures for
major renewals and betterments that extend the useful life of an asset are
capitalized. Expenditures for maintenance and repairs are charged to
expense as incurred. Furniture and equipment and leasehold
improvements consist of:
<PAGE 31>
(In thousands) December 31,
-------------------------
1995 1996
-------- --------
Furniture and equipment $ 7,932 $10,636
Leasehold improvements 273 780
-------- --------
$ 8,205 $11,416
===== ======
Customer Lists: The customer lists are being amortized on a straight-
line basis over five to seven years, the estimated useful lives.
Non-Competition Agreement: The non-competition agreements with
former owners are being amortized on a straight-line basis over two to
five years, the terms of the agreements.
Costs in Excess of Fair Value of Net Assets Acquired: Costs in excess of
the fair value of the tangible net assets and identifiable intangible assets of
businesses acquired are amortized on a straight-line basis over forty years.
The Company assesses the recoverability of costs in excess of the fair
value of the net assets acquired by determining whether the carrying value
of these assets can be recovered through discounted forecasted future
operations over their remaining lives.
Impairments of Long-Lived Assets: The Company records impaiment
losses on long-lived assets used in operations or expected to be disposed
when events and circumstances indicate that the future expected cash
flows of the assets are less than the carrying amounts of those assets.
Stock Based Compensation: The Company has elected to follow
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" (APB 25) and related Interpretations in accounting
for its employee stock option plans because, the alternative fair value
accounting provided for under FASB Statement No. 123, "Accounting for
Stock-Based Compensation" (FASB 123), requires use of option valuation
models that were not developed for use in valuing employee stock options.
Under APB 25, because the exercise price of the Company's employee
stock options equals the fair market value of the underlying common stock
on the date of the grant, no compensation expense is recognized.
Income Taxes: Deferred income tax assets and liabilities arise from
differences between the tax basis of an asset or liability and its reported
amount in the consolidated financial statements.
Net Income per Common Share: Primary earnings per share are
computed using the weighted average number of common shares and
dilutive common share equivalents outstanding. The amount of dilution,
where appropriate, is computed by application of the treasury stock
method. The weighted average number of shares of common stock and
common stock equivalents outstanding was 6,823,754, 8,526,482, and
9,189,246 during the years ended December 31, 1994, 1995 and 1996.
Foreign Currency Translation: The balance sheets of the Company's
foreign subsidiaries are translated at the relevant period end currency
exchange rate, and the results of operations are
<PAGE 32>
translated at the average currency exchange rate for the relevant period.
Translation adjustments, which are not material, are accumulated as a
component of stockholders' equity.
NOTE 3 MERGERS AND ACQUISITIONS
On June 1, 1996, the Company purchased all the outstanding capital stock
of SASS, a German based printing solutions and service company. The
purchase price for the acquisition, including transaction costs, was
approximately $4,117,000.
On April 4, 1996, the Company purchased all the outstanding capital
stock of Barcode, a Swiss based data capture integrator. The purchase
price for the acquisition, including transaction costs, was approximately
$4,193,000. A portion of the purchase price was paid through the
issuance of 52,000 shares of the Company's common stock.
On April 3, 1996, the Company purchased all the outstanding capital
stock of Acquidata, a French based data capture integrator. The purchase
price for the acquisition, including transaction costs, was approximately
$8,000,000. A portion of the purchase price was paid through the
issuance of 172,727 shares of the Company's stock.
On March 15, 1996, Telpar, Inc., a wholly owned subsidiary of the
Company, purchased certain assets and the mini-printer business of
Syntest, a Massachusetts based company, for approximately $4,300,000
and assumed certain liabilities.
On January 26, 1996, the Company purchased all of the outstanding stock
of Combitrading, a Dutch based bar code integrator. The purchase price
for the acquisition, including transaction costs, was approximately
$250,000 plus the assumption of approximately $500,000 in debt.
On December 6, 1995, Dytec, an integrator of bar code data capture
products based in St. Paul, Minnesota, merged its net assets and business
operations with the Company. In connection with this merger, the
Company issued an aggregate of 420,000 shares of the Company's
common stock to Dytec. The transaction was accounted for as a pooling-
of interests, and, as a result, the accompanying financial statements, for
all prior periods, have been restated to give effect of the merger.
In connection with the Dytec merger, the Company incurred merger and
integration charges in the fourth quarter of 1995 totaling approximately
$1,250,000 ($1,040,000 after-taxes or $0.12 per share). Of these
charges, approximately $200,000 are related to professional fees,
$575,000 are related to a non-cash accounting charge for acceleration of
Dytec long term stock grants according to the terms of a pre-existing plan,
and the remaining $475,000 are provisions for the costs of combining
operations of the previously separate companies.
On October 11, 1995, the Company purchased certain assets and the
distribution and software business of Numeric Arts Limited, a UK based
bar code integrator, for a purchase price, including transaction costs, of
approximately $1,200,000 and assumed certain liabilities.
On September 30, 1995, Accuscan, an Atlanta based integrator of bar
code data capture products was merged into the Company. The Company
issued 396,000 shares of common stock for the
<PAGE 33>
outstanding common stock of Accuscan. The merger was accounted for
as a pooling-of interests and Accuscan's financial position and results of
operations since January 1, 1995 have been included with those of the
Company. The historical operations of Accuscan are not material to the
Company's consolidated operations and financial position and, therefore,
prior period consolidated financial statements have not been restated.
In connection with the Accuscan merger, the Company incurred merger
and integration charges in the fourth quarter of 1995 totaling
approximately $400,000 ($272,000 after-taxes or $.03 per share). Of
these charges, approximately $150,000 are related to professional fees
and the remaining $250,000 are provisions for the costs of combining
operations of the previously separate companies.
On September 25, 1995, the Company purchased all of the outstanding
capital stock of Mandata, a Norwegian based bar code integrator. The
purchase price for the acquisition, including transactions costs, was
approximately $5,200,000. A portion of the purchase price was paid
through the issuance of 71,724 shares of the Company's common stock.
On June 20, 1995, the Company purchased certain assets and the
distribution and software business of Datapen Systems Limited, a UK
based bar code integrator, for a purchase price, including transaction costs
of approximately $425,000 and assumed certain liabilities.
On May 1, 1995, the Company purchased certain assets and the
distribution and software business of ISF, a French based bar code
integrator, for a purchase price, including transaction costs, of
approximately $125,000 and assumed certain liabilities.
On January 6, 1995, IPPC, an integrator of bar code data capture
products based in Denver, Colorado, was merged with the Company. In
connection with the merger, the Company issued to the IPPC shareholders
an aggregate of 700,000 shares of the Company's common stock for all of
IPPC's outstanding common stock. As a result of the merger with IPPC,
which was accounted for as a pooling-of-interests, the accompanying
financial statements, for all prior periods, have been restated to give effect
to the merger.
In connection with the IPPC merger, the Company incurred merger and
integration charges in the first quarter of 1995 totaling approximately
$470,000 ($326,000 after-taxes or $.04 per share). Of these charges,
approximately $250,000 are related to professional fees and the remaining
$220,000 are provisions for the cost of combining operations of the
previously separate companies.
A reconciliation of the combined sales and income (loss) from continuing
operations for the years ended December 31, 1994 and 1995 for the
Company and Dytec and for the year ended December 31, 1994 for the
Company and IPPC are as follows:
<PAGE 34>
(In thousands) 1994 1995
------ ------
Sales:
Peak $114,088 $173,000
Dytec 10,217 11,624
IPPC 12,176 --
----------- -----------
$136,481 $184,624
======= =======
Net Income:
Peak $3,990 $5,731
Dytec 357 619
IPPC 503 --
----------- -----------
$4,850 $6,350
====== =======
On October 25, 1994, the Company acquired all the outstanding capital
stock of the Endata Group Limited, a UK based bar code integrator, in
exchange for 169,500 shares of Peak common stock plus approximately
$850,000 in cash. The purchase price including acquisition costs, was
approximately $3,300,000. During January 1995, Endata changed its
name to Peak Technologies UK Limited ("Peak UK").
On July 12, 1994, the Company acquired, in a merger transaction, all of
the outstanding capital stock of NACO Electronics Corporation, in
exchange for 166,667 shares of Peak common stock. The purchase price,
including acquisitions costs, was approximately $2,300,000.
Except for the mergers with IPPC, Accuscan and Dytec, which were
accounted for by the pooling-of-interest method, the Company has
accounted for all of the acquisitions by the purchase method.
Accordingly, the acquired assets and liabilities assumed through these
purchases have been recorded at their estimated fair market values at the
dates of acquisition. The results of operations of the purchased businesses
are included in the accompanying consolidated statements of operations
from their respective dates of acquisition.
Unaudited pro forma sales as if the purchased businesses had all occurred
on January 1 of the year preceding the acquisition would have been
approximately $187,973,000, $217,305,000 and $224,910,000 for the
years ended December 31, 1994, 1995, and 1996. The acquisitions would
not have had a material impact on net income or per share data on a pro
forma basis for each of the three years ended December 31, 1996. The
pro forma results are not necessarily indicative of the results of operations
that would have occurred had the acquisitions taken place at the beginning
of the periods presented nor are they intended to be indicative of results
that may occur in the future.
<PAGE 35>
NOTE 4 RESTRUCTURING CHARGE
In the fourth quarter of 1996, the Company announced a restructuring
plan designed to reduce the Company's ongoing cost structure. The
Consolidated Statement of Operations for the year ended
December 31, 1996 includes a pretax charge of $6,964,000 for the
estimated costs of the restructuring. The restructuring charge includes
$2,323,000 related to severance and related benefits for an approximate
10% reduction of the Company's domestic and international workforce,
$2,095,000 for the write-off of the assets and future commitments related
to a European computer system, $1,575,000 related to the disposition of
ISF and $971,000 for lease costs related to the closing or consolidation of
certain facilities. The plan's implementation began in the fourth quarter of
1996 and is scheduled to be completed by the end of 1997. At December
31, 1996, approximately $3,595,000 of the restructuring charge is
included in other accrued liabilities and other liabilities on the
Consolidated Balance Sheet.
NOTE 5 LONG-TERM DEBT AND REVOLVING LOANS
The Company and its primary operating subsidiaries had outstanding
balances on the long-term revolving loan of $24,928,000 and $2,476,000
at December 31, 1996 and 1995.
In May 1995 the Company amended its revolving loan agreement. The
amended loan agreement, which would have expired in May 1997,
provided for maximum borrowings of $16,000,000. Peak used a portion
of the proceeds from its May 1995 public offering (Note 7) to pay down
this loan in June 1995. In November 1995, the Company and its primary
operating subsidiaries entered into a $25,000,000 long-term loan facility
with a bank, which replaced the existing revolving loan.
In July 1996, the Company and its primary operating subsidiaries
amended its existing long-term loan agreement by increasing its maximum
borrowing capability to $32,000,000. Borrowings under the facility are
unsecured and bear interest at various rates above and below the LIBOR,
Treasury Bond or Prime interest rates. The facility expires in 2002. At
December 31, 1996, there was approximately $7,100,000 available for
future borrowings. The fair market value of borrowings under the long-
term revolving loan, which is measured at prevailing market interest rates,
approximates the carrying amount at December 31, 1996. The long-term
revolving loan contains certain covenants, the more significant of which
relate to additional indebtedness, minimum tangible net worth, and certain
financial ratios. At December 31, 1996, the Company was in compliance
with such covenants as retroactively amended on April 8, 1997.
In connection with the PTI acquisition, a former PTI stockholder, was
issued a $1,000,000 9% subordinated promissory note and a $1,000,000
7% convertible subordinated promissory note both of which paid interest
semi-annually. During the first quarter of 1995, the Company issued
144,306 shares of Peak common stock to retire both of the notes.
An 8% secured, subordinated note payable, due in 1997, to the former
Telpar stockholder with a face value of $5,000,000 was issued in
connection with the acquisition of Telpar which was recorded net of debt
discount of $1,320,000 at December 31, 1994. The effective interest rate
was 11.5%. In May 1995, Telpar agreed to repay this 8% subordinated
note payable and related accrued interest (at carrying value) and to
repurchase 12.5 shares of Telpar. Telpar funded these
<PAGE 36>
transactions with a secured, bank term loan for $5,200,000 which would
have matured in October 1996. Interest on the term loan was payable at a
rate of 0.5% above prime commercial rates. This note was paid in full in
June 1995 using a portion of the proceeds from the Company's public
offering (Note 7).
Scheduled maturities of the long-term revolving loan outstanding at
December 31, 1996, for the next five years are as follows:
(In thousands)
1997 ...................................................$ -
1998 ................................................... -
1999 ........................................................ 4,674
2000 ........................................................ 4,674
2001 ........................................................ 4,674
Thereafter ................................................ 10,906
------------
$ 24,928
======
NOTE 6 INCOME TAXES
The provision (benefit) for income taxes for the years ended December 31,
1994, 1995 and 1996, consisted of the following:
<TABLE>
<CAPTION>
1994 1995 1996
CURRENT INCOME TAX PROVISION ----------- ----------- -----------
(In thousands)
<S> <C> <C> <C>
Federal $ 1,283 $ 3,187 $ 1,957
State 222 701 491
Foreign -- 410 (231)
----------- ----------- ----------
1,505 4,298 2,217
DEFERRED INCOME TAX PROVISION (BENEFIT)
Federal 1,605 (44) (1,592)
State 492 49 (430)
Foreign -- 276 (1,309)
---------- ---------- ---------
2,097 281 (3,331)
---------- ---------- -----------
$ 3,602 $ 4,579 $(1,114)
====== ====== ======
</TABLE>
<PAGE 37>
The reason for the difference between total tax expense (benefit) and the
amount computed by applying the statutory federal income tax rate to
income before income taxes are as follows:
<TABLE>
<CAPTION>
(In thousands)
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Statutory rate applied to pretax income (loss) $ 2,880 $ 3,716 $ (4,651)
Amortization of intangibles 160 248 509
State income taxes, net of federal benefit 523 478 40
S Corporation (Accuscan) income -- (290) --
Nondeductible merger charges -- 319 --
Nondeductible expenses -- -- 1,104
Valuation allowance -- -- 1,686
Foreign income taxed at a different effective rate -- -- 198
Other 39 108 --
---------- ---------- ---------
Income taxes $ 3,602 $ 4,579 $ (1,114)
====== ====== =======
</TABLE>
The deferred tax assets and liabilities at December 31, 1995 and 1996
consisted of the following:
<TABLE>
<CAPTION>
1995 1996
ASSETS: ---------- ----------
(In thousands)
<S> <C> <C>
Effect of differences in financial statements and
tax bases of net assets acquired $ 841 $ 1,737
Account receivable reserves 397 539
Employee benefits 433 481
Inventory reserves 1,254 2,612
Discontinued and restructuring provisions 86 2,309
Net operating loss carryforwards -- 2,621
Other 315 1
--------- ---------
$ 3,326 $10,300
Valuation allowance -- (1,852)
--------- ---------
Total deferred tax assets 3,326 8,448
--------- ---------
LIABILITIES:
Customer list 26 1
Goodwill -- 21
Other 30 --
---------- ---------
Total deferred tax liabilities 56 22
---------- ---------
Net deferred tax assets $ 3,270 $ 8,426
====== ======
</TABLE>
<PAGE 38>
The valuation reserve of $1,852,000 substantially related to foreign net
loss carryforwards of approximately $8,000,000. These valuation
allowances will be reduced when it is more likely than not that the
Company will generate income in the respective jurisdictions for
which the allowances have been provided.
NOTE 7 STOCKHOLDERS' EQUITY
In May 1995, the Company and certain shareholders completed a public
offering of 1,552,129 shares of common stock at an offering price of
$20.00 per share. The Company offered 1,150,000 shares plus granted
an over-allotment option to the Underwriters of 232,819 shares, which
was fully exercised.
NOTE 8 EMPLOYEE BENEFIT PLANS AND STOCK OPTION
PLANS
401(k) Plan:
- ---------------
The Company has a defined contribution plan (401(K)) for all eligible
employees. The terms of the plan, prior to 1996, provided for
discretionary as well as matching contributions by the Company of 50%
of the employee's contribution up to a maximum contribution by the
Company of $250 per employee. During 1996, the Company matched
50% of the first $500 of an employee's contribution and then matched an
additional 25% on any employee contributions above $500 up to the
maximum allowable employee contribution. The Company also offered a
bonus match for first time participants of 25% of the employees
contribution up to a maximum of $250 per employee. The Company's
matching contributions were $82,000, $87,000 and $245,000 in 1994,
1995 and 1996. There were no discretionary contributions made to the
plan in 1994, 1995 or 1996.
Employee Stock Purchase Plan:
- --------------------------------------
In 1995, the Company established The Peak Technologies Group, Inc.
Employee Stock Purchase Plan and The Peak Technologies Group, Inc.
Global Employee Stock Purchase Plan (the "Plans") for all eligible
employees. The Plans' purchases are made quarterly, with the per share
purchase price equal to 85% of the lower of the closing price of the
common stock on the first day or the last day of the quarterly participation
period. Employee contributions, which are made through payroll
deductions, are limited to the lesser of 15% of total compensation or
$25,000 annually. Total shares purchased under the Plans during 1995
and 1996 were 6,723 and 40,807. A total of approximately 127,000
shares of common stock are available for future issuance under the Plans
at December 31, 1996.
Stock Option Plans:
- ------------------------
Under the Company's stock option plan and the Company's non-employee
directors stock option program, 512,378 shares of Peak common stock
were reserved for issuance to key executives, directors and employees at
December 31, 1996. Options are granted under the stock option plans at
the fair market value of the stock at the date of grant. The options
become exercisable at annual
<PAGE 39>
intervals as determined by the Compensation Committee of the Board of
Directors and expire ten years from date of grant, subject to earlier
termination and other rules relating to the cessation of employment. Non-
employee director options are granted according to the established
guidelines of the non-employee director stock option program at the fair
market value at the date of grant. These options become exercisable one
year after grant and expire seven years from date of grant, subject to
earlier termination and other rules relating to the end of a director's
service.
FASB 123 requires pro forma information regarding net income and
earnings per share as if the Company has accounted for its employee stock
options and warrants granted subsequent to December 31, 1994 under the
fair value method of FASB 123. The fair value of these equity awards
was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted average assumptions: risk-free interest
rates of 6.6% in 1995 and 6.7% in 1996; expected volatility of 0.57;
expected option lives from five to six years and an expected dividend yield
of 0.0%. The total compensation related to stock based compensation
awards under FASB 123 for 1995 and 1996 would have been
approximately $228,000 and $365,000.
For purposes of pro forma disclosures, the estimated fair value of the
equity awards is amortized to expense over the options' vesting period.
The Company's pro forma information is as follows:
1995 1996
----------- -----------
Pro forma net income $6,122 $(12,924)
Pro forma net income (loss)
per share of common stock $ 0.72 $ (1.41)
Because FASB 123 is applicable only to equity awards granted
subsequent to December 31, 1994, its proforma effect will not be fully
reflected until 1997.
A summary of stock option activity relating to the Company's stock
options are as follows:
Weighted
Average Number
Exercise Price of Shares
----------------- ------------
Outstanding at January 1, 1994 $ 6.76 227,367
Granted 9.70 110,750
Exercised 5.49 (75,179)
Canceled 9.06 (12,325)
----------
Outstanding at December 31, 1994 8.33 250,613
Granted 15.15 185,800
Exercised 8.72 (54,757)
Canceled 10.70 (7,724)
----------
Outstanding at December 31, 1995 11.59 373,932
Granted 16.64 281,000
Exercised 9.31 (57,084)
Canceled 14.06 (35,060)
----------
Outstanding at December 31, 1996 $14.61 562,788
======
Exercisable at December 31, 1996 108,638
<PAGE 40>
The weighted average fair value of options issued at fair market value in
1995 was $8.28 per share and $8.38 per share in 1996. The weighted
average fair value of options issued below fair market value in 1995 was
$16.40 per share.
Stock options outstanding at December 31, 1996 are summarized as
follows:
<TABLE>
<CAPTION>
Outstanding Weighted Average Weighted Average
Range of Options at Remaining Exercise
Exercise Price December 31, 1996 Contractual Life Price
- ----------------- ----------------------- -------------------- ----------------------
<S> <C> <C> <C>
$3.44 9,275 5.03 $3.44
$7.63 to $10.50 139,178 6.77 $8.91
$12.00 to $14.75 190,335 8.57 $13.83
$18.75 to $24.60 214,000 9.21 $18.79
$30.00 10,000 9.15 $30.00
----------------
$3.44 to $30.00 562,788 8.32 $14.61
=========
</TABLE>
NOTE 9 COMMITMENTS AND CONTINGENCIES
The company leases office and warehouse facilities under various
noncancellable operating leases, including facilities subject to the
restructuring plan (Note 4), which expire through 2006. Minimum future
rental payments are as follows:
(in thousands)
1996........$ 2,733
1997........ 2,291
1998........ 1,741
1999........ 1,492
2000........ 1,226
Thereafter.. 1,659
----------
$11,142
======
Total rent expense for all operating leases was $1,882,000, $2,377,000
and $2,934,000 in 1994, 1995 and 1996.
The Company is involved in litigation as a defendant, incidental to the
conduct of its business. It is the opinion of management, after
consultation with counsel, that the outcome of such litigation will not have
a material adverse effect on the consolidated financial statements.
<PAGE 41>
NOTE 10 MAJOR SUPPLIERS
The Company has authorized dealership or distribution agreements with
various manufacturers. Products of one of these manufacturers accounted
for approximately 8% of Company sales for 1994, 11% in 1995, and 16%
in 1996. Products of another manufacturer accounted for 19%, 19% and
18% of sales in 1994, 1995 and 1996. Products of a third manufacturer
accounted for 17%, 11% and 9% of sales in 1994, 1995 and 1996.
NOTE 11 SEGMENT DATA AND GEOGRAPHIC AREAS
The Company operates in one industry segment. For the year ended
December 31, 1995 and 1996, the Company's European operations
generated revenue of $16,016,000 and $40,421,000. Intercompany
product transfers between North America and Europe are not material.
European operations generated income from operations of $1,587,000 for
the year ended December 31, 1995 and a loss from operations of
$13,481,000 for the year ended December 31, 1996 after allocating
certain operating expenses. Tangible and intangible assets, which have
been identified as part of the European operations, total $22,600,000 at
December 31, 1995 and $48,120,000 at December 31, 1996.
NOTE 12 STATEMENT OF CASH FLOWS - SUPPLEMENTAL
DISCLOSURES
The Company has made acquisitions, accounted for under the purchase
method, which are more fully described in Notes 1 and 3. The purchase
prices are allocated to the assets and liabilities acquired based on their
estimated fair market value as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---------- --------- ----------
(In thousands)
<S> <C> <C> <C>
Fair value of assets acquired:
Current assets excluding cash $4,212 $2,299 $ 6,689
Fixed assets 633 117 186
Other assets 5,594 8,899 22,300
Less liabilities assumed:
Current liabilities (4,862) (2,572) (10,720)
Other liabilities (673) (1,800) (419)
Common stock issued to sellers (4,288) (1,991) (5,048)
---------- --------- ----------
Net cash paid $ 616 $4,952 $12,988
====== ===== ======
</TABLE>
NOTE 13 SUBSEQUENT EVENTS
On April 1, 1997, the Company declared, pursuant to a stock rights plan
adopted on March 27, 1997, a dividend of one preferred share purchase right
("Right") for each outstanding share of Common Stock.. Each right
entitles the holder to purchase from the Company one one-hundredth of a
share
<PAGE 42>
of Series A Preferred for a purchase price of $80 per one one-hundredth
of a preferred share, subject to certain adjustments.
The Rights are not currently exercisable, and would become exercisable
only if someone acquires 15% or more of the Common Stock or takes
certain actions in respect of an acquisition. If the acquirer's actions meet
certain criteria, each holder of a Right would then have the right to
receive upon exercise thereof that number of shares of Common Stock
having a market value of two times the exercise price of the Right. In
addition, if there is a merger or other business combination between the
Company and an acquiring entity, each Right would entitle the holder to
purchase that number of shares of common stock of the acquiring entity
which at the time of such transaction will have a market value of two
times the exercise price of the Right. The Rights, which expire on March
28, 2007, are redeemable by the Company for a price of $.01 per Right.
On April 8, 1997, the Company and its bank retroactively amended
certain covenants of the Company's long-term loan agreement (Note5).
<PAGE 43>
Report of Independent Auditors
The Board of Directors and Stockholders
The Peak Technologies Group, Inc.
We have audited the consolidated financial statements of The Peak
Technologies Group, Inc. as of December 31, 1995 and 1996, and for
each of the three years in the period ended December 31, 1996, and have
issued our report thereon dated March 26, 1997, except for Note 13,
as to which the date is April 8, 1997, (included elsewhere in
this Form 10-K). Our audits also included the financial statement
schedule listed in the index at Item 14(a). This schedule is the
responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Ernst & Young LLP
MetroPark, New Jersey
March 26, 1997
<PAGE 44>
<TABLE>
Schedule II - Valuation and Qualifying Accounts
<CAPTION>
(In thousands)
Charged
to cost Charged
Beginning & to other Ending
Description Balance expense accounts Deductions Balance
- ----------------- ---------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Year ended
December 31, 1996
- ------------------------
Allowance for
doubtful accounts
and sales returns $1,014 $1,338 $165 (1) $565 (4) $1,952
===== ===== ======= ======= =====
Inventory Reserve $2,502 $5,745 $636 (1) $1,781(4) $7,102
===== ===== ======= ======= =====
Year ended
December 31, 1995
- ------------------------
Allowance for
doubtful accounts
and sales returns $912 $440 $48 (2) $386 (4) $1,014
===== ===== ======= ======= =====
Inventory Reserve $2,825 $1,632 $240 (2) $2,195(4) $2,502
===== ===== ======= ======= =====
Year ended
December 31, 1994:
- -------------------------
Allowance for
doubtful accounts
and sales returns $853 $255 $125 (3) $321 (4) $912
===== ===== ======= ======= =====
Inventory Reserve $1,996 $2,596 $200 (3) $1,967(4) $2,825
===== ===== ======= ======= =====
<FN>
(1) Arose from 1996 acquisitions.
(2) Arose from 1995 acquisitions.
(3) Arose from 1994 acquisitions.
(4) Net write-offs.
</TABLE>
<PAGE 45>
PART III
=======
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
Incorporated by reference from the Proxy Statement sections
entitled "Election of Directors" and "Executive Officers".
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the Proxy Statement sections
entitled "Executive Compensation".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from the Proxy Statement section
entitled "Security Ownership of Certain Beneficial Owners
and Management".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
Incorporated by reference from the Proxy Statement section
entitled "Executive Compensation" and "Certain Relationships
and Related Transactions".
PART IV
=======
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K
(a) List of Documents filed as part of this Report:
1.Consolidated Financial Statements: Reference is made to the
Index on Page 23 herein.
2. Financial Statement Schedules: Reference is made to the
Index on Page 23 herein.
3. The exhibits listed on the "Index to Exhibits" on page 47 are
filed with this Form 10K or incorporated by reference as set forth
on the "Index to Exhibits".
<PAGE 46>
(b) The Company filed the following reports on Form 8-K since
September 30, 1996:
On April 1, 1997, the Company filed a Current Report on Form 8-K
(Items 5 and 7) related to the adoption of a shareholder Rights Plan.
<PAGE 47>
INDEX TO EXHIBITS
Exhibit No. Description
- -------------- --------------
2.1** Agreement and Plan of Merger dated July 20, 1993, among The
Peak Technologies Group, Inc., Airbus Acquisition Corp., Concord
Technologies, Inc., and the Shareholders named therein.
2.2** Agreement and Plan of Merger dated July 12, 1994, among the
Navy Acquisition Corp., Naco Data Systems, Inc., Vision Data, Inc.,
Naco Electronics Corporation, Theodore Lenhard and Suzanne Lenhard.
2.3**** Stock Purchase Agreement dated as of October 25, 1994 by and
among Jeffrey P. Thomas, The Small Self Administered Pension Scheme
known as the Thomas Dependent Scheme, Fenchurch Nominees Ltd. and
The Peak Technologies Group, Inc.
2.4*** Agreement and Plan of Merger dated as of January 6, 1995,
among Tiger Acquisition Corp., The Peak Technologies Group, Inc.,
Innovative Products & Peripherals Corporation and the Shareholders
named therein.
2.7******* Asset Purchase Agreement dated as of October 20, 1995 by
and among Dytec, Inc., Gregory Schmidt, Gregory Floyd, Port
Acquisition Corp., and The Peak Technologies Group, Inc.
3.1* Restated Certificate of Incorporation of the Registrant.
3.2* Bylaws of the Registrant.
4.2**Registration Rights Agreement dated July 12, 1994, among The
Peak Technologies Group, Inc., Theodore L. Lenhard and Suzanne C.
Lenhard..
4.3**** Registration Agreement dated as of October 25, 1994, among The
Peak Technologies Group, Inc., Jeffrey P. Thomas, The Small Self
Administered Pension Scheme known as the Thomas Dependent Scheme,
Fenchurch Nominees Ltd.
4.4*** Registration Rights Agreement dated January 6, 1995, among The
Peak Technologies Group, Inc., and the Holders named therein.
4.5****** Registration Rights Agreement dated July 20, 1993, among
The Peak Technologies Group, Inc., and the Holders named therein.
<PAGE 48>
4.8******* Registration Rights Agreement dated December 6, 1995,
among The Peak Technologies Group, Inc., and the Holders named
therein.
10.1******** Loan Agreement, dated as of November 16, 1995, between
The Peak Technologies Group, Inc. and CoreStates Bank. N.A.
10.5* Incentive Stock Option Plan, adopted as of June 3, 1991.
10.6* Non-qualified Stock Option Plan, adopted as of April 1, 1992.
10.7* Form of Indemnification Agreement.
10.8*****Employee Stock Purchase Plan, adopted as of June 8, 1995.
10.9*****Global Employee Stock Purchase Plan, adopted as of June 8,
1995.
10.10*****1995 Non-employee Directors Stock Option Program, adopted
as of June 8, 1995.
10.11********First Amendment to Loan Agreement, dated as of July 31,
1996, between The Peak Technologies Group, Inc. and CoreStates Bank,
N.A.
10.12 Second Amendment to Loan Agreement, dated as of April 8, 1997,
between The Peak Technologies Group, Inc. and CoreStates Bank., N.A.
10.13 Severance Agreement Plan, adopted as of December 13, 1996
as to all officers (Nicholas R.H. Toms, Edward A. Stevens,
Howard Cohen, Colin Wyatt, Michael Fluharty, Michael Miller,
Clay Vigent, Seth Lee, Dianne Sagner and senior management).
10.14 Amendment to Non-qualified Stock Option Plan, adopted
as of February 13, 1997.
10.15*********Shareholders' Rights Plan, adopted as of March 27, 1997.
21 Subsidiaries of Registrant.
23 Consent of Ernst & Young LLP
27 Financial Data Schedule
* Filed with the Securities and Exchange Commission ("Commission") as
an Exhibit to the Company's Registration Statement on Form S-1, as
amended, File No. 33-47160.
** Filed with the Commission as an Exhibit to 1994 Forms 10Q.
*** Filed with the Securities and Exchange Commission as an Exhibit to
the Company's Current Report on Form 8K filed with the Commission on
January 12, 1995.
****Filed with the Commission as an Exhibit to the 1994 Form 10K filed
with the Commission.
*****Filed with the Commission as an Exhibit to the 1995 Proxy
Statement filed with the Commission.
******Filed with the Commission as an Exhibit to the 1993 Form 10Q
filed with the Commission.
*******Filed with the Commission as an Exhibit to the Company's
Current Report on Form 8K Filed with the Commission on December 6,
1995.
********Filed with the Commission as an Exhibit to the Company's Form
10Q filed with the Commission on November 13, 1996.
**********Filed with the Commission as an Exhibit to the Company's
Current Report on Form 8A filed with the Commission on March 31,
1997 and incorporated herein by reference.
<PAGE 49>
SIGNATURES
===========
Pursuant to the requirements of the Securities Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized on this 14th day
of April, 1996.
THE PEAK TECHNOLOGIES GROUP, INC.
By:/s/ Nicholas R.H. Toms
------------------------------
Nicholas R. H. Toms
Chairman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons
in the capacities and on the dates indicated.
Signature Title Date
- --------------------------- ---------------------------- ------------------
/s/ Nicholas R.H. Toms Chairman, April 14, 1997
- ----------------------------- Chief Executive Officer,
NICHOLAS R.H. TOMS Director
/s/ Howard S. Cohen President, April 14, 1997
- ----------------------------- Chief Operating Officer,
HOWARD S. COHEN Director
/s/ Edward A. Stevens Executive Vice President, April 14, 1997
- ----------------------------- Chief Financial Officer,
EDWARD A. STEVENS Chief Accounting Officer, Director
/s/ John R. Coutts Director April 14, 1997
- -----------------------------
JOHN R. COUTTS
/s/ Gregory N. Thomas Director April 14, 1997
- -----------------------------
GREGORY N. THOMAS
/s/ Herbert W. Marache Jr. Director April 14, 1997
- ----------------------------
HERBERT W. MARACHE JR.
EXHIBIT 10.12
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT (this "Amendment") dated as of April 8,
1997 is by and among the several borrowers (each a "Borrower" and
collectively, "Borrowers") listed on the signature pages hereto and
CoreStates Bank, N.A. (the "Bank").
BACKGROUND
(A) Borrowers and the Bank are parties to a certain Loan Agreement
dated as of November 16, 1995 (the "Original Loan Agreement"), as
amended by a certain First Amendment to Loan Agreement dated as of
July 31, 1996 (the "First Amendment"; the Original Loan Agreement and
the First Amendment collectively, the "Loan Agreement").
(B) Borrowers have requested and the Bank is agreeable to amending
certain financial covenants set forth in the Loan Agreement.
(C) The parties, therefore, are entering into the following Amendment for
such purposes and to otherwise amend the Loan Agreement as set forth
herein.
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and intending to be
legally bound, the parties hereto agree as follows:
1. Defined Terms. Capitalized terms not otherwise defined in this
Amendment will have the meanings herein given to such terms in the Loan
Agreement.
2. Amendments to the Loan Agreement. The Loan Agreement is hereby
amended as follows:
(A) The following definitions are hereby added to the Loan Agreement:
"EBIT" means for any fiscal quarter of Peak, the Net Income of Peak and
its Subsidiaries on a Consolidated basis, plus the interest expense and
income tax expense of Peak and its Subsidiaries on a Consolidated basis
for such period.
"Interest Coverage Ratio" means the ratio of (A) EBIT to (B) the interest
expense of Peak and its Subsidiaries on a Consolidated basis for any
fiscal quarter of Peak.
(B) Section 5.18 of the Loan Agreement is hereby amended in its entirety
to read as follows:
SECTION 5.18 Current Ratio. The Borrowers will not permit the
Current Ratio to be less than the applicable ratio set forth in the following
table:
During this period:
The Current Ratio
shall not be less than:
From the Closing Date through 6/30/97
1.00 to 1.00
From 7/1/97 through 12/31/97
1.05 to 1.00
From 1/1/98 through 3/31/98
1.10 to 1.00
From 4/1/98 and thereafter
1.20 to 1.00
(D) Section 5.19 of the Loan Agreement is hereby amended in its entirety
to read as follows:
SECTION 5.19 Funded Debt Ratio. The Borrowers will not permit the
Funded Debt Ratio determined as of the last day of any fiscal quarter of
Peak to be greater than 4.0 to 1.0, provided that for the fiscal quarters of
Peak ending December 31, 1996 and March 31, June 30 and September
30, 1997, the financial covenant contained in this Section 5.19 shall not
apply.
(E) Section 5.21 of the Loan Agreement is hereby amended in its entirety
to read as follows:
SECTION 5.21 Fixed Charge Coverage Ratio. The Borrowers will not
permit the Fixed Charge Coverage Ratio determined as of the last day of
any fiscal quarter of Peak to be less than 1.25 to 1.00, provided that for
the fiscal quarters of Peak ending December 31, 1996 and March 31, June
30 and September 30, 1997, the financial covenant contained in this
Section 5.21 shall not apply.
(F) A new Section 5.21A is hereby added to the Loan Agreement to read
in its entirety as follows:
SECTION 5.21A Interest Coverage Ratio. The Borrowers will not permit
the Interest Coverage Ratio determined as of the last day of the fiscal
quarters of Peak ending June 30 and September 30, 1997 to be less than
2.5 to 1.0 and 4.0 to 1.0, respectively.
3. Adjustment to Applicable Margin for LIBO Loans. Notwithstanding
anything to the contrary in the Loan Agreement, the Applicable Margin
for LIBO Loans shall be 2.25% until the end of the first fiscal quarter of
Peak in which Borrowers comply with each of the financial covenants set
forth in the Original Loan Agreement, on which date the Applicable
Margin for LIBO Loans shall be determined as set forth in the Loan
Agreement.
4. Amendment Fee. In addition to the fees payable or reimbursable to the
Bank pursuant to paragraph 7 below, Borrowers shall pay to the Bank an
amendment fee of $25,000 within 5 business days of the date hereof,
which fee shall be deemed fully earned and non-refundable when due.
5. Confirmation of Representations and Warranties. In order to induce
the Bank to enter into this Amendment, each Borrower hereby confirms,
represents and warrants (A) that the representations and warranties set
forth in the Loan Agreement are accurate on and as of the date hereof as
though made on and as of this date (or, to the extent any such
representation or warranty expressly relates to a specific date, as of such
specific date) except for changes permitted in the Loan Agreement or in
writing by the Bank; and
(B) No Event of Default or Unmatured Event of Default shall have
occurred and be continuing or will result from the execution by Borrowers
of this Amendment or any other document contemplated herein.
6. No Waiver; Acknowledgment of each Borrower. With the exception of
(A) written waivers granted by the Bank to the Borrowers prior to the date
hereof and (B) any Unmatured Event of Default or Event of Default
arising from Borrowers' failure to comply with Sections 5.18, 5.19 and
5.21 of the Loan Agreement that existed immediately before, but were
cured as a result of, the execution of this Amendment, no Unmatured
Event of Default or Event of Default existing on the date hereof or having
occurred prior hereto shall be deemed to have been waived by the Bank by
reason of entering into this Amendment. Each Borrower acknowledges its
indebtedness presently owed by such Borrower to the Bank and hereby
reaffirms its obligation to pay such indebtedness to the Bank in full
according to the terms of the Loan Agreement. Each Borrower confirms
that it has no defenses, setoffs, or counterclaims to the exercise by the
Bank of its remedies under the Loan Agreement or applicable law.
7. Payment of Fees and Expenses. Each Borrower agrees to pay on
demand or to reimburse the Bank, and to save the Bank harmless against
liability for payment of, all the reasonable out-of-pocket expenses arising
in connection with the review, preparation and enforcement of this
Amendment (including, without limitation, the reasonable fees and
expenses of counsel to the Bank).
8. Continuation of Provisions. The Loan Agreement shall remain in full
force and effect except to the extent amended hereby. From and after the
date that this Amendment becomes effective, any reference in the Loan
Agreement or similar term, shall be and mean a reference to the Loan
Agreement as amended hereby and as the same may be further amended,
modified or supplemented from time to time.
9. Miscellaneous.
(A) This Amendment and the First Amendment contain all of the
modifications to the Loan Agreement. No further modifications shall be
deemed effective, unless in writing executed in accordance with the
Agreement.
(B) This Amendment shall be binding upon the parties hereto, their
successors and assigns.
(C) This Amendment shall be construed and enforced in accordance with
the laws of the Commonwealth of Pennsylvania.
10. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall constitute an original agreement, but all
of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each Borrower and the Bank have caused this
Amendment to be duly executed by their respective duly authorized
officers as of the date first above written.
THE PEAK TECHNOLOGIES
GROUP, INC., in its own behalf and as agent for the Borrowers
By: /s/ Nicholas R.H. Toms
- -------------------------------------------
Title: Chief Executive Officer
- -------------------------------------------
PEAK TECHNOLOGIES, INC.
By: /s/ Nicholas R.H. Toms
- -------------------------------------------
Title: Chief Executive Officer
- -------------------------------------------
TELPAR, INC.
By: /s/ Nicholas R.H. Toms
- -------------------------------------------
Title: Chief Executive Officer
- -------------------------------------------
PEAK TECHNOLOGIES UK LIMITED
By: /s/ Nicholas R.H. Toms
- -------------------------------------------
Title: Chief Executive Officer
- -------------------------------------------
BARCODE BC SYSTEME (SWITZERLAND)
By: /s/ Nicholas R.H. Toms
- -------------------------------------------
Title: Chief Executive Officer
- -------------------------------------------
SASS COMPUTERS GMBH (GERMANY)
By: /s/ Nicholas R.H. Toms
- -------------------------------------------
Title: Chief Executive Officer
- -------------------------------------------
PEAK TECHNOLOGIES GROUP, INC., in its capacity as agent for the
Borrowers
By: /s/ Nicholas R.H. Toms
- -------------------------------------------
Title: Chief Executive Officer
- -------------------------------------------
PEAK TECHNOLOGIES AS (NORWAY)
By: /s/ Nicholas R.H. Toms
- -------------------------------------------
Title: Chief Executive Officer
- -------------------------------------------
PEAK TECHNOLOGIES HOLDINGS GMBH (GERMANY)
By: /s/ Nicholas R.H. Toms
- -------------------------------------------
Title: Chief Executive Officer
- -------------------------------------------
PEAK TECHNOLOGIES SA (FRANCE)
By: /s/ Nicholas R.H. Toms
- -------------------------------------------
Title: Chief Executive Officer
- -------------------------------------------
PEAK TECHNOLOGIES CANADA LIMITED
By: /s/ Nicholas R.H. Toms
- -------------------------------------------
Title: Chief Executive Officer
- -------------------------------------------
PEAK TECHNOLOGIES BV (BENELUX)
By: /s/ Nicholas R.H. Toms
- -------------------------------------------
Title: Chief Executive Officer
- -------------------------------------------
CORESTATES BANK, N.A.
By: /s/ Keith Harding
- -------------------------------------------
Title: Vice-President
- -------------------------------------------
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Name: Jurisdiction of Incorporation:
1. Telpar, Inc. (including Syntest, Inc.) Delaware
2. Peak Technologies, Inc. Illinois
3. Concord Technologies, Inc. Massachusetts
4. NACO Electronics Corporation New York
5. Innovative Products & Peripherals Corporation Delaware
6. AccuScan, Inc. Georgia
7. Dytec, Inc. Delaware
8. Peak Technologies Holdings Limited, United Kingdom
which includes:
a. Peak Technologies UK
Ltd. (Endata Group Limited) United Kingdom
b. Peak France SA (including Acquidata SA) France
c. Peak Technologies Norway, AS
(including Mandata, Ltd.) Norway
d. Peak Benelux BV (including
Combitrading, BV) Netherlands
e. Peak Technologies Holdings GmbH
(including SASS Computers GmbH) Germany
f. Peak Technologies Switzerland
(including Barcode BC Systeme) Switzerland
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the SEC Filings (as
defined below) of our reports dated March 26, 1997, except for
Note 13, as to which the date is April 8, 1997, with respect to the
consolidated financial statements and schedules of the Peak Technologies
Group. Inc. included in this Annual Report (Form 10-K) for the year
ended December 31, 1996. SEC Filings means: (i) Registration Statement
on Form S-3 (No. 33-84956) dated October 10, 1994, as amended, and
related Prospectus of the Peak Technologies Group, Inc. for the
registration of 586,093 shares of its common stock; (ii) Registration
Statement on Form S-3 (No.33-90850) dated March 31, 1995, as
amended, and related Prospectus of The Peak Technologies Group, Inc.
for the registration of 944,500 shares of its common stock; (iii)
Registration Statement on Form S-3 (No. 33-91952) dated May 5, 1995,
as amended and related Prospectus of The Peak Technologies Group, Inc.
for the registration of 1,859,139 shares of its common stock; (iv)
Registration Statement on Form S-3 (No. 33-80963) dated December 29,
1995, as amended, and related Prospectus of The Peak Technologies
Group, Inc. for the registration of 887,724 shares of its common stock;
(v) Registration Statement on Form S-3 (No. 333-3536), dated July 26,
1996, of The Peak Technologies Group, Inc. for the registration of
224,727 shares of its common stock; (vi) Registration Statement on Form
S-8 (No. 33-94032), as amended, of The Peak Technologies Group, Inc.
for the registration of 500,000 shares of its common stock; (vii)
Registration Statement on Form S-8 (No. 33-94034) of The Peak
Technologies Group, Inc. for the registration of 250,000 shares of its
common stock; and (viii) Registration Statement on Form S-8 (No. 33-
54338) of The Peak Technologies Group, Inc. for the registration of
505,625 shares of its common stock; and (ix) Registration Statement on
Form S-8 (No. 333-16783) of The Peak Technologies Group, Inc. for
the registration of 500,000 shares of its common stock.
Ernst & Young LLP
MetroPark, New Jersey
April 11, 1997
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE DECEMBER 31, 1996 FORM 10-k AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 789
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<RECEIVABLES> 38,942
<ALLOWANCES> 1,952
<INVENTORY> 28,380
<CURRENT-ASSETS> 80,182
<PP&E> 11,416
<DEPRECIATION> 4,485
<TOTAL-ASSETS> 136,402
<CURRENT-LIABILITIES> 48,016
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0
0
<COMMON> 93
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<TOTAL-LIABILITY-AND-EQUITY> 136,402
<SALES> 215,681
<TOTAL-REVENUES> 215,681
<CGS> 147,950
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<OTHER-EXPENSES> 79,961
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,443
<INCOME-PRETAX> (13,673)
<INCOME-TAX> (1,114)
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</TABLE>
EXHIBIT 10.14
THE PEAK TECHNOLOGIES GROUP, INC.
NONQUALIFIED STOCK OPTION PLAN
The following sets forth the terms of the Non-qualified Stock
Option Plan (the "Plan") of THE PEAK TECHNOLOGIES GROUP,
INC., ("Peak"), a Delaware corporation, duly adopted by the Board of
Directors of Peak as of the 1st day of April, 1992, and revised by
unanimous written consent of the Board of Directors on February 17,
1997.
I.Purpose of the Plan
The Plan is intended as an incentive to key employees of Peak and
its present and future subsidiaries, to expand and improve the profit
position of Peak and its subsidiaries. Its purposes are to retain such
employees (hereinafter collectively referred to as "employees") with a high
degree of training, experience and ability, to attract new employees whose
services are considered unusually valuable, to encourage the sense of
proprietorship of such persons, and to stimulate the active interests of
such persons in the development and financial success of Peak and its
subsidiaries.
II.Administration of the Plan
The Board of Directors of Peak shall appoint and maintain a Non-
qualified Stock Option Committee (the "Committee"), which shall consist
of two or more members of the Board of Directors who shall serve,
without compensation, at the pleasure of the Board of Directors. Subject
to the provisions of the Plan, the Committee shall have full power and
authority to designate key employees to receive options, to determine the
number of shares to be covered by each of the options, the option price,
conditions to be imposed on such grants, and the time or times at which
options shall be granted, and to grant options and to interpret the
provisions and supervise the administration of the Plan. The Board of
Directors may, from time to time, appoint members of the Committee in
substitution for and in addition to members previously appointed, and may
fill vacancies, however caused, in the Committee.
The Committee shall select one of its members as a Chairman
and, shall hold its meetings at such times and places as it shall deem
advisable. A majority of its members shall constitute a quorum. All
actions of the Committee shall be taken by a majority of its members.
Any action may be taken by written instrument signed by the members,
and actions so taken shall be as effective as if taken by members at a
meeting duly called and held. The Committee may appoint a Secretary,
who need not be a director of Peak, who shall keep the minutes of the
meetings, and the Committee shall make such rules and regulations for the
conduct of its business as it shall deem advisable.
Unless otherwise expressly provided by the Committee in any
specific instance, the action of the Committee designating a key employee
to receive an option pursuant to this Plan, determining the number of
shares to be subject to the option and setting the option price of the shares
subject to the option, shall constitute the granting of the option, and the
date when the Committee shall take the action if all conditions imposed
are met shall be the date of granting the option.
III.Designation of Participants
The persons eligible to receive options pursuant to the Plan
(individually, the "Optionee") shall include all employees of Peak of any
of its subsidiaries. Options may be granted by the Committee to any
member of the Committee who otherwise qualifies hereunder, but only
following ratification of such grant by the Board of Directors of Peak.
The directors of Peak shall not be eligible to participate in the Plan as
directors, but directors otherwise qualified shall be eligible to participate.
An employee who has been granted an option hereunder may, if otherwise
eligible, be granted an additional option or options if the Committee shall
so determine.
IV.Shares Subject to the Plan
There have been reserved for issuance upon the exercise of
options to be granted from time to time under the Plan, a maximum
aggregate of One Hundred Twenty Eight Thousand (128,000) of the
authorized but unissued shares of Class A Common Stock, $0.01 par
value ("shares" or "Common Shares"), of Peak as constituted on March
31, 1992. Subject to the above aggregate maximum, no maximum is
imposed by the Plan as to the number of shares to be covered by any
option. The shares subject to the Plan shall consist of unissued Common
Shares or previously issued Common Shares reacquired and held by Peak.
Any of such shares which may remain unsold and which are not subject to
outstanding options at the termination of the Plan, shall cease to be
subject to the Plan, but until termination of the Plan Peak shall at all times
make available a sufficient number of shares to meet the requirements of
the Plan. Should any option expire or be canceled prior to its exercise in
full, the shares theretofore subject to such option may again be subject to
an option under the Plan.
V.Option Price
The option price for each share placed under option pursuant to the Plan
shall be determined by the Committee.
VI.Option Period
Any option granted under this Plan shall terminate and be of no force and
effect in accordance with its terms, and in any event with respect to any
shares not previously exercised by the Optionee, upon the happening of
the first of the following:
(i)The expiration of ten (10) years from the date of granting of such
option;
(ii)The termination of the Optionee's employment with Peak for any
reason (other than by death) with or without cause; or
(iii)The expiration of three (3) months after the date of death of the
Optionee while engaged in employment with Peak.
"Employment with Peak" as used in this Plan, shall include employment
with any subsidiary of Peak and options granted under this Plan shall not
be affected by an employee's transfer of employment from Peak to a
subsidiary, from a subsidiary to Peak, or between subsidiaries.
VII.Terms and Exercise of Options
The Committee, in granting options hereunder, shall have discretion to
determine the terms upon which options shall be exercisable, including the
imposition of the following conditions: (a) that outstanding options held
by the proposed Optionee under this Plan or otherwise be surrendered; and
(b) that the Optionee deliver to Peak an irrevocable waiver of any rights,
as a stockholder of Peak, to inspect Peak's books and records pursuant to
any statute or otherwise under which he may' be entitled. Any option
granted hereunder shall be embodied in a Stock Option substantially in the
form of Exhibit "B" hereto, containing such additional terms and
conditions, not inconsistent herewith, as shall, in the opinion of the
Committee and counsel for Peak, be necessary or desirable. Said options
may become exercisable in installments, with respect to various numbers
of shares after such periods of time as the Committee shall select. An
employee to whom an option is granted shall be required to execute an
acceptance in the form attached to Exhibit "B" hereto or such other form
as the Committee may prescribe.
Options may be exercised solely by the Optionee during his lifetime, or
after his death while in the employment of Peak, by the person or persons
entitled thereto under his Will or the laws of descent and distribution. The
purchase price of the shares to which an option is exercised shall be paid
in full, in cash, at the time of exercise. In no case may an option be
exercised for a fraction of a share or may a fractional share be purchased
or issued upon the exercise of an option. The holders of options shall not
be or have any of the rights or privileges of a stockholder of Peak in
respect of any shares purchasable upon the exercise of any part of an
option, unless and until certificates representing such shares shall have
been issued by Peak to such holders.
In the event of the death of the Optionee while engaged in employment
with Peak, the person or persons entitled to the option under such
Optionee's Will or the laws of descent and distribution shall,
notwithstanding the other provisions of this Article VII, be permitted to
exercise the option within three (3) months after the date of death of the
Optionee (but in no event after the expiration of the term of the option) for
all or any part of the full number of shares under the option not
theretofore purchased by the Optionee, which shares were purchasable by
the Optionee at the time of his death.
VIII.Non-Assignability
Options granted under this Plan shall not be assignable or transferable by
the Optionee other than by Will or the laws of descent and distribution,
and shall be exercisable during the lifetime of the Optionee only by the
Optionee for his individual account, and no purported assignment or
transfer of this option, or of the rights represented hereby, whether
voluntary of involuntary, by operation of law or otherwise, shall vest in
the proposed assignee or transferee any interest or right herein
whatsoever, but immediately upon any such purported assignment or
transfer, or any attempt to make the same, such option shall terminate and
become of no further effect.
IX.Reorganizations and Recapitalizations of Peak
The existence of this plan and options granted hereunder shall not affect,
in any way, the right or power of Peak or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or
other changes in Peak's capital structure or its business, or any merger or
consolidation of Peak, or its business, or any issue of bonds, debentures,
preferred or prior preference stocks ahead of or affecting the Common
Shares or the rights thereof, or the dissolution or liquidation of Peak, or
any sale or transfer of all or any part of its assets or business, or any other
corporate act or proceedings, whether of a similar character or otherwise.
In the event of any stock-split, stock dividend, compensation of shares or
other capital reorganization or reclassification of Peak, which materially
affects the value of the Common Shares, appropriate adjustment in the
number of shares subject to an option or the option price per share, or
both, shall be made by the Board of Directors of Peak to the extent that
the Board of Directors may deem equitable; provided, that a stock
dividend in an amount equal to five (5%) percent or less may not be
deemed to materially affect the value of the shares subject to option. If
Peak proposes to merge into or consolidate with any other corporation,
Peak shall either (i) prior to such merger or consolidation, enter into a
contract with the corporation into which Peak is being merged or
consolidate providing for such corporation to assume the unexercised
portion of the option; or
(ii) give notice to the Optionee as set forth below, permitting him to
exercise his option in full. If Peak is to be liquidated or if, in connection
with a merger or consolidation, Peak is to give notice entitling the
Optionee to exercise his option in full, Peak shall cause at least thirty (30)
days prior written notice to be mailed to the Optionee of the date on which
any such merger, consolidation or liquidation shall take place, or of any
record date as of which the holders of capital stock of Peak shall be
entitled to participate with respect thereto; and thereafter, for a period of
thirty (30) days after such notice shall have been mailed to the
Optionee, he shall have the right to exercise in full his option for all shares
not theretofore purchased by him, with regard to the provisions for terms
of the option. To the extent that the option remains unexercised after such
thirty (30) day period, such option shall be void and without further force
or effect.
x.Restrictions upon Transfer or Pledge of Shares
No voluntary or involuntary transfer or pledge of shares of Peak after
issuance thereof to the Optionee (or of any shares subsequently issued in
relation to such shares, whether as a stock dividend or otherwise) may be
made or suffered by the Optionee except pursuant to the terms of an
Employee-Shareholder Restrictive Agreement (~'Agreementfl), in the form
attached hereto as Exhibit "A," which the Optionee and Peak shall execute
upon exercise of any option granted hereunder, unless the Optionee has
previously executed the Agreement with regard to shares previously
purchased by the Optionee. In the event that the Agreement has not been
previously executed by the Optionee, the Agreement shall be dated as of
the date of exercise of the option.
XI.Compliance with Securities Law and Government Regulations
Whether or not the options and shares covered by the Plan have been
registered pursuant to the Securities Act of 1933, each person exercising
an option under the Plan may be required by Peak to give a representation
in writing that he is acquiring such shares for his own account for
investment, and not with a view to or for sale in connection with the
distribution of any part thereof. Each option shall be subject to the
requirement that if, at any time the Board of Directors of Peak determines, in
its discretion, that the listing, registration or qualification of the shares
subject to the option upon any securities exchange or under any state,
Federal or foreign law, or the consent or approval of any governmental
regulatory body, domestic or foreign, is necessary or desirable as a
condition of, or in connection with, the issue or purchase of shares
thereunder, the option may not be exercised in whole or in part until such
listing, registration, qualification, consent or approval shall have been
effected or obtained and the same shall have been freed of any conditions
not acceptable to the Board of Directors.
Shares issued hereunder shall be delivered to an Optionee only upon
payment by such person to Peak of the amount of any withholding tax
which may be imposed thereon under the provisions of any law of any
taxing jurisdiction requiring such withholding tax.
The Committee may, under such terms and conditions as it deems
appropriate, authorize an Optionee to satisfy withholding tax obligations
under this paragraph by electing to have Peak withhold from the shares to
be issued to the Participant shares having a fair market value equal to the
amount of the withholding tax required to be withheld.
XII. Amendments or Termination
The Board of Directors may amend, alter or discontinue the Plan at any
time, but may not, without the consent of the Optionee, alter or impair any
rights or obligations under any option theretofore granted hereunder.
Exhibit 10.13
ACTION BY UNANIMOUS WRITTEN
CONSENT OF DIRECTORS IN LIEU
OF MEETING OF BOARD OF DIRECTORS
OF THE PEAK TECHNOLOGIES GROUP, INC.
The undersigned, being all of the directors of The Peak Technologies
Group, Inc., a Delaware corporation (the "Corporation"), acting pursuant
to Section 13 of the Company's By-laws and Section 141 (i) of the
General Corporation Law of the State of Delaware, hereby consent to the
adoption of the following with the same force and effect as if the were
approved and adopted as a duly constituted meeting of the directors of the
Corporation.
Creation of an Executive Severance Plan.
WHEREAS, the Board has adequately discussed the proposal to provide
individual severance agreements for certain executives, officers, directors
and senior managers (the "Executives") of the Company that would
provide various benefits if the Executive's employment were to be
terminated after a change in control of the Company; and,
WHEREAS, the Board has recognized, as is the case with many publicly-
held corporations, that the possibility of a change in control of the
Company exists, and that the uncertainty and questions that such a
possibility may generate may result in the resignation or distraction of the
Executives to the detriment of the Company and its stockholders; and,
WHEREAS, the Board believes that it is essential to the best interests of
the Company and its stockholders to foster the continuous employment of
the Executives; and,
WHEREAS, the Board has explored, with the assistance of independent
legal counsel, steps that are appropriate in order to reinforce and
encourage the continued attention and dedication of the Executives to their
assigned duties without distraction in the face of potentially disturbing
circumstances arising from a possible change in control; and,
WHEREAS, the Board believes that the proposal will preserve the
interests of stockholders by providing certain financial protections for the
Executives who represent important assets of the business, thus allowing
management objectivity and continuity of operations in the event of, and
after, a change in control.
RESOLVED, that all of the Executives designated by the Chairman, as
set forth below, shall be given Severance Agreements with the Company
pursuant to which they will be provided post-employment payments in the
event of a change of control of the Company, as described in the
Severance Agreements, and calculated on the basis of: (i) three (3) years
for the Chief Executive Officer and Chief Financial Officer, (ii) two (2)
years each for the Vice Presidents of Americas, Europe, Operations,
Administration, Finance/Controller; (iii) one (1) year each for the
Executives who are not officers, the President of Telpar, Inc., and Level
16 Directors and Managers; and, (iv) six (6) months each for the
Directors and Managers in Level 15; and otherwise on substantially the
terms of the forms of agreement attached hereto and made a part hereof.
RESOLVED, FURTHER, that the Board hereby directs the Officers of
the Corporation, in the name of the Corporation, to do all things, including
executing all documents which they deem necessary or appropriate and
proper, acting on advice of counsel, to effect the Severance Agreements;
and,
RESOLVED, FURTHER, that either or both, Nicholas R. H. Toms and
Edward A. Stevens (collectively the "Authorized Officers"), are
authorized on behalf of the Corporation to execute and deliver the
Severance Agreements substantially in the form appended hereto, with
such changes form the as the Authorized Officer of Officers may approve,
such approval to be conclusively evidenced by their execution and delivery
thereto and to execute and deliver all other agreements contemplated by
the Severance Agreements.
IN WITNESS WHEREOF, each of the undersigned has executed this
Unanimous Written Consent as of December 18, 1996.
/s/ Nicholas R. H. Toms
- --------------------------------------------
Nicholas R. H. Toms
/s/ John R. Coutts
- -------------------------------------------
John R. Coutts
/s/ Gregory N. Thomas
- -------------------------------------------
Gregory N. Thomas
/s/ Edward A. Stevens
- ------------------------------------------
Edward A. Stevens
/s/ Herbert W. Marache, Jr.,
- ------------------------------------------
Herbert W. Marache, Jr.,
The top five executive compensation agreements are listed below:
SEVERANCE AGREEMENT I
THIS SEVERANCE AGREEMENT, dated as of
December 13, 1996 (this "Agreement"), is made by and between The Peak
Technologies Group, Inc., a Delaware corporation, having its principal
offices at 9200 Berger Road, Columbia, Maryland 21046 (the
"Company"), and Nicholas R. H. Toms, residing in the state of New York,
(the "Executive").
WHEREAS, the Company considers it essential to the
best interests of its shareholders to foster the continued employment of key
executive management personnel; and
WHEREAS, the Board of Directors of the Company (the
"Board") recognizes that, as is the case with many publicly-held
corporations, the possibility of a Change in Control (as defined in Section
1.3 below) of the Company exists from time to time and that such
possibility, and the uncertainty, instability and questions which it may
raise for and among key executive management personnel, may result in
the premature departure or significant distraction of such management
personnel to the material detriment of the Company and its shareholders;
and
WHEREAS, the Board has determined that appropriate
steps should be taken to reinforce, focus and encourage the continued
attention and dedication of key members of the executive management of
the Company and its subsidiaries, including (without limitation) the
Executive, to their assigned duties without distraction in the face of
potentially disturbing or unsettling circumstances arising from the
possibility of a Change in Control of the Company;
NOW THEREFORE, in consideration of the premises
and the mutual covenants herein contained, the Company and the
Executive hereby agree as follows:
1. Definitions. For purposes of this Agreement, the
following terms shall have the meanings set forth below:
1.1 "Annual Base Salary" shall mean the Executive's
rate of regular basic annual compensation prior to any reduction under a
salary reduction agreement pursuant to section 401(k) or section 125 of
the Internal Revenue Code of 1986, as amended from time to time (the
"Code"), and shall not include (without limitation) cost of living
allowances, fees, retainers, reimbursements, bonuses, incentive awards,
prizes or similar payments.
1.2 "Cause" for termination by the Company of the
Executive's employment, after any Change in Control, shall mean (i) the
willful and continued failure by the Executive to substantially perform the
Executive's duties with the Company, or a subsidiary of the Company, as
such duties may reasonably be defined from time to time by the Board (or
a duly designated and authorized committee thereof), or to abide by the
reasonable written policies of the Company or of the Executive's primary
employer (other than any such failure resulting from the Executive's
incapacity due to physical or mental illness or any such actual or
anticipated failure after the issuance of a Notice of Termination by the
Executive for Good Reason pursuant to Section 7.1) after a written
demand for substantial performance is delivered to the Executive by the
Board, which demand specifically identifies the manner in which the
Board believes that the Executive has not substantially performed the
Executive's duties or has not abided by any reasonable written policies, or
(ii) the continued and willful engaging by the Executive in conduct which
is demonstrably and materially injurious to the Company or its
subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii)
of this definition, no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the Executive in
bad faith and without reasonable belief that the Executive's act, or failure
to act, was in the best interest of the Company or its subsidiaries. For
purposes of this definition, any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board or upon the
instructions of the Board, the Company's chief executive officer, or other
duly authorized 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 and its subsidiaries. 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 three quarters of the entire
membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice of any such meeting 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
clause (i) or (ii) above, and specifying the particulars thereof in detail.
1.3 "Change in Control" shall mean and be deemed to
have occurred if:
(i) any Person is or becomes the Beneficial
Owner (as that term is defined in Rule 13d-3 under the Securities
Exchange Act of 1934 (the "Exchange Act")), directly or indirectly, of
securities of the Company (not including in the securities beneficially
owned by such Person any securities acquired directly from the Company)
representing twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding securities, or there occurs any
transaction which the Company is required to disclose pursuant to Item
1(a) of Form 8-K (as filed pursuant to Rule 13a-11 or Rule 15d-11 of the
Exchange Act); or
(ii) during any period of twenty-four (24)
consecutive months (not including any period prior to May 1, 1996),
individuals who at the beginning of such period constitute the Board and
any new director (other than a director designated by a Person who has
entered into an agreement with the Company to effect a transaction
described in clause (i),(iii) or (iv) of this definition or any such individual
whose initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents) whose election by the Board
or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of such period or whose
election or nomination for election was previously so approved, cease for
any reason to constitute a majority of the Board; or
(iii) the shareholders of the Company approve a
reorganization, merger or consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially all of the
individuals and entities who were Beneficial Owners, immediately prior to
such reorganization, merger or consolidation, of the combined voting
power of the Company's then outstanding securities beneficially own,
directly or indirectly, immediately after such reorganization, merger or
consolidation, more then fifty-five percent (55%) of the combined voting
power of the securities of the corporation resulting from such
reorganization, merger or consolidation, immediately prior to such
reorganization, merger or consolidation, of the combined voting power of
the Company's securities; or
(iv) the shareholders of the Company approve
(a) the sale or disposition by the Company (other than to a subsidiary of
the Company) of all or substantially all of the assets of the Company, or
(b) a complete liquidation or dissolution of the Company.
Notwithstanding the foregoing, a Change in Control shall
not include any event, circumstance or transaction which results from the
action (excluding the Executive's employment activities with the Company
or any of its subsidiaries) of any Person or group of Persons which
includes, is directly affiliated with or is wholly or partly controlled by one
or more executive officers of the Company.
1.4 "Company" shall mean The Peak Technologies
Group, Inc. and any successor to its business and/or assets which assumes
(either expressly, by operation of law or otherwise) and/or agrees to
perform this Agreement by operation of law or otherwise (except in
determining, under Section 1.3 hereof, whether or not any Change in
Control of the Company has occurred in connection with such
succession).
1.5 "Disability" shall mean and be deemed the reason
for the termination by the Company of the Executive's employment, if, as
a result of the Executive's incapacity due to physical or mental illness, (i)
the Executive shall have been absent from the full-time performance of the
Executive's duties with the Company for a period of six (6) consecutive
months, (ii) the Company gives the Executive a Notice of Termination for
Disability, and (iii) within thirty (30) days after such Notice of
Termination is given, the Executive does not return to the full-time
performance of the Executive's duties.
1.6 "Good Reason" for termination by the Executive
of the Executive's employment in connection with or as a result of any
Change in Control, shall mean the occurrence (without the Executive's
prior express written consent) of any one of the following acts, or failures
to act, unless, in the case of any act or failure to act described in clauses
(i), (iv), (v) or (vi) below, such act or failure to act is corrected by the
Company prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
(i) the assignment to the Executive of any duties
or responsibilities inconsistent with those described in Section 3.2 below
or with the Executive's position(s) (including without limitation status,
offices, titles, and reporting responsibilities/rights) as an executive officer
of the Company and its subsidiaries or a substantial adverse alteration of
the Executive's position or title(s) with the Company or in the nature of
the Executive's authority, duties, or responsibilities from those described
in Section 3.2 below or otherwise;
(ii) a reduction in the Executive's Annual Base
Salary as in effect on the date of this Agreement or as the same may be
increased at any time thereafter and from time to time;
(iii) the relocation of the Company's principal
executive offices where the Executive works to a location more than thirty
(30) miles from its location on the date of this Agreement, or, if different,
more than thirty (30) miles from where such offices are located
immediately prior to any Potential Change in Control, or the Company's
requiring the Executive to be based anywhere other than the Company's
principal executive offices except for required travel on the Company's
business to an extent substantially consistent with the Executive's business
travel obligations as of the date of this Agreement;
(iv) any failure by the Company to comply with
any of the provisions 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;
(v) the failure by the Company or a subsidiary to
continue in effect any pension benefit or incentive or deferred
compensation plan in which the Executive participates immediately prior
to any Potential Change in Control which is material to the Executive's
total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan or arrangement) has been made with
respect to such plan, or the failure by the Company or a subsidiary to
continue the Executive's participation therein (or in such substitute or
alternative plan or arrangement) on a basis not materially less favorable,
both in terms of the amount of benefits provided and the level of the
Executive's participation relative to other participants, as existed at the
time of the Potential Change in Control;
(vi) the failure by the Company or a subsidiary
to continue to provide the Executive with health and welfare benefits
substantially similar to those enjoyed by the Executive under any of the
Company's or a subsidiary's retirement, life insurance, medical, health and
accident, or disability or similar plans in which the Executive was
participating at the time of any Potential Change in Control, the taking of
any action by the Company or a subsidiary which would directly or
indirectly materially reduce any of such benefits or deprive the Executive
of any material fringe benefit enjoyed by the Executive at the time of the
Potential Change in Control, or the failure by the Company or a
subsidiary to provide the Executive with the number of paid vacation days
to which the Executive is entitled in accordance with the Company's or a
subsidiary's normal vacation policy in effect at the time of the Potential
Change in Control;
(vii) any purported termination of the
Executive's employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 7.1; and/or
(viii) a termination by the Executive for any
reason during the thirty (30) day period immediately following the first
anniversary of any Change in Control.
1.7 "Person" shall have the meaning ascribed thereto
in Section 3(a)(9) of the Exchange Act, as modified, applied and used in
Sections 13(d) and 14(d) thereof; provided, however, a Person shall not
include (i) the Company or any of its subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or any of its subsidiaries (in its capacity as such), (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same character and
proportions as their ownership of stock of the Company.
1.8 "Potential Change in Control" shall mean and be
deemed to have occurred if:
(i) the Company commences negotiations in
respect of or enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control;
(ii) the Company or any Person publicly
announces an intention to take actions which, if consummated, would
constitute a Change in Control; and/or
(iii) any Person becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing ten
percent (10%) or more of the combined voting power of the Company's
then outstanding securities, or any Person increases such Person's
beneficial ownership of such securities by five (5) percentage points or
more over the percentage so owned by such Person on May 1, 1996.
2. Term of this Agreement. This Agreement shall
commence on the date hereof and shall continue in effect through
December 31, 1999; provided, however, that commencing on January 1,
1999 and each alternate January 1 thereafter, the term of this Agreement
shall automatically be extended for an additional two years unless, (i) not
later than June 30 of the calendar year preceding any such January 1st,
the Company or the Executive shall have given written notice to the other
not to extend this Agreement or (ii) a Change in Control shall have
occurred prior to any such January 1; provided, further, however, that if a
Change in Control shall have occurred during the term of this Agreement,
this Agreement shall continue in effect for a period of not less than thirty-
six (36) full months beyond the month in which such Change in Control
occurred (the "Term").
3. Company's Covenants.
3.1 Severance Payments. In order to induce the
Executive to remain in the employ of the Company and/or one or more of
its subsidiaries and in consideration of the Executive's covenants set forth
in Section 4 below, the Company agrees, under the terms and conditions
described herein and in addition to the amounts payable to the Executive
under Section 5 below, to pay the Executive the "Severance Payments"
described in Section 6.1 below and the other payments and benefits
described herein in the event the Executive's employment with the
Company is terminated under the circumstances set forth in Section 6.1
below.
3.2 Position and Duties. During the period
commencing on the date of any Change in Control until the earliest to
occur of (i) the date which is thirty-six (36) months from the date of any
such Change in Control, (ii) the date of termination by the Executive of
the Executive's employment for any reason, or (iii) the termination by the
Company of the Executive's employment for any reason (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
the most significant of those held, exercised and assigned at any time
during the one hundred eighty (180) day period immediately preceding any
related Potential Change in Control, and (b) the Executive's services shall
be performed at the location where the Executive was employed
immediately preceding any such Potential Change in Control, or any office
or location less than thirty (30) miles from such location.
3.3 Base Salary. During the Employment Period, the
Executive shall receive Annual Base Salary at least equal to twelve (12)
times the highest monthly base salary paid or payable, including (without
limitation) any base salary which has been earned but deferred, to the
Executive by the Company and its affiliated companies in respect of any
month in the twelve (12) month period immediately preceding the month in
which any related Potential Change in Control occurs. In addition,
Annual Base Salary shall not be reduced after the occurrence of a
Potential Change in Control. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by,
controlling or under common control with the Company.
3.4 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 Executive's highest bonus paid or awarded for the last
three (3) full fiscal years prior to the fiscal year in which the related
Potential Change in Control occurs (annualized in the event that the
Executive was not employed by the Company for the whole of any such
prior fiscal year). Each 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.
3.5 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
one hundred eighty (180) day period immediately preceding any related
Potential Change in Control or if more favorable to the Executive, those
provided generally at any time thereafter to other peer executives of the
Company and its affiliated companies.
3.6 Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case may be,
shall be entitled to participate in and shall receive all benefits under all of
the health and welfare benefit plans, practices, policies and programs
provided by the Company and its affiliated companies (including, without
limitation, medical, prescription, dental, disability, 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 one hundred eighty (180) day period immediately preceding any
related Potential Change in Control or, if more favorable to the Executive,
those provided generally at any time thereafter to other peer executives of
the Company and its affiliated companies.
3.7 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 its
affiliated companies in effect for the Executive at any time during the one
hundred eighty (180) day period immediately preceding any related
Potential Change in Control 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.
3.8 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 an 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 one hundred eighty (180) day period
immediately preceding any related Potential Change in Control 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.
3.9 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 one hundred eighty (180)
day period immediately preceding any related Potential Change in Control
or, if more favorable to the Executive, as provided generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies.
3.10 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
one hundred eighty (180) day period immediately preceding any related
Potential Change in Control 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. The Executive's Covenants.
4.1 Employment. The Executive agrees that, subject
to the terms and conditions of this Agreement, in the event of a Change in
Control during the Term the Executive will remain in the employ of the
Company during any related Employment Period.
4.2 Time and Attention. 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 and
duties assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities and duties. During the Employment Period it shall not be
a violation of this Agreement for the Executive to (i) serve on corporate,
civic or charitable boards or committees, (ii) deliver lectures, fulfill
speaking engagements or teach at educational institutions, and (iii)
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 any
Potential Change in Control, the reinstatement or continued conduct of
such activities (or the reinstatement or conduct of activities similar in
nature and scope thereto) subsequent to any related Potential Change in
Control shall not thereafter be deemed to interfere with the performance of
the Executive's responsibilities to the Company.
4.3 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 direct or indirect
acts by 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, however, shall an asserted violation of
the provisions of this Section 4.3 constitute a basis for deferring or
withholding any amounts otherwise payable to the Executive under this
Agreement.
5. Compensation Other Than Severance Payments.
5.1 Disability. Following a Potential Change in
Control and during the Term, during any period that the Executive fails to
perform the Executive's full-time duties with the Company as a result of
incapacity due to physical or mental illness, the Executive's full salary
shall be paid to the Executive by the Company at a rate no less than the
rate in effect at the commencement of any such disability period, together
with all compensation and benefits payable to the Executive under the
terms of any compensation or benefit plan, program or arrangement
maintained by the Company or its subsidiaries during such disability
period, until the Executive's employment is terminated by the Company
for Disability.
5.2 Base Salary. If the Executive's employment shall
be terminated for any reason following a Potential Change in Control and
during the Term, the Executive's full salary shall be paid to the Executive
by the Company through the Date of Termination (as defined below in
Section 7.2) at the rate in effect at the time the Notice of Termination is
given, together with all compensation and benefits payable to or with
respect to the Executive through the Date of Termination under the terms
of any compensation or benefit plan, program or arrangement maintained
by the Company or its subsidiaries during such period.
5.3 Benefits. If the Executive's employment shall be
terminated for any reason following a Potential Change in Control and
during the Term, the Executive's normal post-termination compensation
and benefits shall be paid to the Executive as such payments become due.
Such post-termination compensation and benefits shall be determined
under, and paid in accordance with, the retirement, insurance and other
compensation or benefit plans, programs and arrangements maintained by
the Company or its subsidiaries.
6. Severance Payments.
6.1 Severance. The Company shall pay the
Executive the payments described in this Section 6.1 (the "Severance
Payments") upon the termination of the Executive's employment with the
Company following a Change in Control and during the Term, in addition
to the payments and benefits described in Section 5 hereof, unless such
termination is (i) by the Company for Cause, or (ii) by the Executive
without Good Reason, or (iii) due to death or Disability. In addition, the
Executive's employment shall be deemed to have been terminated
following a Change in Control by the Company without Cause or by the
Executive with Good Reason (a) if the Executive reasonably demonstrates
that the Executive's employment was terminated prior to a Change in
Control without Cause (1) at the request of a Person who has entered into
an agreement with the Company the consummation of which will
constitute a Change in Control (or who has taken other steps reasonably
calculated to effect a Change in Control) or (2) otherwise in connection
with, as a result of or in anticipation of a Change in Control, (b) if the
Executive terminates his employment for Good Reason prior to a Change
in Control and the Executive reasonably demonstrates that the
circumstance(s) or event(s) which constitute such Good Reason occurred
(1) at the request of such Person or (2) otherwise in connection with, as a
result of or in anticipation of a Change in Control, or (c) the Executive
dies or is terminated by the Company due to Disability, in each case, after
the occurrence of a Potential Change in Control and a related Change in
Control actually occurs within one (1) year after the Date of Termination
or the date of death, as the case may be. The Executive's right to
terminate the Executive's employment for Good Reason shall not be
affected by the Executive's incapacity due to physical or mental illness.
The Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any act or failure to act constituting Good
Reason hereunder.
6.1.1 In lieu of any further salary and annual
bonus payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay to the Executive a lump sum
severance payment, in cash, equal to three (3) times the sum of (i) the
highest Annual Base Salary paid or payable to the Executive during the
thirty-six (36) month period immediately preceding the month in which the
Change in Control occurs, and (ii) the highest annual bonus paid or
determined and payable to the Executive during such thirty-six (36) month
period.
6.1.2 For a thirty-six (36) month period after the
Date of Termination, the Company shall arrange to provide the Executive
with life, disability, accident and health insurance benefits substantially
similar to those which the Executive is receiving immediately prior to any
related Potential Change in Control or the receipt of the Notice of
Termination (without giving effect to any reduction in such benefits
subsequent to a Change in Control which reduction constitutes Good
Reason), whichever is greater. Benefits otherwise receivable by the
Executive pursuant to this Section 6.1.2 shall be reduced to the extent
comparable benefits are actually received by or made available to the
Executive without cost during such period following the Executive's
termination of employment (and any such benefits actually received by the
Executive shall be reported to the Company by the Executive).
6.2 Special Reimbursement. In the event that the
Executive becomes entitled to the Severance Payments, if any payment or
benefit paid or payable, or received or to be received, by or on behalf of
the Executive in connection with a Change in Control or the termination of
the Executive's employment, whether any such payments or benefits are
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any of its subsidiaries, any Person, or
otherwise (the "Total Payments"), will or would be subject to the excise
tax imposed under section 4999 of the Code (the "Excise Tax"), the
Company shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that after payment by the Executive 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 any Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Total Payments.
6.2.1 For purposes of determining whether any
of the Total Payments will be subject to the Excise Tax and the amount of
such Excise Tax, (i) the Total Payments shall be treated as "parachute
payments" within the meaning of section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax, unless in the
opinion of tax counsel (delivered to the Executive) selected by the
Company and reasonably acceptable to the Executive such Total
Payments (in whole or in part) (a) do not constitute parachute payments,
including (without limitation) by reason of section 280G(b)(4)(A) of the
Code, (b) such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered, within the
meaning of section 280G(b)(4)(B) of the Code, or (c) are otherwise not
subject to the Excise Tax, and (ii) the value of any non-cash benefits or
any deferred payment or benefit shall be determined by the Company's
independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
6.2.2 In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account
hereunder at the time of termination of the Executive's employment, the
Executive shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction plus interest on the amount of such
repayment at the rate provided in section 1274(b)(2)(B) of the Code. In
the event that the Excise Tax is determined to exceed the amount taken
into account hereunder at the time of the termination of the Executive's
employment (including by reason of any payment the existence or amount
of which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in respect of such
excess (plus any interest, penalties or additions payable by the Executive
with respect to such excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any administrative
or judicial proceedings concerning the existence or amount of any such
subsequent liability for Excise Tax with respect to the Severance
Payments.
6.3 Date of Payment. The payments provided for in
Section 6.1.1 and Section 6.2 hereof shall be made not later than the
fifteenth (15th) day following the Date of Termination; provided,
however, that if the amounts of such payments cannot be finally
determined on or before such day, the Company shall pay to the Executive
on such day an estimate, as determined in good faith by the Company, of
the minimum amount of such payments to which the Executive is likely to
be entitled to and shall pay the remainder of such payments (together with
interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon
as the amount thereof can be determined but in no event later than the
thirtieth (30th) day after the Date of Termination. In the event that the
amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the
Company to the Executive, payable on the fifth (5th) business day after
demand by the Company (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code). At the time that payments are made
under this Section 6.3, the Company shall provide the Executive with a
detailed written statement setting forth the manner in which such
payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Company has received
from outside counsel, auditors or consultants (and any such opinions or
advice which are in writing shall be attached to the statement).
6.4 Legal Costs. The Company shall also reimburse
the Executive for all legal fees and expenses incurred in good faith by the
Executive as a result of any dispute with any party (including, but not
limited to, the Company and/or any affiliate of the Company) regarding
the payment of any benefit provided for in this Agreement (including, but
not limited, all such fees and expenses incurred in disputing any
termination or in seeking in good faith to obtain or enforce any benefit or
right provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of section 4999 of
the Code 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 within five (5) business days after delivery
of the Executive's written requests for payment accompanied by such
evidence of fees and expenses incurred as the Company reasonably may
require.
7. Termination Procedures and Compensation During
Dispute.
7.1 Notice of Termination. After a Change in
Control and during the Term, any purported termination of the Executive's
employment with the Company (other than by reason of death) shall be
communicated by written Notice of Termination from one party hereto to
the other party hereto in accordance with Section 10 hereof. For purposes
of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied
upon, if any, and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment with the Company under the provision so
indicated. Further, a Notice of Termination for Cause is required to
include a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board which was called and held for the purpose of
considering such termination (which meeting may be a regular meeting of
the Board where prior notice of consideration of such termination is given
to members of the Board) finding that, in the good faith opinion of the
Board, the Executive engaged in conduct set forth in clause (i) or (ii) of
the definition of Cause herein, and specifying the particulars thereof in
detail. For purposes of this Agreement, any purported termination not
effected in accordance with this Section 7.1 shall not be considered
effective.
7.2 Date of Termination. "Date of Termination",
with respect to any purported termination of the Executive's employment
after a Change in Control and during the Term, shall mean (i) if the
Executive's employment is terminated for Disability, thirty (30) days after
Notice of Termination is given (provided that the Executive shall not have
returned to the full-time performance of the Executive's duties during such
thirty (30) day period), and (ii) if the Executive's employment is
terminated for any other reason, the date specified in the Notice of
Termination (which, in the case of a termination by the Company, shall
not be less than thirty (30) days (except in the case of a termination for
Cause) and, in the case of a termination by the Executive, shall not be less
than fifteen (15) days nor more than sixty (60) days, respectively, after the
date such Notice of Termination is given).
7.3 Dispute Concerning Termination. 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 7.3), the party receiving such Notice of Termination notifies the
other party that a dispute exists concerning the termination, the Date of
Termination shall be 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 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 only if the
basis for such notice is reasonable, such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute with
reasonable diligence.
7.4 Compensation During Dispute. If a purported
termination occurs following a Change in Control and during the Term,
and such termination is disputed in accordance with Section 7.3 above, the
Company shall continue to pay the Executive the full compensation
(including without limitation Annual Base Salary and Annual Bonus) in
effect at the time of any related Potential Change in Control or when the
notice giving rise to the dispute was given (whichever is greater) and
continue the Executive as a participant in all compensation, incentive,
pension and welfare benefit and insurance plans in which the Executive
was participating at the time of any Potential Change in Control or when
the notice giving rise to the dispute was given, whichever is greater, until
the dispute is finally resolved in accordance with Section 7.3 hereof.
Amounts paid under this Section 7.4 are in addition to all other amounts
due under this Agreement (other than those due under Section 5.2 hereof)
and shall not be offset against or reduce any other amounts due under this
Agreement or any other plan, agreement or arrangement.
8. No Mitigation. The Company agrees that, if the
Executive's employment is terminated during the Term, the Executive is
not required to seek other employment or to attempt in any way to reduce
any amounts payable to the Executive by the Company pursuant to
Section 6 or Section 7.4. Further, the amount of any payment or benefit
provided for in Section 6 (other than pursuant to Section 6.1.2) or Section
7.4 shall not be reduced by any compensation earned by the Executive as
the result of employment by another employer, by retirement benefits, or
offset against any amount claimed to be owed by the Executive to the
Company or any of its subsidiaries, or otherwise.
9. Successors; Binding Agreement.
9.1 Successors. In addition to any obligations imposed
by law upon any successor to the Company, 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 expressly assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required
to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement
and shall entitle the Executive to compensation from the Company in the
same amount and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive's employment
for Good Reason after a Change in Control, except that, for purposes of
implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination.
9.2 Binding Agreement. This Agreement shall inure
to the benefit of and be enforceable by this Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would
still be payable to the Executive hereunder (other than amounts which, by
their terms, terminate upon the death of the Executive) if the Executive
had continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to the
executors, personal representatives or administrators of the Executive's
estate.
10. Notices. For the purpose of this Agreement, notices and
all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
mailed by United States certified mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth below, or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be
effective only upon actual receipt:
To the Company: The Peak Technologies Group, Inc.
9200 Berger Road
Columbia, Maryland 21046
Attention: Ed Stevens
To the Executive: Nic Toms
11. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing and signed by the Executive and such
officer as may be specifically designated by the Board. No waiver by
either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been
made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Delaware without
regard to the principles of conflict of laws thereof. All references to
sections of the Exchange Act or the Code shall be deemed also to refer to
and include any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding
required under federal, state or local law and any additional withholding to
which the Executive has agreed. The rights and obligations of the
Company and the Executive under this Agreement shall survive the
expiration of the Term and the Employment Period.
12. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force
and effect.
13. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument.
14. No Limitation. 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 other 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.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the date and year first written above.
The Peak Technologies Group, Inc.
/s/ Edward A. Stevens
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Edward A. Stevens
Executive Vice President and Chief Financial Officer
/s/ Nicholas R. H. Toms
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Nicholas R. H. Toms
SEVERANCE AGREEMENT I
THIS SEVERANCE AGREEMENT, dated as of
December 13, 1996 (this "Agreement"), is made by and between The Peak
Technologies Group, Inc., a Delaware corporation, having its principal
offices at 9200 Berger Road, Columbia, Maryland 21046 (the
"Company"), and Edward A. Stevens, residing in the state of Maryland.
(the "Executive").
WHEREAS, the Company considers it essential to the
best interests of its shareholders to foster the continued employment of key
executive management personnel; and
WHEREAS, the Board of Directors of the Company (the
"Board") recognizes that, as is the case with many publicly-held
corporations, the possibility of a Change in Control (as defined in Section
1.3 below) of the Company exists from time to time and that such
possibility, and the uncertainty, instability and questions which it may
raise for and among key executive management personnel, may result in
the premature departure or significant distraction of such management
personnel to the material detriment of the Company and its shareholders;
and
WHEREAS, the Board has determined that appropriate
steps should be taken to reinforce, focus and encourage the continued
attention and dedication of key members of the executive management of
the Company and its subsidiaries, including (without limitation) the
Executive, to their assigned duties without distraction in the face of
potentially disturbing or unsettling circumstances arising from the
possibility of a Change in Control of the Company;
NOW THEREFORE, in consideration of the premises
and the mutual covenants herein contained, the Company and the
Executive hereby agree as follows:
1. Definitions. For purposes of this Agreement, the
following terms shall have the meanings set forth below:
1.1 "Annual Base Salary" shall mean the Executive's
rate of regular basic annual compensation prior to any reduction under a
salary reduction agreement pursuant to section 401(k) or section 125 of
the Internal Revenue Code of 1986, as amended from time to time (the
"Code"), and shall not include (without limitation) cost of living
allowances, fees, retainers, reimbursements, bonuses, incentive awards,
prizes or similar payments.
1.2 "Cause" for termination by the Company of the
Executive's employment, after any Change in Control, shall mean (i) the
willful and continued failure by the Executive to substantially perform the
Executive's duties with the Company, or a subsidiary of the Company, as
such duties may reasonably be defined from time to time by the Board (or
a duly designated and authorized committee thereof), or to abide by the
reasonable written policies of the Company or of the Executive's primary
employer (other than any such failure resulting from the Executive's
incapacity due to physical or mental illness or any such actual or
anticipated failure after the issuance of a Notice of Termination by the
Executive for Good Reason pursuant to Section 7.1) after a written
demand for substantial performance is delivered to the Executive by the
Board, which demand specifically identifies the manner in which the
Board believes that the Executive has not substantially performed the
Executive's duties or has not abided by any reasonable written policies, or
(ii) the continued and willful engaging by the Executive in conduct which
is demonstrably and materially injurious to the Company or its
subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii)
of this definition, no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the Executive in
bad faith and without reasonable belief that the Executive's act, or failure
to act, was in the best interest of the Company or its subsidiaries. For
purposes of this definition, any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board or upon the
instructions of the Board, the Company's chief executive officer, or other
duly authorized 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 and its subsidiaries. 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 three quarters of the entire
membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice of any such meeting 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
clause (i) or (ii) above, and specifying the particulars thereof in detail.
1.3 "Change in Control" shall mean and be deemed to
have occurred if:
(i) any Person is or becomes the Beneficial
Owner (as that term is defined in Rule 13d-3 under the Securities
Exchange Act of 1934 (the "Exchange Act")), directly or indirectly, of
securities of the Company (not including in the securities beneficially
owned by such Person any securities acquired directly from the Company)
representing twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding securities, or there occurs any
transaction which the Company is required to disclose pursuant to Item
1(a) of Form 8-K (as filed pursuant to Rule 13a-11 or Rule 15d-11 of the
Exchange Act); or
(ii) during any period of twenty-four (24)
consecutive months (not including any period prior to May 1, 1996),
individuals who at the beginning of such period constitute the Board and
any new director (other than a director designated by a Person who has
entered into an agreement with the Company to effect a transaction
described in clause (i),(iii) or (iv) of this definition or any such individual
whose initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents) whose election by the Board
or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of such period or whose
election or nomination for election was previously so approved, cease for
any reason to constitute a majority of the Board; or
(iii) the shareholders of the Company approve a
reorganization, merger or consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially all of the
individuals and entities who were Beneficial Owners, immediately prior to
such reorganization, merger or consolidation, of the combined voting
power of the Company's then outstanding securities beneficially own,
directly or indirectly, immediately after such reorganization, merger or
consolidation, more then fifty-five percent (55%) of the combined voting
power of the securities of the corporation resulting from such
reorganization, merger or consolidation, immediately prior to such
reorganization, merger or consolidation, of the combined voting power of
the Company's securities; or
(iv) the shareholders of the Company approve
(a) the sale or disposition by the Company (other than to a subsidiary of
the Company) of all or substantially all of the assets of the Company, or
(b) a complete liquidation or dissolution of the Company.
Notwithstanding the foregoing, a Change in Control shall
not include any event, circumstance or transaction which results from the
action (excluding the Executive's employment activities with the Company
or any of its subsidiaries) of any Person or group of Persons which
includes, is directly affiliated with or is wholly or partly controlled by one
or more executive officers of the Company.
1.4 "Company" shall mean The Peak Technologies
Group, Inc. and any successor to its business and/or assets which assumes
(either expressly, by operation of law or otherwise) and/or agrees to
perform this Agreement by operation of law or otherwise (except in
determining, under Section 1.3 hereof, whether or not any Change in
Control of the Company has occurred in connection with such
succession).
1.5 "Disability" shall mean and be deemed the reason
for the termination by the Company of the Executive's employment, if, as
a result of the Executive's incapacity due to physical or mental illness, (i)
the Executive shall have been absent from the full-time performance of the
Executive's duties with the Company for a period of six (6) consecutive
months, (ii) the Company gives the Executive a Notice of Termination for
Disability, and (iii) within thirty (30) days after such Notice of
Termination is given, the Executive does not return to the full-time
performance of the Executive's duties.
1.6 "Good Reason" for termination by the Executive
of the Executive's employment in connection with or as a result of any
Change in Control, shall mean the occurrence (without the Executive's
prior express written consent) of any one of the following acts, or failures
to act, unless, in the case of any act or failure to act described in clauses
(i), (iv), (v) or (vi) below, such act or failure to act is corrected by the
Company prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
(i) the assignment to the Executive of any duties
or responsibilities inconsistent with those described in Section 3.2 below
or with the Executive's position(s) (including without limitation status,
offices, titles, and reporting responsibilities/rights) as an executive officer
of the Company and its subsidiaries or a substantial adverse alteration of
the Executive's position or title(s) with the Company or in the nature of
the Executive's authority, duties, or responsibilities from those described
in Section 3.2 below or otherwise;
(ii) a reduction in the Executive's Annual Base
Salary as in effect on the date of this Agreement or as the same may be
increased at any time thereafter and from time to time;
(iii) the relocation of the Company's principal
executive offices where the Executive works to a location more than thirty
(30) miles from its location on the date of this Agreement, or, if different,
more than thirty (30) miles from where such offices are located
immediately prior to any Potential Change in Control, or the Company's
requiring the Executive to be based anywhere other than the Company's
principal executive offices except for required travel on the Company's
business to an extent substantially consistent with the Executive's business
travel obligations as of the date of this Agreement;
(iv) any failure by the Company to comply with
any of the provisions 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;
(v) the failure by the Company or a subsidiary to
continue in effect any pension benefit or incentive or deferred
compensation plan in which the Executive participates immediately prior
to any Potential Change in Control which is material to the Executive's
total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan or arrangement) has been made with
respect to such plan, or the failure by the Company or a subsidiary to
continue the Executive's participation therein (or in such substitute or
alternative plan or arrangement) on a basis not materially less favorable,
both in terms of the amount of benefits provided and the level of the
Executive's participation relative to other participants, as existed at the
time of the Potential Change in Control;
(vi) the failure by the Company or a subsidiary
to continue to provide the Executive with health and welfare benefits
substantially similar to those enjoyed by the Executive under any of the
Company's or a subsidiary's retirement, life insurance, medical, health and
accident, or disability or similar plans in which the Executive was
participating at the time of any Potential Change in Control, the taking of
any action by the Company or a subsidiary which would directly or
indirectly materially reduce any of such benefits or deprive the Executive
of any material fringe benefit enjoyed by the Executive at the time of the
Potential Change in Control, or the failure by the Company or a
subsidiary to provide the Executive with the number of paid vacation days
to which the Executive is entitled in accordance with the Company's or a
subsidiary's normal vacation policy in effect at the time of the Potential
Change in Control;
(vii) any purported termination of the
Executive's employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 7.1; and/or
(viii) a termination by the Executive for any
reason during the thirty (30) day period immediately following the first
anniversary of any Change in Control.
1.7 "Person" shall have the meaning ascribed thereto
in Section 3(a)(9) of the Exchange Act, as modified, applied and used in
Sections 13(d) and 14(d) thereof; provided, however, a Person shall not
include (i) the Company or any of its subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or any of its subsidiaries (in its capacity as such), (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same character and
proportions as their ownership of stock of the Company.
1.8 "Potential Change in Control" shall mean and be
deemed to have occurred if:
(i) the Company commences negotiations in
respect of or enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control;
(ii) the Company or any Person publicly
announces an intention to take actions which, if consummated, would
constitute a Change in Control; and/or
(iii) any Person becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing ten
percent (10%) or more of the combined voting power of the Company's
then outstanding securities, or any Person increases such Person's
beneficial ownership of such securities by five (5) percentage points or
more over the percentage so owned by such Person on May 1, 1996.
2. Term of this Agreement. This Agreement shall
commence on the date hereof and shall continue in effect through
December 31, 1999; provided, however, that commencing on January 1,
1999 and each alternate January 1 thereafter, the term of this Agreement
shall automatically be extended for an additional two years unless, (i) not
later than June 30 of the calendar year preceding any such January 1st,
the Company or the Executive shall have given written notice to the other
not to extend this Agreement or (ii) a Change in Control shall have
occurred prior to any such January 1; provided, further, however, that if a
Change in Control shall have occurred during the term of this Agreement,
this Agreement shall continue in effect for a period of not less than thirty-
six (36) full months beyond the month in which such Change in Control
occurred (the "Term").
3. Company's Covenants.
3.1 Severance Payments. In order to induce the
Executive to remain in the employ of the Company and/or one or more of
its subsidiaries and in consideration of the Executive's covenants set forth
in Section 4 below, the Company agrees, under the terms and conditions
described herein and in addition to the amounts payable to the Executive
under Section 5 below, to pay the Executive the "Severance Payments"
described in Section 6.1 below and the other payments and benefits
described herein in the event the Executive's employment with the
Company is terminated under the circumstances set forth in Section 6.1
below.
3.2 Position and Duties. During the period
commencing on the date of any Change in Control until the earliest to
occur of (i) the date which is thirty-six (36) months from the date of any
such Change in Control, (ii) the date of termination by the Executive of
the Executive's employment for any reason, or (iii) the termination by the
Company of the Executive's employment for any reason (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
the most significant of those held, exercised and assigned at any time
during the one hundred eighty (180) day period immediately preceding any
related Potential Change in Control, and (b) the Executive's services shall
be performed at the location where the Executive was employed
immediately preceding any such Potential Change in Control, or any office
or location less than thirty (30) miles from such location.
3.3 Base Salary. During the Employment Period, the
Executive shall receive Annual Base Salary at least equal to twelve (12)
times the highest monthly base salary paid or payable, including (without
limitation) any base salary which has been earned but deferred, to the
Executive by the Company and its affiliated companies in respect of any
month in the twelve (12) month period immediately preceding the month in
which any related Potential Change in Control occurs. In addition,
Annual Base Salary shall not be reduced after the occurrence of a
Potential Change in Control. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by,
controlling or under common control with the Company.
3.4 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 Executive's highest bonus for the last three (3) full fiscal
years prior to the fiscal year in which the related Potential Change in
Control occurs (annualized in the event that the Executive was not
employed by the Company for the whole of any such prior fiscal year).
Each 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.
3.5 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
one hundred eighty (180) day period immediately preceding any related
Potential Change in Control or if more favorable to the Executive, those
provided generally at any time thereafter to other peer executives of the
Company and its affiliated companies.
3.6 Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case may be,
shall be entitled to participate in and shall receive all benefits under all of
the health and welfare benefit plans, practices, policies and programs
provided by the Company and its affiliated companies (including, without
limitation, medical, prescription, dental, disability, 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 one hundred eighty (180) day period immediately preceding any
related Potential Change in Control or, if more favorable to the Executive,
those provided generally at any time thereafter to other peer executives of
the Company and its affiliated companies.
3.7 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 its
affiliated companies in effect for the Executive at any time during the one
hundred eighty (180) day period immediately preceding any related
Potential Change in Control 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.
3.8 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 an 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 one hundred eighty (180) day period
immediately preceding any related Potential Change in Control 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.
3.9 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 one hundred eighty (180)
day period immediately preceding any related Potential Change in Control
or, if more favorable to the Executive, as provided generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies.
3.10 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
one hundred eighty (180) day period immediately preceding any related
Potential Change in Control 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. The Executive's Covenants.
4.1 Employment. The Executive agrees that, subject
to the terms and conditions of this Agreement, in the event of a Change in
Control during the Term the Executive will remain in the employ of the
Company during any related Employment Period.
4.2 Time and Attention. 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 and
duties assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities and duties. During the Employment Period it shall not be
a violation of this Agreement for the Executive to (i) serve on corporate,
civic or charitable boards or committees, (ii) deliver lectures, fulfill
speaking engagements or teach at educational institutions, and (iii)
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 any
Potential Change in Control, the reinstatement or continued conduct of
such activities (or the reinstatement or conduct of activities similar in
nature and scope thereto) subsequent to any related Potential Change in
Control shall not thereafter be deemed to interfere with the performance of
the Executive's responsibilities to the Company.
4.3 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 direct or indirect
acts by 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, however, shall an asserted violation of
the provisions of this Section 4.3 constitute a basis for deferring or
withholding any amounts otherwise payable to the Executive under this
Agreement.
5. Compensation Other Than Severance Payments.
5.1 Disability. Following a Potential Change in
Control and during the Term, during any period that the Executive fails to
perform the Executive's full-time duties with the Company as a result of
incapacity due to physical or mental illness, the Executive's full salary
shall be paid to the Executive by the Company at a rate no less than the
rate in effect at the commencement of any such disability period, together
with all compensation and benefits payable to the Executive under the
terms of any compensation or benefit plan, program or arrangement
maintained by the Company or its subsidiaries during such disability
period, until the Executive's employment is terminated by the Company
for Disability.
5.2 Base Salary. If the Executive's employment shall
be terminated for any reason following a Potential Change in Control and
during the Term, the Executive's full salary shall be paid to the Executive
by the Company through the Date of Termination (as defined below in
Section 7.2) at the rate in effect at the time the Notice of Termination is
given, together with all compensation and benefits payable to or with
respect to the Executive through the Date of Termination under the terms
of any compensation or benefit plan, program or arrangement maintained
by the Company or its subsidiaries during such period.
5.3 Benefits. If the Executive's employment shall be
terminated for any reason following a Potential Change in Control and
during the Term, the Executive's normal post-termination compensation
and benefits shall be paid to the Executive as such payments become due.
Such post-termination compensation and benefits shall be determined
under, and paid in accordance with, the retirement, insurance and other
compensation or benefit plans, programs and arrangements maintained by
the Company or its subsidiaries.
6. Severance Payments.
6.1 Severance. The Company shall pay the
Executive the payments described in this Section 6.1 (the "Severance
Payments") upon the termination of the Executive's employment with the
Company following a Change in Control and during the Term, in addition
to the payments and benefits described in Section 5 hereof, unless such
termination is (i) by the Company for Cause, or (ii) by the Executive
without Good Reason, or (iii) due to death or Disability. In addition, the
Executive's employment shall be deemed to have been terminated
following a Change in Control by the Company without Cause or by the
Executive with Good Reason (a) if the Executive reasonably demonstrates
that the Executive's employment was terminated prior to a Change in
Control without Cause (1) at the request of a Person who has entered into
an agreement with the Company the consummation of which will
constitute a Change in Control (or who has taken other steps reasonably
calculated to effect a Change in Control) or (2) otherwise in connection
with, as a result of or in anticipation of a Change in Control, (b) if the
Executive terminates his employment for Good Reason prior to a Change
in Control and the Executive reasonably demonstrates that the
circumstance(s) or event(s) which constitute such Good Reason occurred
(1) at the request of such Person or (2) otherwise in connection with, as a
result of or in anticipation of a Change in Control, or (c) the Executive
dies or is terminated by the Company due to Disability, in each case, after
the occurrence of a Potential Change in Control and a related Change in
Control actually occurs within one (1) year after the Date of Termination
or the date of death, as the case may be. The Executive's right to
terminate the Executive's employment for Good Reason shall not be
affected by the Executive's incapacity due to physical or mental illness.
The Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any act or failure to act constituting Good
Reason hereunder.
6.1.1 In lieu of any further salary and annual
bonus payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay to the Executive a lump sum
severance payment, in cash, equal to three (3) times the sum of (i) the
highest Annual Base Salary paid or payable to the Executive during the
thirty-six (36) month period immediately preceding the month in which the
Change in Control occurs, and (ii) the highest annual bonus paid or
determined and payable to the Executive during such thirty-six (36) month
period.
6.1.2 For a thirty-six (36) month period after the
Date of Termination, the Company shall arrange to provide the Executive
with life, disability, accident and health insurance benefits substantially
similar to those which the Executive is receiving immediately prior to any
related Potential Change in Control or the receipt of the Notice of
Termination (without giving effect to any reduction in such benefits
subsequent to a Change in Control which reduction constitutes Good
Reason), whichever is greater. Benefits otherwise receivable by the
Executive pursuant to this Section 6.1.2 shall be reduced to the extent
comparable benefits are actually received by or made available to the
Executive without cost during such period following the Executive's
termination of employment (and any such benefits actually received by the
Executive shall be reported to the Company by the Executive).
6.2 Special Reimbursement. In the event that the
Executive becomes entitled to the Severance Payments, if any payment or
benefit paid or payable, or received or to be received, by or on behalf of
the Executive in connection with a Change in Control or the termination of
the Executive's employment, whether any such payments or benefits are
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any of its subsidiaries, any Person, or
otherwise (the "Total Payments"), will or would be subject to the excise
tax imposed under section 4999 of the Code (the "Excise Tax"), the
Company shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that after payment by the Executive 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 any Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Total Payments.
6.2.1 For purposes of determining whether any
of the Total Payments will be subject to the Excise Tax and the amount of
such Excise Tax, (i) the Total Payments shall be treated as "parachute
payments" within the meaning of section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax, unless in the
opinion of tax counsel (delivered to the Executive) selected by the
Company and reasonably acceptable to the Executive such Total
Payments (in whole or in part) (a) do not constitute parachute payments,
including (without limitation) by reason of section 280G(b)(4)(A) of the
Code, (b) such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered, within the
meaning of section 280G(b)(4)(B) of the Code, or (c) are otherwise not
subject to the Excise Tax, and (ii) the value of any non-cash benefits or
any deferred payment or benefit shall be determined by the Company's
independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
6.2.2 In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account
hereunder at the time of termination of the Executive's employment, the
Executive shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction plus interest on the amount of such
repayment at the rate provided in section 1274(b)(2)(B) of the Code. In
the event that the Excise Tax is determined to exceed the amount taken
into account hereunder at the time of the termination of the Executive's
employment (including by reason of any payment the existence or amount
of which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in respect of such
excess (plus any interest, penalties or additions payable by the Executive
with respect to such excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any administrative
or judicial proceedings concerning the existence or amount of any such
subsequent liability for Excise Tax with respect to the Severance
Payments.
6.3 Date of Payment. The payments provided for in
Section 6.1.1 and Section 6.2 hereof shall be made not later than the
fifteenth (15th) day following the Date of Termination; provided,
however, that if the amounts of such payments cannot be finally
determined on or before such day, the Company shall pay to the Executive
on such day an estimate, as determined in good faith by the Company, of
the minimum amount of such payments to which the Executive is likely to
be entitled to and shall pay the remainder of such payments (together with
interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon
as the amount thereof can be determined but in no event later than the
thirtieth (30th) day after the Date of Termination. In the event that the
amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the
Company to the Executive, payable on the fifth (5th) business day after
demand by the Company (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code). At the time that payments are made
under this Section 6.3, the Company shall provide the Executive with a
detailed written statement setting forth the manner in which such
payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Company has received
from outside counsel, auditors or consultants (and any such opinions or
advice which are in writing shall be attached to the statement).
6.4 Legal Costs. The Company shall also reimburse
the Executive for all legal fees and expenses incurred in good faith by the
Executive as a result of any dispute with any party (including, but not
limited to, the Company and/or any affiliate of the Company) regarding
the payment of any benefit provided for in this Agreement (including, but
not limited, all such fees and expenses incurred in disputing any
termination or in seeking in good faith to obtain or enforce any benefit or
right provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of section 4999 of
the Code 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 within five (5) business days after delivery
of the Executive's written requests for payment accompanied by such
evidence of fees and expenses incurred as the Company reasonably may
require.
7. Termination Procedures and Compensation During
Dispute.
7.1 Notice of Termination. After a Change in
Control and during the Term, any purported termination of the Executive's
employment with the Company (other than by reason of death) shall be
communicated by written Notice of Termination from one party hereto to
the other party hereto in accordance with Section 10 hereof. For purposes
of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied
upon, if any, and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment with the Company under the provision so
indicated. Further, a Notice of Termination for Cause is required to
include a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board which was called and held for the purpose of
considering such termination (which meeting may be a regular meeting of
the Board where prior notice of consideration of such termination is given
to members of the Board) finding that, in the good faith opinion of the
Board, the Executive engaged in conduct set forth in clause (i) or (ii) of
the definition of Cause herein, and specifying the particulars thereof in
detail. For purposes of this Agreement, any purported termination not
effected in accordance with this Section 7.1 shall not be considered
effective.
7.2 Date of Termination. "Date of Termination",
with respect to any purported termination of the Executive's employment
after a Change in Control and during the Term, shall mean (i) if the
Executive's employment is terminated for Disability, thirty (30) days after
Notice of Termination is given (provided that the Executive shall not have
returned to the full-time performance of the Executive's duties during such
thirty (30) day period), and (ii) if the Executive's employment is
terminated for any other reason, the date specified in the Notice of
Termination (which, in the case of a termination by the Company, shall
not be less than thirty (30) days (except in the case of a termination for
Cause) and, in the case of a termination by the Executive, shall not be less
than fifteen (15) days nor more than sixty (60) days, respectively, after the
date such Notice of Termination is given).
7.3 Dispute Concerning Termination. 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 7.3), the party receiving such Notice of Termination notifies the
other party that a dispute exists concerning the termination, the Date of
Termination shall be 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 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 only if the
basis for such notice is reasonable, such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute with
reasonable diligence.
7.4 Compensation During Dispute. If a purported
termination occurs following a Change in Control and during the Term,
and such termination is disputed in accordance with Section 7.3 above, the
Company shall continue to pay the Executive the full compensation
(including without limitation Annual Base Salary and Annual Bonus) in
effect at the time of any related Potential Change in Control or when the
notice giving rise to the dispute was given (whichever is greater) and
continue the Executive as a participant in all compensation, incentive,
pension and welfare benefit and insurance plans in which the Executive
was participating at the time of any Potential Change in Control or when
the notice giving rise to the dispute was given, whichever is greater, until
the dispute is finally resolved in accordance with Section 7.3 hereof.
Amounts paid under this Section 7.4 are in addition to all other amounts
due under this Agreement (other than those due under Section 5.2 hereof)
and shall not be offset against or reduce any other amounts due under this
Agreement or any other plan, agreement or arrangement.
8. No Mitigation. The Company agrees that, if the
Executive's employment is terminated during the Term, the Executive is
not required to seek other employment or to attempt in any way to reduce
any amounts payable to the Executive by the Company pursuant to
Section 6 or Section 7.4. Further, the amount of any payment or benefit
provided for in Section 6 (other than pursuant to Section 6.1.2) or Section
7.4 shall not be reduced by any compensation earned by the Executive as
the result of employment by another employer, by retirement benefits, or
offset against any amount claimed to be owed by the Executive to the
Company or any of its subsidiaries, or otherwise.
9. Successors; Binding Agreement.
9.1 Successors. In addition to any obligations imposed
by law upon any successor to the Company, 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 expressly assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required
to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement
and shall entitle the Executive to compensation from the Company in the
same amount and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive's employment
for Good Reason after a Change in Control, except that, for purposes of
implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination.
9.2 Binding Agreement. This Agreement shall inure
to the benefit of and be enforceable by this Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would
still be payable to the Executive hereunder (other than amounts which, by
their terms, terminate upon the death of the Executive) if the Executive
had continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to the
executors, personal representatives or administrators of the Executive's
estate.
10. Notices. For the purpose of this Agreement, notices and
all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
mailed by United States certified mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth below, or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be
effective only upon actual receipt:
To the Company: The Peak Technologies Group, Inc.
9200 Berger Road
Columbia, Maryland 21046
Attention:
To the Executive:
11. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing and signed by the Executive and such
officer as may be specifically designated by the Board. No waiver by
either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been
made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Delaware without
regard to the principles of conflict of laws thereof. All references to
sections of the Exchange Act or the Code shall be deemed also to refer to
and include any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding
required under federal, state or local law and any additional withholding to
which the Executive has agreed. The rights and obligations of the
Company and the Executive under this Agreement shall survive the
expiration of the Term and the Employment Period.
12. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force
and effect.
13. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument.
14. No Limitation. 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 other 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.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the date and year first written above.
The Peak Technologies Group, Inc.
/s/ Nicholas R. H. Toms
- -------------------------------
By: Nicholas R. H. Toms
Chairman and Chief Executive Officer
/s/ Edward A. Stevens
- -----------------------------
Edward A. Stevens
SEVERANCE AGREEMENT II
THIS SEVERANCE AGREEMENT, dated as of
December 13, 1996 (this "Agreement"), is made by and between The Peak
Technologies Group, Inc., a Delaware corporation, having its principal
offices at 9200 Berger Road, Columbia, Maryland 21046 (the
"Company"), and Michael Fluharty residing in the State of Maryland, (the
"Executive").
WHEREAS, the Company considers it essential to the
best interests of its shareholders to foster the continued employment of key
executive management personnel; and
WHEREAS, the Board of Directors of the Company (the
"Board") recognizes that, as is the case with many publicly-held
corporations, the possibility of a Change in Control (as defined in Section
1.3 below) of the Company exists from time to time and that such
possibility, and the uncertainty, instability and questions which it may
raise for and among key executive management personnel, may result in
the premature departure or significant distraction of such management
personnel to the material detriment of the Company and its shareholders;
and
WHEREAS, the Board has determined that appropriate
steps should be taken to reinforce, focus and encourage the continued
attention and dedication of key members of the executive management of
the Company and its subsidiaries, including (without limitation) the
Executive, to their assigned duties without distraction in the face of
potentially disturbing or unsettling circumstances arising from the
possibility of a Change in Control of the Company;
NOW THEREFORE, in consideration of the premises
and the mutual covenants herein contained, the Company and the
Executive hereby agree as follows:
1. Definitions. For purposes of this Agreement, the
following terms shall have the meanings set forth below:
1.1 "Annual Base Salary" shall mean the Executive's
rate of regular basic annual compensation prior to any reduction under a
salary reduction agreement pursuant to section 401(k) or section 125 of
the Internal Revenue Code of 1986, as amended from time to time (the
"Code"), and shall not include (without limitation) cost of living
allowances, fees, retainers, reimbursements, bonuses, incentive awards,
prizes or similar payments.
1.2 "Cause" for termination by the Company of the
Executive's employment, after any Change in Control, shall mean (i) the
willful and continued failure by the Executive to substantially perform the
Executive's duties with the Company, or a subsidiary of the Company, as
such duties may reasonably be defined from time to time by the Board (or
a duly designated and authorized committee thereof), or to abide by the
reasonable written policies of the Company or of the Executive's primary
employer (other than any such failure resulting from the Executive's
incapacity due to physical or mental illness or any such actual or
anticipated failure after the issuance of a Notice of Termination by the
Executive for Good Reason pursuant to Section 7.1) after a written
demand for substantial performance is delivered to the Executive by the
Board, which demand specifically identifies the manner in which the
Board believes that the Executive has not substantially performed the
Executive's duties or has not abided by any reasonable written policies, or
(ii) the continued and willful engaging by the Executive in conduct which
is demonstrably and materially injurious to the Company or its
subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii)
of this definition, no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the Executive in
bad faith and without reasonable belief that the Executive's act, or failure
to act, was in the best interest of the Company or its subsidiaries. For
purposes of this definition, any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board or upon the
instructions of the Board, or the Company's chief executive officer or
other duly authorized 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 and its subsidiaries. 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 three
quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice of any such
meeting 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 clause (i) or (ii) above, and specifying the particulars
thereof in detail.
1.3 "Change in Control" shall mean and be deemed to
have occurred if:
(i) any Person is or becomes the Beneficial
Owner (as that term is defined in Rule 13d-3 under the Securities
Exchange Act of 1934 (the "Exchange Act")), directly or indirectly, of
securities of the Company (not including in the securities beneficially
owned by such Person any securities acquired directly from the Company)
representing twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding securities, or there occurs any
transaction which the Company is required to disclose pursuant to Item
1(a) of Form 8-K (as filed pursuant to Rule 13a-11 or Rule 15d-11 of the
Exchange Act); or
(ii) during any period of twenty-four (24)
consecutive months (not including any period prior to September 1, 1995),
individuals who at the beginning of such period constitute the Board and
any new director (other than a director designated by a Person who has
entered into an agreement with the Company to effect a transaction
described in clause (i),(iii) or (iv) of this definition or any such individual
whose initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents) whose election by the Board
or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of such period or whose
election or nomination for election was previously so approved, cease for
any reason to constitute a majority of the Board; or
(iii) the shareholders of the Company approve a
reorganization, merger or consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially all of the
individuals and entities who were Beneficial Owners, immediately prior to
such reorganization, merger or consolidation, of the combined voting
power of the Company's then outstanding securities beneficially own,
directly or indirectly, immediately after such reorganization, merger or
consolidation, more then fifty-five percent (55%) of the combined voting
power of the securities of the corporation resulting from such
reorganization, merger or consolidation [in substantially the same
proportions as their respective ownership], immediately prior to such
reorganization, merger or consolidation, of the combined voting power of
the Company's securities; or
(iv) the shareholders of the Company approve
(a) the sale or disposition by the Company (other than to a subsidiary of
the Company) of all or substantially all of the assets of the Company, or
(b) a complete liquidation or dissolution of the Company.
Notwithstanding the foregoing, a Change in Control shall not include any
event, circumstance or transaction which results from the action
(excluding the Executive's employment activities with the Company or any
of its subsidiaries) of any Person or group of Persons which includes, is
directly affiliated with or is wholly or partly controlled by one or more
executive officers of the Company and in which the Executive actively
participates.
1.4 "Company" shall mean The Peak Technologies
Group, Inc. and any successor to its business and/or assets which assumes
(either expressly, by operation of law or otherwise) and/or agrees to
perform this Agreement by operation of law or otherwise (except in
determining, under Section 1.3 hereof, whether or not any Change in
Control of the Company has occurred in connection with such
succession).
1.5 "Disability" shall mean and be deemed the reason
for the termination by the Company of the Executive's employment, if, as
a result of the Executive's incapacity due to physical or mental illness, (i)
the Executive shall have been absent from the full-time performance of the
Executive's duties with the Company for a period of six (6) consecutive
months, (ii) the Company gives the Executive a Notice of Termination for
Disability, and (iii) within thirty (30) days after such Notice of
Termination is given, the Executive does not return to the full-time
performance of the Executive's duties.
1.6 "Good Reason" for termination by the Executive
of the Executive's employment in connection with or as a result of any
Change in Control, shall mean the occurrence (without the Executive's
prior express written consent) of any one of the following acts, or failures
to act, unless, in the case of any act or failure to act described in clauses
(i), (iv), (v) or (vi) below, such act or failure to act is corrected by the
Company prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
(i) the assignment to the Executive of any duties
or responsibilities inconsistent with those described in Section 3.2 below
or with the Executive's position(s) (including without limitation status,
offices, titles, and reporting responsibilities/rights) as an executive officer
of the Company and its subsidiaries or a substantial adverse alteration of
the Executive's position or title(s) with the Company or in the nature of
the Executive's authority, duties, or responsibilities from those described
in Section 3.2 below or otherwise;
(ii) a reduction in the Executive's Annual Base
Salary as in effect on the date of this Agreement or as the same may be
increased at any time thereafter and from time to time;
(iii) the relocation of the Company's principal
executive offices, or the office where the Executive works, to a location
more than thirty (30) miles from his or its location on the date of this
Agreement, or, if different, more than thirty (30) miles from where such
offices are located immediately prior to any Potential Change in Control,
or the Company's requiring the Executive to be based anywhere, other
than the Company's principal executive offices, except for required travel
on the Company's business to an extent substantially consistent with the
Executive's business travel obligations as of the date of this Agreement;
(iv) any failure by the Company to comply with
any of the provisions 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;
(v) the failure by the Company or a subsidiary to
continue in effect any pension benefit or incentive or deferred
compensation plan in which the Executive participates immediately prior
to any Potential Change in Control which is material to the Executive's
total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan or arrangement) has been made with
respect to such plan, or the failure by the Company or a subsidiary to
continue the Executive's participation therein (or in such substitute or
alternative plan or arrangement) on a basis not materially less favorable,
both in terms of the amount of benefits provided and the level of the
Executive's participation relative to other participants, as existed at the
time of the Potential Change in Control;
(vi) the failure by the Company or a subsidiary
to continue to provide the Executive with health and welfare benefits
substantially similar to those enjoyed by the Executive under any of the
Company's or a subsidiary's retirement, life insurance, medical, health and
accident, or disability or similar plans in which the Executive was
participating at the time of any Potential Change in Control, the taking of
any action by the Company or a subsidiary which would directly or
indirectly materially reduce any of such benefits or deprive the Executive
of any material fringe benefit enjoyed by the Executive at the time of the
Potential Change in Control, or the failure by the Company or a
subsidiary to provide the Executive with the number of paid vacation days
to which the Executive is entitled in accordance with the Company's or a
subsidiary's normal vacation policy in effect at the time of the Potential
Change in Control;
(vii) any purported termination of the
Executive's employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 7.1.; and/or
(viii) a termination by the Executive for any
reason during the thirty (30) day period immediately following the first
anniversary of any Change in Control.
1.7 "Person" shall have the meaning ascribed thereto
in Section 3(a)(9) of the Exchange Act, as modified, applied and used in
Sections 13(d) and 14(d) thereof; provided, however, a Person shall not
include (i) the Company or any of its subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or any of its subsidiaries (in its capacity as such), (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same character and
proportions as their ownership of stock of the Company.
1.8 "Potential Change in Control" shall mean and be
deemed to have occurred if:
(i) the Company commences negotiations in
respect of or enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control;
(ii) the Company or any Person publicly
announces an intention to take actions which, if consummated, would
constitute a Change in Control; and/or
(iii) any Person becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing [ten
percent (10%)] or more of the combined voting power of the Company's
then outstanding securities, or any Person increases such Person's
beneficial ownership of such securities by [five (5)] percentage points or
more over the percentage so owned by such Person on May 1, 1996.
2. Term of this Agreement. This Agreement shall
commence on the date hereof and shall continue in effect through
December 31, 1999; provided, however, that commencing on January 1,
1999 and each alternate January 1 thereafter, the term of this Agreement
shall automatically be extended for an additional two years unless, (i) not
later than June 30 of the calendar year preceding any such January 1st,
the Company or the Executive shall have given written notice to the other
not to extend this Agreement or (ii) a Change in Control shall have
occurred prior to any such January 1; provided, further, however, that if a
Change in Control shall have occurred during the term of this Agreement,
this Agreement shall continue in effect for a period of not less than thirty-
six (36) full months beyond the month in which such Change in Control
occurred (the "Term").
3. Company's Covenants.
3.1 Severance Payments. In order to induce the
Executive to remain in the employ of the Company and/or one or more of
its subsidiaries and in consideration of the Executive's covenants set forth
in Section 4 below, the Company agrees, under the terms and conditions
described herein and in addition to the amounts payable to the Executive
under Section 5 below, to pay the Executive the "Severance Payments"
described in Section 6.1 below and the other payments and benefits
described herein in the event the Executive's employment with the
Company is terminated during the Term and after a Change in Control
under the circumstances set forth in Section 6.1 below.
3.2 Position and Duties. During the period
commencing on the date of any Change in Control until the earliest to
occur of (i) the date which is thirty-six (36) months from the date of any
such Change in Control, (ii) the date of termination by the Executive of
the Executive's employment for any reason, or (iii) the termination by the
Company of the Executive's employment for any reason (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
the most significant of those held, exercised and assigned at any time
during the one hundred eighty (180) day period immediately preceding any
related Potential Change in Control, and (b) the Executive's services shall
be performed at the location where the Executive was employed
immediately preceding any such Potential Change in Control, or any office
or location less than thirty (30) miles from such location.
3.3 Base Salary. During the Employment Period, the
Executive shall receive Annual Base Salary at least equal to twelve (12)
times the highest monthly base salary paid or payable, including (without
limitation) any base salary which has been earned but deferred, to the
Executive by the Company and its affiliated companies in respect of any
month in the twelve (12) month period immediately preceding the month in
which any related Potential Change in Control occurs. In addition,
Annual Base Salary shall not be reduced after the occurrence of a
Potential Change in Control. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by,
controlling or under common control with the Company.
3.4 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 Executive's highest bonus for the last three (3) full fiscal
years prior to the fiscal year in which the related Potential Change in
Control occurs (annualized in the event that the Executive was not
employed by the Company for the whole of any such prior fiscal year).
Each 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.
3.5 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
one hundred eighty (180) day period immediately preceding any related
Potential Change in Control or if more favorable to the Executive, those
provided generally at any time thereafter to other peer executives of the
Company and its affiliated companies.
3.6 Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case may be,
shall be entitled to participate in and shall receive all benefits under all of
the health and welfare benefit plans, practices, policies and programs
provided by the Company and its affiliated companies (including, without
limitation, medical, prescription, dental, disability, 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 one hundred eighty (180) day period immediately preceding any
related Potential Change in Control or, if more favorable to the Executive,
those provided generally at any time thereafter to other peer executives of
the Company and its affiliated companies.
3.7 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 its
affiliated companies in effect for the Executive at any time during the one
hundred eighty (180) day period immediately preceding any related
Potential Change in Control 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.
3.8 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 an 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 one hundred eighty (180) day period
immediately preceding any related Potential Change in Control 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.
3.9 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 one hundred eighty (180)
day period immediately preceding any related Potential Change in Control
or, if more favorable to the Executive, as provided generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies.
3.10 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
one hundred eighty (180) day period immediately preceding any related
Potential Change in Control 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. The Executive's Covenants.
4.1 Employment. The Executive agrees that, subject
to the terms and conditions of this Agreement, in the event of a Change in
Control during the Term the Executive will remain in the employ of the
Company during any related Employment Period.
4.2 Time and Attention. 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 and
duties assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities and duties. During the Employment Period it shall not be
a violation of this Agreement for the Executive to (i) serve on corporate,
civic or charitable boards or committees, (ii) deliver lectures, fulfill
speaking engagements or teach at educational institutions, and (iii)
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 any
Potential Change in Control, the reinstatement or continued conduct of
such activities (or the reinstatement or conduct of activities similar in
nature and scope thereto) subsequent to any related Potential Change in
Control shall not thereafter be deemed to interfere with the performance of
the Executive's responsibilities to the Company.
4.3 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 direct or indirect
acts by 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, however, shall an asserted violation of
the provisions of this Section 4.3 constitute a basis for deferring or
withholding any amounts otherwise payable to the Executive under this
Agreement.
5. Compensation Other Than Severance Payments.
5.1 Disability. Following a Potential Change in
Control and during the Term, during any period that the Executive fails to
perform the Executive's full-time duties with the Company as a result of
incapacity due to physical or mental illness, the Executive's full salary
shall be paid to the Executive by the Company at a rate no less than the
rate in effect at the commencement of any such disability period, together
with all compensation and benefits payable to the Executive under the
terms of any compensation or benefit plan, program or arrangement
maintained by the Company or its subsidiaries during such disability
period, until the Executive's employment is terminated by the Company
for Disability.
5.2 Base Salary. If the Executive's employment shall
be terminated for any reason following a Potential Change in Control and
during the Term, the Executive's full salary shall be paid to the Executive
by the Company through the Date of Termination (as defined below in
Section 7.2) at the rate in effect at the time the Notice of Termination is
given, together with all compensation and benefits payable to or with
respect to the Executive through the Date of Termination under the terms
of any compensation or benefit plan, program or arrangement maintained
by the Company or its subsidiaries during such period.
5.3 Benefits. If the Executive's employment shall be
terminated for any reason following a Potential Change in Control and
during the Term, the Executive's normal post-termination compensation
and benefits shall be paid to the Executive as such payments become due.
Such post-termination compensation and benefits shall be determined
under, and paid in accordance with, the retirement, insurance and other
compensation or benefit plans, programs and arrangements maintained by
the Company or its subsidiaries.
6. Severance Payments.
6.1 Severance. The Company shall pay the
Executive the payments described in this Section 6.1 (the "Severance
Payments") upon the termination of the Executive's employment with the
Company following a Change in Control and during the Term, in addition
to the payments and benefits described in Section 5 hereof, unless such
termination is (i) by the Company for Cause, or (ii) by the Executive
without Good Reason , or (iii) due to death or Disability. In addition, the
Executive's employment shall be deemed to have been terminated
following a Change in Control by the Company without Cause or by the
Executive with Good Reason (a) if the Executive reasonably demonstrates
that the Executive's employment was terminated prior to a Change in
Control without Cause (1) at the request of a Person who has entered into
an agreement with the Company the consummation of which will
constitute a Change in Control (or who has taken other steps reasonably
calculated to effect a Change in Control) or (2) otherwise in connection
with, as a result of or in anticipation of a Change in Control, (b) if the
Executive terminates his employment for Good Reason prior to a Change
in Control and the Executive reasonably demonstrates that the
circumstance(s) or event(s) which constitute such Good Reason occurred
(1) at the request of such Person or (2) otherwise in connection with, as a
result of or in anticipation of a Change in Control, or (c) the Executive
dies or is terminated by the Company due to Disability, in each case, after
the occurrence of a Potential Change in Control and a related Change in
Control actually occurs within one (1) year after the Date of Termination
or the date of death, as the case may be. The Executive's right to
terminate the Executive's employment for Good Reason shall not be
affected by the Executive's incapacity due to physical or mental illness.
The Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any act or failure to act constituting Good
Reason hereunder.
6.1.1 In lieu of any further salary and annual
bonus payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay to the Executive a lump sum
severance payment, in cash, equal to two (2) times the sum of (i) the
highest Annual Base Salary paid or payable to the Executive during the
thirty-six (36) month period immediately preceding the month in which the
Change in Control occurs, and (ii) the highest annual bonus paid or
determined and payable to the Executive during such thirty-six (36) month
period.
6.1.2 For a twenty-four (24) month period after
the Date of Termination, the Company shall arrange to provide the
Executive with life, disability, accident and health insurance benefits
substantially similar to those which the Executive is receiving immediately
prior to any related Potential Change in Control or the receipt of the
Notice of Termination (without giving effect to any reduction in such
benefits subsequent to a Change in Control which reduction constitutes
Good Reason), whichever is greater. Benefits otherwise receivable by the
Executive pursuant to this Section 6.1.2 shall be reduced to the extent
comparable benefits are actually received by or made available to the
Executive without cost during such period following the Executive's
termination of employment (and any such benefits actually received by the
Executive shall be reported to the Company by the Executive).
6.2 Special Reimbursement. In the event that the
Executive becomes entitled to the Severance Payments, if any payment or
benefit paid or payable, or received or to be received, by or on behalf of
the Executive in connection with a Change in Control or the termination of
the Executive's employment, whether any such payments or benefits are
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any of its subsidiaries, any Person, or
otherwise (the "Total Payments"), will or would be subject to the excise
tax imposed under section 4999 of the Code (the "Excise Tax"), the
Company shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that after payment by the Executive 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 any Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Total Payments.
6.2.1 For purposes of determining whether any
of the Total Payments will be subject to the Excise Tax and the amount of
such Excise Tax, (i) the Total Payments shall be treated as "parachute
payments" within the meaning of section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax, unless in the
opinion of tax counsel (delivered to the Executive) selected by the
Company and reasonably acceptable to the Executive such Total
Payments (in whole or in part) (a) do not constitute parachute payments,
including (without limitation) by reason of section 280G(b)(4)(A) of the
Code, (b) such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered, within the
meaning of section 280G(b)(4)(B) of the Code, or (c) are otherwise not
subject to the Excise Tax, and (ii) the value of any non-cash benefits or
any deferred payment or benefit shall be determined by the Company's
independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
6.2.2 In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account
hereunder at the time of termination of the Executive's employment, the
Executive shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction plus interest on the amount of such
repayment at the rate provided in section 1274(b)(2)(B) of the Code. In
the event that the Excise Tax is determined to exceed the amount taken
into account hereunder at the time of the termination of the Executive's
employment (including by reason of any payment the existence or amount
of which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in respect of such
excess (plus any interest, penalties or additions payable by the Executive
with respect to such excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any administrative
or judicial proceedings concerning the existence or amount of any such
subsequent liability for Excise Tax with respect to the Severance
Payments.
6.3 Date of Payment. The payments provided for in
Section 6.1.1 and Section 6.2 hereof shall be made not later than the
fifteenth (15th) day following the Date of Termination; provided,
however, that if the amounts of such payments cannot be finally
determined on or before such day, the Company shall pay to the Executive
on such day an estimate, as determined in good faith by the Company, of
the minimum amount of such payments to which the Executive is likely to
be entitled to and shall pay the remainder of such payments (together with
interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon
as the amount thereof can be determined but in no event later than the
thirtieth (30th) day after the Date of Termination. In the event that the
amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the
Company to the Executive, payable on the fifth (5th) business day after
demand by the Company (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code). At the time that payments are made
under this Section 6.3, the Company shall provide the Executive with a
detailed written statement setting forth the manner in which such
payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Company has received
from outside counsel, auditors or consultants (and any such opinions or
advice which are in writing shall be attached to the statement).
6.4 Legal Costs. The Company shall also reimburse
the Executive for all legal fees and expenses incurred in good faith by the
Executive as a result of any dispute with any party (including, but not
limited to, the Company and/or any affiliate of the Company) regarding
the payment of any benefit provided for in this Agreement (including, but
not limited, all such fees and expenses incurred in disputing any
termination or in seeking in good faith to obtain or enforce any benefit or
right provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of section 4999 of
the Code 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 within five (5) business days after delivery
of the Executive's written requests for payment accompanied by such
evidence of fees and expenses incurred as the Company reasonably may
require.
7. Termination Procedures and Compensation During
Dispute.
7.1 Notice of Termination. After a Change in
Control and during the Term, any purported termination of the Executive's
employment with the Company (other than by reason of death) shall be
communicated by written Notice of Termination from one party hereto to
the other party hereto in accordance with Section 10 hereof. For purposes
of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment
with the Company under the provision so indicated. Further, a Notice of
Termination for Cause is required to include a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters (3/4) of the
entire membership of the Board at a meeting of the Board which was
called and held for the purpose of considering such termination (which
meeting may be a regular meeting of the Board where prior notice of
consideration of such termination is given to members of the Board)
finding that, in the good faith opinion of the Board, the Executive engaged
in conduct set forth in clause (i) or (ii) of the definition of Cause herein,
and specifying the particulars thereof in detail. For purposes of this
Agreement, any purported termination not effected in accordance with this
Section 7.1 shall not be considered effective.
7.2 Date of Termination. "Date of Termination",
with respect to any purported termination of the Executive's employment
after a Change in Control and during the Term, shall mean (i) if the
Executive's employment is terminated for Disability, thirty (30) days after
Notice of Termination is given (provided that the Executive shall not have
returned to the full-time performance of the Executive's duties during such
thirty (30) day period), and (ii) if the Executive's employment is
terminated for any other reason, the date specified in the Notice of
Termination (which, in the case of a termination by the Company, shall
not be less than thirty (30) days (except in the case of a termination for
Cause) and, in the case of a termination by the Executive, shall not be less
than fifteen (15) days nor more than sixty (60) days, respectively, after the
date such Notice of Termination is given).
7.3 Dispute Concerning Termination. 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 7.3), the party receiving such Notice of Termination notifies the
other party that a dispute exists concerning the termination, the Date of
Termination shall be 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 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 only if the
basis for such notice is reasonable, such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute with
reasonable diligence.
7.4 Compensation During Dispute. If a purported
termination occurs following a Change in Control and during the Term,
and such termination is disputed in accordance with Section 7.3 above, the
Company shall continue to pay the Executive the full compensation
(including without limitation Annual Base Salary and Annual Bonus) in
effect at the time of any related Potential Change in Control or when the
notice giving rise to the dispute was given (whichever is greater) and
continue the Executive as a participant in all compensation, incentive,
pension and welfare benefit and insurance plans in which the Executive
was participating at the time of any Potential Change in Control or when
the notice giving rise to the dispute was given, whichever is greater, until
the dispute is finally resolved in accordance with Section 7.3 hereof.
Amounts paid under this Section 7.4 are in addition to all other amounts
due under this Agreement (other than those due under Section 5.2 hereof)
and shall not be offset against or reduce any other amounts due under this
Agreement or any other plan, agreement or arrangement.
8. No Mitigation. The Company agrees that, if the
Executive's employment is terminated during the Term, the Executive is
not required to seek other employment or to attempt in any way to reduce
any amounts payable to the Executive by the Company pursuant to
Section 6 or Section 7.4. Further, the amount of any payment or benefit
provided for in Section 6 (other than pursuant to Section 6.1.2) or Section
7.4 shall not be reduced by any compensation earned by the Executive as
the result of employment by another employer, by retirement benefits, or
offset against any amount claimed to be owed by the Executive to the
Company or any of its subsidiaries, or otherwise.
9. Successors; Binding Agreement.
9.1 Successors. In addition to any obligations imposed
by law upon any successor to the Company, 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 expressly assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required
to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement
and shall entitle the Executive to compensation from the Company in the
same amount and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive's employment
for Good Reason after a Change in Control, except that, for purposes of
implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination.
9.2 Binding Agreement. This Agreement shall inure
to the benefit of and be enforceable by this Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would
still be payable to the Executive hereunder (other than amounts which, by
their terms, terminate upon the death of the Executive) if the Executive
had continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to the
executors, personal representatives or administrators of the Executive's
estate.
10. Notices. For the purpose of this Agreement, notices and
all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
mailed by United States certified mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth below, or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be
effective only upon actual receipt:
To the Company:
The Peak Technologies Group, Inc.
9200 Berger Road
Columbia, Maryland 21046
Attention: Edward A. Stevens
To the Executive: Michael Fluharty
11. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing and signed by the Executive and such
officer as may be specifically designated by the Board. No waiver by
either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been
made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Delaware without
regard to the principles of conflict of laws thereof. All references to
sections of the Exchange Act or the Code shall be deemed also to refer to
and include any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding
required under federal, state or local law and any additional withholding to
which the Executive has agreed. The rights and obligations of the
Company and the Executive under this Agreement shall survive the
expiration of the Term and the Employment Period.
12. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force
and effect.
13. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument.
14. No Limitation. 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 other 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.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first written above.
The Peak Technologies Group, Inc.
/s/ Nicholas R. H. Toms
- ---------------------------------
By: Nicholas R. H. Toms
Chairman and Chief Executive Officer
/s/ Michael Fluharty
- -------------------------------
Michael Fluharty
SEVERANCE AGREEMENT II
THIS SEVERANCE AGREEMENT, dated as of
December 13, 1996 (this "Agreement"), is made by and between The Peak
Technologies Group, Inc., a Delaware corporation, having its principal
offices at 9200 Berger Road, Columbia, Maryland 21046 (the
"Company"), and Colin Wyatt residing in the United Kingdom, (the
"Executive").
WHEREAS, the Company considers it essential to the
best interests of its shareholders to foster the continued employment of key
executive management personnel; and
WHEREAS, the Board of Directors of the Company (the
"Board") recognizes that, as is the case with many publicly-held
corporations, the possibility of a Change in Control (as defined in Section
1.3 below) of the Company exists from time to time and that such
possibility, and the uncertainty, instability and questions which it may
raise for and among key executive management personnel, may result in
the premature departure or significant distraction of such management
personnel to the material detriment of the Company and its shareholders;
and
WHEREAS, the Board has determined that appropriate
steps should be taken to reinforce, focus and encourage the continued
attention and dedication of key members of the executive management of
the Company and its subsidiaries, including (without limitation) the
Executive, to their assigned duties without distraction in the face of
potentially disturbing or unsettling circumstances arising from the
possibility of a Change in Control of the Company;
NOW THEREFORE, in consideration of the premises
and the mutual covenants herein contained, the Company and the
Executive hereby agree as follows:
1. Definitions. For purposes of this Agreement, the
following terms shall have the meanings set forth below:
1.1 "Annual Base Salary" shall mean the Executive's
rate of regular basic annual compensation prior to any reduction under a
salary reduction agreement pursuant to section 401(k) or section 125 of
the Internal Revenue Code of 1986, as amended from time to time (the
"Code"), and shall not include (without limitation) cost of living
allowances, fees, retainers, reimbursements, bonuses, incentive awards,
prizes or similar payments.
1.2 "Cause" for termination by the Company of the
Executive's employment, after any Change in Control, shall mean (i) the
willful and continued failure by the Executive to substantially perform the
Executive's duties with the Company, or a subsidiary of the Company, as
such duties may reasonably be defined from time to time by the Board (or
a duly designated and authorized committee thereof), or to abide by the
reasonable written policies of the Company or of the Executive's primary
employer (other than any such failure resulting from the Executive's
incapacity due to physical or mental illness or any such actual or
anticipated failure after the issuance of a Notice of Termination by the
Executive for Good Reason pursuant to Section 7.1) after a written
demand for substantial performance is delivered to the Executive by the
Board, which demand specifically identifies the manner in which the
Board believes that the Executive has not substantially performed the
Executive's duties or has not abided by any reasonable written policies, or
(ii) the continued and willful engaging by the Executive in conduct which
is demonstrably and materially injurious to the Company or its
subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii)
of this definition, no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the Executive in
bad faith and without reasonable belief that the Executive's act, or failure
to act, was in the best interest of the Company or its subsidiaries. For
purposes of this definition, any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board or upon the
instructions of the Board, or the Company's chief executive officer or
other duly authorized 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 and its subsidiaries. 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 three
quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice of any such
meeting 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 clause (i) or (ii) above, and specifying the particulars
thereof in detail.
1.3 "Change in Control" shall mean and be deemed to
have occurred if:
(i) any Person is or becomes the Beneficial
Owner (as that term is defined in Rule 13d-3 under the Securities
Exchange Act of 1934 (the "Exchange Act")), directly or indirectly, of
securities of the Company (not including in the securities beneficially
owned by such Person any securities acquired directly from the Company)
representing twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding securities, or there occurs any
transaction which the Company is required to disclose pursuant to Item
1(a) of Form 8-K (as filed pursuant to Rule 13a-11 or Rule 15d-11 of the
Exchange Act); or
(ii) during any period of twenty-four (24)
consecutive months (not including any period prior to September 1, 1995),
individuals who at the beginning of such period constitute the Board and
any new director (other than a director designated by a Person who has
entered into an agreement with the Company to effect a transaction
described in clause (i),(iii) or (iv) of this definition or any such individual
whose initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents) whose election by the Board
or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of such period or whose
election or nomination for election was previously so approved, cease for
any reason to constitute a majority of the Board; or
(iii) the shareholders of the Company approve a
reorganization, merger or consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially all of the
individuals and entities who were Beneficial Owners, immediately prior to
such reorganization, merger or consolidation, of the combined voting
power of the Company's then outstanding securities beneficially own,
directly or indirectly, immediately after such reorganization, merger or
consolidation, more then fifty-five percent (55%) of the combined voting
power of the securities of the corporation resulting from such
reorganization, merger or consolidation [in substantially the same
proportions as their respective ownership], immediately prior to such
reorganization, merger or consolidation, of the combined voting power of
the Company's securities; or
(iv) the shareholders of the Company approve
(a) the sale or disposition by the Company (other than to a subsidiary of
the Company) of all or substantially all of the assets of the Company, or
(b) a complete liquidation or dissolution of the Company.
Notwithstanding the foregoing, a Change in Control shall not include any
event, circumstance or transaction which results from the action
(excluding the Executive's employment activities with the Company or any
of its subsidiaries) of any Person or group of Persons which includes, is
directly affiliated with or is wholly or partly controlled by one or more
executive officers of the Company and in which the Executive actively
participates.
1.4 "Company" shall mean The Peak Technologies
Group, Inc. and any successor to its business and/or assets which assumes
(either expressly, by operation of law or otherwise) and/or agrees to
perform this Agreement by operation of law or otherwise (except in
determining, under Section 1.3 hereof, whether or not any Change in
Control of the Company has occurred in connection with such
succession).
1.5 "Disability" shall mean and be deemed the reason
for the termination by the Company of the Executive's employment, if, as
a result of the Executive's incapacity due to physical or mental illness, (i)
the Executive shall have been absent from the full-time performance of the
Executive's duties with the Company for a period of six (6) consecutive
months, (ii) the Company gives the Executive a Notice of Termination for
Disability, and (iii) within thirty (30) days after such Notice of
Termination is given, the Executive does not return to the full-time
performance of the Executive's duties.
1.6 "Good Reason" for termination by the Executive
of the Executive's employment in connection with or as a result of any
Change in Control, shall mean the occurrence (without the Executive's
prior express written consent) of any one of the following acts, or failures
to act, unless, in the case of any act or failure to act described in clauses
(i), (iv), (v) or (vi) below, such act or failure to act is corrected by the
Company prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
(i) the assignment to the Executive of any duties
or responsibilities inconsistent with those described in Section 3.2 below
or with the Executive's position(s) (including without limitation status,
offices, titles, and reporting responsibilities/rights) as an executive officer
of the Company and its subsidiaries or a substantial adverse alteration of
the Executive's position or title(s) with the Company or in the nature of
the Executive's authority, duties, or responsibilities from those described
in Section 3.2 below or otherwise;
(ii) a reduction in the Executive's Annual Base
Salary as in effect on the date of this Agreement or as the same may be
increased at any time thereafter and from time to time;
(iii) the relocation of the Company's principal
executive offices, or the office where the Executive works, to a location
more than thirty (30) miles from his or its location on the date of this
Agreement, or, if different, more than thirty (30) miles from where such
offices are located immediately prior to any Potential Change in Control,
or the Company's requiring the Executive to be based anywhere, other
than the Company's principal executive offices, except for required travel
on the Company's business to an extent substantially consistent with the
Executive's business travel obligations as of the date of this Agreement;
(iv) any failure by the Company to comply with
any of the provisions 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;
(v) the failure by the Company or a subsidiary to
continue in effect any pension benefit or incentive or deferred
compensation plan in which the Executive participates immediately prior
to any Potential Change in Control which is material to the Executive's
total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan or arrangement) has been made with
respect to such plan, or the failure by the Company or a subsidiary to
continue the Executive's participation therein (or in such substitute or
alternative plan or arrangement) on a basis not materially less favorable,
both in terms of the amount of benefits provided and the level of the
Executive's participation relative to other participants, as existed at the
time of the Potential Change in Control;
(vi) the failure by the Company or a subsidiary
to continue to provide the Executive with health and welfare benefits
substantially similar to those enjoyed by the Executive under any of the
Company's or a subsidiary's retirement, life insurance, medical, health and
accident, or disability or similar plans in which the Executive was
participating at the time of any Potential Change in Control, the taking of
any action by the Company or a subsidiary which would directly or
indirectly materially reduce any of such benefits or deprive the Executive
of any material fringe benefit enjoyed by the Executive at the time of the
Potential Change in Control, or the failure by the Company or a
subsidiary to provide the Executive with the number of paid vacation days
to which the Executive is entitled in accordance with the Company's or a
subsidiary's normal vacation policy in effect at the time of the Potential
Change in Control;
(vii) any purported termination of the
Executive's employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 7.1.; and/or
(viii) a termination by the Executive for any
reason during the thirty (30) day period immediately following the first
anniversary of any Change in Control.
1.7 "Person" shall have the meaning ascribed thereto
in Section 3(a)(9) of the Exchange Act, as modified, applied and used in
Sections 13(d) and 14(d) thereof; provided, however, a Person shall not
include (i) the Company or any of its subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or any of its subsidiaries (in its capacity as such), (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same character and
proportions as their ownership of stock of the Company.
1.8 "Potential Change in Control" shall mean and be
deemed to have occurred if:
(i) the Company commences negotiations in
respect of or enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control;
(ii) the Company or any Person publicly
announces an intention to take actions which, if consummated, would
constitute a Change in Control; and/or
(iii) any Person becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing [ten
percent (10%)] or more of the combined voting power of the Company's
then outstanding securities, or any Person increases such Person's
beneficial ownership of such securities by [five (5)] percentage points or
more over the percentage so owned by such Person on May 1, 1996.
2. Term of this Agreement. This Agreement shall
commence on the date hereof and shall continue in effect through
December 31, 1999; provided, however, that commencing on January 1,
1999 and each alternate January 1 thereafter, the term of this Agreement
shall automatically be extended for an additional two years unless, (i) not
later than June 30 of the calendar year preceding any such January 1st,
the Company or the Executive shall have given written notice to the other
not to extend this Agreement or (ii) a Change in Control shall have
occurred prior to any such January 1; provided, further, however, that if a
Change in Control shall have occurred during the term of this Agreement,
this Agreement shall continue in effect for a period of not less than thirty-
six (36) full months beyond the month in which such Change in Control
occurred (the "Term").
3. Company's Covenants.
3.1 Severance Payments. In order to induce the
Executive to remain in the employ of the Company and/or one or more of
its subsidiaries and in consideration of the Executive's covenants set forth
in Section 4 below, the Company agrees, under the terms and conditions
described herein and in addition to the amounts payable to the Executive
under Section 5 below, to pay the Executive the "Severance Payments"
described in Section 6.1 below and the other payments and benefits
described herein in the event the Executive's employment with the
Company is terminated during the Term and after a Change in Control
under the circumstances set forth in Section 6.1 below.
3.2 Position and Duties. During the period
commencing on the date of any Change in Control until the earliest to
occur of (i) the date which is thirty-six (36) months from the date of any
such Change in Control, (ii) the date of termination by the Executive of
the Executive's employment for any reason, or (iii) the termination by the
Company of the Executive's employment for any reason (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
the most significant of those held, exercised and assigned at any time
during the one hundred eighty (180) day period immediately preceding any
related Potential Change in Control, and (b) the Executive's services shall
be performed at the location where the Executive was employed
immediately preceding any such Potential Change in Control, or any office
or location less than thirty (30) miles from such location.
3.3 Base Salary. During the Employment Period, the
Executive shall receive Annual Base Salary at least equal to twelve (12)
times the highest monthly base salary paid or payable, including (without
limitation) any base salary which has been earned but deferred, to the
Executive by the Company and its affiliated companies in respect of any
month in the twelve (12) month period immediately preceding the month in
which any related Potential Change in Control occurs. In addition,
Annual Base Salary shall not be reduced after the occurrence of a
Potential Change in Control. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by,
controlling or under common control with the Company.
3.4 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 Executive's highest bonus for the last three (3) full fiscal
years prior to the fiscal year in which the related Potential Change in
Control occurs (annualized in the event that the Executive was not
employed by the Company for the whole of any such prior fiscal year).
Each 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.
3.5 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
one hundred eighty (180) day period immediately preceding any related
Potential Change in Control or if more favorable to the Executive, those
provided generally at any time thereafter to other peer executives of the
Company and its affiliated companies.
3.6 Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case may be,
shall be entitled to participate in and shall receive all benefits under all of
the health and welfare benefit plans, practices, policies and programs
provided by the Company and its affiliated companies (including, without
limitation, medical, prescription, dental, disability, 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 one hundred eighty (180) day period immediately preceding any
related Potential Change in Control or, if more favorable to the Executive,
those provided generally at any time thereafter to other peer executives of
the Company and its affiliated companies.
3.7 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 its
affiliated companies in effect for the Executive at any time during the one
hundred eighty (180) day period immediately preceding any related
Potential Change in Control 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.
3.8 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 an 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 one hundred eighty (180) day period
immediately preceding any related Potential Change in Control 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.
3.9 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 one hundred eighty (180)
day period immediately preceding any related Potential Change in Control
or, if more favorable to the Executive, as provided generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies.
3.10 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
one hundred eighty (180) day period immediately preceding any related
Potential Change in Control 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. The Executive's Covenants.
4.1 Employment. The Executive agrees that, subject
to the terms and conditions of this Agreement, in the event of a Change in
Control during the Term the Executive will remain in the employ of the
Company during any related Employment Period.
4.2 Time and Attention. 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 and
duties assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities and duties. During the Employment Period it shall not be
a violation of this Agreement for the Executive to (i) serve on corporate,
civic or charitable boards or committees, (ii) deliver lectures, fulfill
speaking engagements or teach at educational institutions, and (iii)
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 any
Potential Change in Control, the reinstatement or continued conduct of
such activities (or the reinstatement or conduct of activities similar in
nature and scope thereto) subsequent to any related Potential Change in
Control shall not thereafter be deemed to interfere with the performance of
the Executive's responsibilities to the Company.
4.3 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 direct or indirect
acts by 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, however, shall an asserted violation of
the provisions of this Section 4.3 constitute a basis for deferring or
withholding any amounts otherwise payable to the Executive under this
Agreement.
5. Compensation Other Than Severance Payments.
5.1 Disability. Following a Potential Change in
Control and during the Term, during any period that the Executive fails to
perform the Executive's full-time duties with the Company as a result of
incapacity due to physical or mental illness, the Executive's full salary
shall be paid to the Executive by the Company at a rate no less than the
rate in effect at the commencement of any such disability period, together
with all compensation and benefits payable to the Executive under the
terms of any compensation or benefit plan, program or arrangement
maintained by the Company or its subsidiaries during such disability
period, until the Executive's employment is terminated by the Company
for Disability.
5.2 Base Salary. If the Executive's employment shall
be terminated for any reason following a Potential Change in Control and
during the Term, the Executive's full salary shall be paid to the Executive
by the Company through the Date of Termination (as defined below in
Section 7.2) at the rate in effect at the time the Notice of Termination is
given, together with all compensation and benefits payable to or with
respect to the Executive through the Date of Termination under the terms
of any compensation or benefit plan, program or arrangement maintained
by the Company or its subsidiaries during such period.
5.3 Benefits. If the Executive's employment shall be
terminated for any reason following a Potential Change in Control and
during the Term, the Executive's normal post-termination compensation
and benefits shall be paid to the Executive as such payments become due.
Such post-termination compensation and benefits shall be determined
under, and paid in accordance with, the retirement, insurance and other
compensation or benefit plans, programs and arrangements maintained by
the Company or its subsidiaries.
6. Severance Payments.
6.1 Severance. The Company shall pay the
Executive the payments described in this Section 6.1 (the "Severance
Payments") upon the termination of the Executive's employment with the
Company following a Change in Control and during the Term, in addition
to the payments and benefits described in Section 5 hereof, unless such
termination is (i) by the Company for Cause, or (ii) by the Executive
without Good Reason , or (iii) due to death or Disability. In addition, the
Executive's employment shall be deemed to have been terminated
following a Change in Control by the Company without Cause or by the
Executive with Good Reason (a) if the Executive reasonably demonstrates
that the Executive's employment was terminated prior to a Change in
Control without Cause (1) at the request of a Person who has entered into
an agreement with the Company the consummation of which will
constitute a Change in Control (or who has taken other steps reasonably
calculated to effect a Change in Control) or (2) otherwise in connection
with, as a result of or in anticipation of a Change in Control, (b) if the
Executive terminates his employment for Good Reason prior to a Change
in Control and the Executive reasonably demonstrates that the
circumstance(s) or event(s) which constitute such Good Reason occurred
(1) at the request of such Person or (2) otherwise in connection with, as a
result of or in anticipation of a Change in Control, or (c) the Executive
dies or is terminated by the Company due to Disability, in each case, after
the occurrence of a Potential Change in Control and a related Change in
Control actually occurs within one (1) year after the Date of Termination
or the date of death, as the case may be. The Executive's right to
terminate the Executive's employment for Good Reason shall not be
affected by the Executive's incapacity due to physical or mental illness.
The Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any act or failure to act constituting Good
Reason hereunder.
6.1.1 In lieu of any further salary and annual
bonus payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay to the Executive a lump sum
severance payment, in cash, equal to two (2) times the sum of (i) the
highest Annual Base Salary paid or payable to the Executive during the
thirty-six (36) month period immediately preceding the month in which the
Change in Control occurs, and (ii) the highest annual bonus paid or
determined and payable to the Executive during such thirty-six (36) month
period.
6.1.2 For a twenty-four (24) month period after
the Date of Termination, the Company shall arrange to provide the
Executive with life, disability, accident and health insurance benefits
substantially similar to those which the Executive is receiving immediately
prior to any related Potential Change in Control or the receipt of the
Notice of Termination (without giving effect to any reduction in such
benefits subsequent to a Change in Control which reduction constitutes
Good Reason), whichever is greater. Benefits otherwise receivable by the
Executive pursuant to this Section 6.1.2 shall be reduced to the extent
comparable benefits are actually received by or made available to the
Executive without cost during such period following the Executive's
termination of employment (and any such benefits actually received by the
Executive shall be reported to the Company by the Executive).
6.2 Special Reimbursement. In the event that the
Executive becomes entitled to the Severance Payments, if any payment or
benefit paid or payable, or received or to be received, by or on behalf of
the Executive in connection with a Change in Control or the termination of
the Executive's employment, whether any such payments or benefits are
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any of its subsidiaries, any Person, or
otherwise (the "Total Payments"), will or would be subject to the excise
tax imposed under section 4999 of the Code (the "Excise Tax"), the
Company shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that after payment by the Executive 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 any Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Total Payments.
6.2.1 For purposes of determining whether any
of the Total Payments will be subject to the Excise Tax and the amount of
such Excise Tax, (i) the Total Payments shall be treated as "parachute
payments" within the meaning of section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax, unless in the
opinion of tax counsel (delivered to the Executive) selected by the
Company and reasonably acceptable to the Executive such Total
Payments (in whole or in part) (a) do not constitute parachute payments,
including (without limitation) by reason of section 280G(b)(4)(A) of the
Code, (b) such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered, within the
meaning of section 280G(b)(4)(B) of the Code, or (c) are otherwise not
subject to the Excise Tax, and (ii) the value of any non-cash benefits or
any deferred payment or benefit shall be determined by the Company's
independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
6.2.2 In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account
hereunder at the time of termination of the Executive's employment, the
Executive shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction plus interest on the amount of such
repayment at the rate provided in section 1274(b)(2)(B) of the Code. In
the event that the Excise Tax is determined to exceed the amount taken
into account hereunder at the time of the termination of the Executive's
employment (including by reason of any payment the existence or amount
of which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in respect of such
excess (plus any interest, penalties or additions payable by the Executive
with respect to such excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any administrative
or judicial proceedings concerning the existence or amount of any such
subsequent liability for Excise Tax with respect to the Severance
Payments.
6.3 Date of Payment. The payments provided for in
Section 6.1.1 and Section 6.2 hereof shall be made not later than the
fifteenth (15th) day following the Date of Termination; provided,
however, that if the amounts of such payments cannot be finally
determined on or before such day, the Company shall pay to the Executive
on such day an estimate, as determined in good faith by the Company, of
the minimum amount of such payments to which the Executive is likely to
be entitled to and shall pay the remainder of such payments (together with
interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon
as the amount thereof can be determined but in no event later than the
thirtieth (30th) day after the Date of Termination. In the event that the
amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the
Company to the Executive, payable on the fifth (5th) business day after
demand by the Company (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code). At the time that payments are made
under this Section 6.3, the Company shall provide the Executive with a
detailed written statement setting forth the manner in which such
payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Company has received
from outside counsel, auditors or consultants (and any such opinions or
advice which are in writing shall be attached to the statement).
6.4 Legal Costs. The Company shall also reimburse
the Executive for all legal fees and expenses incurred in good faith by the
Executive as a result of any dispute with any party (including, but not
limited to, the Company and/or any affiliate of the Company) regarding
the payment of any benefit provided for in this Agreement (including, but
not limited, all such fees and expenses incurred in disputing any
termination or in seeking in good faith to obtain or enforce any benefit or
right provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of section 4999 of
the Code 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 within five (5) business days after delivery
of the Executive's written requests for payment accompanied by such
evidence of fees and expenses incurred as the Company reasonably may
require.
7. Termination Procedures and Compensation During
Dispute.
7.1 Notice of Termination. After a Change in
Control and during the Term, any purported termination of the Executive's
employment with the Company (other than by reason of death) shall be
communicated by written Notice of Termination from one party hereto to
the other party hereto in accordance with Section 10 hereof. For purposes
of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment
with the Company under the provision so indicated. Further, a Notice of
Termination for Cause is required to include a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters (3/4) of the
entire membership of the Board at a meeting of the Board which was
called and held for the purpose of considering such termination (which
meeting may be a regular meeting of the Board where prior notice of
consideration of such termination is given to members of the Board)
finding that, in the good faith opinion of the Board, the Executive engaged
in conduct set forth in clause (i) or (ii) of the definition of Cause herein,
and specifying the particulars thereof in detail. For purposes of this
Agreement, any purported termination not effected in accordance with this
Section 7.1 shall not be considered effective.
7.2 Date of Termination. "Date of Termination",
with respect to any purported termination of the Executive's employment
after a Change in Control and during the Term, shall mean (i) if the
Executive's employment is terminated for Disability, thirty (30) days after
Notice of Termination is given (provided that the Executive shall not have
returned to the full-time performance of the Executive's duties during such
thirty (30) day period), and (ii) if the Executive's employment is
terminated for any other reason, the date specified in the Notice of
Termination (which, in the case of a termination by the Company, shall
not be less than thirty (30) days (except in the case of a termination for
Cause) and, in the case of a termination by the Executive, shall not be less
than fifteen (15) days nor more than sixty (60) days, respectively, after the
date such Notice of Termination is given).
7.3 Dispute Concerning Termination. 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 7.3), the party receiving such Notice of Termination notifies the
other party that a dispute exists concerning the termination, the Date of
Termination shall be 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 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 only if the
basis for such notice is reasonable, such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute with
reasonable diligence.
7.4 Compensation During Dispute. If a purported
termination occurs following a Change in Control and during the Term,
and such termination is disputed in accordance with Section 7.3 above, the
Company shall continue to pay the Executive the full compensation
(including without limitation Annual Base Salary and Annual Bonus) in
effect at the time of any related Potential Change in Control or when the
notice giving rise to the dispute was given (whichever is greater) and
continue the Executive as a participant in all compensation, incentive,
pension and welfare benefit and insurance plans in which the Executive
was participating at the time of any Potential Change in Control or when
the notice giving rise to the dispute was given, whichever is greater, until
the dispute is finally resolved in accordance with Section 7.3 hereof.
Amounts paid under this Section 7.4 are in addition to all other amounts
due under this Agreement (other than those due under Section 5.2 hereof)
and shall not be offset against or reduce any other amounts due under this
Agreement or any other plan, agreement or arrangement.
8. No Mitigation. The Company agrees that, if the
Executive's employment is terminated during the Term, the Executive is
not required to seek other employment or to attempt in any way to reduce
any amounts payable to the Executive by the Company pursuant to
Section 6 or Section 7.4. Further, the amount of any payment or benefit
provided for in Section 6 (other than pursuant to Section 6.1.2) or Section
7.4 shall not be reduced by any compensation earned by the Executive as
the result of employment by another employer, by retirement benefits, or
offset against any amount claimed to be owed by the Executive to the
Company or any of its subsidiaries, or otherwise.
9. Successors; Binding Agreement.
9.1 Successors. In addition to any obligations imposed
by law upon any successor to the Company, 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 expressly assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required
to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement
and shall entitle the Executive to compensation from the Company in the
same amount and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive's employment
for Good Reason after a Change in Control, except that, for purposes of
implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination.
9.2 Binding Agreement. This Agreement shall inure
to the benefit of and be enforceable by this Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would
still be payable to the Executive hereunder (other than amounts which, by
their terms, terminate upon the death of the Executive) if the Executive
had continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to the
executors, personal representatives or administrators of the Executive's
estate.
10. Notices. For the purpose of this Agreement, notices and
all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
mailed by United States certified mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth below, or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be
effective only upon actual receipt:
To the Company:
The Peak Technologies Group, Inc.
9200 Berger Road
Columbia, Maryland 21046
Attention:
To the Executive:
11. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing and signed by the Executive and such
officer as may be specifically designated by the Board. No waiver by
either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been
made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Delaware without
regard to the principles of conflict of laws thereof. All references to
sections of the Exchange Act or the Code shall be deemed also to refer to
and include any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding
required under federal, state or local law and any additional withholding to
which the Executive has agreed. The rights and obligations of the
Company and the Executive under this Agreement shall survive the
expiration of the Term and the Employment Period.
12. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force
and effect.
13. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument.
14. No Limitation. 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 other 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.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first written above.
The Peak Technologies Group, Inc.
/s/ Nicholas R. H. Toms
- --------------------------------
By: Nicholas R. H. Toms
Chairman and Chief Executive Officer
/s/ Colin Wyatt
- ------------------------
Colin Wyatt
SEVERANCE AGREEMENT II
THIS SEVERANCE AGREEMENT, dated as of
December 13, 1996 (this "Agreement"), is made by and between The Peak
Technologies Group, Inc., a Delaware corporation, having its principal
offices at 9200 Berger Road, Columbia, Maryland 21046 (the
"Company"), and Seth Lee residing in the State of Maryland, (the
"Executive").
WHEREAS, the Company considers it essential to the
best interests of its shareholders to foster the continued employment of key
executive management personnel; and
WHEREAS, the Board of Directors of the Company (the
"Board") recognizes that, as is the case with many publicly-held
corporations, the possibility of a Change in Control (as defined in Section
1.3 below) of the Company exists from time to time and that such
possibility, and the uncertainty, instability and questions which it may
raise for and among key executive management personnel, may result in
the premature departure or significant distraction of such management
personnel to the material detriment of the Company and its shareholders;
and
WHEREAS, the Board has determined that appropriate
steps should be taken to reinforce, focus and encourage the continued
attention and dedication of key members of the executive management of
the Company and its subsidiaries, including (without limitation) the
Executive, to their assigned duties without distraction in the face of
potentially disturbing or unsettling circumstances arising from the
possibility of a Change in Control of the Company;
NOW THEREFORE, in consideration of the premises
and the mutual covenants herein contained, the Company and the
Executive hereby agree as follows:
1. Definitions. For purposes of this Agreement, the
following terms shall have the meanings set forth below:
1.1 "Annual Base Salary" shall mean the Executive's
rate of regular basic annual compensation prior to any reduction under a
salary reduction agreement pursuant to section 401(k) or section 125 of
the Internal Revenue Code of 1986, as amended from time to time (the
"Code"), and shall not include (without limitation) cost of living
allowances, fees, retainers, reimbursements, bonuses, incentive awards,
prizes or similar payments.
1.2 "Cause" for termination by the Company of the
Executive's employment, after any Change in Control, shall mean (i) the
willful and continued failure by the Executive to substantially perform the
Executive's duties with the Company, or a subsidiary of the Company, as
such duties may reasonably be defined from time to time by the Board (or
a duly designated and authorized committee thereof), or to abide by the
reasonable written policies of the Company or of the Executive's primary
employer (other than any such failure resulting from the Executive's
incapacity due to physical or mental illness or any such actual or
anticipated failure after the issuance of a Notice of Termination by the
Executive for Good Reason pursuant to Section 7.1) after a written
demand for substantial performance is delivered to the Executive by the
Board, which demand specifically identifies the manner in which the
Board believes that the Executive has not substantially performed the
Executive's duties or has not abided by any reasonable written policies, or
(ii) the continued and willful engaging by the Executive in conduct which
is demonstrably and materially injurious to the Company or its
subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii)
of this definition, no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the Executive in
bad faith and without reasonable belief that the Executive's act, or failure
to act, was in the best interest of the Company or its subsidiaries. For
purposes of this definition, any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board or upon the
instructions of the Board, or the Company's chief executive officer or
other duly authorized 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 and its subsidiaries. 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 three
quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice of any such
meeting 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 clause (i) or (ii) above, and specifying the particulars
thereof in detail.
1.3 "Change in Control" shall mean and be deemed to
have occurred if:
(i) any Person is or becomes the Beneficial
Owner (as that term is defined in Rule 13d-3 under the Securities
Exchange Act of 1934 (the "Exchange Act")), directly or indirectly, of
securities of the Company (not including in the securities beneficially
owned by such Person any securities acquired directly from the Company)
representing twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding securities, or there occurs any
transaction which the Company is required to disclose pursuant to Item
1(a) of Form 8-K (as filed pursuant to Rule 13a-11 or Rule 15d-11 of the
Exchange Act); or
(ii) during any period of twenty-four (24)
consecutive months (not including any period prior to September 1, 1995),
individuals who at the beginning of such period constitute the Board and
any new director (other than a director designated by a Person who has
entered into an agreement with the Company to effect a transaction
described in clause (i),(iii) or (iv) of this definition or any such individual
whose initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents) whose election by the Board
or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of such period or whose
election or nomination for election was previously so approved, cease for
any reason to constitute a majority of the Board; or
(iii) the shareholders of the Company approve a
reorganization, merger or consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially all of the
individuals and entities who were Beneficial Owners, immediately prior to
such reorganization, merger or consolidation, of the combined voting
power of the Company's then outstanding securities beneficially own,
directly or indirectly, immediately after such reorganization, merger or
consolidation, more then fifty-five percent (55%) of the combined voting
power of the securities of the corporation resulting from such
reorganization, merger or consolidation [in substantially the same
proportions as their respective ownership], immediately prior to such
reorganization, merger or consolidation, of the combined voting power of
the Company's securities; or
(iv) the shareholders of the Company approve
(a) the sale or disposition by the Company (other than to a subsidiary of
the Company) of all or substantially all of the assets of the Company, or
(b) a complete liquidation or dissolution of the Company.
Notwithstanding the foregoing, a Change in Control shall not include any
event, circumstance or transaction which results from the action
(excluding the Executive's employment activities with the Company or any
of its subsidiaries) of any Person or group of Persons which includes, is
directly affiliated with or is wholly or partly controlled by one or more
executive officers of the Company and in which the Executive actively
participates.
1.4 "Company" shall mean The Peak Technologies
Group, Inc. and any successor to its business and/or assets which assumes
(either expressly, by operation of law or otherwise) and/or agrees to
perform this Agreement by operation of law or otherwise (except in
determining, under Section 1.3 hereof, whether or not any Change in
Control of the Company has occurred in connection with such
succession).
1.5 "Disability" shall mean and be deemed the reason
for the termination by the Company of the Executive's employment, if, as
a result of the Executive's incapacity due to physical or mental illness, (i)
the Executive shall have been absent from the full-time performance of the
Executive's duties with the Company for a period of six (6) consecutive
months, (ii) the Company gives the Executive a Notice of Termination for
Disability, and (iii) within thirty (30) days after such Notice of
Termination is given, the Executive does not return to the full-time
performance of the Executive's duties.
1.6 "Good Reason" for termination by the Executive
of the Executive's employment in connection with or as a result of any
Change in Control, shall mean the occurrence (without the Executive's
prior express written consent) of any one of the following acts, or failures
to act, unless, in the case of any act or failure to act described in clauses
(i), (iv), (v) or (vi) below, such act or failure to act is corrected by the
Company prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
(i) the assignment to the Executive of any duties
or responsibilities inconsistent with those described in Section 3.2 below
or with the Executive's position(s) (including without limitation status,
offices, titles, and reporting responsibilities/rights) as an executive officer
of the Company and its subsidiaries or a substantial adverse alteration of
the Executive's position or title(s) with the Company or in the nature of
the Executive's authority, duties, or responsibilities from those described
in Section 3.2 below or otherwise;
(ii) a reduction in the Executive's Annual Base
Salary as in effect on the date of this Agreement or as the same may be
increased at any time thereafter and from time to time;
(iii) the relocation of the Company's principal
executive offices, or the office where the Executive works, to a location
more than thirty (30) miles from his or its location on the date of this
Agreement, or, if different, more than thirty (30) miles from where such
offices are located immediately prior to any Potential Change in Control,
or the Company's requiring the Executive to be based anywhere, other
than the Company's principal executive offices, except for required travel
on the Company's business to an extent substantially consistent with the
Executive's business travel obligations as of the date of this Agreement;
(iv) any failure by the Company to comply with
any of the provisions 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;
(v) the failure by the Company or a subsidiary to
continue in effect any pension benefit or incentive or deferred
compensation plan in which the Executive participates immediately prior
to any Potential Change in Control which is material to the Executive's
total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan or arrangement) has been made with
respect to such plan, or the failure by the Company or a subsidiary to
continue the Executive's participation therein (or in such substitute or
alternative plan or arrangement) on a basis not materially less favorable,
both in terms of the amount of benefits provided and the level of the
Executive's participation relative to other participants, as existed at the
time of the Potential Change in Control;
(vi) the failure by the Company or a subsidiary
to continue to provide the Executive with health and welfare benefits
substantially similar to those enjoyed by the Executive under any of the
Company's or a subsidiary's retirement, life insurance, medical, health and
accident, or disability or similar plans in which the Executive was
participating at the time of any Potential Change in Control, the taking of
any action by the Company or a subsidiary which would directly or
indirectly materially reduce any of such benefits or deprive the Executive
of any material fringe benefit enjoyed by the Executive at the time of the
Potential Change in Control, or the failure by the Company or a
subsidiary to provide the Executive with the number of paid vacation days
to which the Executive is entitled in accordance with the Company's or a
subsidiary's normal vacation policy in effect at the time of the Potential
Change in Control;
(vii) any purported termination of the
Executive's employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 7.1.; and/or
(viii) a termination by the Executive for any
reason during the thirty (30) day period immediately following the first
anniversary of any Change in Control.
1.7 "Person" shall have the meaning ascribed thereto
in Section 3(a)(9) of the Exchange Act, as modified, applied and used in
Sections 13(d) and 14(d) thereof; provided, however, a Person shall not
include (i) the Company or any of its subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or any of its subsidiaries (in its capacity as such), (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same character and
proportions as their ownership of stock of the Company.
1.8 "Potential Change in Control" shall mean and be
deemed to have occurred if:
(i) the Company commences negotiations in
respect of or enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control;
(ii) the Company or any Person publicly
announces an intention to take actions which, if consummated, would
constitute a Change in Control; and/or
(iii) any Person becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing [ten
percent (10%)] or more of the combined voting power of the Company's
then outstanding securities, or any Person increases such Person's
beneficial ownership of such securities by [five (5)] percentage points or
more over the percentage so owned by such Person on May 1, 1996.
2. Term of this Agreement. This Agreement shall
commence on the date hereof and shall continue in effect through
December 31, 1999; provided, however, that commencing on January 1,
1999 and each alternate January 1 thereafter, the term of this Agreement
shall automatically be extended for an additional two years unless, (i) not
later than June 30 of the calendar year preceding any such January 1st,
the Company or the Executive shall have given written notice to the other
not to extend this Agreement or (ii) a Change in Control shall have
occurred prior to any such January 1; provided, further, however, that if a
Change in Control shall have occurred during the term of this Agreement,
this Agreement shall continue in effect for a period of not less than thirty-
six (36) full months beyond the month in which such Change in Control
occurred (the "Term").
3. Company's Covenants.
3.1 Severance Payments. In order to induce the
Executive to remain in the employ of the Company and/or one or more of
its subsidiaries and in consideration of the Executive's covenants set forth
in Section 4 below, the Company agrees, under the terms and conditions
described herein and in addition to the amounts payable to the Executive
under Section 5 below, to pay the Executive the "Severance Payments"
described in Section 6.1 below and the other payments and benefits
described herein in the event the Executive's employment with the
Company is terminated during the Term and after a Change in Control
under the circumstances set forth in Section 6.1 below.
3.2 Position and Duties. During the period
commencing on the date of any Change in Control until the earliest to
occur of (i) the date which is thirty-six (36) months from the date of any
such Change in Control, (ii) the date of termination by the Executive of
the Executive's employment for any reason, or (iii) the termination by the
Company of the Executive's employment for any reason (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
the most significant of those held, exercised and assigned at any time
during the one hundred eighty (180) day period immediately preceding any
related Potential Change in Control, and (b) the Executive's services shall
be performed at the location where the Executive was employed
immediately preceding any such Potential Change in Control, or any office
or location less than thirty (30) miles from such location.
3.3 Base Salary. During the Employment Period, the
Executive shall receive Annual Base Salary at least equal to twelve (12)
times the highest monthly base salary paid or payable, including (without
limitation) any base salary which has been earned but deferred, to the
Executive by the Company and its affiliated companies in respect of any
month in the twelve (12) month period immediately preceding the month in
which any related Potential Change in Control occurs. In addition,
Annual Base Salary shall not be reduced after the occurrence of a
Potential Change in Control. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by,
controlling or under common control with the Company.
3.4 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 Executive's highest bonus for the last three (3) full fiscal
years prior to the fiscal year in which the related Potential Change in
Control occurs (annualized in the event that the Executive was not
employed by the Company for the whole of any such prior fiscal year).
Each 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.
3.5 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
one hundred eighty (180) day period immediately preceding any related
Potential Change in Control or if more favorable to the Executive, those
provided generally at any time thereafter to other peer executives of the
Company and its affiliated companies.
3.6 Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case may be,
shall be entitled to participate in and shall receive all benefits under all of
the health and welfare benefit plans, practices, policies and programs
provided by the Company and its affiliated companies (including, without
limitation, medical, prescription, dental, disability, 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 one hundred eighty (180) day period immediately preceding any
related Potential Change in Control or, if more favorable to the Executive,
those provided generally at any time thereafter to other peer executives of
the Company and its affiliated companies.
3.7 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 its
affiliated companies in effect for the Executive at any time during the one
hundred eighty (180) day period immediately preceding any related
Potential Change in Control 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.
3.8 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 an 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 one hundred eighty (180) day period
immediately preceding any related Potential Change in Control 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.
3.9 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 one hundred eighty (180)
day period immediately preceding any related Potential Change in Control
or, if more favorable to the Executive, as provided generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies.
3.10 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
one hundred eighty (180) day period immediately preceding any related
Potential Change in Control 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. The Executive's Covenants.
4.1 Employment. The Executive agrees that, subject
to the terms and conditions of this Agreement, in the event of a Change in
Control during the Term the Executive will remain in the employ of the
Company during any related Employment Period.
4.2 Time and Attention. 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 and
duties assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities and duties. During the Employment Period it shall not be
a violation of this Agreement for the Executive to (i) serve on corporate,
civic or charitable boards or committees, (ii) deliver lectures, fulfill
speaking engagements or teach at educational institutions, and (iii)
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 any
Potential Change in Control, the reinstatement or continued conduct of
such activities (or the reinstatement or conduct of activities similar in
nature and scope thereto) subsequent to any related Potential Change in
Control shall not thereafter be deemed to interfere with the performance of
the Executive's responsibilities to the Company.
4.3 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 direct or indirect
acts by 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, however, shall an asserted violation of
the provisions of this Section 4.3 constitute a basis for deferring or
withholding any amounts otherwise payable to the Executive under this
Agreement.
5. Compensation Other Than Severance Payments.
5.1 Disability. Following a Potential Change in
Control and during the Term, during any period that the Executive fails to
perform the Executive's full-time duties with the Company as a result of
incapacity due to physical or mental illness, the Executive's full salary
shall be paid to the Executive by the Company at a rate no less than the
rate in effect at the commencement of any such disability period, together
with all compensation and benefits payable to the Executive under the
terms of any compensation or benefit plan, program or arrangement
maintained by the Company or its subsidiaries during such disability
period, until the Executive's employment is terminated by the Company
for Disability.
5.2 Base Salary. If the Executive's employment shall
be terminated for any reason following a Potential Change in Control and
during the Term, the Executive's full salary shall be paid to the Executive
by the Company through the Date of Termination (as defined below in
Section 7.2) at the rate in effect at the time the Notice of Termination is
given, together with all compensation and benefits payable to or with
respect to the Executive through the Date of Termination under the terms
of any compensation or benefit plan, program or arrangement maintained
by the Company or its subsidiaries during such period.
5.3 Benefits. If the Executive's employment shall be
terminated for any reason following a Potential Change in Control and
during the Term, the Executive's normal post-termination compensation
and benefits shall be paid to the Executive as such payments become due.
Such post-termination compensation and benefits shall be determined
under, and paid in accordance with, the retirement, insurance and other
compensation or benefit plans, programs and arrangements maintained by
the Company or its subsidiaries.
6. Severance Payments.
6.1 Severance. The Company shall pay the
Executive the payments described in this Section 6.1 (the "Severance
Payments") upon the termination of the Executive's employment with the
Company following a Change in Control and during the Term, in addition
to the payments and benefits described in Section 5 hereof, unless such
termination is (i) by the Company for Cause, or (ii) by the Executive
without Good Reason , or (iii) due to death or Disability. In addition, the
Executive's employment shall be deemed to have been terminated
following a Change in Control by the Company without Cause or by the
Executive with Good Reason (a) if the Executive reasonably demonstrates
that the Executive's employment was terminated prior to a Change in
Control without Cause (1) at the request of a Person who has entered into
an agreement with the Company the consummation of which will
constitute a Change in Control (or who has taken other steps reasonably
calculated to effect a Change in Control) or (2) otherwise in connection
with, as a result of or in anticipation of a Change in Control, (b) if the
Executive terminates his employment for Good Reason prior to a Change
in Control and the Executive reasonably demonstrates that the
circumstance(s) or event(s) which constitute such Good Reason occurred
(1) at the request of such Person or (2) otherwise in connection with, as a
result of or in anticipation of a Change in Control, or (c) the Executive
dies or is terminated by the Company due to Disability, in each case, after
the occurrence of a Potential Change in Control and a related Change in
Control actually occurs within one (1) year after the Date of Termination
or the date of death, as the case may be. The Executive's right to
terminate the Executive's employment for Good Reason shall not be
affected by the Executive's incapacity due to physical or mental illness.
The Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any act or failure to act constituting Good
Reason hereunder.
6.1.1 In lieu of any further salary and annual
bonus payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay to the Executive a lump sum
severance payment, in cash, equal to two (2) times the sum of (i) the
highest Annual Base Salary paid or payable to the Executive during the
thirty-six (36) month period immediately preceding the month in which the
Change in Control occurs, and (ii) the highest annual bonus paid or
determined and payable to the Executive during such thirty-six (36) month
period.
6.1.2 For a twenty-four (24) month period after
the Date of Termination, the Company shall arrange to provide the
Executive with life, disability, accident and health insurance benefits
substantially similar to those which the Executive is receiving immediately
prior to any related Potential Change in Control or the receipt of the
Notice of Termination (without giving effect to any reduction in such
benefits subsequent to a Change in Control which reduction constitutes
Good Reason), whichever is greater. Benefits otherwise receivable by the
Executive pursuant to this Section 6.1.2 shall be reduced to the extent
comparable benefits are actually received by or made available to the
Executive without cost during such period following the Executive's
termination of employment (and any such benefits actually received by the
Executive shall be reported to the Company by the Executive).
6.2 Special Reimbursement. In the event that the
Executive becomes entitled to the Severance Payments, if any payment or
benefit paid or payable, or received or to be received, by or on behalf of
the Executive in connection with a Change in Control or the termination of
the Executive's employment, whether any such payments or benefits are
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any of its subsidiaries, any Person, or
otherwise (the "Total Payments"), will or would be subject to the excise
tax imposed under section 4999 of the Code (the "Excise Tax"), the
Company shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that after payment by the Executive 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 any Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Total Payments.
6.2.1 For purposes of determining whether any
of the Total Payments will be subject to the Excise Tax and the amount of
such Excise Tax, (i) the Total Payments shall be treated as "parachute
payments" within the meaning of section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax, unless in the
opinion of tax counsel (delivered to the Executive) selected by the
Company and reasonably acceptable to the Executive such Total
Payments (in whole or in part) (a) do not constitute parachute payments,
including (without limitation) by reason of section 280G(b)(4)(A) of the
Code, (b) such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered, within the
meaning of section 280G(b)(4)(B) of the Code, or (c) are otherwise not
subject to the Excise Tax, and (ii) the value of any non-cash benefits or
any deferred payment or benefit shall be determined by the Company's
independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
6.2.2 In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account
hereunder at the time of termination of the Executive's employment, the
Executive shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction plus interest on the amount of such
repayment at the rate provided in section 1274(b)(2)(B) of the Code. In
the event that the Excise Tax is determined to exceed the amount taken
into account hereunder at the time of the termination of the Executive's
employment (including by reason of any payment the existence or amount
of which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in respect of such
excess (plus any interest, penalties or additions payable by the Executive
with respect to such excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any administrative
or judicial proceedings concerning the existence or amount of any such
subsequent liability for Excise Tax with respect to the Severance
Payments.
6.3 Date of Payment. The payments provided for in
Section 6.1.1 and Section 6.2 hereof shall be made not later than the
fifteenth (15th) day following the Date of Termination; provided,
however, that if the amounts of such payments cannot be finally
determined on or before such day, the Company shall pay to the Executive
on such day an estimate, as determined in good faith by the Company, of
the minimum amount of such payments to which the Executive is likely to
be entitled to and shall pay the remainder of such payments (together with
interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon
as the amount thereof can be determined but in no event later than the
thirtieth (30th) day after the Date of Termination. In the event that the
amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the
Company to the Executive, payable on the fifth (5th) business day after
demand by the Company (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code). At the time that payments are made
under this Section 6.3, the Company shall provide the Executive with a
detailed written statement setting forth the manner in which such
payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Company has received
from outside counsel, auditors or consultants (and any such opinions or
advice which are in writing shall be attached to the statement).
6.4 Legal Costs. The Company shall also reimburse
the Executive for all legal fees and expenses incurred in good faith by the
Executive as a result of any dispute with any party (including, but not
limited to, the Company and/or any affiliate of the Company) regarding
the payment of any benefit provided for in this Agreement (including, but
not limited, all such fees and expenses incurred in disputing any
termination or in seeking in good faith to obtain or enforce any benefit or
right provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of section 4999 of
the Code 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 within five (5) business days after delivery
of the Executive's written requests for payment accompanied by such
evidence of fees and expenses incurred as the Company reasonably may
require.
7. Termination Procedures and Compensation During
Dispute.
7.1 Notice of Termination. After a Change in
Control and during the Term, any purported termination of the Executive's
employment with the Company (other than by reason of death) shall be
communicated by written Notice of Termination from one party hereto to
the other party hereto in accordance with Section 10 hereof. For purposes
of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment
with the Company under the provision so indicated. Further, a Notice of
Termination for Cause is required to include a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters (3/4) of the
entire membership of the Board at a meeting of the Board which was
called and held for the purpose of considering such termination (which
meeting may be a regular meeting of the Board where prior notice of
consideration of such termination is given to members of the Board)
finding that, in the good faith opinion of the Board, the Executive engaged
in conduct set forth in clause (i) or (ii) of the definition of Cause herein,
and specifying the particulars thereof in detail. For purposes of this
Agreement, any purported termination not effected in accordance with this
Section 7.1 shall not be considered effective.
7.2 Date of Termination. "Date of Termination",
with respect to any purported termination of the Executive's employment
after a Change in Control and during the Term, shall mean (i) if the
Executive's employment is terminated for Disability, thirty (30) days after
Notice of Termination is given (provided that the Executive shall not have
returned to the full-time performance of the Executive's duties during such
thirty (30) day period), and (ii) if the Executive's employment is
terminated for any other reason, the date specified in the Notice of
Termination (which, in the case of a termination by the Company, shall
not be less than thirty (30) days (except in the case of a termination for
Cause) and, in the case of a termination by the Executive, shall not be less
than fifteen (15) days nor more than sixty (60) days, respectively, after the
date such Notice of Termination is given).
7.3 Dispute Concerning Termination. 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 7.3), the party receiving such Notice of Termination notifies the
other party that a dispute exists concerning the termination, the Date of
Termination shall be 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 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 only if the
basis for such notice is reasonable, such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute with
reasonable diligence.
7.4 Compensation During Dispute. If a purported
termination occurs following a Change in Control and during the Term,
and such termination is disputed in accordance with Section 7.3 above, the
Company shall continue to pay the Executive the full compensation
(including without limitation Annual Base Salary and Annual Bonus) in
effect at the time of any related Potential Change in Control or when the
notice giving rise to the dispute was given (whichever is greater) and
continue the Executive as a participant in all compensation, incentive,
pension and welfare benefit and insurance plans in which the Executive
was participating at the time of any Potential Change in Control or when
the notice giving rise to the dispute was given, whichever is greater, until
the dispute is finally resolved in accordance with Section 7.3 hereof.
Amounts paid under this Section 7.4 are in addition to all other amounts
due under this Agreement (other than those due under Section 5.2 hereof)
and shall not be offset against or reduce any other amounts due under this
Agreement or any other plan, agreement or arrangement.
8. No Mitigation. The Company agrees that, if the
Executive's employment is terminated during the Term, the Executive is
not required to seek other employment or to attempt in any way to reduce
any amounts payable to the Executive by the Company pursuant to
Section 6 or Section 7.4. Further, the amount of any payment or benefit
provided for in Section 6 (other than pursuant to Section 6.1.2) or Section
7.4 shall not be reduced by any compensation earned by the Executive as
the result of employment by another employer, by retirement benefits, or
offset against any amount claimed to be owed by the Executive to the
Company or any of its subsidiaries, or otherwise.
9. Successors; Binding Agreement.
9.1 Successors. In addition to any obligations imposed
by law upon any successor to the Company, 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 expressly assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required
to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement
and shall entitle the Executive to compensation from the Company in the
same amount and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive's employment
for Good Reason after a Change in Control, except that, for purposes of
implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination.
9.2 Binding Agreement. This Agreement shall inure
to the benefit of and be enforceable by this Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would
still be payable to the Executive hereunder (other than amounts which, by
their terms, terminate upon the death of the Executive) if the Executive
had continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to the
executors, personal representatives or administrators of the Executive's
estate.
10. Notices. For the purpose of this Agreement, notices and
all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
mailed by United States certified mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth below, or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be
effective only upon actual receipt:
To the Company:
The Peak Technologies Group, Inc.
9200 Berger Road
Columbia, Maryland 21046
Attention: Edward A. Stevens
To the Executive: Michael Fluharty
11. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing and signed by the Executive and such
officer as may be specifically designated by the Board. No waiver by
either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been
made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Delaware without
regard to the principles of conflict of laws thereof. All references to
sections of the Exchange Act or the Code shall be deemed also to refer to
and include any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding
required under federal, state or local law and any additional withholding to
which the Executive has agreed. The rights and obligations of the
Company and the Executive under this Agreement shall survive the
expiration of the Term and the Employment Period.
12. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force
and effect.
13. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument.
14. No Limitation. 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 other 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.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first written above.
The Peak Technologies Group, Inc.
/s/ Nicholas R. H. Toms
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By: Nicholas R. H. Toms
Chairman and Chief Executive Officer
/s/ Seth Lee
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Seth Lee
