Exhibit 10.1
TSI
TelSys Corporation
7100 Columbia
Gateway Drive
Columbia, MD 21046
U.S.A.
May 20, 1998
Mr. Joseph T. Pisula
1582 North Colonial Terrace
Arlington, VA 22209
Dear Jay:
Subject: OFFER OF EMPLOYMENT
We are pleased to offer you the position of President/Chief
Executive Officer
(<O`>President/CEO<O'>) of TSI TelSys Corporation (the
<O`>Company<O'>) at an
annual salary of US$240,000 (US$20,000 monthly) on the terms set
out below.
EMPLOYMENT TERM. We would like you to start full-time
employment on June 1,
1998 or earlier as mutual agreed. [Confidential portions omitted
and filed separately with the Commission.]
SUBSEQUENT APPOINTMENT AS ADVISOR. In addition, the Company and
you also now
agree that the Company will offer and that you will accept
employment as
Advisor to the Company for a period of 21 months, which will
begin immediately
following your employment as President/CEO or as Vice-
Chairman, whichever
appointment is the latest one held. As Advisor, the Company and
you agree that
your salary would be US$1,000 per month and your time
commitment would be
proportionately reduced. Also, during your employment as Advisor,
you agree not
to compete with the Company, as per the section labeled
<O`>Non-Compete<O'>
below. None of the provisions pertaining to the
<O`>Additional Incentive
Compensation<O'>, <O`>Benefits<O'>, <O`>Leave<O'>, <O`>Temporary
Lodging<O'>,
<O`>Disclosure of Other Business Interests<O'>,
<O`>Notice<O'> or
<O`>Severance<O'> sections that appear below will apply to
you in this
position. Further, the Company and you also now agree that
neither party is
able to terminate your employment as Advisor before 21 months<O~>
employment in
this role has been completed.
DUTIES OF PRESIDENT/CEO. As you know, the Company has been in
existence for
two and one-half years and is now past the <O`>start-up<O'>
phase. We are in a
period of exciting growth and transition, which we would like
for you to
continue and accelerate. The Board of Directors of the Company
expects that you
will:
<circle> within the first 45 days of your employment, present a
written version
of your operating plan to the Board for its review and
concurrence. Your
operating plan must detail (i) how the Company will achieve
and exceed in
1998 the sales, bookings and net operating income targets
presented in the
Strategic Business Plan for the Communications Division
(dated December 5,
1997), and (ii) state your financing objectives and plans;
<circle> within three to six months of your start date, to
present your
strategic plan to the Board for its review and concurrence;
<circle> obtain and close on financing for the Company in an
amount not less
than US$2.5 million by August 15, 1998 D this amount and
its achievement
date will be subject to modification depending on the success
in arranging
an extension or renewal of the letter of credit;
<circle> assess and make recommendations for the Company<O~>s
team-building
skills and competencies;
<circle> also assume the position of CEO at the Company<O~>s
wholly-owned
subsidiary, TSI TelSys Inc. and Acting CEO at the Company<O~>s
subsidiary,
TSI Technology Inc., for the flat fee of US$1.00 per
year at each
subsidiary;
AS YOU KNOW, WE HAVE BEGUN PREPARING TO RESTRUCTURE OF THESE TWO
SUBSIDIARIES.
IT IS EXPECTED THAT AFTER THIS RESTRUCTURE, TSI TELSYS
INC. WILL BE
PRIMARILY FOCUSED ON THE COMMUNICATIONS BUSINESS, WHILE TSI
TECHNOLOGY INC.
WILL BECOME FOCUSED ON RECONFIGURABLE COMPUTING. IT IS
ALSO OUR CURRENT
INTENTION, SUBJECT TO THE APPROVAL OF THE STRATEGIC PLAN BY
THE BOARD, TO
SEPARATE TSI TECHNOLOGY INC. FROM TSI TELSYS CORPORATION
AND TO RECRUIT
ANOTHER INDIVIDUAL TO HEAD THE FORMER COMPANY AS CEO.
<circle> implement and carry out any other additional duties
assigned to you by
the Board from time to time.
ADDITIONAL INCENTIVE COMPENSATION. In addition to your
monthly salary as
President/CEO and/or as Vice-Chairman, the Company agrees to
offer additional
incentive compensation in the form of Stock Option Compensation,
as outlined in
<O`>Attachment A: Stock Option Compensation<O'>, and in the
form of a
Performance Bonus, as outlined in <O`>Attachment B: Performance
Bonus<O'>.
BENEFITS. While you are employed as President/CEO or as Vice-
Chairman, the
Company will provide you with benefits that include health and
life insurance,
workers<O~> compensation, social security and a 401(k) plan,
which will be
described in a separate brochure. There will be an employee
contribution
required to participate in certain benefits, many of which are
administered by
an outside vendor, Administaff. Under this arrangement, you will
be an employee
of both Administaff (for purposes of payroll, insurance and so
forth) and the
Company through TSI TelSys Inc. You will be required to complete
an employment
application and other administrative documents as part of the
hiring process.
LEAVE. President/CEO is a full-time position. However, the
Company recognizes
that you have some outside commitments. You and the Company
agree that these
outside commitments will not exceed four working days a month and
that if you
elect to take any one or all of those days, you
1
will take them as unpaid leave. You are entitled to three (3)
weeks<O~> paid
vacation a calendar year (pro rated). The Company<O~>s composite
leave policy
will NOT apply to you while you are President/CEO. The
Company<O~>s composite
leave policy will apply to you on a pro rata basis while you
are employed as
Vice-Chairman. The composite leave policy will NOT apply to you
when you become
Advisor, however.
TEMPORARY LODGING. During your employment as President/CEO, the
Company will
reimburse you for actual and reasonable temporary lodging expenses
you incur to
facilitate your employment commitment in the Columbia office, at a
rate not to
exceed US$110 per night on a tax-grossed-up basis, and subject to
a maximum of
US$1,500 per month on a tax-grossed-up basis.
NON-COMPETE. In consideration for your employment and the
compensation and
benefits that you will receive, provided that the Company is not
in default on
its obligations, the Company requires that, (i) during and for
two years after
your employment with the Company as either President/CEO or as
Vice-Chairman
and also (ii) during your employment with the Company as Advisor,
you agree:
<circle> NOT to engage in any business activities for your
own account,
directly or indirectly, other than via investments in mutual
funds, or to
act as an officer, director, agent, or in any other capacity
of any other
corporation, partnership, or any other business organization
that have or
may have business interests that are similar or in any way
connected to or
competitive with the Company<O~>s interests or the interests
of any of its
subsidiaries without the knowledge of and approval by the
Board;
<circle> NOT to solicit, directly or indirectly, any customers of
the Company
or of any of its subsidiaries to divert their business in any
way to you or
to any corporation, partnership or any other business
organization in which
you have a financial interest, directly or indirectly, without
the knowledge
of and approval by the Board;
<circle> NOT to solicit, directly or indirectly, any employee of
the Company or
of any of its subsidiaries to leave the Company for any other
corporation,
partnership or any other business organization without the
knowledge of and
approval by the Board.
You agree that the scope of this agreement not to compete and
the nature and
duration of the restrictions are reasonable and necessary for
the proper
protection of the Company. In the event that any person or entity
successfully
contests the validity or enforceability of this agreement not to
compete in its
present form, the agreement not to compete shall not be deemed
invalid or
unenforceable, but shall instead be deemed modified so as to
be valid and
enforceable. This non-compete provision may be enforced through
request for
injunctive relief or damages in any court of competent
jurisdiction.
DISCLOSURE OF OTHER BUSINESS INTERESTS. You agree that within 21
days of your
start date as President/CEO, you will disclose to the Board
of TSI TelSys
Corporation all other business interests in which you have
greater than a five
percent (5%) ownership interest. During your term of
employment as
President/CEO or as Vice-Chairman, you also agree to notify the
Board of any
changes to your ownership interest in any of these other business
interests or
in any other business interests in which you acquire a greater
than a five
percent (5%) ownership interest: such notification is to be made
within 21 days
of any such change. You also agree, while employed as
President/CEO or as Vice-
Chairman, not to act as an officer, director, agent or in any
other capacity
of any other corporation, partnership or any other business
organization
without the knowledge of the Board. You also agree, while
employed as
President/CEO or as Vice-Chairman,
2
not to act as an officer, director, agent, or in any other
capacity of any
other corporation, partnership or any other business organization
that have or
may have business interests that are similar or in any way
connected to or
competitive with the Company<O~>s interests without the
knowledge of and
approval by the Board.
You also agree, while employed as President/CEO or as Vice-
Chairman, to
disclose to the Board all investment banks and stockbroking
companies with
which you have had any business dealings over the past three
years. You also
agree to disclose to the Board, at a time and date no later than
the following
Board meeting, any business dealings you have or have
arranged with any
investment banks and stockbroking companies for your own account,
directly or
indirectly, or as an officer, director, agent, or in any other
capacity of any
other corporation, partnership, or any other business
organization while you
are employed as President/CEO or as Vice-Chairman.
NON-DISCLOSURE OF COMPANY MATTERS. You will be required to
sign a non-
disclosure agreement, the purpose of which is to safeguard the
Company<O~>s
interests in proprietary information developed by the
Company and its
subsidiaries.
NOTICE. While you are employed as President/CEO or as Vice-
Chairman, if you
decide to terminate your employment with the Company, you are
required to give
at least three months<O~> prior written notice to the Board.
The Company has the right to terminate your employment as
President/CEO or as
Vice-Chairman at any time with or without prior written
notice. Other than
termination for just cause, if the Company decides to
terminate your
employment, you will be entitled to receive the severance package
described in
the following section entitled <O`>Severance<O'>. The Company will
be entitled
to terminate your employment without notice and without
severance package to
you for just cause. For the purposes of this employment
letter, <O`>just
cause<O'> shall mean: (I) commission of a willful act of
dishonesty in the
course of your duties; (ii) conviction by a court of competent
jurisdiction of
a crime constituting a felony or conviction in respect of any
act involving
fraud, dishonesty or moral turpitude; (iii) performance of
your job
responsibilities while under the influence of alcohol or
any controlled
substance during working hours after the Company shall have
provided written
notice to you that your behaviour is inappropriate and will not
be tolerated
and has offered to you counselling services; (iv) frequent or
extended, and
unjustifiable (not as a result of your incapacity or
disability) absenteeism
which shall not have been cured within 30 days after the
Company shall have
advised you in writing of its intention to terminate your
employment in
accordance with these provisions in the event that such
condition shall not
have been cured; (v) willful and continued personal
misconduct, action,
inaction, inability or refusal by you to perform duties and
responsibilities
described under <O`>Duties<O'> above; (vi) material non-
compliance with the
terms of this employment letter.
The Company and you agree that if the Company chooses to
terminate your
employment as President/CEO, then you will be subsequently
employed as Advisor
to the Company for a period of 21 months, as described earlier,
but you will
NOT be employed as Vice-Chairman. Also, the Company and you
agree that if the
Company chooses to terminate your employment as Vice-Chairman,
then you will be
subsequently employed as Advisor to the Company for a period of 21
months.
Further, the Company and you agree that the Company<O~>s
subsidiaries will be
entitled to terminate your employment without notice and without
severance for
any reason, provided that your employment with the subsidiary (or
subsidiaries)
is not the primary source of your salary, benefits or
other incentive
compensation at that time.
SEVERANCE. If the Company decides to terminate your
employment as
President/CEO or as Vice-Chairman for any reason other than for
just cause, you
will be entitled to one of the following severance packages:
a) if the decision to terminate occurs within the first six
months from the
start date of your employment, you will be entitled to
severance equivalent
to six months<O~> salary as President/CEO (the total to be
paid to you at
one-sixth each month for six months) and to enjoy a
continuation of the
Company benefits (health and life insurance, workers<O~>
compensation,
social security and 401(k) plan) for the same six-month
period. Further the
six-
3
month period during which you continue to draw salary and
benefits will be
hereinafter referred to as the <O`>Termination Period<O'>;
b) if the decision to terminate occurs more than six months from
the start date
of your employment and if you are at that time employed as
President/CEO,
you will be entitled to severance equivalent to nine
months<O~> salary as
President/CEO (the total to be paid to you at one-ninth each
month for nine
months) and to enjoy a continuation of the Company benefits
(health and life
insurance, workers<O~> compensation, social security and
401(k) plan) for
the same nine-month period. Further the nine-month period
during which you
continue to draw salary and benefits will be hereinafter
referred to as the
<O`>Termination Period<O'>;
c) if you are employed at that time as Vice-Chairman, you will
be entitled to
severance equivalent to twelve months<O~> salary as Vice-
Chairman (the total
to be paid to you at one-twelfth each month for twelve months)
and to enjoy
a continuation of the Company benefits on a pro rata basis
(health and life
insurance, workers<O~> compensation, social security and
401(k) plan) for
the same twelve-month period. The twelve-month period
during which you
continue to draw salary and benefits will be hereinafter
referred to as the
<O`>Termination Period<O'>.
NON-VESTING DURING TERMINATION PERIOD. If the Company decides to
terminate your
employment as President/CEO or as Vice-Chairman, it also can
choose whether to
request you to continue to come to work during the Termination
Period. Vesting
of Time-Based Stock Options granted to you will continue
through the
Termination Period only if the Company requests you to
continue to come to
work, or unless you qualify for accelerating vesting of
Time-Based Stock
Options by virtue of the completion of a Change of Control
Transaction or Sale
of the Communications Business during the 180 day period
immediately following
the termination of your employment as either President/CEO or as
Vice-Chairman
in which the Pre-Deal Valuation of the Company or the Pre-Deal
Valuation of the
Communications Business is at least US$50 million and so
long as you also
played an active part in the negotiations with the
purchaser prior to
termination.
Vesting of Performance-Based Stock Options will also continue
through the
Termination Period only if the Company requests you to
continue to come to
work, or unless you qualify for further vesting by virtue of the
completion of
a Change of Control Transaction or Sale of the Communications
Business during
the 180 day period immediately following the termination of your
employment as
either President/CEO or as Vice-Chairman in which the Pre-Deal
Valuation of the
Company or the Pre-Deal Valuation of the Communications
Business is at least
US$25 million and so long as you also played an active part in the
negotiations
with the purchaser prior to termination.
CHANGES IN DESIGNATION AND DUTIES TO ENABLE TSI TELSYS INC TO
OBTAIN FACILITY
CLEARANCE. The Company and you share an understanding that we
are proceeding
with this appointment letter, notwithstanding the possibility that
the Company
may find it desirable to redefine your role at some future date
in order for
its subsidiary, TSI TelSys Inc., to obtain facility
clearance from the
Department of Security Services (<O`>DSS<O'>).
As you know, we are still exploring possibilities in this
regard. It is
possible, for example, that it would serve the Company<O~>s best
interests if
you step down as President/CEO of the Company in a few months<O~>
time, while
continuing to take charge of the operations of the subsidiary,
TSI TelSys Inc,
by becoming simply the CEO of the latter, which could then qualify
for Facility
Clearance. If the Company and you mutually agree to terminate
your employment
as President/CEO of TSI TelSys Corporation for this reason,
then you will be
offered an equivalent employment package as
4
CEO of TSI TelSys Inc. (with the same salary and benefits as
before and an
incentive compensation package that will parallel what is
contained herein).
GOVERNING LAW. This agreement, including all attachments, shall
be interpreted
pursuant to the laws of the State of Maryland except as
to its law of
conflicts.
We look forward to your joining the Company.
Sincerely,
For and on behalf of TSI TelSys Corporation
_____________________________________
Dr. Wan Muhamad Hasni Wan Sulaiman
Chairman
Attachment A: Stock Option Compensation
Attachment B: Completion of Tasks Bonus
I agree and accept employment on the terms set out above:
_____________________________________
Joseph T. Pisula
_____________________________________
Date
5
ATTACHMENT A
STOCK OPTION COMPENSATION
GRANT OF STOCK OPTIONS.. TSI TelSys Corporation (the
<O`>Company<O'>) agrees to
grant to you 2,438,500 Stock Options on your start date,
pursuant to the
Company<O~>s Key Employee Incentive Stock Option Plan and
subject to the
conditions that no options are exercised by you until such time as
the Montreal
Exchange has granted their approval of the issuance of the Stock
Options to you
and the Montreal Exchange and the shareholders of the Company have
approved the
increase in the number of common share options available to be
issued under the
Company<O~>s Key Employee Share Option Incentive Plan, such
shareholder
approval being sought at the Annual General Meeting to be
held on June 25,
1998. Of this total, 1,538,500 will be Time-Based Stock Options
and 900,000
will be Performance-Based Stock Options. They will vest as
per the schemes
described below.
EXERCISE PRICE. The exercise price on these Stock Options will be
set at either
(i) Cdn$0.45; or (ii) pursuant to the terms of the Key Employee
Share Option
Incentive Plan, the average of daily high and low board lot
trading prices on
the Montreal Exchange for the immediately preceding five days on
which trades
occurred prior to the date of grant; whichever is the highest.
EXERCISE PERIOD. The exercise period for these Stock Options shall
terminate 90
days from date that your employment (i.e., from the last day of
employment as
Advisor) with the Company terminates.
CHANGES IN CAPITALIZATION. If the authorized capital of the
Company as
presently constituted is consolidated into a lesser number of
common shares or
subdivided into a greater number of common shares, the number of
Stock Options
covered by this letter and its attachments shall be decreased
or increased
proportionately, as the case may be, and the exercise price to be
paid for each
new share in TSI TelSys Corporation shall also be adjusted
accordingly.
AMALGAMATION OR MERGER. If, from time to time, any other change
is made in the
capital of the Company or the Company amalgamates or
combines, merges or
consolidates with one or more other companies or corporations (and
the right to
do so is hereby expressly reserved by the Company) whether
by way of
arrangement, by exchange of shares, or otherwise, in each such
case each Stock
Option shall extend to and cover the number, class and kind of
shares or other
obligations to which the holder of the Stock Option would have
been entitled
had the Stock Option been fully exercised immediately prior to
the date such
amalgamation, merger, combination or consolidation becomes
effective and the
then prevailing subscription price of the Shares or other
obligations so
covered shall be correspondingly adjusted if and to the extent
that the Board
considers it to be equitable and appropriate.
EXCEPTION FOR DISTRIBUTION OR RIGHTS OFFERING OF SHARES IN A
RECONFIGURABLE
COMPUTING COMPANY. It is currently contemplated that the
reconfigurable
business will be transferred to a separate subsidiary, such as
TSI Technology
Inc., and that shares in this subsidiary could then be
distributed to
shareholders via a dividend or via a rights offering or might
even be sold
directly to a third party. It is the Company<O~>s understanding
that holder of
Stock Options would NOT be entitled to participate in the
dividend or rights
offering. However, if it is determined at a future date that
holders of Stock
Options will be entitled to participate to some extent, you
agree that your
participation will be limited to the extent that you have
already become
vested or become entitled to vesting. In other words, if you have
been granted
a total of 2,438,500 Stock Options but only 833,333 have actually
vested at the
time of the
6
distribution or rights offering of RC shares, and if the Company
has decided to
distribute 100 RC Shares for every 1,000 Stock Options, for
example, then you
agree that you would be entitled to 83,333 RC shares (NOT 243,850
RC shares).
DEFINITIONS:
CHANGE OF CONTROL TRANSACTION (<O`>CCT<O'>):
A CCT refers to a sale of shares or any combination or
series of
sales of
shares or new issuances of shares that results in one
single party or a
group acting in concert accumulating more than 50% of the
common shares of
the Company.
Notwithstanding the above, for the purposes of this
letter and its
attachments, a CCT does not include a sale or transfer of
shares presently
registered to Abrar Group International (hereinafter
<O`>A.G.I.<O'>) or to
other companies in the Abrar group of companies
(hereinafter <O`>other
Abrar-related companies<O'>) if that sale or transfer
takes place to
either:
<circle> other Abrar-related companies; or
<circle> an individual shareholder of A.G.I.; or
<circle> a company controlled by an individual shareholder
of A.G.I..
SALE OF THE COMMUNICATIONS BUSINESS (<O`>SCB<O'>):
In the case that Communications and Reconfigurable Computing
are both
divisions
of TSI TelSys Inc. on the Completion Date, then a SCB
refers to the
execution of a Sale and Purchase Agreement by both parties
that involves a
sale of the Communications Division.
In the case that Reconfigurable Computing is no longer a
division of TSI
TelSys Inc. on the Completion Date, then a SCB refers to the
execution of
a Sale and Purchase Agreement by both parties that involves
a sale of at
least 50% of the common shares of TSI TelSys Inc.
PRE-DEAL VALUATION OF THE COMPANY<O~>S EQUITY
(<O`>PDVCE<O'>):
Recognizing that a Change of Control Transaction could
involve
significantly
less than 100% of the common shares of the Company, then
PDVCE will be
calculated as follows:
PDVCE = ( P x CE ) + <capital-sigma> ( V{i} x W{i} ) +
<capital-sigma> [ (
P - E{j} ) x W{j} x D{j }]
where
P = total gross consideration agreed to be paid by the
purchaser in a
Change of Control
Transaction for the common shares in the Company that
he agrees to
purchase, divided
by the number of common shares in the Company that
he agrees to
purchase;
CE = total number of common shares outstanding in the
Company on the
Completion Date
(see definition below) of the Change of Control
Transaction;
V{i} = total gross consideration agreed to be paid by the
purchaser in
a Change of Control
Transaction for the warrants (or options that have
been vested by
the Completion Date)
of subset i which he agrees to purchase, divided by
the number of
warrants (or options
that have been vested by the Completion Date) of
subset i that he
agrees to purchase;
W{i} = the total no. of warrants (or options that have
been vested by
the Completion Date) of
subset i that have been issued by the Company and
which have not
expired or
been canceled on or before the Completion Date of
the Change of
Control Transaction;
E{j} = the exercise price of subset j of warrants (or
options that have
been vested by the
Completion Date) which the purchaser has not
7
agreed to purchase (i.e., they remain outside the deal);
D{j} = a dummy variable which takes the value of either
(a) 1, if the
warrants (or
options that have been vested by the Completion Date)
of subset i
can be considered to be <O^>in the money<O~> (i.e., if
E{j} is less
than or equal P) or
(b) 0, if the warrants (or options that have been
vested by the
Completion
Date) of subset i can be considered to be <O^>out of
the money<O~>
(i.e., if E{j} is
greater than P);
<capital-sigma> is a mathematical notation, that refers to
summation.
NOTE: PDVCE does NOT include the market value of the
Company<O~>s debt
obligations.
PRE-DEAL VALUATION OF THE COMMUNICATIONS BUSINESS
(<O`>PDVCB<O'>):
In the case that the Communications Business and
Reconfigurable
Computing are
both divisions of TSI TelSys Inc. on the Completion Date of
a Sale of the
Communications Business, then PDVCB will be calculated as
follows:
PDVCB = total gross consideration agreed to be paid by the
purchaser in
a Sale
of the Communications Business to acquire the
Communications
Division of TSI TelSys Inc.;
NOTE: PDVCB does NOT take include the market value of TSI
TelSys Inc.<O~>s
debt
obligations that may be attributable to the
Communications Division.
In the case that the Reconfigurable Computing business has
already been
taken out of TSI TelSys Inc. by the Completion Date, such
that TSI TelSys
Inc. is essentially a Communications Business only, and
also recognizing
that a Sale of the Communications Business could involve
significantly
less than 100% (e.g., 51%) of the common shares of the
Company, then PDVCB
will be calculated as follows:
PDVCB = ( P x CE )
where
P = total gross consideration agreed to be paid by the
purchaser in a
Sale of the
Communications Business for the equity in TSI TelSys
Inc., that he
agrees to
purchase, divided by the number of shares in TSI TelSys
Inc. that he
agrees to
purchase;
CE = total number of common shares outstanding in TSI
TelSys Inc. on the
Completion Date (see definition below) of the
Sale of the
Communications
Business.
NOTE: PDVCB does NOT include the market value of the
Company<O~>s debt
obligations.
8
Completion Date:
<O`>Completion Date<O'> shall be the date on
which the
agreement for the sale
and purchase of the shares has been executed by
both parties.
Current U.S. Dollar Equivalent Price:
In the case that the Company becomes listed on
a U.S. stock
exchange, the <O`>Current U.S. Dollar Equivalent
Price<O'> will
refer to the number of U.S. dollars equivalent to
a specified
Canadian price, after conversion at the daily
closing exchange
rate quoted by Bank of Canada, or quoted by
another financial
source that the Company and you mutually agree
upon.
VESTING OF TIME-BASED STOCK OPTIONS. The Time-Based Stock Options
will vest as
follows:
<circle> 18,500 will vest on your start date.
<circle> 56,000 options will vest each month from June
1998 to December
1999 inclusive (19 months) for each full month that you
complete as
President/CEO. Vesting will occur on the first
business day of each
subsequent month.
<circle> 28,500 options will vest each month from January
2000 to April
2001 inclusive (16 months) for each full month that you
complete as
Vice-Chairman. Vesting will occur on the first
business day of each
subsequent month.
<circle> there will NOT be any pro rata vesting of Time-
Based Stock
Options D e.g., if your employment as President/CEO
ceases on December
15, 1999, you will NOT be vested with 15/31 of 56,000
options for
December 1999.
ACCELERATED VESTING OF TIME-BASED STOCK OPTIONS. As
an additional
incentive, all Time-Based Stock Options not already
vested will vest
immediately if either:
<circle> you are President/CEO at the time and either
on or before
December 31, 1999, the average of daily high and low
board lot trading
prices on the primary exchange for a period of twenty
days on which
trades occur (hereinafter referred to as the <O`>20
Day Average
Price<O'>) reaches or exceeds Cdn$2.20, adjusted to take
into account
any changes in capitalization, or, in the case that the
Company becomes
listed on a U.S. stock exchange, that the average of daily
high and low
board lot trading prices on that U.S. exchange for a
period of twenty
days on which trades occur, and after converting each
day<O~>s average
to its Canadian dollar equivalent using the daily closing
exchange rate
quoted by Bank of Canada, (hereinafter referred to as the
<O`>US Dollar
Equivalent of the 20 Day Average Price<O'>) reaches
or exceeds
Cdn$2.20, adjusted to take into account any changes in
capitalization;
or
<circle> you are Vice-Chairman at the time and either on or
before April
30, 2001, the 20 Day Average Price reaches or
exceeds Cdn$3.00,
adjusted to take into account any changes in
capitalization, or, in the
case that the Company becomes listed on a U.S. stock
exchange, that the
US Dollar Equivalent of the 20 Day Average Price reaches
or exceeds
Cdn$3.00, adjusted to take into account any changes in
capitalization;
or
<circle>
9
there is the completion of a Change of Control Transaction
or a Sale of
the Communications Business in which the Pre-Deal
Valuation of the
Company<O~>s Equity or the Pre-Deal Valuation of the
Communications
Business is at least US$50 million, and either:
(i) you are President/CEO on the Completion Date; or
(ii) you are Vice-Chairman on the Completion Date; or
(iii) the Completion Date occurs within 180 days after
your term as
either President/CEO or Vice-Chairman, and so
long as you also
played an active part in the negotiations with
the purchaser
prior to termination.
ENTITLEMENT TO VESTING OF PERFORMANCE-BASED STOCK OPTIONS. You
can become
entitled to the vesting of Performance-Based Stock Options
through either (i)
increases in the market value of TSI TelSys shares or (ii) the
completion of a
Change of Control Transaction or a Sale of the Communications
Business or (iii)
some combination of both, as follows:
(i) INCREASES IN THE MARKET VALUE OF TSI TELSYS SHARES.
While you are
employed as President/CEO and on or before December 31, 1999:
a) you will be entitled to be vested with 83,333
Performance-Based
Stock Options if the 20 Day Average Price for TSI
TelSys Corporation
shares reaches or exceeds Cdn$0.50 (or the Current
U.S. Dollar
Equivalent Price).
b) you will be entitled to be vested with an
additional 83,333
Performance-Based Stock Options whenever the 20 Day
Average Price
reaches the next price level that is Cdn$0.10 above
its precedent.
For instance at Cdn$0.60 (or the Current U.S.
Dollar Equivalent
Price), you will be entitled to be vested with
another 83,333
Performance-Based Stock Options, at Cdn$0.70 (or the
Current U.S.
Dollar Equivalent Price) another 83,333, and so on.
c) there will be 18 price levels that would trigger your
entitlement to
be vested, viz.: Cdn$0.50, Cdn$0.60, and at each
Cdn$0.10 interval
up to Cdn$2.20 (or the Current U.S. Dollar Equivalent
Prices).
d) at the Cdn$2.20-level (or the Current U.S. Dollar
Equivalent Price),
you will be entitled to be vested with 83,339
Performance-Based
Stock Options.
e) however, you will not be entitled to be vested with
any additional
Performance-Based Stock Options at any prices above
Cdn$2.20.
f) when there is either the completion of a Change
of Control
Transaction or a Sale of the Communications
Business or your
employment as President/CEO or as Vice-Chairman
terminates, then a
pro rata calculation of the number of Performance Stock
Options that
you have earned will be made. For instance, if the
20 Day Average
Price has reached Cdn$1.09 at the time that any of
these occur, then
you will be entitled to 9/10ths of the entitlement
earned if the 20
Day Average Price had increased from Cdn$1.00 to
Cdn$1.10 (i.e., an
additional 75,000).
g) you will only become entitled to be vested the first
time that the
20 Day Average Price reaches or exceeds a particular
price level. It
is NOT intended that you would become entitled to vest
an additional
number of Performance-Based Stock Options if the 20
Day Average
Price exceeds Cdn$1.00 for a second time, for example.
h) both the number of Performance-Based Stock Options and
the exercise
price may be adjusted, as described in the
<O`>Change in
Capitalization<O'> section above, to take into
account any changes
in capitalization since the original grant.
If, by the time your employment as President/CEO
terminates, your
entitlements to Performance-Based Stock Options are less than
one and one
half million, then during your employment as Vice-
Chairman and on or
before April 30, 2001:
[a] the difference between one and one half million and
the number of
entitlements earned as President/CEO will be
calculated;
[b] the highest round-number price level that was
achieved will be
determined (hereinafter the <O`>Previous Price Level
Attained<O'>).
[c] the remaining entitlements will then be spread
evenly from the
Previous Price Level Attained up to the Cdn$3.00
level (or the
Current U.S. Dollar Equivalent Price of Cdn$3.00),
at Cdn$0.10
intervals.
[d] however, there will be no further entitlement to
be vested with
Performance-Based Stock Options at any prices above
Cdn$3.00.
[e] also clauses (f), (g) and (h) of <O`>Section (i)
Increases in the
Market Value of TSI TelSys Shares<O'> will continue to
apply.
EXAMPLE: Suppose that you had become entitled to 833,333
Performance-
Based Stock Options while serving as President/CEO and
the 20 Day
Average Price had reached a maximum of Cdn$1.445.
Then 666,667
entitlements would be spread over 16 intervals from
Cdn$1.50 to
Cdn$3.00 D 41,666 per Cdn$0.10 intervals, and 41,677 at
the Cdn$3.00
price level.
(i) CHANGE OF CONTROL TRANSACTION OR SALE OF THE
COMMUNICATIONS BUSINESS.
You will be entitled to be vested with 450,000 Performance-
Based Stock
Options if a Change of Control Transaction of a Sale of the
Communications
Business is completed in which the Pre-Deal Valuation of the
Company<O~>s
Equity or the Pre-Deal Valuation of the Communications
Business is at
least US$25 million (twenty five million US dollars), so long
as either:
a) you are the President/CEO of the Company on the Completion
Date; or
b) you are the Vice-Chairman of the Company on the Completion
Date; or
c) the Completion Date occurs within 180 days after your
term as either
President/CEO or Vice-Chairman has ended, and so long
as you also
played an active role in the negotiations with the
purchaser prior to
termination.
Furthermore, you will also be entitled to be vested with
an additional
12,500 Performance-Based Stock Options for every additional
US$1.0 million
(one million US dollars), or a pro rata of 12,500 Stock
Options for any
part of US$1.0 million, that the Pre-Deal Valuation of the
Company<O~>s
Equity or the Pre-Deal Valuation of the Communications
Business, as the
case may be, exceeds US$25 million -- up to a maximum
valuation of US$61
million (sixty-one million US dollars) or a maximum of
an additional
450,000 Performance-Based Stock Options.
10
At US$61 million, therefore, you would therefore be
entitled to
900,000
Performance-Based Stock Options in the aggregate (450,000
plus 450,000).
You will NOT be entitled to be vested for any additional
Performance-Based
Stock Options (i.e., none in excess of this 900,000) if
the Pre-Deal
Valuation of the Company<O~>s Equity or the Pre-Deal
Valuation of the
Communications Business exceeds US$61 million.
(i) VESTING UNDER A COMBINATION OF THE TWO SCHEMES. You can
also be entitled
to be vested under a combination of the two entitlement
schemes discussed
above. If so, the number of Performance-Based Stock Options
that you would
be entitled to be vested with will be the sum of the number
you would be
entitled to under each of the two schemes, except that the
total number of
Performance-Based Stock Options that you may become entitled
to will never
exceed one and one half million.
For example, if you are entitled to be vested with 833,333
Performance-
Based Stock Options (because the 20 Day Average Price
reached Cdn$1.40
while you are employed as President/CEO, for instance) and
you also closed
a Change of Control Transaction or Sale of Communications
Business at a
Pre-Deal Valuation of US$45 million (entitling you to
vest a further
700,000 Performance-Based Stock Options), then you would
still have earned
entitlements to vest only one and one half million
Performance-Based Share
Options.
NON-VESTING DURING TERMINATION PERIOD. If the Company decides to
terminate your
employment as President/CEO or as Vice-Chairman, it also can
choose whether to
request you to continue to come to work during the termination
period. Vesting
of Time-Based Stock Options granted to you will continue
through the
termination period only if the Company requests you to
continue to come to
work, or unless you qualify for accelerating vesting of Time-
Based Stock
Options by virtue of the closing of a Change of Control
Transaction or Sale of
the Communications Business during the 180 day period
immediately following
your employment as either President/CEO or as Vice-Chairman in
which the Pre-
Deal Valuation of the Company or the Pre-Deal Valuation of the
Communications
Business is at least US$50 million and so long as you also
played an active
part in the negotiations with the purchaser prior to termination.
Vesting of Performance-Based Stock Options will also continue
through the
termination period only if the Company requests you to
continue to come to
work, or unless you qualify for further vesting by virtue of the
closing of a
Change of Control Transaction or Sale of the Communications
Business during the
180 day period immediately following your employment as either
President/CEO or
as Vice-Chairman in which the Pre-Deal Valuation of the Company or
the Pre-Deal
Valuation of the Communications Business is at least US$25
million and so long
as you also played an active part in the negotiations with
purchaser prior to
termination.
Up to 900,000 Performance-Based Stock Options will vest as
soon as you have
become entitled to their vesting. If you become entitled to more
than 900,000
Performance-Based Stock Options. Based on the vesting program
laid out above,
the total number of Performance-Based Stock Options that you
could conceivably
be entitled to vest could aggregate to 1,500,000, which is in
excess of the
900,000 Performance-Based Stock Options actually being granted to
you. In this
circumstance, i.e., where you become entitled to more than 900,000
Performance-
Based Options, the Company agrees that compensation as
outlined in
<O`>Attachment B: Performance Bonus<O'> will be paid to you as
consideration
for having outperformed the benchmarks for the 900,000 Performance-
Based Stock
Options.
11
ATTACHMENT B
PERFORMANCE BONUS
1) PERFORMANCE BONUS. If you have earned the entitlement to more
than 900,000
Performance-Based Stock Options, then the Company will
provide you with
additional compensation, which will either take the form
of (a) an
Additional Cash Bonus or (b) Additional Stock Options combined
with a Cash
Top-Up Payment.
(a) ADDITIONAL CASH BONUS ALTERNATIVE. The Additional Cash
Bonus will be
calculated as follows:
<capital-sigma> [ Q x ( P - OEP) x TF ]
where:
Q = the number of entitlements in excess of
900,000 that
you have earned
P = the average of daily high and low board
trading prices
on the principal exchange for the
immediately preceding
five days on which trades occur
OEP = the original exercise price on the
original 2,438,500
Stock
Options granted to you
TF = either 1.000, 1.192 or 1.324, depending on
the date that
you
earn the respective entitlements, viz:
TF = 1.000 if the entitlements were earned
in the first
12 months from your start date
TF = 1.192 if the entitlements were earned
in the
13{th} to
18{th} month from your start date
TF = 1.324 if the entitlements were earned
after
18 months from your start date.
<capital-sigma> is a mathematical notation,
that refers to
summation.
Here, the formula within the square
brackets
is to be calculated for all the actual cases
in which
you earn entitlements in excess of
900,000 and the
results of each calculation are to be
summed.
The Company agrees to pay you this additional cash bonus:
<circle> on the date that full payment has been
received by the
seller in the case that a Change of Control
Transaction or Sale
of the Communications Business is completed; or
<circle> in the case that your entitlement to this
additional cash
bonus arises from the increase in market value
of TSI TelSys
shares either:
<circle> if the additional cash bonus is less than
Cdn$100,000,
by a lump sum payment to you within 10 days
from the date on
which all 2,438,500 vested Stock Options
have been
exercised; or
<circle>
12
if the additional cash bonus is greater than
Cdn$100,000 and
less than Cdn$400,000, by equal monthly
installments (1/12
of the total to be paid to you per month)
over a one-year
period beginning from the date on which all
2,438,500 vested
Stock Options have been exercised;
<circle> it the additional cash bonus is
greater than
Cdn$400,000, by equal monthly installments
(1/24 of the
total to be paid to you per month) over a two-
year period
beginning from the date on which all 2,438,500
vested Stock
Options have been exercised.
<circle> or an appropriate combination of the two,
if some of the
entitlements arise from a Change of Control
Transaction or Sale
of the Communications Business and some arise from
an increase in
the market value of TSI TelSys shares.
(a) ADDITIONAL STOCK OPTIONS WITH CASH TOP-UP PAYMENT
ALTERNATIVE.
Notwithstanding the foregoing, the Company shall have
the right to
substitute for the additional cash bonus in (a) above by
granting you
up to an additional 600,000 Performance-Based Stock
Options. In the
event that the Company grants you these additional Stock
Options, then
the difference between the original exercise price of
the 2,438,500
original Stock Options and the exercise price of the
600,000 Stock
Options multiplied by the additional number of
Performance-Based Stock
Options being vested shall be paid to you as a Cash Top-
Up Payment on
the date(s) that any of the 600,000 Stock Options are
exercised. All
Stock Options that become vested shall be exercised on
a <O`>First
In/First Out<O'> basis such that the Cash Top-Up Payment
would be paid
only after all of the vested Stock Options from the
2,438,500 pool had
been exercised.
1) CASH BONUS FOR CHANGE OF CONTROL TRANSACTION OR SALE OF THE
COMMUNICATIONS
BUSINESS.
The Company also agrees to pay to you an additional cash bonus on
the date that
full payment has been received by the seller in the event that
a Change of
Control Transaction or Sale of the Communications Business is
completed, so
long as you were either:
<circle> employed as either President/CEO or as Vice-
Chairman of the
Company on the Completion Date; or
<circle> meet all three of the following conditions: (i) had
been employed
as either President/CEO or as Vice-Chairman within 180
days of the
Completion Date, (ii) had not been terminated for just
cause; and (iii)
had also played an active role in the negotiations with
the purchaser
prior to termination.
The amount of this additional bonus will be as follows:
<circle> if the Completion Date of the Change of Control
Transaction or
Sale of the Communications Business occurs within 12
months from your
start date, there will be no additional cash bonus
(<O`>nil<O'>).
<circle> if the Completion Date of the Change of Control
Transaction or
Sale of the Communications Business occurs within 13-
18 months from
your start date, the size of this additional cash
bonus will be
equivalent to 0.5% (one half of one percent) of the Pre-
Deal Valuation
of the Company<O~>s Equity or the Pre-Deal
Valuation of the
Communications Business, whichever is relevant.
<circle>
13
if the Completion Date of the Change of Control
Transaction or Sale of
the Communications Business occurs more than 18 months
from your start
date, the size of this additional cash bonus will be
equivalent to
0.75% (three quarters of one percent) of the Pre-Deal
Valuation of the
Company<O~>s Equity or the Pre-Deal Valuation of the
Communications
Business, whichever is relevant.
14