Exhibit 10.2
TEL-INSTRUMENT ELECTRONICS CORPORATION
EMPLOYMENT AGREEMENT
This Agreement, made on this 19th day of August, 2002, by and
between Tel-Instrument Electronics Corp., hereinafter referred to as the
"Company", and Charles R. Palanzo, hereinafter referred to as the "Employee."
W I T N E S S E T H:
WHEREAS, the Company wishes to assure itself of the services of the
Employee; and
WHEREAS, the Employee desires to serve in the employ of the Company
on a full-time basis, and upon the terms and conditions hereafter provided;
NOW, THEREFORE, in consideration of the premises and of the
respective representations and warranties set forth and of the mutual covenants
herein contained, and as an inducement to the Company to employ the Employee,
the parties hereby agree as follow:
1. Employment. The Company agrees to employ the Employee, and the Employee
agrees to enter the employ of the Company as of August 19, 2002, upon the terms
and conditions provided herein.
2. Position and Responsibilities. Employee shall serve as Chief Operating
Officer and Vice-President of the Company, and shall exercise such powers and
comply with and perform such directions and duties, consistent with his
executive position, regarding the business and affairs of the Company as may
from time to time be vested in or given to him by the President or Board of
Directors of the Company (the "Board"), and shall use diligent efforts to
improve, advance and extend the business of the Company.
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The Employee shall at all times report to, and his activities shall at all times
be subject to the direction and control of, the President. The Employee agrees
to devote all of his available business time, attention and services to the
discharge of such duties for the best interest of the Company. The Employee and
the President of the Company shall determine additions to the Employee's
responsibilities, leading to his possibly becoming Chief Executive Officer of
the Company, as outlined in Exhibit 1 to this Agreement. The President and the
Board will make the final determination when additional responsibilities in
accordance with Exhibit 1, should be made.
3. Obligation of Loyalty to the Company.
A. During the term of this Agreement and while employed by the
Company, the Employee agrees that he will not:
a. Make any statement or perform any act intended to advance
any interest of any existing or prospective competitor of the Company in any way
that will or may injure the Company in its relationship and dealings with any
existing or potential supplier, customer, stockholder or creditor; or solicit or
encourage any other employee of the Company to do any act that is disloyal to
the Company or inconsistent with the Company's interests or in violation of any
provision of this Agreement;
b. Solicit any other employee to participate in or assist with
the formation or operation of any business intended to compete with the Company,
or with respect to the possible future employment of such other employee by any
such business;
c. Inform any existing or potential customer, supplier or
creditor of the Company that Employee intends to resign, or make any statement
or do any act intended to cause any existing or potential customer, supplier or
creditor of the Company to learn of the Employee's intention to resign;
d. Discuss with any existing or potential customer, supplier
or creditor of the Company the present or future availability of services or
products
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provided by a business that competes with or where such services or products are
competitive with services or products that the Company provides.
B. The Employee acknowledges receiving and reading a copy of the
Company's Declaration of Corporate Policy, a copy of which is annexed as Exhibit
2 to and made a part of this Agreement, and the Employee agrees to act in
accordance therewith as long as he is an Employee of the Company.
4. Compensation. The Company will provide the Employee with the following
compensation during his employment:
a. Salary: Base salary of $130,000 per year,
payable in conformity with the Company's
customary practices for employee
compensation, as such practices shall be
established from time to time.
b. Severance: As more specifically described in
Section 7A below, nine months'
severance, tied to base salary, during
the first 12 months of employment; six
months' severance during the second 12
months of employment. Severance would
apply to any termination or separation,
other than for cause, initiated by the
Company.
c. Incentive: Participation in "key man" incentive
program (tied to profits and averaging
15% per year since inception in FY '97),
which will be pro-rated for the FY '03
which began on April 1, 2002.
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d. Stock Options: Options will be granted pursuant to the
Company's Employee Stock Option Plan of
1998 to purchase 35,000 shares of common
stock exercisable at the closing price
as defined in the Plan on the date of
employment; the Employee may exercise
7,000 options after the first year and
an additional 7,000 per year for the
balance of the option term, which
expires five years from grant. In
addition, the stock options listed in
Exhibit 1 will be granted upon achieving
the associated milestones. Options
granted to the Employee shall become
immediately exercisable should the
Company be sold or merged, or
substantially all its assets are sold,
or if any person or group (not including
Employee) hereafter acquires ownership
of 40% or more of the common stock of
the Company, or if a "change of control"
occurs which would be required to be
disclosed under the proxy rules under
the Securities Exchange Act of 1934.
e. Medical: Fully-paid medical insurance after three
months' employment, providing coverage
and at a cost offered to other
management employees. The Company has a
"Point of Service" plan with Aetna/US
Healthcare.
f. Life Insurance: $65,000 face amount of term life
coverage
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after three months' employment, assuming
the carrier will provide coverage, at
Company cost.
g. 401(k) Plan: See a copy of the enclosed plan.
h. Vacation: Three weeks per year up to five years of
employment, and four weeks thereafter.
Vacation begins accruing on the date of
employment.
i. Holidays: Nine paid days per year.
j. Sick/Personal: Ten days per year, beginning after one
month of employment.
k. Relocation: The Employee shall receive from the
Company reimbursement for reasonable
moving expenses related to his
relocation to the Carlstadt, New Jersey
area to accept this position with the
Company, in an aggregate amount not to
exceed 67% of his base salary. Adequate
verification of such expenses shall be a
prerequisite to such reimbursement. The
amount of such reimbursement that is
includible in gross income, or not
deductible by Employee, for Federal
income tax purposes shall be "grossed
up" to cover all or part of the
Employee's Federal and State tax
liabilities attributable to this
allowance, which amount shall be paid to
the Employee at such time as the moving
expenses and the "gross up" amount has
been computed by the Employee's
accountant or tax
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advisor and verified by the Company. In
no event will total payments hereunder,
including "gross up" amounts, exceed 67%
of Employee's annual base salary, and no
payment will be made for expenses
incurred after January 31, 2003.
By accepting relocation assistance
as described in this Section 4(k),
Employee acknowledges that if he
voluntarily terminates his employment,
or if the Company terminates him for
cause (i) within the first six months of
employment, he will repay 75% of all
amounts paid to him or a third party on
his behalf by the Company pursuant to
this Section 4(k), including any "gross
up" amounts or (ii) within the second
six months of his employment hereunder,
he will repay 50% of all amounts paid to
him or a third party on his behalf by
the Company pursuant to this Section
4(k), including any "gross up" amounts.
No amounts need be repaid after one year
of employment.
Amounts due the Company hereunder
must be repaid within 90 days of written
demand.
l. Medical Insurance
Premium Reimbursement: The Company
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will reimburse the Employee for medical
insurance premium payments he makes, but
only for payments made covering a 90-day
period starting with Employee's
commencement of his employment
hereunder.
5. Termination. The Employee's employment under this Agreement and this
Agreement may be terminated as follows:
A. At the Employee's Election. The Employee may terminate his
employment at any time by giving one hundred and twenty (120) days' advance
written notice to the Company. During such one hundred and twenty (120) day
period, the Employee will be available on a full-time basis for the benefit of
the Company, and the Company will compensate the Employee as long as he complies
with this Agreement, at his then base salary rate. The Company, at its option,
may accelerate the Employee's departure date and will have no obligation to
provide compensation or benefits to the Employee after his actual departure
date, except to the extent required by law as specifically set forth elsewhere
in this Agreement.
B. At the Election of the Company Without Cause. The Company may
terminate the Employee's employment and this Agreement at any time without Cause
by giving one hundred and twenty (120) days' advance written notice to the
Employee. During this 120-day period the Employee will be available on a
full-time basis for the benefit of the Company. However, the Company grants the
Employee the reasonable right to pursue other employment during this period. The
Company shall pay the Employee his base salary rate for the entire portion of
this 120-day period, whether or not the Company requires the Employee to perform
services during this entire period. If, however, the Employee accepts any
employment with any other organization during any portion of the foregoing
120-day period or breaches his obligations under the Non-Disclosure Agreement as
defined in Section 8 hereof, further payments by the Company
7
to the Employee shall cease upon the earlier to occur of (i) the effective date
of such other employment or (ii) a breach of the Non-Disclosure Agreement. Any
cessation of payments for breach of the Company's Non-Disclosure Agreement shall
be in addition to, and not as an alternative to, any other remedies in law or in
equity available to the Company, including the right to specific performance or
any injunction.
C. At the Election of the Company for Cause. The Company may,
immediately and unilaterally, terminate the Employee's employment and this
Agreement for "Cause" upon written notice to the Employee at any time. As used
herein, "Cause" shall mean (i) the Employee's persistent failure (other than any
such failure resulting from Employee's incapacity due to mental or physical
illness) to report to work or substantially perform all duties assigned to him
in accordance with this Agreement, which failure of performance is not cured
within 30 days after written notice hereof has been provided to the Employee;
(ii) the Employee's willful misconduct or gross negligence in connection with
the performance of such assigned duties; (iii) the Employee's gross
insubordination; (iv) the commission by the Employee of an act of fraud,
embezzlement or theft relating to the Company or any of its funds, properties,
opportunities, or other assets; (v) the conviction of the Employee, or entry of
a plea of nolo contendere by Employee to any felony or any misdemeanor involving
an act of moral turpitude or unethical business conduct; (vi) the Employee's
breach of any material provision of this Agreement including the breach of the
Company's Non-Disclosure Agreement; (vii) the Employee's willful failure to
comply with any applicable rule, policy or practice of the Company (including
his commission of any act of moral turpitude or unethical business conduct)
which failure or loss results in a material loss, damage or injury to the
Company or adversely affects the business activities, reputation, goodwill or
image of the Company; and (viii) the commission of an act that constitutes
unfair competition with the Company or such wrongful conduct that induces any
customer of the Company to breach a relationship with the Company.
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D. Termination Due to Death or Disability. Employee's employment and
this Agreement will terminate automatically upon Employee's death or upon his
physical incapacity or mental incompetence. For the purposes of this Agreement,
the Employee shall be deemed to have suffered physical incapacity or mental
incompetence upon the earlier of: (i) the 90th consecutive or 180th cumulative
calendar day in any twelve-month period that the Employee is unable to perform
with reasonable accommodation the essential functions of his job due to a
physical or mental disability (any accommodation will not be deemed reasonable
if it imposes an undue hardship on the Company); or (ii) the date a physician
selected by or acceptable to the Employee determines that the Employee will by
reason of physical incapacity or mental incompetence be unable to perform the
essential functions of his job for a period of at least 90 consecutive or 180
cumulative calendar days in any twelve-month period.
7. Consequences of Termination.
A. Termination by the Company Without Cause, or Due to Death or
Disability. In the event of a termination of Employee's employment (i) by the
Company without Cause, (ii) due to death of the Employee, or (iii) due to
physical incapacity or mental incompetence pursuant to Section 6(D), then in any
of such events the employee shall be entitled to only: (a) base salary through
date of termination (including base salary determined under Section 4(a) and an
Annual Incentive Bonus, if any, pro-rated, based on the performance, goals and
objectives achieved during the period of the Employee's employment during that
year, attributable to said Base Salary through date of termination; (b) payment
for accrued but unused vacation time through the termination date; and (c)
statutory benefit continuation rights in accordance with COBRA, provided the
Employee makes the appropriate and timely voluntary contribution payments and
subject to applicable law and the requirements of the Company's health insurance
plans then in effect. Notwithstanding the foregoing, in the event of the
termination of the Employee's employment by the Company, without cause,
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in addition to the above entitlements, the Company shall provide the Employee
with severance in an amount equal to his then monthly base salary for a period
of (i) nine months if the termination occurs during the first twelve months of
employment hereunder and (ii) six months if the termination occurs during the
second twelve months of employment hereunder. Notwithstanding the foregoing, if
Employee breaches his obligations under the Non-Disclosure Agreement, the
Company may immediately cease payment of this severance. Such cessation of
Employee's severance shall be in addition to, and not as an alternative to, any
other remedies in law or in equity available to the Company, including the right
to specific performance or an injunction.
B. Termination at Employee's Election. In the Event of a termination
of the Employee's employment at his election upon not less than one hundred and
twenty (120) days' advance written notice to the Company, the Employee shall be
entitled to only: (a) base salary through date of termination; (b) payment for
accrued but unused vacation time through the termination date; and (c) statutory
benefit continuation rights in accordance with COBRA, provided the Employee
makes the appropriate and timely voluntary contribution payments and subject to
applicable law and the requirements of the Company's health insurance plans then
in effect.
C. Termination by the Company for Cause. In the event of a
termination of the Employee's employment by the Company for Cause, the Employee
shall be entitled to only: (a) base salary through date of termination; (b)
payment for accrued but unused vacation time through the termination date; and
(c) statutory benefit continuation rights in accordance with COBRA, provided the
Employee makes the appropriate voluntary contribution payments and subject to
applicable law and the requirements of the Company's health insurance plans then
in effect.
D. No Further Obligations. Except as expressly set forth in this
Section 7 of this Agreement, the Employee acknowledges that the Company shall
not
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have any further obligations to the Employee in the event of a termination of
Employee's employment and/or this Agreement.
8. Confidential and Proprietary Information Agreement and Employee
Invention Agreement. As a condition and in consideration of entering into this
Agreement and the Employee's initial and continued employment by the Company,
the Employee will execute, prior to or simultaneously with the execution hereof,
the Confidential and Proprietary Information Agreement and Employee Invention
Agreement (attached hereto as Exhibit 3) (the "Non-Disclosure Agreement"), and
will abide by its terms.
9. Survival of Certain Provisions. Sections 7, 8, 10, 11, 12, 15, 17 and
18 hereof, as well as the terms and conditions of the Non-Disclosure Agreement,
expressly survive any termination of employment and termination of this
Agreement.
10. Consent and Waiver by Third Parties. The Employee hereby represents
and warrants that he has obtained all waivers and/or consents from third parties
that are necessary to enable him to enjoy employment with the Company on the
terms and conditions set forth herein and to execute and perform this Agreement
and the Non-Disclosure Agreement without being in conflict with any other
agreement, obligation or understanding with any such third party. The Employee
represents that he is not bound by any agreement or any other existing or
previous business relationship that conflicts with, or may conflict with, the
performance of his duties and obligations hereunder. The Employee shall defend
and indemnify the Company against all costs and expenses, including but not
limited to reasonable attorneys' fees, in the event any third part asserts any
claim against the Company arising out of or relating to its hiring of the
Employee.
11. Governing Law. This Agreement, the employment relationship
contemplated herein and any claim arising from or relating to such relationship,
whether or not arising under this Agreement, shall be governed by and construed
in accordance
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with the internal laws of the State of New Jersey, without giving effect to the
principles of choice of law or conflicts of laws of New Jersey.
12. Severability. In case anyone or more of the provisions in this
Agreement, the Non-Disclosure Agreement, or any other agreements executed in
connection with the transactions contemplated hereby for any reason shall be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement, the Non-Disclosure Agreement, or such other agreements, and this
Agreement, the Non-Disclosure Agreement, or such other agreements, as the case
may be, shall be construed and reformed to the maximum extent permitted by law.
13. Waivers and Modifications. This Agreement may be modified, and the
rights, remedies and obligations contained in any provision hereof may be
waived, only in accordance with this Section 13. No waiver by either party of
any breach by the other or any provision hereof shall be deemed to be a waiver
of any later or other breach thereof or as a waiver of any other provision of
this Agreement. This Agreement and its terms may not be waived, changed,
discharged or terminated orally or by any course of dealing between the parties,
but only by an instrument in writing signed by the party against whom any
waiver, change, discharge or termination is sought. No modification or waiver by
the Company shall become effective without the consent of the Board then in
office at the time of such modification or waiver.
14. Assignment. The Employee acknowledges that the services to be rendered
by him hereunder are unique and personal in nature. Accordingly, the Employee
may not assign any of his rights or delegate any of his duties or obligations
under this Agreement, but the rights and obligations hereunder will insure to
the benefit of and be binding upon the Employee's heirs, estate and
administrators. Any attempted assignment or delegation shall be null and void.
The rights and obligations of the Company under this Agreement
12
may be assigned by the Company and shall insure to the benefit of, and shall be
binding upon, the successors and assigns of the Company.
15. Acknowledgment of Non-Disclosure Agreement. The Employee recognizes
and agrees that due to the proprietary nature of the Company's business, the
restrictions set forth in the Non-Disclosure Agreement are reasonable, and that
enforcement of the Non-Disclosure Agreement is necessary to ensure the
preservation, protection and continuity of the business, trade secrets and
goodwill of the Company. The Employee further recognizes that the Non-Disclosure
Agreement is an integral part of the Agreement and that the Company would not
have entered into this Agreement without the Non-Disclosure Agreement.
16. Entire Agreement. This Agreement (and its attached Exhibits)
constitutes the entire understanding of the parties relating to the subject
matter hereof and supersedes and cancels all offers, agreements, negotiations,
representations and discussions, whether written or oral, made by or between the
parties prior to the date hereof.
17. Arbitration. Any controversy, dispute, claim or breach by or between
the parties, including without limitation, those arising out of or relating to
this Agreement, shall be submitted to arbitration with the American Arbitration
Association (the "AAA"); provided, however, that this arbitration provision will
not apply in any manner to the Company's enforcement of Sections _____ and _____
of this Agreement, and the Non-Disclosure Agreement. The arbitration shall be
heard by a panel of three (3) arbitrators appointed by the AAA. Such arbitration
shall be held in Newark, New Jersey in accordance with the rules and practices
of the AAA. The decision of such arbitrators shall be final and binding on the
parties and judgment upon the award may be entered in any court having
jurisdiction.
18. Notices. All notices hereunder shall be in writing and shall be
delivered in person, by first class mail, by overnight delivery or by facsimile,
addressed as follows: If to the Company, to:
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PERSONAL AND CONFIDENTIAL
-------------------------
Mr. Harold K. Fletcher
President
Tel-Instrument Electronics Corp.
728 Garden Street
Carlstadt, New Jersey 07072
With a copy to:
Donald Stuart Bab, Esq.
Jackson & Nash, LLP
330 Madison Avenue
New York, New York 10017
If to the Employee, at the Employee's address set forth on the signature page
hereto, or at such other address as Employee shall designate in writing, with a
copy to:
Notices shall be deemed to be given when delivered in person, upon
confirmation of a facsimile transmission, the day after delivery by overnight
mail, or three days after deposit in the mail as set forth above.
19. Interpretation. The language of all parts of this Agreement shall in
all cases be construed as a whole according to its fair meaning and not strictly
for or against either of the parties. The descriptive section hearings herein
have been inserted for convenience only and shall not be deemed to define,
limit, or otherwise affect the construction of any provision hereof.
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20. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereunto have executed this Employment
Agreement as of the date first above written as an instrument under seal.
Tel-Instrument Electronics Corporation Charles R. Palanzo
"Company" "Employee"
By: _____________________________ _________________________________
Harold K. Fletcher (Signature)
President and
Chief Executive Officer _________________________________
(Street Address)
_________________________________
(City, State and Zip Code)
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Exhibits
--------
1. Outline of additions to the Employee's responsibilities, leading to
possible becoming Chief Executive Officer of the Company (listing stock
options).
1. Company's Declaration of Corporate Policy.
1. Confidential and Proprietary Information Agreement and Employee Invention
Agreement (the "Non-Disclosure Agreement").
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Exhibit 1
CRP TRANSITION SCHEDULE - PRELIMINARY
31 Jul 02
- --------------------------------------------------------------------------------
Steps Job Responsibilities Term Option
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 COO Eng/Mfg 6 to 9 months 35,000
(new products/shipments)
budgets/schedules
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2 VP/COO BD/Eng/Mfg 6 to 9 months 15,000
AvTE P&L/cash
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3 President/COO Corporate P&L/cash 9 to 12 months 15,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
21 to 30 months
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4 CEO/Director Corporate Future 35,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
100,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Attachment
to
Non-Disclosure Agreement
------------------------
Exhibit A: Described below are "inventions" created by the Employee which are
not associated with his employment by the Company within the meaning
of Paragraph 3 of the Non-Disclosure Agreement, and therefore not
within the restrictions set forth in Paragraph 3.
Exhibit A
Attachment
to
Non-Disclosure Agreement
Exhibit A: Described below are "inventions" created by the Employee which
are not associated with his employment by the Company within
the meaning of Paragraph 3 of the Non-Disclosure Agreement,
and therefore not within the restrictions set forth in
Paragraph 3.
1. Internet and web system that provides online
capability to modify and update web content using
only a brower.
2. U.S. Patent Application #20020042815 "Automated
system and method for routing undeliverable e-mail
messages and otherwise managing e-mail"
3. Web based system of selecting individual search
results from a large group of search results and
automatically retrieving associated contact
information from the web.
Exhibit 1
TEL-INSTRUMENTS ELECTRONICS CORP.
DECLARATION OF CORPORATE POLICY
(Adopted December 13, 2000)
1. General Policy. It shall be the policy of the Company that, unless
fully disclosed to and authorized or approved by the Board of Directors, no
Director or Employee shall engage in any activity or acquire any business
investment or financial interest, either directly or indirectly, which conflicts
in any manner with the best interests of the Company or which interferes with or
impedes the Director's or Employee's ability to perform his or her duties in
good faith and in the best interests of the Company. The entering into any
agreement or transaction which contemplates any such activity or acquisition
shall likewise be deemed to constitute a violation of this policy.
2. Specific Guidelines. For the purpose of implementing this policy, the
Company hereby adopts the following specific guidelines to be applied in
determining whether or not this policy has been violated in any given instance.
The following guidelines shall not be deemed to constitute a comprehensive
listing of all such violations, and compliance with all the foregoing shall not
be determinative of the absence of any particular violation. Unless fully
disclosed to and authorized or approved by the Board of Directors, the following
shall be deemed to constitute a violation of the policy.
Page -1- of 4 Pages
2.1. The ownership or acquisition, either directly or indirectly, of any
business investment or financial interest in any entity in which the Company
holds an interest, or which has current or known prospective business dealings
with the Company. The foregoing notwithstanding, the ownership or acquisition of
any business investment or financial interest in an entity whose securities are
listed on a national stock exchange or are customarily traded on the
over-the-counter market shall not constitute a violation of this guideline;
provided, however, that such business investment or financial interest does not
represent more than five (5%) of the issued and outstanding securities of the
entity of the same class as those so owned or acquired, and the aggregate
estimated value thereof does not exceed the sum of $50,000.
2.2. The ownership or acquisition, either directly or indirectly, of any
interest in real property or personal property in which the Company holds an
interest;
2.3. The solicitation or acceptance, either directly or indirectly, of any
payment, loan, gift, gratuity, discount or other thing of value from any entity
in which the Company holds an interest, or from any person or entity which has
current or known prospective business dealings with the Company. The foregoing
notwithstanding, the solicitation or acceptance of any payment, loan, gift,
gratuity, discount or other thing of value from any person or entity which is of
nominal value and within the limits of common courtesy generally associated with
accepted business practices shall not constitute a violation of this guideline.
Page -2- of 4 Pages
Likewise except for the solicitation or acceptance of any loan in the amount of
$50,000 or more, from Summit Bank, or from any other bank which may hereafter
serve as the primary commercial bank of the Company the solicitation or
acceptance of any loan from any bank or other recognized lending institution
which engages in the lending of money as a regular part of its business
operations shall not constitute a violation of this guideline.
2.4. The diversion of any business opportunity of the Company, or the
participation in any business opportunity with knowledge of the fact that such
business opportunity has been or will be submitted or presented to the Company,
whether or not the same is ultimately rejected by the Company;
2.5. The engaging in any outside activities or pursuits, which, because of
the time required to be devoted thereto, materially interfere with or impede the
ability of any Director or Employee to perform his or her duties in good faith
and in the best interests of the Company. The foregoing notwithstanding, the
Board of Directors recognizes the advantages of responsible participation in
civic and charitable endeavors and encourages Employees to devote their time and
effort thereto. Accordingly, subject to the approval of the President, the
devotion of a reasonable amount of time during normal business hours to service
by an Employee in representing the Company on boards of directors, committees,
associations, chambers of commerce, civic leagues, and other organizations of
which the Company is a member, or which directly relate to the properties,
business activities or financial interests of the Company, or to the conduct of
any of the Company's operations, shall not constitute a violation of this
guideline; or
Page -3- of 4 Pages
2.6. The disclosure or use, for personal benefit, of any confidential or
non-public information concerning any properties, business activities or
financial interest of the Company, or the conduct of any of the Company's
operations, including but not limited to the purchase or sale of any real
property in reliance upon or based upon such confidential or non-public
information.
2.7. All future transactions between the Company and its officers,
directors or 5% shareholders, and their respective affiliates will be on terms
no less favorable than could be obtained from unaffiliated third parties and
will be approved by a majority of the independent, disinterested directors of
the Company.
Page -4- of 4 Pages
TEL-INSTRUMENT ELECTRONICS CORPORATION
CONFIDENTIAL AND PROPRIETARY INFORMATION AGREEMENT
and
EMPLOYEE INVENTION AGREEMENT
This Agreement, made on this 19th day of August, 2002, by and
between Tel-Instrument Electronics Corp., hereinafter referred to as the
"Company", and Charles R. Palanzo, hereinafter referred to as the "Employee."
1. Employment Agreement. This Confidential and Proprietary Information
Agreement and Employee Invention Agreement ("Non-Disclosure Agreement") is
entered into by the Employee in consideration of and as a condition for the
Company employing the Employee, is deemed incorporated in, and is to be
construed and enforced as part of the Employment Agreement with Employee of even
date herewith.
2. Proprietary Information and Trade Secrets. The Company has invested
substantial resources in developing its unique technology, its relationships
with its customers and suppliers and its reputation for its products, services
and business ethics, all of which are critical to the continued success of the
Company. As a result, the Company has substantial and unique confidential and
proprietary information and trade secrets, including but not limited to, (i)
customer and vendor, and contact lists, and information concerning their
business, needs, employment records and policies; (ii) Company business,
technologies, products, services and methods, and marketing plans, strategies
and data; (iii) personnel, technical and trade "know how"; (iv) specific
software, object and source codes, user manuals, designs and design projects,
pending patents; (v) computer systems, including but not limited to passwords,
computer hardware, computer software, computer firmware and any other similar or
related
1
confidential or proprietary information or concept relating thereto; (vi) joint
venture and subcontract or out-sourcing agreements; and (vii) costs, prices and
other financial data and information not made generally public (hereinafter,
"Proprietary Information and Trade Secrets").
Although the Company keeps the Proprietary Information and Trade Secrets
confidential, the Employee will of necessity during his employment have access
to the Company's Proprietary Information and Trade Secrets. Therefore:
A. Non-Competition Clause.
In consideration of his employment hereunder and the receipt by him
of the various forms of compensation described in his Employment Agreement,
Employee hereby agrees that during the term of his employment by the Company and
for two years after the termination of said employment, Employee will not,
directly or indirectly, (i) own, have a proprietary interest (except for less
than 5% of any listed company or company traded in the over-the-counter market)
of any kind in, be employed by, be a partner in, or serve as a consultant to or
in any other capacity with any firm, partnership, corporation, business
enterprise or individual, other than the Company, which is engaged in
competition with any business conducted, or to the Employee's knowledge
contemplated, by the Company in any of the geographic areas in which the Company
does or proposes to do business; and (ii) provide or offer to provide on behalf
of a competitor of the Company, products, services or technology that compete
with the business of the Company, to any customer or client or prospective
customer or client of the Company. Specifically excluded from the restrictions
set forth in this Section are companies, business enterprises or entities of any
type engaged in telecommunications, networking technologies or data storage
industries, in which the Company is not presently engaged.
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A. Confidentiality Covenant.
Employee agrees that while employed by the Company and thereafter
for a period of two years, he will not, directly or indirectly, disclose or use
to the detriment of the Company or any of its affiliates (the term "affiliates"
as used in this Agreement is understood to mean subsidiaries, and parent and
brother/sister corporations of the Company) or for the benefit of himself or of
any other person, firm or entity, any Proprietary Information or Trade Secrets
of the Company or any of its affiliates, which are not readily available in the
public domain. Employee shall not, while employed by the Company or thereafter
for a period of two years, directly or indirectly, induce, advise, recommend to,
or participate in any effort to induce, any officer or employee of the Company
or any of its affiliates to leave the Company's employment or to do any of the
things which Employee is prohibited from doing. Furthermore, Employee shall
deliver promptly to the Company upon termination of employment, or at any time
the Company may so request, all memoranda, notes, records, reports, manuals,
drawings, blueprints, formulas, computer disks, hardware, software and other
documents and things (and all copies thereof) relating to the Proprietary
Information or Trade Secrets, as well as all cellular telephones, Company credit
cards, keys to Company property and all other items which are Company property.
A. Remedies for Breach.
Employee acknowledges that the legal remedies for breach of the
covenants contained in Section 2A or 2B, as well as in Section 3 below, are
inadequate, and therefore agrees that, in addition to any or all other remedies
available to the Company and its affiliates in the event of a breach or a
threatened breach of any covenant contained in Section 2A or 2B, or Section 3,
the Company or any of its affiliates may:
i. Obtain preliminary and permanent injunctions against any
and all such actions, and
ii. Seek to recover from Employee monetary damages to the
Company or its affiliates arising from such breach or threatened breach and all
costs and
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expenses (including reasonable attorneys' fees) incurred by the Company or any
of its affiliates in enforcement of such covenants.
The Company may seek the relief stated in Paragraphs 2(C)(i) and
(ii) in any federal or state court sitting in New Jersey, and the Employee
admits personal and subject matter jurisdiction in any such court in any action
brought by the Company pursuant to this Paragraph 2(C).
3. Inventions. During his employment, Employee shall devote full time and
best efforts to the performance of all responsibilities to the Company and its
affiliates and to further the businesses and interests of the Company and its
affiliates. Employee agrees that all processes, discoveries, formulas,
improvements, technologies, designs and inventions ("Inventions"), including new
contributions, improvements, ideas and discoveries, whether patentable or not,
conceived, developed, invented or made solely by Employee, or jointly with
others, during his employment, shall belong to the Company or its affiliates.
Employee shall further: (a) promptly disclose such Inventions to the Company;
(b) assign to the Company, without additional compensation, all patent and other
rights to such Inventions, whether patentable or unpatentable, including all
substitute, continuation-in-part and reissue applications, patents of addition
and confirmation relative thereto, for the United States of America and foreign
countries; (c) sign all papers necessary to carry out the foregoing; and, (d)
give testimony in support of inventorship. Furthermore, if any Invention
associated with the Employee's employment at the Company is described in a
patent application or is disclosed to third parties, directly or indirectly, by
Employee within two years after termination of employment with the Company, it
is to be presumed that the Invention was conceived or made during the period of
Employee's employment by the Company. Employee agrees not to assert any rights
to any Invention as having been made or acquired prior to the date of this
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Agreement, except for Inventions, if any, disclosed to the Company in writing
prior to the date hereof.
The attached Exhibit A describes an "invention" created by the
Employee which is not associated with his employment by the Company within the
meaning of this Paragraph 3, and therefore not within the restrictions set forth
in this Paragraph 3.
4. Incorporation and Severability. This Agreement is to be construed and
enforced as part of the Employment Agreement, of even date, between the Employee
and the Company, and all provisions in the Employment Agreement, including
specifically, without limitation, Sections 8, 11, 12 and 15, as well as all
other sections not contradicted by this Agreement, shall apply to this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Tel-Instrument Electronics Corporation Charles R. Palanzo
"Company" "Employee"
By: _________________________ _________________________________
Harold K. Fletcher (Signature)
President and
Chief Executive Officer _________________________________
(Street Address)
_________________________________
(City, State and Zip Code)
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