SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
for the quarterly period ended March 31, 2001 or
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
for the transition period to
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Commission File Number: 0-8588
Massachusetts 04-2295040
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
100 Domino Drive, Concord, MA 01742-2892
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(Address of principal executive offices) (zip code)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Number of shares of Common Stock, $.10 par value, outstanding as of May 11, 2001: 1,323,328.
INDEX
Page
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PART I Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets,
as of March 31, 2001 (unaudited) and September 30, 2000 1
Condensed Consolidated Statements of Operations,
Three (3) months ended March 31, 2001 and April 1, 2000 (unaudited), 2
Condensed Consolidated Statements of Operations,
Six (6) months ended March 31, 2001 and April 1, 2000 (unaudited), 3
Condensed Consolidated Statements of Cash Flows,
Six (6) months ended March 31, 2001 and April 1, 2000 (unaudited), 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 7
PART II Other Information 10
Signatures 11
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PART I. Financial Information - Item 1. Financial Statements
TECHNICAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
March 31, 2001 September 30, 2000
-------------- ------------------
(unaudited)
Assets
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Current Assets:
Cash and cash equivalents $1,307,531 $3,121,617
Accounts receivable - trade, less
allowance for doubtful accounts
of $70,000 963,386 363,742
Inventories 3,379,173 3,452,403
Deferred income taxes 157,500 157,500
Other current assets 271,904 269,980
---------- ----------
Total current assets 6,079,494 7,365,242
Equipment and leasehold improvements 4,916,568 4,899,615
Less: accumulated depreciation and
amortization 4,460,534 4,330,749
---------- ----------
456,034 568,866
Goodwill 1,614,131 1,614,131
Less: accumulated amortization 1,253,717 1,146,262
---------- ----------
360,414 467,869
Other assets 740 740
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$6,896,682 $8,402,717
========== ==========
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities:
Accounts payable $ 260,686 $ 524,231
Accrued liabilities
Compensation and related expenses 234,220 162,420
Other 544,877 435,602
---------- ----------
Total current liabilities 1,039,783 1,122,253
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Commitments and contingencies
Stockholders' Equity:
Common stock, par value $.10 per share;
authorized 3,500,000 shares; issued
and outstanding 1,323,328 and
1,312,153 shares 132,333 131,215
Treasury stock at cost, 4,845 and
22,968 shares (38,284) (118,610)
Additional paid-in capital 1,365,600 1,341,742
Retained earnings 4,397,250 5,926,111
---------- ----------
Total stockholders' equity 5,856,899 7,280,458
---------- ----------
$6,896,682 $8,402,717
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The accompanying notes are an integral part of these condensed consolidated financial statements.
TECHNICAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended
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March 31, 2001 April 1, 2000
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Net sales $ 779,297 $1,381,050
Cost of sales 408,259 702,144
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Gross profit 371,038 678,906
Operating expenses:
Selling, general and
administrative expenses 936,184 1,102,528
Product development costs 329,603 266,972
---------- ----------
Total operating expenses 1,265,787 1,369,500
---------- ----------
Operating loss (894,749) (690,594)
---------- ----------
Other income (expense):
Interest income 18,641 82,063
Interest expense (537) (426)
Other 5,999 11,658
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Total other income (expense): 24,103 93,295
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Loss before income taxes (870,646) (597,299)
Provision (benefit) for income taxes - (179,190)
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Net loss $ (870,646) $ (418,109)
========== ==========
Net loss per common share:
Basic $(0.66) $(0.32)
Diluted $(0.66) $(0.32)
Weighted average common shares outstanding
used in computation:
Basic 1,314,182 1,291,300
Diluted 1,314,182 1,291,300
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The accompanying notes are an integral part of these condensed consolidated financial statements.
TECHNICAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
Six Months Ended
---------------------------------
March 31, 2001 April 1, 2000
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Net sales $ 2,100,214 $3,634,453
Cost of sales 831,811 1,512,480
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Gross profit 1,268,403 2,121,973
Operating expenses:
Selling, general and
administrative expenses 2,151,938 2,055,361
Product development costs 570,579 628,316
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Total operating expenses 2,722,517 2,683,677
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Operating income (loss) (1,454,114) (561,704)
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Other income (expense):
Interest income 54,484 105,141
Interest expense (1,069) (709)
Other (72,631) 12,382
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Total other income (expense): (19,216) 116,814
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Loss before income taxes (1,473,330) (444,890)
Provision (benefit) for income taxes - (133,467)
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Net loss $(1,473,330) $ (311,423)
=========== ==========
Net loss per common share:
Basic $(1.14) $(0.24)
Diluted $(1.14) $(0.24)
Weighted average common shares outstanding
used in computation:
Basic 1,297,876 1,284,950
Diluted 1,297,876 1,284,950
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The accompanying notes are an integral part of these condensed consolidated financial statements.
TECHNICAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
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March 31, 2001 April 1, 2000
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Operating Activities:
Net loss $(1,473,330) $ (311,423)
Adjustments to reconcile net loss to net
cash provided (used) by operating
activities:
Depreciation and amortization 261,625 421,935
Non-cash compensation 24,789 34,309
Gain on sale of investment - 117,121
Changes in assets and liabilities:
Accounts receivable (599,644) 1,375,255
Inventories 73,230 228,901
Other current assets ( 1,924) 225,431
Accounts payable and other accrued
liabilities ( 82,470) (432,410)
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Net cash provided (used) by operating
activities (1,797,724) 1,659,119
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Investing Activities:
Additions to equipment and leasehold
improvements (41,338) (131,346)
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Net cash used by investing activities (41,338) (131,346)
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Financing Activities:
Proceeds from stock issuance 24,976 37,633
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Net cash provided by financing
activities 24,976 37,633
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Net increase (decrease) in cash and
cash equivalents (1,814,086) 1,565,406
Cash and cash equivalents at beginning of
the period 3,121,617 2,338,935
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Cash and cash equivalents at the end of
the period $ 1,307,531 $3,904,341
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Supplemental Disclosures:
Interest paid $ 1,069 $ 142
Income taxes paid 3,256 -
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The accompanying notes are an integral part of these condensed consolidated financial statements.
TECHNICAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTE: THE DISCUSSIONS IN THIS FORM 10-Q, INCLUDING ANY DISCUSSION OF OR IMPACT, EXPRESSED OR IMPLIED, ON TECHNICAL COMMUNICATIONS CORPORATION'S (THE COMPANY) ANTICIPATED OPERATING RESULTS AND FUTURE EARNINGS, INCLUDING STATEMENTS ABOUT THE COMPANY'S ABILITY TO ACHIEVE GROWTH AND PROFITABILITY, CONTAIN FORWARD- LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED. THE COMPANY'S OPERATING RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS INDICATED BY SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY'S OPERATING RESULTS MAY BE AFFECTED BY MANY FACTORS, INCLUDING BUT NOT LIMITED TO FUTURE CHANGES IN EXPORT LAWS OR REGULATIONS, CHANGES IN TECHNOLOGY, THE EFFECT OF FOREIGN POLITICAL UNREST, THE ABILITY TO HIRE, RETAIN AND MOTIVATE TECHNICAL, MANAGEMENT AND SALES PERSONNEL, THE RISKS ASSOCIATED WITH THE TECHNICAL FEASIBILITY AND MARKET ACCEPTANCE OF NEW PRODUCTS, CHANGES IN TELECOMMUNICATIONS PROTOCOLS, AND THE EFFECTS OF CHANGING COSTS, EXCHANGE RATES AND INTEREST RATES. THESE AND OTHER RISKS ARE DETAILED FROM TIME TO TIME IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2000, FORM 10-Q FOR THE QUARTER ENDED DECEMBER 30, 2000 AND THIS FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2001.
Certain disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted as allowed by Form 10-Q. The accompanying unaudited consolidated financial statements should be read in conjunction with the Company's consolidated financial statements for the year ending September 30, 2000 as filed with the Securities and Exchange Commission on Form 10-K.
Inventories consisted of the following:
March 31, 2001 September 30, 2000
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Finished Goods $ 534,648 $ 622,003
Work in Process 1,178,686 1,181,510
Raw Materials 1,665,839 1,648,890
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$3,379,173 $3,452,403
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The Company has a $5 million asset-based credit facility with Coast Business Credit ("Coast"). The line carries an interest rate of prime plus 1/2% (9.0% at March 31, 2001). This revolving line of credit is collateralized by substantially all the assets of the Company and requires no compensating balances. There are financial covenants associated with the line, which call for a minimum net tangible worth of $4,791,000 at March 31, 2001 and increasing over time based on certain criteria and an interest coverage ratio requirement. The amount of borrowings is limited to a percentage of certain accounts receivable balances. At March 31, 2001 the Company was in violation with its interest coverage covenant. Subsequently, Coast waived the default and modified the interest coverage requirement for the future. The line matures in August 2003. There were no outstanding borrowings during the quarter.
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. However, as disclosed in the financial statements, the Company had a net loss of $1,473,330 during the first six months of fiscal 2001, and the Company had significant losses in the prior two fiscal years. Additionally, the Company's operations used significant cash during the first six months of fiscal 2001. The recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to increase sales and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and amounts and classification of liabilities that might be necessary should the Company be unable to continue.
Management has taken significant steps to streamline its operations and will continue to do so as the situation warrants. These steps include reducing headcount and eliminating infrastructure and other nonessential expenses and capital expenditures. Management believes based on its understanding of the marketplace that future sales will occur in a sufficient manner to allow the Company to continue as a viable going concern.
PART I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The Company is in the business of designing, manufacturing and marketing communications security equipment. The Company receives orders for equipment from customers, which may take several months or longer to manufacture and ship. With the exception of long-term contracts where revenue is recognized under the percentage of completion method, the Company generally recognizes income on a unit-of-delivery basis. This latter method can cause revenues to vary widely from quarter to quarter and therefore quarterly comparisons of revenue may not be indicative of any trend.
Net sales for the quarter ended March 31, 2001 and April 1, 2000, were $779,000 and $1,381,000, respectively. This decrease of 44% is attributed to variability as a result of the timing of shipments and the receipt of anticipated orders.
Gross profit for the first quarter of fiscal 2001 was $371,000 as compared to gross profit of $679,000 for the same period of fiscal 2000. This represented a 45% decrease in gross profit for the quarter. Gross profit expressed as a percentage of sales remained relatively stable at 48% in 2001 as compared to 49% for the same period in fiscal 2000. The overall decrease was the result of the lower sales.
Selling, general and administrative expenses for the second quarter of fiscal 2001 and 2000 were $936,000 and 1,103,000, respectively. This decrease of 15% was primarily attributable to $133,000 in costs associated with the settlement of litigation during fiscal 2000 and a decrease in payroll, recruiting and benefit related costs associated with a reduced headcount of approximately $142,000. These decreases were partially offset by increased bidding and proposal activity of $105,000 and a charge of approximately $40,000 associated with a restructuring program and related workforce reductions.
Product development costs for the quarter ended March 31, 2001 were $330,000 compared to $267,000 for the same period in fiscal 2000. This increase of 24% was primarily attributable to a shift away from billable product development in fiscal 2001, which increased product development cost in fiscal 2001 by approximately $160,000. There was a reduction in other departmental overhead spending in the quarter that accounted for a decrease of approximately $100,000. The decreases included training, recruiting, consultants, payroll and benefit related costs associated with a slowdown in development related work.
The Company showed a net loss of $871,000 for the second quarter of fiscal 2001 as compared to a net loss of $418,000 for the same period in fiscal 2000. The decrease in profitability is primarily attributable to the decrease in gross profit and income tax benefit, which was partially offset by a decrease in operating spending as described above. In addition, the Company earned $63,000 less interest income due to lower cash.
Net sales for the six months ended March 31, 2001 and April 1, 2000, were $2,100,000 and $3,634,000, respectively. This decrease of 42% is attributed to variability as a result of the timing of shipments and the receipt of anticipated orders.
Gross profit for the first six months of fiscal 2001 was $1,268,000 as compared to gross profit of $2,122,000 for the same period of fiscal year 2000. This represented a 40% decrease in gross profit for the period. Gross profit expressed as a percentage of sales increased to 60% in 2001 from 58% as compared to the same period in fiscal year 2000 due to a slightly better product mix.
Selling, general and administrative expenses for the first six months of fiscal 2001 and 2000 were $2,152,000 and $2,055,000, respectively. This increase of 5% was attributable to an increase in selling costs of approximately $288,000 and a reduction in general & administrative costs of approximately $191,000.
The increase in selling costs was primarily attributable to increased third party sales commissions and marketing contracts totaling $185,000, increased bidding and proposal activity of $231,000 and marketing studies and research amounting to $53,000. These increases were offset by a reduction in travel, payroll, internal commissions and benefit related costs associated with the lower sales volume, of approximately $166,000.
The decrease in general and administrative expenses were primarily attributable to $144,000 in costs associated with the settlement of litigation during fiscal 2000 and a decrease in payroll, recruiting and benefit related costs associated with a reduced headcount of approximately $92,000. These costs were partially offset by a charge of approximately $40,000 associated with a restructuring program and related workforce reductions.
Product development costs for the six months ended March 31, 2001 were $571,000 compared to $628,000 for the same period in fiscal 2000. This decrease of 9% was attributable to an increase in engineering efforts to develop bids and proposals of approximately $95,000, which is classified as a selling expense and decreases in training, recruiting, payroll and benefit related costs associated with a slowdown in development related work of approximately $165,000. These reductions were offset by a shift away from billable product development in fiscal 2001, which increased product development cost in fiscal 2001 by approximately $267,000.
The Company showed a net loss of $1,473,000 for the first six months of fiscal 2001 as compared to a net loss of $311,000 for the same period in fiscal 2000. The decrease in profitability is primarily attributable to the decrease in gross profit and income tax benefit, as described above. The Company has recorded a charge of approximately $75,000 for the discount associated with the non- recourse sale of a long-term receivable in fiscal 2001. In addition, the Company earned $51,000 less interest income due to lower cash balances.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101 ("SAB No. 101"), "Revenue Recognition in Financial Statements." SAB No. 101 provides guidance on applying generally accepted accounting principles to revenue recognition, presentation and disclosure in financial statements. Subsequently, the SEC has amended the implementation dates so that the Company is required to adopt the provisions of SAB No. 101 in the fourth quarter of 2001. Management does not expect the adoption of this statement to have a material impact on its financial position or results of operations.
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging Activities". The Statement establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. In June 1999, FASB issued Statement of Financial Accounting Standards No. 137 (SFAS 137), "Accounting for Derivative Instruments and Hedging Activities--Deferral of the Effective Date of FASB Statement No. 133--an amendment of FASB Statement No. 133". This Statement has delayed the effective date of SFAS 133 until fiscal years beginning after June 15, 2000. In June 2000, SFAS No. 133 was amended by Statement of Financial Accounting Standards No. 138 (SFAS 138), "Accounting for Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133. The Company has adopted this Statement during the first quarter of this fiscal year. There was no material impact on the Company's financial position or results of operations as a result of the adoption.
Cash and cash equivalents decreased by $1,814,000 or 58% to $1,308,000 as of March 31, 2001, from a balance of $3,122,000 at September 30, 2000. This decrease was primarily due to a loss from operations and an increase of accounts receivable. The current ratio decreased slightly to 5.9:1 at March 31, 2001 compared to 6.6:1 as of September 30, 2000.
The Company has a $5 million asset-based credit facility with Coast Business Credit ("Coast"). The line carries an interest rate of prime plus 1/2% (9.0% at March 31, 2001). This revolving line of credit is collateralized by substantially all the assets of the Company and requires no compensating balances. There are financial covenants associated with the line, which call for a minimum net tangible worth of $4,791,000 at March 31, 2001 and increasing over time based on certain criteria and an interest coverage ratio requirement. The amount of borrowings is limited to a percentage of certain accounts receivable balances. At March 31, 2001 the Company was in violation with its interest coverage covenant. The bank subsequently waived the violation and the covenant was amended going forward. The line matures in August 2003. There were no outstanding borrowings during the quarter. Management believes this credit facility will meet its current credit needs. Management anticipates no unusual capital expenditures during the remainder of fiscal 2001.
The Company's revenues have historically included significant transactions with foreign governments and other organizations. The Company expects this trend to continue. The timing of these transactions has in the past and will in the future impact the cash flow of the Company. Although the Company believes there are currently sufficient cash and available funds under the line of credit to meet its working capital needs, delays in the timing of significant transactions may cause the Company to reevaluate and adjust its operations.
PART II. Other Information
ITEM 1. LEGAL PROCEEDINGS:
There are no current matters pending.
Item 2. Changes in Securities and Use of Proceeds:
Not applicable.
Item 3. Defaults Upon Senior Securities:
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders:
The Annual Meeting of Stockholders of the Company was held on
February 12, 2001. The meeting was conducted for the purpose of
(i) electing one Class I Director, to serve for a term of three years
and (ii) ratifying the election of the Company's independent auditors.
The ratification of the election of the Class I Director was approved with 1,145,244 votes in favor, 51,302 votes withheld.
The ratification of the Company's auditors was approved with 1,182,066 votes in favor, 11,500 votes against and 2,980 votes abstaining.
Item 5. Other Information:
None.
Item 6. Exhibits and Reports on Form 8-K:
a. Exhibits:
10.5 Employment Agreement dated February 12, 2001 between the Company and Michael P. Malone.
10.6 Employment Agreement dated February 12, 2001 between the Company and John I. Gill.
b. Reports on Form 8-K:
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
May 14, 2001 By: /s/ Carl H. Guild, Jr.
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Date Carl H. Guild, Jr., President and
Chief Executive Officer
May 14, 2001 By: /s/ Michael P. Malone
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Date Michael P. Malone, Chief Financial Officer
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EXHIBIT 10.5
TECHNICAL COMMUNICATIONS CORPORATION
EMPLOYMENT AGREEMENT
Effective as of February 12, 2001
TO: Mr. Michael Malone
c/o Technical Communications Corporation
100 Domino Drive
Concord, Massachusetts 01742
This Agreement is intended to state the terms of your employment with Technical Communications Corporation, a Massachusetts corporation (the "Company"). The Company hereby agrees with you as follows:
1.1 You shall serve as Chief Financial Officer for the Company and shall perform the duties customarily associated with such capacity from time to time and at such place or places as the Company shall designate are appropriate and necessary in connection with such employment.
1.2 You will, to the best of your ability, devote your best efforts to the performance of your duties hereunder and the business and affairs of the Company. You agree to perform such duties as may be assigned to you by the Company's Chief Executive Officer or the Company's Board of Directors from time to time.
1.3 You will duly, punctually, and faithfully perform and observe any and all rules and regulations which the Company may now or shall hereafter establish governing the conduct of its business.
2.1 The term of this Agreement shall be for the period of years set forth on Exhibit A annexed hereto commencing with the date hereof. Thereafter, this Agreement shall be automatically renewed for successive periods of one (1) year, unless you or the Company give written notice of termination of your employment or non-renewal of this agreement. Your employment with the Company may be terminated at any time as provided in Section 2.2 or 2.4 of this Agreement.
2.2 The Company shall have the right, on written notice to you, to terminate your employment:
(a) immediately at any time for Cause (as hereinafter defined); or
(b) at any time without Cause.
2.3 For purposes of Section 2.2, the term "Cause" shall mean:
(a) Your failure or refusal to perform the services specified herein, or to carry out any lawful directions of the Board of Directors of the Company with respect to the services to be rendered or the manner of rendering such services by you;
(b) conviction of a felony;
(c) fraud or embezzlement involving the assets of the Company, its customers, suppliers or affiliates;
(d) gross negligence or willful misconduct;
(e) inability for a continuous period of at least one hundred eighty (180) days in the aggregate during any 360- day period to perform duties hereunder due to a physical or mental disability that is incapable of reasonable accommodation under applicable law, including but not limited to the Americans with Disabilities Act of 1990, as amended; or
(f) breach of any term of this Agreement other than as noted in
(a) above.
Further, any dispute, controversy, or claim arising out of, in connection with, or in relation to this definition of "Cause" shall be settled by arbitration in Boston, Massachusetts, pursuant to the Commercial Rules then in effect of the American Arbitration Association and in no other place. Any award or determination shall be final, binding, and conclusive upon the parties, and a judgment rendered may be entered in any court having jurisdiction thereof. You and the Company knowingly waive any and all rights to a jury trial in any form. Each party shall bear its own expenses relating to the arbitration, unless otherwise determined in arbitration.
2.4 You shall have the right to terminate your employment under this Agreement upon prior written notice to the Company. Such notice shall contain the termination date of your employment (your last date of employment in all cases under this Agreement is hereby defined as the "Termination Date"). In the event you terminate this Agreement, you will be paid the portion of your Base Salary earned and accrued through the termination date, less applicable taxes, other required withholdings, and any amounts you may owe the Company, plus all accrued but unpaid expenses and vacation time.
2.5 In the event the Company terminates your employment or chooses not to renew your employment, the Company shall be obligated to pay you as Severance Pay (defined as one of the following, as applied to the facts):
(a) In the event of your termination by the Company without
Cause, you shall be paid severance in an amount equal to the greater of six
(6) months' Base Salary at the then current level (as set forth on Exhibit
A attached hereto) or your Base Salary for the remaining Term of this
Agreement, less applicable taxes, other required withholdings, and any
amounts you may owe the Company, plus all accrued but unpaid expenses and
vacation time; or
(b) In the event the Company notifies you of its intent not to renew this Agreement, you will be guaranteed, at the Company's option, at will employment for six (6) months or paid severance at an amount equal to six (6) months' Base Salary at the then current level (as set forth on Exhibit A attached hereto), less applicable taxes, other required withholdings, and any amounts you may owe the Company, plus all accrued but unpaid expenses and vacation time; or
(c) In the event of your termination by the Company for Cause, you shall be entitled to no Severance Pay.
In all circumstances arising under Section 2.4 or this Section 2.5, you agree that at the time of your leaving the employ of the Company, the Company has a right of set-off against all monies, salary, expenses, or other payments owed to you as of that date with respect to any and all amounts owed by you to the Company.
2.6 In the event of a Change in Control (as hereinafter defined) of the Company where you (i) resign within six (6) months after such event, or (ii) are terminated without Cause by the Company within six (6) months after such event, any unvested option shares held by you shall automatically vest and become immediately exercisable, and you shall be entitled to receive severance in an amount, payable in a lump sum within thirty (30) days after the effective date of such resignation or termination, equal to six (6) months' Base Salary at the then current level (as set forth on Exhibit A attached hereto), less applicable taxes, other required withholdings, and any amounts you may owe the Company, plus all accrued but unpaid expenses and vacation time (the "Change in Control Payment"). [IN THE EVENT THAT ANY PAYMENT TO BE RECEIVED BY YOU PURSUANT TO THIS SECTION 2.6 OR THE VALUE OF ANY ACCELERATION RIGHT IN ANY COMPANY STOCK OPTIONS YOU MAY HOLD IN CONNECTION WITH THE CHANGE IN CONTROL OF THE COMPANY WOULD BE SUBJECT TO AN EXCISE TAX PURSUANT TO SECTION 4999 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), WHETHER IN WHOLE OR IN
PART AS A RESULT OF BEING AN "EXCESS PARACHUTE PAYMENT" WITHIN THE MEANING OF
SUCH TERM IN SECTION 280G(B) OF THE CODE, THE AMOUNT PAYABLE UNDER THIS SECTION
2.6 SHALL BE INCREASED (GROSSED UP) TO COVER THE EXCISE TAX LIABILITY DUE UNDER
THE SECTION 4999 OF THE CODE. NOTWITHSTANDING THE PRECEDING SENTENCE, (A) NO
PORTION OF SUCH CHANGE IN CONTROL PAYMENT OR ANY ACCELERATION RIGHT WHICH TAX
COUNSEL, SELECTED BY THE COMPANY'S INDEPENDENT AUDITORS AND ACCEPTABLE TO YOU,
DETERMINES NOT TO CONSTITUTE A "PARACHUTE PAYMENT" WITHIN THE MEANING OF SECTION
280G(B)(2) OF THE CODE WILL BE TAKEN INTO ACCOUNT AND (B) NO PORTION OF THE
CHANGE IN CONTROL PAYMENT WHICH TAX COUNSEL, SELECTED BY THE COMPANY'S
INDEPENDENT AUDITORS AND ACCEPTABLE TO YOU, DETERMINED TO BE REASONABLE
COMPENSATION FOR SERVICES RENDERED WITHIN THE MEANING OF SECTION 280G(B)(4) OF
THE CODE WILL BE TAKEN INTO ACCOUNT.]
2.7 For purposes of Section 2.6 the term "Change in Control" shall mean the occurrence of any of the following:
(a) any person or entity, including a "group" as defined in
Section 13(d) of the Securities Exchange Act of 1934, as amended, other than the
Company, a wholly owned subsidiary of the Company, or any employee benefit plan
of the Company or its subsidiaries, becomes the beneficial owner of the
Company's securities having fifty-one percent (51%) or more of the combined
voting power of the then outstanding securities of the Company that may be cast
for the election for directors of the Company; or
(b) as the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election or any combination of the foregoing transactions, less than a majority of the combined voting power of the then outstanding securities of the Company or any successor corporation or entity entitled to vote generally in the election of directors of the Company or such other corporation or entity after such transaction, are held in the aggregate by holders of the Company's securities entitled to vote generally in the election of directors of the company immediately prior to such transaction; or
(c) the approval of the stockholders of the Company of a plan of liquidation.
4.1 You agree at all times during the term of your employment and thereafter to hold in strictest confidence, and not to use, except for the benefit of the Company, or to disclose to any person, firm or corporation without written authorization of the Company, any Proprietary Information of the Company. "Proprietary Information" means any Company proprietary information, technical data, trade secrets or know-how, including, but not limited to, research and development information, product plans, products, services, customer lists and customers (including, but not limited to customers of the Company on whom you called or with whom you became acquainted during the term of your employment), suppliers, markets, software, developments, inventions, processes, formulas, technology, designs, drawings, engineering information, hardware configuration information, marketing information, costs, pricing, finances or other business information disclosed to you by the Company either directly or indirectly in writing, orally or by drawings or inspection of parts or equipment. Proprietary Information does not include any of the foregoing items that have become publicly known and made generally available through no wrongful act of yours. You further agree that all Proprietary Information shall at all times remain the property of the Company.
4.2 You agree that any and all information generated by you during working hours, or on Company property, or by the use of any Company assets, whether in electronic or physical form, is and shall remain the property of the
Company, and that the Company has the right of access to any information belonging to you that is at any time stored in Company equipment, or on Company property, in any form, including the right to inspect the contents of briefcases, handbags, and the like.
4.3 You agree that at the time of your leaving the employ of the Company, you will immediately deliver to the Company (and will not keep in your possession or deliver to anyone else) any and all devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, other documents or property, or reproductions of any aforementioned items, containing Proprietary Information or otherwise belonging to the Company, its successors or assigns.
4.4 You agree that you will not, during your employment with the Company, improperly use or disclose any proprietary information or trade secrets of any former employer or other person or entity, if any, with which you have an agreement or duty to keep such information in confidence, and that you will not bring onto the premises of the Company any unpublished document or proprietary information belonging to any such employer, person or entity.
4.5 You recognize that the Company has received and in the future will receive from third parties their trade secrets or proprietary information subject to a duty on the Company's part to maintain the confidentiality of such information to use it only for certain limited purposes. You agree to hold all such trade secrets or proprietary information in the strictest confidence and not to disclose it to any person, firm or corporation or to use it except as necessary in carrying out my work for the Company consistent with the Company's agreement with such third party.
THIS SECTION MAY AFFECT YOUR RIGHT TO ACCEPT EMPLOYMENT WITH OTHER
COMPANIES SUBSEQUENT TO YOUR EMPLOYMENT BY THE COMPANY.
5.1 For the purpose of this Section:
(i) "Competing Product" means any product, process or service of any person or organization other than the Company, in existence or under development, which is (A) identical to, substantially the same as, or an adequate substitute for any product, process or service of the Company, in existence or under development, on which you worked during the last two (2) years of your employment with the Company or about which you acquired Proprietary Information and (B) which is (or could reasonably be anticipated to be) marketed or distributed in such a manner and in such a geographic area as to actually compete with such product, process or service of the Company.
(ii) "Competing Organization" means any person or organization, including yourself, engaged in, or about to become engaged in, research on or the acquisition, development, production, distribution, marketing, or providing of, a Competing Product.
5.2 As a material inducement to the Company to employ you and to continue to employ you, and in order to protect the Company's Proprietary Information and good will, you agree to the following stipulations:
(i) You agree that, during the term of your employment with the Company, you will not engage in any other employment, occupation, consulting or other business activity related to the business in which the Company is now involved or becomes involved during the term of your employment, nor will you engage in any other activities that conflict with your obligations to the Company.
(ii) In the event you terminate (or do not renew) this Agreement, then you will not directly or indirectly, participate or engage in, solicit, deliver or accept business relating in any manner to Competing Products or to products, processes or services of the Company from or with any of the customers or accounts of the Company with which you had any contact as a result of your employment with the Company for a period which is the greater of (A) six (6) months commencing with the Termination Date, or (B) the balance of the Term of this Agreement (both A or B being a "Non-compete Period").
(iii) In the event the Company terminates without Cause (or does not renew) this Agreement, then you will not directly or indirectly, participate or engage in, solicit, deliver or accept business relating in any manner to Competing Products or to products, processes or services of the Company from or with any of the customers or accounts of the Company with which you had any contact as a result of your employment with the Company for a period which is the greater of (A) six (6) months commencing with the Termination Date, or (B) the balance of the Term of this Agreement (both A or B being a "Non-compete Period").
(iv) In the event the Company terminates your employment with Cause, then, you will not, directly or indirectly, participate or engage in, solicit, deliver or accept business relating in any manner to Competing Products or to products, processes or services of the Company from or with any of the customers or accounts of the Company with which you had any contact as a result of your employment with the Company for a period of six (6) months commencing with the Termination Date (a "Non-compete Period").
(v) During any Non-compete Period you will not render services, directly or indirectly, as an employee, consultant or otherwise, to any Competing Organization in connection with research on, or the acquisition,
development, production, distribution, marketing, sale or provision of any Competing Product.
(vi) During any Non-compete Period you will not, directly or indirectly: (a) induce any employee of the Company to leave the Company's employment; (b) assist any other person or entity in requesting or inducing any such employee of the Company to leave such employment; or (c) induce or attempt to induce any employee of the Company to join with you in any capacity, direct or indirect.
5.3 You agree that the restrictions set forth in this Section 5 are fair and reasonable and are reasonably required for the protection of the interests of the Company. However, should an arbitrator or court nonetheless determine at a later date that such restrictions are unreasonable in light of the circumstances as they then exist, then you agree that this Section 5 shall be construed in such a manner as to impose on you such restrictions as may then be reasonable and sufficient to assure the Company of the intended benefits of this Section.
5.4 Notwithstanding the provisions of this Section 5, the Board of Directors may, in its sole discretion, permit you to accept employment with a Competing Organization.
7.1 Except as set forth in Section 7.3 of this Agreement, you hereby acknowledge and agree that the Company is the owner of all Inventions (as hereinafter defined). In order to protect the Company's rights to such Inventions, by executing this Agreement you hereby irrevocably assign to the Company all of your right, title and interest in and to all Inventions to the Company.
7.2 For purposes of this Agreement, "Inventions" shall mean all discoveries, processes, designs, technologies, devices, or improvements in any of the foregoing or other ideas, whether or not patentable and whether or not reduced to practice, made or conceived by you (whether solely or jointly with others) during or prior to the period of your employment with the Company, which relate in any manner to the actual or demonstrably anticipated business, work,
or research and development of the Company, or result from or are suggested by any task assigned to you or any work performed by you for or on behalf of the Company.
7.3 You agree that in connection with any Invention, you will promptly disclose such Invention to your immediate superior at the Company in order to permit the Company to enforce its property rights to such Invention in accordance with this Agreement. Your disclosure shall be received in confidence by the Company.
7.4 Upon request, you agree to assist the Company or its nominee (at its expense) during and at any time subsequent to your employment in every reasonable way to obtain for its own benefit patents and copyrights for Inventions in any and all countries. Such patents and copyrights shall be and remain the sole and exclusive property of the Company or its nominee. You agree to perform such lawful acts as the Company deems to be necessary to allow it to exercise all right, title and interest in and to such patents and copyrights.
7.5 In connection with this Agreement, you agree to execute, acknowledge and deliver to the Company or its nominee upon request and at its expense all documents, including assignments of title, patent or copyright applications, assignments of such applications, assignments of patents or copyrights upon issuance, as the Company may determine necessary or desirable to protect the Company's or its nominee's interest in Inventions, and/or to use in obtaining patents or copyrights in any and all countries and to vest title thereto in the Company or its nominee to any of the foregoing.
7.6 You agree to keep and maintain adequate and current written records of all Inventions made by you (in the form of notes, sketches, drawings, flowcharts and other records as may be specified by the Company), which records shall be available to and remain the sole property of the Company at all times.
7.7 You acknowledge that the Company from time to time may have agreements with other persons or with the U.S. Government or agencies thereof, which impose obligations or restrictions on the Company regarding Inventions made during the course of work thereunder or regarding the confidential nature of such work. You agree to be bound by all such obligations and restrictions and to take all action necessary to discharge the Company's obligations.
7.8 You represent that your performance of all the terms of this Agreement and as an employee of the Company does not and will not breach any agreement to keep confidential proprietary information, knowledge or data acquired by you in confidence or in trust prior to your employment by the Company, and you will not disclose to the Company, or induce the Company to use, any confidential or proprietary information or material belonging to any previous client, employer or others. You agree not to enter into any agreement either written or oral in conflict herewith.
If you are in agreement with the foregoing, please sign your name below, whereupon this Agreement shall become binding in accordance with its terms. Please then return this Agreement to the Company. (You may retain for your records the accompanying counterpart of this Agreement enclosed herewith).
Very truly yours,
TECHNICAL COMMUNICATIONS
CORPORATION
(As authorized by the Board of Directors)
By: /s/ Carl H. Guild Jr.
---------------------
Title: Carl H. Guild Jr.
President & CEO, TCC
|
Accepted and Agreed:
/s/ Michael P. Malone --------------------- Michael Malone |
EXHIBIT A
EMPLOYMENT TERM, COMPENSATION AND BENEFITS
OF
MICHAEL MALONE
EXHIBIT 10.6
TECHNICAL COMMUNICATIONS CORPORATION
EMPLOYMENT AGREEMENT
Effective as of February 12, 2001
TO: Mr. John I. Gill
c/o Technical Communications Corporation
100 Domino Drive
Concord, Massachusetts 01742
This Agreement is intended to state the terms of your employment with Technical Communications Corporation, a Massachusetts corporation (the "Company"). The Company hereby agrees with you as follows:
1.1 You shall serve as Executive Vice President for the Company and shall perform the duties customarily associated with such capacity from time to time and at such place or places as the Company shall designate are appropriate and necessary in connection with such employment.
1.2 You will, to the best of your ability, devote your best efforts to the performance of your duties hereunder and the business and affairs of the Company. You agree to perform such duties as may be assigned to you by the Company's Chief Executive Officer or the Company's Board of Directors from time to time.
1.3 You will duly, punctually, and faithfully perform and observe any and all rules and regulations which the Company may now or shall hereafter establish governing the conduct of its business.
2.1 The term of this Agreement shall be for the period of years set forth on Exhibit A annexed hereto commencing with the date hereof. Thereafter, this Agreement shall be automatically renewed for successive periods of one (1) year, unless you or the Company give written notice of termination of your employment or non-renewal of this agreement. Your employment with the Company may be terminated at any time as provided in Section 2.2 or 2.4 of this Agreement.
2.2 The Company shall have the right, on written notice to you, to terminate your employment:
(a) immediately at any time for Cause (as hereinafter defined); or
(b) at any time without Cause.
2.3 For purposes of Section 2.2, the term "Cause" shall mean:
(a) Your failure or refusal to perform the services specified herein, or to carry out any lawful directions of the Board of Directors of the Company with respect to the services to be rendered or the manner of rendering such services by you;
(b) conviction of a felony;
(c) fraud or embezzlement involving the assets of the Company, its customers, suppliers or affiliates;
(d) gross negligence or willful misconduct;
(e) inability for a continuous period of at least one hundred eighty (180) days in the aggregate during any 360-day period to perform duties hereunder due to a physical or mental disability that is incapable of reasonable accommodation under applicable law, including but not limited to the Americans with Disabilities Act of 1990, as amended; or
(f) breach of any term of this Agreement other than as noted in
(a) above.
Further, any dispute, controversy, or claim arising out of, in connection with, or in relation to this definition of "Cause" shall be settled by arbitration in Boston, Massachusetts, pursuant to the Commercial Rules then in effect of the American Arbitration Association and in no other place. Any award or determination shall be final, binding, and conclusive upon the parties, and a judgment rendered may be entered in any court having jurisdiction thereof. You and the Company knowingly waive any and all rights to a jury trial in any form. Each party shall bear its own expenses relating to the arbitration, unless otherwise determined in arbitration.
2.4 You shall have the right to terminate your employment under this Agreement upon prior written notice to the Company. Such notice shall contain the termination date of your employment (your last date of employment in all cases under this Agreement is hereby defined as the "Termination Date"). In the event you terminate this Agreement, you will be paid the portion of your Base Salary earned and accrued through the termination date, less applicable taxes, other required withholdings, and any amounts you may owe the Company, plus all accrued but unpaid expenses and vacation time.
2.5 In the event the Company terminates your employment or chooses not to renew your employment, the Company shall be obligated to pay you as Severance Pay (defined as one of the following, as applied to the facts):
(a) In the event of your termination by the Company without
Cause, you shall be paid severance in an amount equal to the greater of six
(6) months' Base Salary at the then current level (as set forth on Exhibit
A attached hereto) or your Base Salary for the remaining Term of this
Agreement, less applicable taxes, other required withholdings, and any
amounts you may owe the Company, plus all accrued but unpaid expenses and
vacation time; or
(b) In the event the Company notifies you of its intent not to renew this Agreement, you will be guaranteed, at the Company's option, at will employment for six (6) months or paid severance at an amount equal to six (6) months' Base Salary at the then current level (as set forth on Exhibit A attached hereto), less applicable taxes, other required withholdings, and any amounts you may owe the Company, plus all accrued but unpaid expenses and vacation time; or
(c) In the event of your termination by the Company for Cause, you shall be entitled to no Severance Pay.
In all circumstances arising under Section 2.4 or this Section 2.5, you agree that at the time of your leaving the employ of the Company, the Company has a right of set-off against all monies, salary, expenses, or other payments owed to you as of that date with respect to any and all amounts owed by you to the Company.
2.6 In the event of a Change in Control (as hereinafter defined) of the Company where you (i) resign within six (6) months after such event, or (ii) are terminated without Cause by the Company within six (6) months after such event, any unvested option shares held by you shall automatically vest and become immediately exercisable, and you shall be entitled to receive severance in an amount, payable in a lump sum within thirty (30) days after the effective date of such resignation or termination, equal to six (6) months' Base Salary at the then current level (as set forth on Exhibit A attached hereto), less applicable taxes, other required withholdings, and any amounts you may owe the Company, plus all accrued but unpaid expenses and vacation time (the "Change in Control Payment"). [IN THE EVENT THAT ANY PAYMENT TO BE RECEIVED BY YOU PURSUANT TO THIS SECTION 2.6 OR THE VALUE OF ANY ACCELERATION RIGHT IN ANY COMPANY STOCK OPTIONS YOU MAY HOLD IN CONNECTION WITH THE CHANGE IN CONTROL OF THE COMPANY WOULD BE SUBJECT TO AN EXCISE TAX PURSUANT TO SECTION 4999 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), WHETHER IN WHOLE OR IN
PART AS A RESULT OF BEING AN "EXCESS PARACHUTE PAYMENT" WITHIN THE MEANING OF
SUCH TERM IN SECTION 280G(B) OF THE CODE, THE AMOUNT PAYABLE UNDER THIS SECTION
2.6 SHALL BE INCREASED (GROSSED UP) TO COVER THE EXCISE TAX LIABILITY DUE UNDER
THE SECTION 4999 OF THE CODE. NOTWITHSTANDING THE PRECEDING SENTENCE, (A) NO
PORTION OF SUCH CHANGE IN CONTROL PAYMENT OR ANY ACCELERATION RIGHT WHICH TAX
COUNSEL, SELECTED BY THE COMPANY'S INDEPENDENT AUDITORS AND ACCEPTABLE TO YOU,
DETERMINES NOT TO CONSTITUTE A "PARACHUTE PAYMENT" WITHIN THE MEANING OF SECTION
280G(B)(2) OF THE CODE WILL BE TAKEN INTO ACCOUNT AND (B) NO PORTION OF THE
CHANGE IN CONTROL PAYMENT WHICH TAX COUNSEL, SELECTED BY THE COMPANY'S
INDEPENDENT AUDITORS AND ACCEPTABLE TO YOU, DETERMINED TO BE REASONABLE
COMPENSATION FOR SERVICES RENDERED WITHIN THE MEANING OF SECTION 280G(B)(4) OF
THE CODE WILL BE TAKEN INTO ACCOUNT.]
2.7 For purposes of Section 2.6 the term "Change in Control" shall mean the occurrence of any of the following:
(a) any person or entity, including a "group" as defined in
Section 13(d) of the Securities Exchange Act of 1934, as amended, other than the
Company, a wholly owned subsidiary of the Company, or any employee benefit plan
of the Company or its subsidiaries, becomes the beneficial owner of the
Company's securities having fifty-one percent (51%) or more of the combined
voting power of the then outstanding securities of the Company that may be cast
for the election for directors of the Company; or
(b) as the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election or any combination of the foregoing transactions, less than a majority of the combined voting power of the then outstanding securities of the Company or any successor corporation or entity entitled to vote generally in the election of directors of the Company or such other corporation or entity after such transaction, are held in the aggregate by holders of the Company's securities entitled to vote generally in the election of directors of the company immediately prior to such transaction; or
(c) the approval of the stockholders of the Company of a plan of liquidation.
4.1 You agree at all times during the term of your employment and thereafter to hold in strictest confidence, and not to use, except for the benefit of the Company, or to disclose to any person, firm or corporation without written authorization of the Company, any Proprietary Information of the Company. "Proprietary Information" means any Company proprietary information, technical data, trade secrets or know-how, including, but not limited to, research and development information, product plans, products, services, customer lists and customers (including, but not limited to customers of the Company on whom you called or with whom you became acquainted during the term of your employment), suppliers, markets, software, developments, inventions, processes, formulas, technology, designs, drawings, engineering information, hardware configuration information, marketing information, costs, pricing, finances or other business information disclosed to you by the Company either directly or indirectly in writing, orally or by drawings or inspection of parts or equipment. Proprietary Information does not include any of the foregoing items that have become publicly known and made generally available through no wrongful act of yours. You further agree that all Proprietary Information shall at all times remain the property of the Company.
4.2 You agree that any and all information generated by you during working hours, or on Company property, or by the use of any Company assets, whether in electronic or physical form, is and shall remain the property of the Company, and that the Company has the right of access to any information belonging to you that is at any time stored in Company equipment, or on Company
property, in any form, including the right to inspect the contents of briefcases, handbags, and the like.
4.3 You agree that at the time of your leaving the employ of the Company, you will immediately deliver to the Company (and will not keep in your possession or deliver to anyone else) any and all devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, other documents or property, or reproductions of any aforementioned items, containing Proprietary Information or otherwise belonging to the Company, its successors or assigns.
4.4 You agree that you will not, during your employment with the Company, improperly use or disclose any proprietary information or trade secrets of any former employer or other person or entity, if any, with which you have an agreement or duty to keep such information in confidence, and that you will not bring onto the premises of the Company any unpublished document or proprietary information belonging to any such employer, person or entity.
4.5 You recognize that the Company has received and in the future will receive from third parties their trade secrets or proprietary information subject to a duty on the Company's part to maintain the confidentiality of such information to use it only for certain limited purposes. You agree to hold all such trade secrets or proprietary information in the strictest confidence and not to disclose it to any person, firm or corporation or to use it except as necessary in carrying out my work for the Company consistent with the Company's agreement with such third party.
THIS SECTION MAY AFFECT YOUR RIGHT TO ACCEPT EMPLOYMENT WITH OTHER
COMPANIES SUBSEQUENT TO YOUR EMPLOYMENT BY THE COMPANY.
5.1 For the purpose of this Section:
(i) "Competing Product" means any product, process or service of any person or organization other than the Company, in existence or under development, which is (A) identical to, substantially the same as, or an adequate substitute for any product, process or service of the Company, in existence or under development, on which you worked during the last two (2) years of your employment with the Company or about which you acquired Proprietary Information and (B) which is (or could reasonably be anticipated to be) marketed or distributed in such a manner and in such a geographic area as to actually compete with such product, process or service of the Company.
(ii) "Competing Organization" means any person or organization, including yourself, engaged in, or about to become engaged in, research on or the acquisition, development, production, distribution, marketing, or providing of, a Competing Product.
5.2 As a material inducement to the Company to employ you and to continue to employ you, and in order to protect the Company's Proprietary Information and good will, you agree to the following stipulations:
(i) You agree that, during the term of your employment with the Company, you will not engage in any other employment, occupation, consulting or other business activity related to the business in which the Company is now involved or becomes involved during the term of your employment, nor will you engage in any other activities that conflict with your obligations to the Company.
(ii) In the event you terminate (or do not renew) this Agreement, then you will not directly or indirectly, participate or engage in, solicit, deliver or accept business relating in any manner to Competing Products or to products, processes or services of the Company from or with any of the customers or accounts of the Company with which you had any contact as a result of your employment with the Company for a period which is the greater of (A) six (6) months commencing with the Termination Date, or (B) the balance of the Term of this Agreement (both A or B being a "Non-compete Period").
(iii) In the event the Company terminates without Cause (or does not renew) this Agreement, then you will not directly or indirectly, participate or engage in, solicit, deliver or accept business relating in any manner to Competing Products or to products, processes or services of the Company from or with any of the customers or accounts of the Company with which you had any contact as a result of your employment with the Company for a period which is the greater of (A) six (6) months commencing with the Termination Date, or (B) the balance of the Term of this Agreement (both A or B being a "Non-compete Period").
(iv) In the event the Company terminates your employment with Cause, then, you will not, directly or indirectly, participate or engage in, solicit, deliver or accept business relating in any manner to Competing Products or to products, processes or services of the Company from or with any of the customers or accounts of the Company with which you had any contact as a result of your employment with the Company for a period of six (6) months commencing with the Termination Date (a "Non-compete Period").
(v) During any Non-compete Period you will not render services, directly or indirectly, as an employee, consultant or otherwise, to any
Competing Organization in connection with research on, or the acquisition, development, production, distribution, marketing, sale or provision of any Competing Product.
(vi) During any Non-compete Period you will not, directly or indirectly: (a) induce any employee of the Company to leave the Company's employment; (b) assist any other person or entity in requesting or inducing any such employee of the Company to leave such employment; or (c) induce or attempt to induce any employee of the Company to join with you in any capacity, direct or indirect.
5.3 You agree that the restrictions set forth in this Section 5 are fair and reasonable and are reasonably required for the protection of the interests of the Company. However, should an arbitrator or court nonetheless determine at a later date that such restrictions are unreasonable in light of the circumstances as they then exist, then you agree that this Section 5 shall be construed in such a manner as to impose on you such restrictions as may then be reasonable and sufficient to assure the Company of the intended benefits of this Section.
5.4 Notwithstanding the provisions of this Section 5, the Board of Directors may, in its sole discretion, permit you to accept employment with a Competing Organization.
7.1 Except as set forth in Section 7.3 of this Agreement, you hereby acknowledge and agree that the Company is the owner of all Inventions (as hereinafter defined). In order to protect the Company's rights to such Inventions, by executing this Agreement you hereby irrevocably assign to the Company all of your right, title and interest in and to all Inventions to the Company.
7.2 For purposes of this Agreement, "Inventions" shall mean all discoveries, processes, designs, technologies, devices, or improvements in any of the foregoing or other ideas, whether or not patentable and whether or not reduced to practice, made or conceived by you (whether solely or jointly with others) during or prior to the period of your employment with the Company, which relate in any manner to the actual or demonstrably anticipated business, work,
or research and development of the Company, or result from or are suggested by any task assigned to you or any work performed by you for or on behalf of the Company.
7.3 You agree that in connection with any Invention, you will promptly disclose such Invention to your immediate superior at the Company in order to permit the Company to enforce its property rights to such Invention in accordance with this Agreement. Your disclosure shall be received in confidence by the Company.
7.4 Upon request, you agree to assist the Company or its nominee (at its expense) during and at any time subsequent to your employment in every reasonable way to obtain for its own benefit patents and copyrights for Inventions in any and all countries. Such patents and copyrights shall be and remain the sole and exclusive property of the Company or its nominee. You agree to perform such lawful acts as the Company deems to be necessary to allow it to exercise all right, title and interest in and to such patents and copyrights.
7.5 In connection with this Agreement, you agree to execute, acknowledge and deliver to the Company or its nominee upon request and at its expense all documents, including assignments of title, patent or copyright applications, assignments of such applications, assignments of patents or copyrights upon issuance, as the Company may determine necessary or desirable to protect the Company's or its nominee's interest in Inventions, and/or to use in obtaining patents or copyrights in any and all countries and to vest title thereto in the Company or its nominee to any of the foregoing.
7.6 You agree to keep and maintain adequate and current written records of all Inventions made by you (in the form of notes, sketches, drawings, flowcharts and other records as may be specified by the Company), which records shall be available to and remain the sole property of the Company at all times.
7.7 You acknowledge that the Company from time to time may have agreements with other persons or with the U.S. Government or agencies thereof, which impose obligations or restrictions on the Company regarding Inventions made during the course of work thereunder or regarding the confidential nature of such work. You agree to be bound by all such obligations and restrictions and to take all action necessary to discharge the Company's obligations.
7.8 You represent that your performance of all the terms of this Agreement and as an employee of the Company does not and will not breach any agreement to keep confidential proprietary information, knowledge or data acquired by you in confidence or in trust prior to your employment by the Company, and you will not disclose to the Company, or induce the Company to use, any confidential or proprietary information or material belonging to any
previous client, employer or others. You agree not to enter into any agreement either written or oral in conflict herewith.
If you are in agreement with the foregoing, please sign your name below, whereupon this Agreement shall become binding in accordance with its terms. Please then return this Agreement to the Company. (You may retain for your records the accompanying counterpart of this Agreement enclosed herewith).
Very truly yours,
TECHNICAL COMMUNICATIONS
CORPORATION
(As authorized by the Board of Directors)
By: /s/ Carl H. Guild Jr.
---------------------
Title: Carl H. Guild Jr.
President & CEO, TCC
|
Accepted and Agreed:
EXHIBIT A
EMPLOYMENT TERM, COMPENSATION AND BENEFITS
OF
JOHN I. GILL