EXECUTIVE RETENTION AGREEMENT
THIS IS AN AGREEMENT made on this 29th day of September, 1998 (the
"Date of this Agreement"), by and between Aydin Corporation, a Delaware
corporation (the "Company"), and [name] , who is the [title] of the Company's
Turkish Division (the "Executive").
WHEREAS, the Company recently announced publicly that it has engaged
PricewaterhouseCoopers Securities, L.L.C. to assist the Company in evaluating
potential strategic alternatives to enhance shareholder value; and
WHEREAS, such announcement has led to uncertainty regarding the future
path of the Company and the long-term prospects for executive employment with
the Company; and
WHEREAS, the Executive is an "employee at will," and as such the
Company is not legally obligated to continue his employment for any fixed period
of time; and
WHEREAS, the Company's Board of Directors (the "Board") believes it is
important to the enhancement of shareholder value that, notwithstanding such
uncertainty, the Executive continue his employment with the Company in order
that the Company can benefit from the continued availability of the Executive's
services, for a period continuing until after the Board has completed its
evaluation of strategic alternatives and, should the Board cause the Company to
engage in, or recommend to the shareholders that the Company engage in, any form
of transaction to increase shareholder value, continuing for a period of time
after such transaction has been consummated; and consequently, the Board intends
to provide the incentives set forth herein for the Executive to remain in the
Company's employ during such period; and
WHEREAS, as an additional inducement for the Executive to remain in the
employ of the Company both before and after a change in control transaction,
this agreement (the "Agreement") provides that certain severance benefits will
be paid to the Executive in the event the Executive's employment is terminated
by the Company without cause or by the Executive for good reason within two
years following the execution of this Agreement;
NOW, THEREFORE, in consideration of the above premises and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Executive agree as follows:
1. Retention Bonus.
A. The Company agrees to pay to the Executive a retention bonus
under either of the following circumstances:
(i) In the absence of a change in status, as defined in Section 4
hereof, during the period of one (1) year following the Date
of this
Agreement, the Executive shall have remained employed by the
Company continuously throughout that period; or
(ii) In the event a change in status does occur within one (1) year
after the Date of this Agreement, the Executive shall have
remained employed by the Company or its successor
continuously throughout the period of six (6) consecutive
months from the date of the change in status.
B. The amount of the retention bonus payable under this Section 1
shall be equal to twenty-five percent (25%) of the Executive's annual base
salary in effect upon the Date of this Agreement. The retention bonus shall be
paid to the Executive in cash within thirty (30) days after the date on which
the Executive satisfies the requirements of either A(i) or A(ii) above,
whichever is applicable (such date hereinafter referred to as the "Bonus Date").
2. Payment of Severance Benefits. No severance benefits shall be
payable hereunder unless the Executive's employment by the Company shall have
been terminated for one of the reasons set forth in Section 5 hereof during the
period commencing on the Date of this Agreement and ending on the second
anniversary of that date (the "Change in Status Period").
3. Termination During the Change in Status Period. The Executive shall
be entitled to the benefits provided in Section 5 hereof upon the termination of
the Executive's employment at any time during the Change in Status Period unless
such termination is (a) because of the Executive's death or Retirement, (b) by
the Company for Cause or Disability or (c) by the Executive other than for Good
Reason. If the Executive's termination of employment is because of one of the
reasons described in (a), (b) or (c) in the preceding sentence, the Executive's
rights under this Agreement shall cease as of the date of such termination. For
purposes of this Agreement, the following definitions shall apply:
(i) Disability; Retirement.
(A) Termination by the Company of the Executive's employment
based on "Disability" shall mean termination because of the
Executive's absence from his duties with the Company on a
full-time basis for ninety (90) consecutive business days,
as a result of the Executive's incapacity due to physical
or mental illness, unless within thirty (30) days after a
Notice of Termination (as hereinafter defined) is given
following such absence the Executive shall have returned to
the full-time performance of his duties. If the Company
terminates the Executive's employment by reason of
Disability, the Executive shall be entitled to the benefits
determined in accordance with the Company's retirement and
welfare benefit programs then in effect, provided that in
no event shall such retirement and welfare benefits be
materially less than those in effect immediately prior to
the change in status.
2
(B) Termination by the Executive of his employment based on
"Retirement" shall mean termination in accordance with the
Company's retirement policy, including early retirement,
generally applicable to its salaried employees.
(ii) Cause. Termination by the Company of the Executive's employment
for "Cause" shall mean termination upon:
(A) the Executive's willful and continued failure to
substantially perform his duties with the Company (other
than any such failure resulting from the Executive's
incapacity due to physical or mental illness), after a
demand for substantial performance is delivered to the
Executive by the Board, which specifically identifies the
manner in which the Board believes that the Executive has
not substantially performed his duties; or
(B) the Executive's admission or conviction of, or plea of nolo
contendere to, any felony that, in the judgement of the
Board, adversely affects the Company's reputation or the
Executive's ability to carry out his obligations as an
officer of the Company; or
(C) the Executive's willful engaging in misconduct which is
materially injurious to the Company, monetarily or
otherwise. For purposes of this paragraph, no act, or
failure to act, on the Executive's part shall be considered
"willful" unless done, or omitted to be done, by the
Executive not in good faith and without reasonable belief
that the Executive's action or omission was in the best
interest of the Company. Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated for
Cause unless and until there shall have been delivered to
the Executive a copy of a Notice of Termination from the
Board, after reasonable notice to the Executive and an
opportunity for the Executive to be heard before the
Compensation Committee of the Board (or, if there be no
such Committee or such Committee delivers the Notice of
Termination, the Board), finding that in the good faith
opinion of such Committee (or the Board) the Executive was
guilty of conduct set forth above in clauses (A), (B) or
(C) of the first sentence of this paragraph and specifying
the particulars thereof in detail.
(iii) Good Reason. The Executive's termination of his employment for
"Good Reason" shall mean a termination on account of:
(A) the assignment, without the Executive's express written
consent, to the Executive of any duties inconsistent with
his positions, duties, responsibilities and status with the
Company immediately prior to a change in status, or a
change in the Executive's reporting
3
responsibilities, titles or offices as in effect
immediately prior to a change in status, or any removal of
the Executive from or any failure to re-elect the Executive
to any of such positions, except in connection with the
termination of the Executive's employment for Cause,
Disability or Retirement or as a result of the Executive's
death or by the Executive other than for Good Reason;
(B) a reduction by the Company in the Executive's annual base
salary as in effect on the date hereof or as the same may
be increased from time to time, except for across-the-board
salary reductions similarly affecting all executives of the
Company and all executives of any Person in control of the
Company;
(C) a failure by the Company to continue any bonus plans in
which the Executive is presently entitled to participate
(the "Bonus Plans") as the same may be modified from time
to time, but substantially in the forms currently in
effect, or a failure by the Company to continue the
Executive as a participant in the Bonus Plans on at least
the same basis as the Executive presently participates in
accordance with the Bonus Plans;
(D) the Company's requiring the Executive, without his express
written consent, to be based anywhere other than within
twenty-five (25) miles of the Executive's present office
location, except for required travel on the Company's
business to an extent substantially consistent with the
Executive's present business travel obligations;
(E) the failure by the Company to continue in effect any
benefit or compensation plan, life insurance plan,
health-and-accident plan or disability plan in which the
Executive is participating at the time of a change in
status (or plans providing the Executive with substantially
similar benefits), the taking of any action by the Company
which would adversely affect the Executive's participation
in or materially reduce the Executive's benefits under any
of such plans or deprive the Executive of any material
fringe benefit enjoyed by the Executive at the time of the
change in status, or the failure by the Company to provide
the Executive with the number of paid vacation days to
which the Executive is then entitled in accordance with the
Company's normal vacation policy in effect on the date
hereof; provided, however, that none of the foregoing
provisions of this subparagraph (E) shall apply to any
stock ownership plan, stock option plan or stock
appreciation rights plan (or plans providing the Executive
with substantially similar benefits);
4
(F) the failure by the Company to obtain the assumption of
the obligation to perform this Agreement by any successor
as contemplated in Section 10A hereof; or
(G) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination
satisfying the requirements of paragraph (iv) below (and,
if applicable, paragraph (ii) above); and for purposes of
this Agreement, no such purported termination shall be
effective.
(iv) Notice of Termination. Any purported termination by the
Company pursuant to paragraph (i) or (ii) above or by the
Executive pursuant to subparagraph (B) of paragraph (i) or
paragraph (iii) above 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
which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis
for termination of the Executive's employment under the
provision so indicated.
(v) Date of Termination. "Date of Termination" shall mean (A) if
the Executive's employment is terminated for Disability,
thirty (30) days after Notice of Termination is given
(provided that the Executive shall not have returned to the
performance of his duties on a full-time basis during such
thirty (30) day period), (B) if the Executive's employment is
terminated pursuant to paragraph (ii) above, the date
specified in the Notice of Termination, and (C) if the
Executive's employment is terminated for any other reason, the
date on which a Notice of Termination is given; provided that
if within thirty (30) days after any Notice of Termination is
given the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on
which the dispute is finally determined, either by mutual
written agreement of the parties, by a binding and final
arbitration award or by a final judgment, order or decree of a
court of competent jurisdiction entered upon such arbitration
award (the time for appeal therefrom having expired and no
appeal having been perfected).
4. Definition of Change in Status. The term "change in status" shall
hereinafter be used to refer to either a change in control of the Company or a
workforce adjustment, as each is defined below. For purposes of this Agreement,
a transaction constituting a change in status shall be deemed to have occurred
upon the closing of such transaction.
A. For purposes of this Agreement, a "change in control of the
Company" shall mean the occurrence of any one of the following events:
5
(i) An acquisition (other than directly from the Company) of
any voting securities of the Company (the "Voting
Securities") by any "Person" (as the term person is used
for purposes of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")),
immediately after which such Person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of more than fifty percent (50%) of
the combined voting power of the Company's then outstanding
Voting Securities; provided, however, in determining
whether a change in control has occurred, Voting Securities
which are acquired in a "Non-Control Acquisition" (as
hereinafter defined) shall not constitute an acquisition
which would cause a change in control. A "Non-Control
Acquisition" shall mean an acquisition by (A) an employee
benefit plan (or a trust forming a part thereof) maintained
by (1) the Company or (2) any corporation or other Person
of which a majority of its voting power or its voting
equity securities or equity interest is owned, directly or
indirectly, by the Company (for purposes of this
definition, a "Subsidiary"), (B) the Company or its
Subsidiaries, or (C) any Person in connection with a
"Non-Control Transaction" (as hereinafter defined);
(ii) A merger, consolidation or reorganization involving the
Company, unless such merger, consolidation or
reorganization is a "Non-Control Transaction." A
"Non-Control Transaction" shall mean a merger,
consolidation or reorganization of the Company where:
(1) the stockholders of the Company, immediately before
such merger, consolidation or reorganization, own
directly or indirectly immediately following such
merger, consolidation or reorganization, at least
fifty percent (50%) of the combined voting power of
the outstanding voting securities of the corporation
resulting from such merger or consolidation or
reorganization (the "Surviving Corporation") in
substantially the same proportion as their ownership
of the Voting Securities immediately before such
merger, consolidation or reorganization, or
(2) no Person other than (i) the Company, (ii) any
Subsidiary, (iii) any employee benefit plan (or any
trust forming a party thereof) maintained by the
Company, the Surviving Corporation, or any Subsidiary,
or (iv) any Person who, immediately prior to such
merger, consolidation or reorganization had Beneficial
Ownership of more than fifty percent (50%) or more of
the then outstanding Voting Securities), has
Beneficial Ownership of more than fifty percent (50%)
or more of the combined voting power of the Surviving
Corporation's then outstanding voting securities; or
(iii) The sale or other disposition of all or substantially all
of the assets of the Company to any Person (other than a
transfer to a Subsidiary).
6
B. Notwithstanding the foregoing, a change in control of the Company
shall not be deemed to occur solely because any Person (the "Subject
Person") acquired Beneficial Ownership of more than the permitted amount
of the then outstanding Voting Securities as a result of the acquisition
of Voting Securities by the Company which, by reducing the number of
Voting Securities then outstanding, increases the proportional number of
shares Beneficially Owned by the Subject Person, provided that if a change
in control would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Company, and after
such share acquisition by the Company, the Subject Person becomes the
Beneficial Owner of any additional Voting Securities which increases the
percentage of the then outstanding Voting Securities Beneficially Owned by
the Subject Person, then a change in control shall occur.
C. For purposes of this Agreement, a "workforce adjustment"
shall mean the sale or other disposition of all or substantially all of
the assets of the Aydin Telemetry Division or any other division of the
Company (other than the Displays Division) that accounts for at least
fifteen percent (15%) of the Company's gross revenues to any Person (other
than a transfer to a Subsidiary).
D. Notwithstanding the foregoing, a change in status will not
be deemed to have occurred with respect to the Executive if he, either directly
or indirectly, is financially involved as a principal or otherwise (1) of any
successor to the Company or of any Person who purchases all or substantially all
of the Company's assets, or (2) in the event of a workforce adjustment, of any
Person who purchases all or substantially all of the business or assets of a
division identified in Section 4C hereof.
5. Severance Benefits Upon Termination. If during the Change in Status
Period, the Executive's employment by the Company shall be terminated (a) by the
Company other than for Cause, Disability or Retirement or (b) by the Executive
for Good Reason, then the Executive shall be entitled to the benefits provided
below:
(i) the Company shall pay the Executive his full base
salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given
plus credit for any vacation earned but not taken and
the amount, if any, of any bonus for a past
performance period which has been earned, but not yet
paid to the Executive;
(ii) the Executive shall continue to receive as severance
pay during the six month period subsequent to the
Date of Termination payments of the Executive's base
salary at the highest rate in effect during the
twelve (12) months immediately preceding the Date of
Termination, payable in the same manner as salaries
paid to other active executive employees of the
Company;
(iii) all options to purchase shares of the Company's
common stock granted to the Executive by the Company
shall immediately become fully exercisable
7
and shall remain exercisable in accordance with
their terms for at least one year, regardless of any
provision in the option grants to the contrary; and
(iv) the Company shall maintain in full force and effect,
for the Executive's continued benefit until the
earlier of (A) six months after the Date of
Termination or (B) the Executive's commencement of
full time employment with a new employer, all life
insurance, medical, health, dental and disability
plans, programs or arrangements in which the
Executive was entitled to participate immediately
prior to the Date of Termination, provided that the
Executive's continued participation is possible
under the general terms and provisions of such plans
and programs. In the event that the Executive's
participation in any such plan or program is barred,
the Company shall arrange to provide the Executive
with benefits substantially similar to those which
the Executive is entitled to receive under such
plans and programs.
6. Mitigation. The Executive shall not be required to mitigate the
amount of any payment provided for in Section 5 hereof by seeking other
employment or otherwise, nor shall the amount of any payment provided for in
Section 5 hereof be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.
7. Options. If as the result of a change in status or in anticipation
of a change in status, the Board determines that all options issued by the
Company to purchase shares of common stock of the Company are to be terminated,
then all of the options granted to the Executive by the Company shall become
fully exercisable, regardless of vesting, not less than thirty (30) days prior
to the date such options are to be terminated.
8. Certain Obligations.
8
(i) Confidential Information. In consideration of the mutual
terms and agreements set forth herein the Executive hereby
agrees to hold in a fiduciary capacity for the benefit of
the Company and its subsidiaries all proprietary, secret or
confidential information, knowledge or data relating to the
Company or its subsidiaries, and their respective
businesses, which shall have been obtained by the Executive
during his employment by the Company or its subsidiaries and
which shall not be or become public knowledge (other than by
acts by the Executive or his representatives in violation of
this Agreement). After termination of the Executive's
employment with the Company or its subsidiaries, the
Executive agrees that he will not, without the prior written
consent of the Company, communicate or divulge any such
information, knowledge or data to anyone other than the
Company and those designated by it. The Executive's
undertakings set forth in this subsection (i) hereof are in
addition to, and not in substitution of, any other
obligation the Executive may have, whether by other
agreement or imposed by law, regarding confidentiality and
disclosure of information, knowledge or data relating to the
Company and its subsidiaries.
(ii) Non-Compete. In consideration of the mutual terms and
agreements set forth herein the Executive hereby agrees that
while employed by the Company, the Executive will not,
unless authorized in writing to do so by the Company,
directly or indirectly own, manage, operate, join, control
or participate in the ownership, management, operation or
control of, or be employed or otherwise connected in any
substantial manner with, any business in North America which
directly or indirectly competes with any line of business of
the Company or its subsidiaries; provided, that nothing in
this subsection (ii) shall prohibit the Executive from
acquiring up to five percent (5%) of any class of
outstanding equity securities of any corporation whose
equity securities are regularly traded on a national
securities exchange or in the "over-the-counter market." The
Executive also agrees that following the Executive's
termination of employment and until the first anniversary of
the Executive's Date of Termination, the Executive will not
(x) recruit any employee of the Company or its subsidiaries
or solicit or induce, or attempt to solicit or induce, any
employee of the Company or its subsidiaries to terminate his
or her employment with, or otherwise cease his or her
relationship with, the Company or its subsidiaries, provided
that this will not preclude hiring any person who contacts
the Executive for employment and who has not been employed
by the Company or its subsidiaries at any time during the
preceding six months; or (y) solicit, divert or take away,
or attempt to solicit, divert or take away, the business or
patronage of any of the clients, customers or accounts, or
prospective clients, customers or accounts, of the Company
or its subsidiaries that were contacted, solicited or served
by the Executive while employed by the Company or its
subsidiaries.
9
(iii) Remedies. The Company and the Executive confirm that the
restrictions contained in Sections 8(i) and 8(ii) hereof
are, in view of the nature of the business of the Company,
reasonable and necessary to protect the legitimate interests
of the Company and that any violation of any provision of
Section 8(i) or 8(ii) will result in irreparable injury to
the Company. The Executive hereby agrees that, in the event
of the Executive's breach or threatened breach of the terms
or conditions of Section 8(i) or 8(ii) of this Agreement,
the Company's remedies at law will be inadequate and, in any
such event, the Company shall be entitled to commence an
action for preliminary and permanent injunctive relief and
other equitable relief in any court of competent
jurisdiction.
(iv) Modification of Terms. If any restriction in this Section 8
is adjudicated to exceed the time, geographic, service or
other limitations permitted by applicable law in any
jurisdiction, the Executive agrees that such may be modified
and narrowed, either by a court or the Company, to the
maximum time, geographic, service or other limitations
permitted by applicable law so as to preserve and protect
the Company's legitimate business interest, without negating
or impairing any other restriction or undertaking set forth
in this Agreement.
9. Term of Agreement. This Agreement shall terminate at the end of the
Change in Status Period, provided that if, at the end of the Change in Status
Period, the Executive is still receiving salary continuation payments in
accordance with Section 5(ii) hereof, the term of this Agreement shall be
extended until the last payment due under such section has been made.
10. Successors; Binding Agreement.
A. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in the same amount
and on the same terms as the Executive would be entitled hereunder if the
Executive terminated his employment for Good Reason, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. 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 Section 10 or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
B. This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die after a Notice of Termination has
10
been delivered by the Executive or while any amount would still be payable to
the Executive hereunder if the Executive had continued to live, all amounts due
to the Executive under this Agreement, 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.
11. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally, when sent by a
nationally recognized overnight delivery service, when mailed by certified or
registered mail, return receipt requested, postage prepaid, or when sent by
telegram, fax or telecopy (confirmed by U.S. Mail), receipt acknowledged,
addressed as follows:
If to the Company:
Aydin Corporation
700 Dresher Road
Horsham, PA 19044
Attention: Chief Executive Officer
If to the Executive:
[address]
The Executive or the Company may change the person or address
to which notices or other communications are to be sent by giving written notice
of such change to the other party in the manner provided herein for giving
notice.
12. 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 agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement; provided,
however, that this Agreement shall not supersede or in any way limit the rights,
duties or obligations the Executive may have under any other written agreement
with the Company. Moreover, the severance payments provided herein following a
change in status shall be in place of, and shall not be in addition to, any and
all other severance benefits to which the Executive may be entitled. The
validity, interpretation, construction and performance of this Agreement shall
be governed by the laws of the Commonwealth of Pennsylvania without giving
effect to otherwise applicable principles of conflicts of law. Finally, the
Company shall withhold
11
from all amounts payable under this Agreement such Federal, state and local
taxes as shall be required to be withheld pursuant to any applicable law or
regulation.
13. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
14. Counterparts; Headings. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument. The headings of the
Sections of this Agreement are for convenience of reference only and shall not
control or affect the meaning or construction or limit the scope or intent of
any of the provisions of this Agreement.
15. Arbitration. Except with respect to relief sought by the Company
pursuant to Section 8(iii) hereof, any dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by arbitration in
Philadelphia, Pennsylvania in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
IN WITNESS WHEREOF, the undersigned have signed this Agreement on the
date indicated above.
AYDIN CORPORATION
By:
--------------------------- ------------------------------------
Chief Executive Officer Executive