CHANGE IN CONTROL AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT dated May 26, 1998, by
and between Base Ten Systems, Inc., a New Jersey corporation (together with any
successor, the "Company"), and William F. Hackett, residing at 34 Wilshire Dr.,
Belle Mead, NJ 08502, (the "Executive").
W I T N E S S E T H:
WHEREAS, should the Company receive a proposal from or
engage in discussions with a third person concerning a possible business
combination with or the acquisition of a substantial portion of voting
securities of the Company, the Board of Directors of the Company (the "Board")
has deemed it imperative that it and the Company be able to rely on the
Executive to continue to serve in his position and that the Board and the
Company be able to rely upon his advice as being in the best interests of the
Company and its shareholders without concern that the Executive might be
distracted by the personal uncertainties and risks that such a proposal or
discussions might otherwise create; and
WHEREAS, the Company desires to enhance executive morale
and its ability to retain existing management; and
WHEREAS, the Company desires to reward the Executive for
his service to the Company or one or more of its subsidiary corporations (each
together with any successor, a "Subsidiary") should his service be terminated
under circumstances hereinafter described; and
WHEREAS, the Board therefore considers it in the best
interests of the Company and its shareholders for the Company to enter into
Change in Control Agreements, in form similar to this Agreement, with certain
key executive officers of the Company; and
WHEREAS, the Executive is presently a key executive with
whom the Company has been authorized by the Board to enter into this Agreement;
WHEREAS, as of the date of this Agreement, the specialized
knowledge and skills of the Executive will be particularly needed by the Company
as the Company continues to expand its medical technology business, and
stability at the top management level is and will be critically important to the
ultimate success of the Company; and
WHEREAS, in order to provide an incentive to members of top
management not to seek and consider opportunities outside of the Company, which
would substantially impede the continued expansion of the Company's medical
technology business, while at the same time continuing to engage in its historic
business, the Company's independent directors have determined it to be in the
best interests of the Company to revise and amend this Agreement in order to
make it consistent with the purposes underlying the original entry of this
Agreement;
NOW, THEREFORE, to assure the Company of the Executive's
continued dedication and the availability of his advice and counsel in the event
of any such proposal, to induce the Executive to remain in the employ of the
Company or a Subsidiary, and to reward the Executive for his valuable, dedicated
service to the Company or a Subsidiary should his service be terminated under
circumstances hereinafter described, and for other good and valuable
consideration, the receipt and adequacy whereof each party acknowledges, the
Company and the Executive agree as follows:
1. OPERATION, EFFECTIVE DATE, AND TERM OF AGREEMENT.
(a) This Agreement shall commence on the date hereof and
continue in effect through December 31, 2000; provided, however, that commencing
on January 1, 1999 and each succeeding January 1 thereafter, the term of this
Agreement shall be extended automatically for one additional year (so that at
all times the remaining term hereof shall not be less than two (2) years) unless
not later than the September 30 preceding such automatic extension date the
Company shall have given notice that it does not wish to extend this Agreement.
(b) This Agreement is effective and binding on both parties
as of the date hereof. Notwithstanding its present effectiveness, the provisions
of paragraphs 3 and 4 of this Agreement shall become operative only when, as and
if there has been a "Change in Control of the Company." For purposes of this
Agreement, a "Change in Control of the Company" shall be deemed to have occurred
if
(X) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), or persons "acting
in concert" (which for purposes of this Agreement shall
include two or more persons voting together on a consistent
basis pursuant to an agreement or understanding between
them), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company
and other than a person engaging in a transaction of the
type described in clause (Z) of this subsection but which
does not constitute a change in control under such clause,
is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing forty percent (40%)
or more of the combined voting power of the Company's then
outstanding securities; or
(Y) individuals who, as of the date of this
Amended and Restated Agreement, constitute the Board and
any new director ("New Director") whose election by the
Board, or nomination for election by the Company
shareholders, was approved by a vote of at least
seventy-five percent (75%) of the directors then still in
office who either were directors at the beginning of the
period or whose election or nomination for election was
previously so approved ("Continuing Members"), cease for
any reason to constitute a majority thereof (provided that,
for purposes of this clause (Y), the term "New Director"
shall exclude (i) a director designated by a person who has
entered into an agreement with the Company to effect a
transaction described in clauses (X) or (Z) of this
subsection, and (ii) an individual whose initial assumption
of office as a director is in connection with any actual or
threatened contest related to the election of any directors
to the Board); or
(Z) the shareholders of the Company approve or,
if no shareholder approval is required or obtained, the
Company or a Subsidiary completes a merger, consolidation
or similar transaction of the Company or a Subsidiary with
or into any other corporation, or a binding share exchange
involving the Company's securities, other than any such
transaction which would result in the voting securities of
the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving
entity) at least seventy-five percent (75%) of the combined
voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such
transaction, or the shareholders of the Company approve a
plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or
substantially all the Company's assets (excluding, for this
purpose, the sale of the Company's Government Technology
division).
2. EMPLOYMENT OF EXECUTIVE.
Nothing herein shall affect any right which the Executive
or the Company or a Subsidiary may otherwise have to terminate the Executive's
employment by the Company or a Subsidiary at any time in any lawful manner,
subject always to the Company's providing to the Executive the payments and
benefits specified in paragraphs 3 and 4 of this Agreement to the extent
hereinbelow provided.
In the event any person commences a tender or exchange
offer, circulates a proxy statement to the Company's shareholders or takes other
steps designed to effect a Change in Control of the Company as defined in
paragraph 1 of this Agreement, the Executive agrees that, subject to the
provisions of Section 5(a)(iii), (c) and (j) of the Employment Agreement, he
will not voluntarily leave the employ of the Company or a Subsidiary, and will
continue to perform his regular duties and to render the services specified in
the recitals of this Agreement, until such person has abandoned or terminated
his efforts to effect a Change in Control of the Company or until a Change in
Control of the Company has occurred. Should the Executive voluntarily terminate
his employment before any such effort to effect a Change in Control of the
Company has commenced, or after any such effort has been abandoned or terminated
without effecting a Change in Control of the Company and no such effort is then
in process, this Agreement shall lapse and be of no further force or effect.
3. TERMINATION FOLLOWING CHANGE IN CONTROL.
(a) If any of the events described in paragraph 1 hereof
constituting a Change in Control of the Company shall have occurred, the
Executive shall be entitled to the benefits provided in paragraph 4 hereof upon
the termination of his employment within the applicable period set forth in
paragraph 4 hereof unless such termination is (i) due to the Executive's death;
or (ii) by the Company or a Subsidiary by reason of the Executive's Disability
or for Cause; or (iii) by the Executive other than for Good Reason.
(b) If following a Change in Control of the Company the
Executive's employment is terminated by reason of his death or Disability, the
Executive shall be entitled to death or long-term disability benefits, as the
case may be, from the Company no less favorable than the maximum benefits to
which he would have been entitled had the death or termination for Disability
occurred during the six month period prior to the Change in Control of the
Company. If prior to any such termination for Disability, the Executive fails to
perform his duties as a result of incapacity due to physical or mental illness,
he shall continue to receive his Salary less any benefits as may be available to
him under the Company's or Subsidiary's disability plans until his employment is
terminated for Disability.
(c) If the Executive's employment shall be terminated by
the Company or a Subsidiary for Cause or by the Executive other than for Good
Reason, the Company shall pay to the Executive his full Salary through the Date
of Termination at the rate in effect at the time Notice of Termination is given,
and the Company shall have no further obligations to the Executive under this
Agreement.
(d) For purposes of this Agreement:
(i) "Disability" shall mean the Executive's incapacity due
to physical or mental illness such that the Executive shall
have become qualified to receive benefits under the
Company's or Subsidiary's long-term disability plans or any
equivalent coverage required to be provided to the
Executive pursuant to any other plan or agreement,
whichever is applicable.
(ii) "Cause" shall mean:
(A) the conviction of the Executive for a felony,
or the willful commission by the Executive of a
criminal or other act that in the judgment of the
Board causes or will probably cause substantial
economic damage to the Company or a Subsidiary or
substantial injury to the business reputation of
the Company or a Subsidiary;
(B) the commission by the Executive of an act of
fraud in the performance of such Executive's
duties on behalf of the Company or a Subsidiary
that causes or will probably cause economic
damage to the Company or a Subsidiary; or
(C) the continuing willful failure of the
Executive to perform the duties of such Executive
to the Company or a Subsidiary (other than any
such failure resulting from the Executive's
incapacity due to physical or mental illness)
after written notice thereof (specifying the
particulars thereof in reasonable detail) and a
reasonable opportunity to be heard and cure such
failure are given to the Executive by the
Compensation Committee of the Board with the
approval thereof by a majority of the Continuing
Directors.
For purposes of this subparagraph (d)(ii), no act, or
failure to act, on the Executive's part shall be considered "willful" unless
done, or omitted to be done, by him not in good faith and without reasonable
belief that his action or omission was in the best interests of the Company or a
Subsidiary.
(iii) "Good Reason" shall mean:
(A) The assignment by the Company or a Subsidiary
to the Executive of duties without the
Executive's express written consent, which (i)
are materially different or require travel
significantly more time consuming or extensive
than the Executive's duties or business travel
obligations measured from the point in time one
(1) year prior to the Change in Control of the
Company, or (ii) result in either a significant
reduction in the Executive's authority and
responsibility as a senior corporate executive of
the Company or a Subsidiary when compared to the
highest level of authority and responsibility
assigned to the Executive at any time during the
one (1) year period prior to the Change in
Control of the Company, or, (iii) without the
Executive's express written consent, the removal
of the Executive from, or any failure to
reappoint or reelect the Executive to, the
highest title held since the date one (1) year
before the Change in Control of the Company,
except in connection with a termination of the
Executive's employment by the Company or a
Subsidiary for Cause, or by reason of the
Executive' death or Disability;
(B) A reduction by the Company or a Subsidiary of
the Executive's Salary, or the failure to grant
increases in the Executive's Salary on a basis at
least substantially comparable to those granted
to other executives of the Company or a
Subsidiary of comparable title, salary and
performance ratings made in good faith;
(C) The relocation of the Company's principal
executive offices (or in the case of an employee
of a Subsidiary, the principal executive offices
of such Subsidiary) to a location outside the
State of New Jersey, or the Company's requiring
the Executive to be based anywhere other than the
Company's principal executive offices (or in the
case of an employee of a Subsidiary, the
principal executive officer of such Subsidiary)
except for required travel on the Company's or a
Subsidiary's business to an extent substantially
consistent with the Executive's business travel
obligations measured from the point in time one
(1) year prior to the Change in Control of the
Company, or in the event of any relocation of the
Executive with the Executive's express written
consent, the failure by the Company or a
Subsidiary to pay (or reimburse the Executive
for) all reasonable moving expenses by the
Executive relating to a change of principal
residence in connection with such relocation and
to indemnify the Executive against any loss
realized in the sale of the Executive's principal
residence in connection with any such change of
residence, all to the effect that the Executive
shall incur no loss upon such sale on an after
tax basis;
(D) The failure by the Company or a Subsidiary to
continue to provide the Executive with
substantially the same welfare benefits (which
for purposes of this Agreement shall mean
benefits under all welfare plans as that term is
defined in Section 3(1) of the Employee
Retirement Income Security Act of 1974, as
amended), and perquisites, including
participation on a comparable basis in the
Company's or a Subsidiary's stock option plan,
incentive bonus plan and any other plan in which
executives of the Company or a subsidiary of
comparable title and salary participate and as
were provided to the Executive measured from the
point in time one (1) year prior to such Change
in Control of the Company, or with a package of
welfare benefits and perquisites that is
substantially comparable in all material respects
to such welfare benefits and perquisites; or
(E) The failure of the Company to obtain the
express written assumption of and agreement to
perform this Agreement by any successor as
contemplated in subparagraph 5(d) hereof.
(iv) "Dispute" shall mean (i) in the case of termination of
employment of the Executive with the Company or a
Subsidiary by the Company or a Subsidiary for Disability or
Cause, that the Executive challenges the existence of
Disability or Cause and (ii) in the case of termination of
employment of the Executive with the Company or a
Subsidiary by the Executive for Good Reason, that the
Company or the Subsidiary challenges the existence of Good
Reason.
(v) "Salary" shall mean the Executive's average annual
compensation reported on Form W-2.
(vi) "Incentive Compensation" in any year shall mean the
amount the Executive has elected to defer in such year
pursuant to any plan, arrangement or contract providing for
the deferral of compensation.
(e) Any purported termination of employment by the Company
or a Subsidiary by reason of the Executive's Disability or for Cause, or by the
Executive for Good Reason, shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice given by the Executive or the Company or a
Subsidiary, as the case may be, which shall indicate the specific basis for
termination and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for determination of any payments under this
Agreement. The Executive shall not be entitled to give a Notice of Termination
that the Executive is terminating his employment with the Company or a
Subsidiary for Good Reason more than six (6) months following the later to occur
of (i) the Change in Control and (ii) the occurrence of the event alleged to
constitute Good Reason. The Executive's actual employment by the Company or a
Subsidiary shall cease on the Date of Termination specified in the Notice of
Termination, even though such Date of Termination for all other purposes of this
Agreement may be extended in the manner contemplated in the second sentence of
Paragraph 3(f).
(f) For purposes of this Agreement, "Date of Termination"
shall mean the date specified in the Notice of Termination, which shall be not
more than ninety (90) days after such Notice of Termination is given, as such
date may be modified pursuant to the next sentence. If within thirty (30) days
after any Notice of Termination is given, the party who receives such Notice of
Termination notifies the other party that a Dispute (as heretofore defined)
exists, the Date of Termination shall be the date on which the Dispute is
finally determined, either by mutual written agreement of the parties, or by a
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected);
provided that the Date of Termination shall be extended by a notice of Dispute
only if such notice is given in good faith and the party giving such notice
pursues the resolution of such Dispute with reasonable diligence and provided
further that pending the resolution of any such Dispute, the Company or a
Subsidiary shall continue to pay the Executive the same Salary and to provide
the Executive with the same or substantially comparable welfare benefits and
perquisites that the Executive was paid and provided as of a date one (1) year
prior to the Change in Control of the Company. Should a Dispute ultimately be
determined in favor of the Company or a Subsidiary, then all sums paid by the
Company or a Subsidiary to the Executive from the date of termination specified
in the Notice of Termination until final resolution of the Dispute pursuant to
this paragraph shall be repaid promptly by the Executive to the Company or a
Subsidiary, with interest at the prime rate generally prevailing from time to
time among major New York City banks and all options, rights and stock awards
granted to the Executive during such period shall be cancelled or returned to
the Company or Subsidiary. The Executive shall not be obligated to pay to the
Company or a Subsidiary the cost of providing the Executive with welfare
benefits and perquisites for such period unless the final judgment, order or
decree of a court or other body resolving the Dispute determines that the
Executive acted in bad faith in giving a notice of Dispute. Should a Dispute
ultimately be determined in favor of the Executive or be settled by mutual
agreement between the Executive and the Company, then the Executive shall be
entitled to retain all sums paid to the Executive under this subparagraph (f)
for the period pending resolution of the Dispute and shall be entitled to
receive, in addition, the payments and other benefits to the extent provided for
in paragraph 4 hereof to the extent not previously paid hereunder.
4. PAYMENTS UPON TERMINATION.
If within three years after a Change in Control of the
Company (or if within nine (9) months prior to a Change in Control if effected
in connection with such Change in Control), the Company or a Subsidiary shall
terminate the Executive's employment other than by reason of the Executive's
death, Disability or for Cause or the Executive shall terminate his employment
for Good Reason then,
(a) The Company or a Subsidiary will pay on the Date of
Termination to the Executive as compensation for services
rendered on or before the Executive's Date of Termination,
a lump sum cash amount (subject to any applicable payroll
or taxes required to be withheld computed at the rate for
supplemental payments) equal to (i) 2.99 times the sum of
the average for each of the five fiscal years of the
Company ending before the day on which the Change in
Control of the Company occurs of the Executive's Salary,
his Incentive Compensation and the annual cost to the
Company of all hospital, medical and dental insurance, life
insurance, disability insurance and other welfare or
benefit plan provided to the Executive minus (ii) the cost
to the Company of the insurance required under subparagraph
4(b) hereof;
(b) For a period of three years following the Date of
Termination, the Company shall provide, at Company expense,
the Executive and the Executive's spouse with full
hospital, medical and dental insurance with substantially
the same coverage and benefits as were provided to the
Executive immediately prior to the Change in Control of the
Company; and
(c) In event that any payment or benefit received or to be
received by the Executive pursuant to this Agreement in
connection with a Change in Control of the Company or the
termination of the Executive's employment (collectively
with all payments and benefits hereunder, "Total Payments")
would not be deductible in whole or in part by the Company
as the result of Section 280G of the Internal Revenue Code
of 1986, as amended and the regulations thereunder (the
"Code"), the payments and benefits hereunder shall be
reduced until no portion of the Total Payments is not
deductible by reducing to the extent necessary the payment
under subparagraph (a) hereof. For purposes of this
limitation (i) no portion of the Total Payments the receipt
or enjoyment of which the Executive shall have effectively
waived in writing prior to the date of payment shall be
taken into account, (ii) no portion of the Total Payments
shall be taken into account which in the opinion of tax
counsel selected by the Executive and acceptable to the
Company's independent auditors the Executive is not likely
to constitute a "parachute payment" within the meaning of
Section 280G(b)(2) of the Code, and (iii) the value of any
non-cash benefit or any deferred payment or benefit
included in the Total Payments shall be determined by the
Company's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
5. GENERAL.
(a) The Executive shall retain in confidence any
proprietary or other confidential information known to him concerning the
Company and its business (including the Company's Subsidiaries and their
businesses) so long as such information is not publicly disclosed and disclosure
is not required by an order of any governmental body or court.
(b) If litigation or other proceedings shall be brought to
enforce or interpret any provision contained herein, or in connection with any
tax audit to the extent attributable to the application of Section 4999 of the
Code to any payment or benefit provided hereunder, the Company shall indemnify
the Executive for his reasonable attorney's fees and disbursements incurred in
connection therewith (which indemnification shall be made at regular intervals
during the course of such litigation, not less frequently than every three (3)
months) and pay prejudgment interest on any money judgment obtained by the
Executive calculated at the prime rate of interest generally prevailing from
time to time among major New York City banks from the date that payment should
have been made under the Agreement; provided that if the Executive initiated the
proceedings, the Executive shall not have been found by the court or other fact
finder to have acted in bad faith in initiating such litigation or other
proceeding, which finding must be final without further rights of appeal.
(c) The Company's obligation to pay the Executive the
compensation and to make the arrangements provided herein shall be absolute and
unconditional and shall not be affected by any circumstance, including, without
limitation, any setoff, counterclaim, recoupment, defense or other right which
the Company may have against the Executive or anyone else. All amounts payable
by the Company hereunder shall be paid without notice or demand. Except as
expressly provided herein, the Company waives all rights which it may now have
or may hereafter have conferred upon it, by statute or otherwise, to terminate,
cancel or rescind this Agreement in whole or in part. Except as provided in
paragraph 3(f) herein, each and every payment made hereunder by the Company
shall be final and the Company will not seek to recover for any reason all or
any part of such payment from the Executive or any person entitled thereto. The
Executive shall not be required to mitigate the amount of any payment or other
benefit provided for in this Agreement by seeking other employment or otherwise.
(d) 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 (excluding, for
this purpose, the sale of the Company's Government Technology division), by
written agreement in form and substance satisfactory to the Executive, 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.
As used in this Agreement, "Company" shall mean the Company
as hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this
paragraph 5 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
(e) This Agreement shall inure to the benefit of, and be
enforceable by, the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devises and legatees. If the
Executive should die while any amounts would still be payable to the Executive
hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the Executive's devisee, legatee or other designee or, if there be no such
designee, to the Executive's estate. The obligations of the Executive hereunder
shall not be assignable by the Executive.
(f) Nothing in this Agreement shall be deemed to entitle
the Executive to continued employment with the Company or a Subsidiary, and the
rights of the Company or a Subsidiary to terminate the employment of the
Executive shall continue as fully as though this Agreement were not in effect.
6. NOTICE.
For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
William F. Hackett
34 Wilshire Dr.
Belle Mead, NJ 08502
If to the Company:
Base Ten Systems, Inc.
One Electronics Drive
P. O. Box 3151
Trenton, New Jersey 08619
Attention: Secretary
7. MISCELLANEOUS.
No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing, 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 assurances or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement or the
Employment Agreement. However, this Agreement is in addition to, and not in lieu
of, any other plan providing for payments to or benefits for the Executive or
any agreement now existing, or which hereafter may be entered into, between the
Company and the Executive. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of New
Jersey.
8. FINANCING.
All amounts due and benefits provided under this Agreement
shall constitute general obligations of the Company in accordance with the terms
of this Agreement. The Executive shall have only an unsecured right to payment
thereof out of the general assets of the Company. Notwithstanding the foregoing,
the Company may, by agreement with one or more trustees to be selected by the
Company, create a trust on such terms as the Company shall determine to make
payments to the Executive in accordance with the terms of this Agreement.
9. VALIDITY.
The invalidity or unenforceability of any provisions 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. Any
provision in this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating or affecting the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date set forth above.
BASE TEN SYSTEMS, INC.
T.E. GARDNER
By:----------------------------------------
Chairman of the Board and
Chief Executive Officer
WILLIAM F. HACKETT
----------------------------------------
(EXECUTIVE)