-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GAtm4Pn6/1UxeseozV1Qf5F2kT1WOZk4BblALb/hzQACynvUYDZK1qMEVmJx2KRE fX2Ri67piB+eCmLQflP8lg== 0000912057-01-003167.txt : 20010130 0000912057-01-003167.hdr.sgml : 20010130 ACCESSION NUMBER: 0000912057-01-003167 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20010129 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TCI INTERNATIONAL INC CENTRAL INDEX KEY: 0000357064 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 943026925 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 000-10877 FILM NUMBER: 1517388 BUSINESS ADDRESS: STREET 1: 222 CASPIAN DR CITY: SUNNYVALE STATE: CA ZIP: 94089 BUSINESS PHONE: 4087476100 MAIL ADDRESS: STREET 1: 222 CASPIN DRIVE CITY: SUNNYVALE STATE: CA ZIP: 94089 FORMER COMPANY: FORMER CONFORMED NAME: TECHNOLOGY FOR COMMUNICATIONS INTERNATIONAL INC DATE OF NAME CHANGE: 19880606 10-K/A 1 a2036440z10-ka.txt FORM 10-K/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 (Fee Required) For the fiscal year ended SEPTEMBER 30, 2000 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 (No Fee Required) For the transition period N/A Commission file number 0-10877 ------- TCI INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) DELAWARE 94-3026925 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 47300 KATO ROAD, FREMONT, CA 94538 (510) 687-6100 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered ------------------- ---------------- NONE ----------------------------------- Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.01 PAR VALUE ----------------------------------- Indicate by check mark whether the registrant (l) 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: YES X NO --- --- Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ] As of January 19, 2001, the aggregate market value of voting stock held by non-affiliates was $35,218,233. As of January 19, 2001, the number of shares of common stock outstanding was 3,478,344. TCI International, Inc. (the "Company") hereby amends Part III and Item 14 of Part IV of its annual report on Form 10-K for the fiscal year ended September 30, 2000, to read in their entirety as follows: PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT BOARD OF DIRECTORS
Class and Year Director in which Term Name Principal Occupation Since Will Expire Age - ---- -------------------- ----- ----------- --- John L. Anderson President of Celerity Systems, Inc. 1998 Class III; 2002 48 John W. Ballard, III President and CEO of TCI International, Inc. 1996 Class III; 2002 42 Donald C. Cox Professor, Electrical Engineering, Stanford University 1995 Class II; 2001 61 Asaph H. Hall Retired 1992 Class I; 2003 67 E. M. T. Jones Chairman of the Board of TCI International, Inc. 1987 Class I; 2003 76 C. Alan Peyser Consultant 1995 Class II; 2001 67 Slobodan Tkalcevic Vice President of Advanced Development of TCI 1996 Class I; 2003 47 International, Inc.
John L. Anderson is the President of Celerity Systems, Inc. He founded Celerity Systems, Inc. in 1994 and is responsible for product definition and development. From 1981 to 1994, he was Chief Engineer of New Products Group at TRW/ESL in Sunnyvale. Mr. Anderson is a member of the Compensation Committee. John W. Ballard III joined the Company in 1988 serving in numerous capacities in the Engineering and Administration Departments of the Information System Division. In 1990, he was appointed Deputy General Manager and later was appointed Vice President and General Manager of the Information System Division. In 1992, he was appointed President of BR Communications. In 1993, he was appointed Chief Financial Officer, Chief Operating Officer, and Vice President and General Manager of the Company. On October 3, 1998, he was appointed President and CEO of the Company. Donald C. Cox, a professor of Electrical Engineering at Stanford University, has held the Harold Trap Friis Professor of Engineering chair since 1993 and is the Director of Stanford's Center for Communications. From 1991 to 1993, he was Executive Director of Radio Research Department, Bellcore. Dr. Cox is a member of the Compensation Committee and the Audit Committee. Asaph H. Hall, from 1991 to 1994, was Corporate Vice President-Information Systems and Administrative Services at General Dynamics, and from 1984 to 1991 was General Manager of General Dynamics Data Systems Division. Mr. Hall has held various other positions at General Dynamics since 1977. He serves on the Compensation Committee and Audit Committee. E.M.T. Jones, a founder of TCI, has been Chairman of the Board of the Company since 1990. From 1985 to 1990, Dr. Jones served as Vice President, Development of TCI. From 1974 to 1985 he was Executive Vice President of TCI. From 1968 to 1974 Dr. Jones served as Vice President, Engineering of TCI. He has been a Director of TCI since 1968 and of the Company since 1987. C. Alan Peyser was the President and CEO of Cable and Wireless, Inc. from 1993 to 1997. He was the President of Cable and Wireless, Inc. from 1980 to 1993. Mr. Peyser also serves as a Director of Network Imaging, CWI and Spaceworks. Mr. Peyser is a member of the Audit Committee. Dr. Slobodan Tkalcevic joined the Company in 1978. He was named Senior System Engineer in 1986, became Technical Advisor to General Manager in 1990, and has served as the Company's Vice President for Advanced Development since 1993. BOARD MEETINGS AND COMMITTEES The Board of Directors of the Company held a total of four meetings during the fiscal year ended September 30, 2000. Each Director attended (during the period that he served) at least 75% of the aggregate of (i) the total number of meetings of the Board and (ii) the total number of meetings held by all committees of the Board on which he served. The Company has an Audit Committee and a Compensation Committee of the Board of Directors. There is no nominating committee or committee performing the functions of a nominating committee. The Audit Committee meets with the Company's financial management and its independent public accountants and reviews internal control conditions, audit plans and results, and financial reporting procedures. This Committee, which currently consists of Messrs. Cox, Hall and Peyser, held five meetings during the Company's last fiscal year. The Compensation Committee reviews and approves the Company's compensation arrangements for key employees. This Committee, which currently consists of Messrs. Cox, Anderson and Hall, held two meeting during the Company's last fiscal year. The Compensation Committee also has responsibility for administering the Company's 1981 Stock Option Plan with respect to all individuals in the Company's employ or service, other than the Company's executive officers. The Board of Directors has responsibility for administering the 1981 Stock Option Plan with respect to the Company's executive officers. SECTION 16 (a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Under the securities laws of the United States, the Company's directors, executive officers, and any persons holding more than ten percent of the Company's Common Stock are required to report their initial ownership of the Company's Common Stock and any subsequent changes in their ownership to the Securities and Exchange Commission ("SEC"). Specific due dates have been established by the SEC, and the Company is required to disclose any failure to file by those dates. Based upon (i) the copies of Section 16(a) reports that the Company received from such persons for 2000 fiscal year transactions and (ii) the written representations received from one or more of such persons that no annual Form 5 reports were required to be filed for them for the 2000 fiscal year, the Company believes that there has been compliance with all Section 16(a) filing requirements applicable to such officers, directors, and ten-percent beneficial owners for such fiscal year. ITEM 11. EXECUTIVE COMPENSATION EXECUTIVE COMPENSATION SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION The following table sets forth the compensation paid or accrued by the Company for the years ended September 30, 2000, 1999 and 1998 to the Chief Executive Officer, and the four other executive officers of the Company whose salary and bonus for the fiscal year ended September 30, 2000 exceeded $100,000 (the "Named Officers"). SUMMARY COMPENSATION TABLE
Long Term Compensation Annual Compensation ---------------- ------------------- Securities Fiscal Underlying All Other Name and Principal Position Year Salary(1) Bonus Options/SARs (#) Compensation (2) - --------------------------- ---- --------- ----- ---------------- ---------------- John W. Ballard III, President and Chief Executive 2000 $195,106 $40,000 20,000 $11,684 Officer of the Company 1999 174,571 10,000 35,000 8,102 1998 148,092 --- --- 7,044 Slobodan Tkalcevic Vice President of Advanced 2000 165,054 35,000 10,000 11,684 (5) Development of the Company 1999 144,169 25,000 35,000 8,012 (3) 1998 144,105 10,000 --- 7,589 Mary Ann W. Alcon 2000 125,383 10,500 5,000 10,398 (6) Chief Financial Officer 1999 112,108 17,000 10,000 5,929 . 1998 105,297 5,000 --- 5,109 Mansour Moussavian 2000 135,583 16,375 7,500 10,997 (7) General Manager of the 1999 127,708 15,000 20,000 6,722 (4) Broadcast & Communications 1998 127,375 5,000 --- 6,269 Division Gordon Sinclair 2000 138,389 16,375 31,000 10,948 (8) VP of Antenna/Structural 1999 117,932 18,000 10,000 6,134 Engineering 1998 117,845 3,000 --- 5,886
- ------------------------------ (1) Salary amounts include amounts deferred under the Company's 401(k) Plan and Executive Deferred Compensation Plan. (2) Represents the Company's contribution under the Company's ESOP and 401(k) Plan as follows:
Section 401(k) Employee Stock Plan/Profit Sharing Plan Ownership Plans ------------------------ --------------- 2000 1999 1998 2000 1999 1998 ---- ---- ---- ---- ---- ---- John W. Ballard III 11,684 8,000 6,778 --- 102 266 Slobodan Tkalcevic 11,684 7,908 7,323 --- 104 266 Mary Ann W. Alcon 10,398 5,855 4,934 --- 74 175 Mansour Moussavian 10,997 6,635 6,059 --- 87 210 Gordon Sinclair 10,948 6,088 5,852 --- 46 34
(3) Does not include the Company contribution to the Executive Deferred Compensation Plan of $10,000, which will vest if employed by the Company at age 55. (4) Does not include the Company contribution to the Executive Deferred Compensation Plan of $5,000, which will vest if the earnings before interest, taxes, depreciation and amortization is more than $1 million in any one year in the next three years for the Broadcast & Communications Division. (5) Does not include the Company contribution to the Executive Deferred Compensation Plan of $10,000, which will vest if employed by the Company at age 50. (6) Does not include the Company contribution to the Executive Deferred Compensation Plan of $5,000, which will vest upon completion of the Oracle ERP implementation. (7) Does not include the Company contribution to the Executive Deferred Compensation Plan of $7,500, which will vest upon booking of at least $6M in domestic DTV product orders for fiscal year 2000. (8) Does not include the Company contribution to the Executive Deferred Compensation Plan of $7,500, which will vest upon completing the development of the initial 888 Slot Antenna by NAB 2000. STOCK OPTIONS The following table sets forth certain information concerning stock options granted in fiscal 2000 under the Company's 1981 Stock Option Plan to the Named Officers. All five Named Officers received option grants in fiscal year 2000, and no stock appreciation rights ("SARs") were granted during such fiscal year to any Named Officer. The table also lists potential realizable values of such options on the basis of assumed annual compounded stock appreciation rates of 5% and 10% over the life of the options. OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at Percent of Assumed Annual Rates of Stock Number of Total Options Price Appreciation Securities Granted to Exercise for Option Term (3) Underlying Stock Employees in Price Per Expiration ------------------- Name Options Granted (1) Fiscal 1999 Share(2) Date 5% 10% ---- ------------------- ----------- -------- ---- -- --- John W. Ballard, III 10,000 6% $4.25 11/30/06 $17,302 $ 40,320 10,000 6% $9.13 8/1/07 $37,148 $ 86,570 Slobodan Tkalcevic 10,000 6% $4.25 11/30/06 $17,302 $ 40,320 Mary Ann Alcon 5,000 3% $4.25 11/30/06 $ 8,651 $ 20,160 Mansour Moussavian 7,500 5% $4.25 11/30/06 $12,976 $ 30,240 Gordon Sinclair 6,000 4% $4.25 11/30/06 $10,381 $ 24,192 25,000 15% $6.00 5/9/07 $61,065 $ 142,308
- ------------------- (1) The options were granted under the Company's 1981 Stock Option Plan with an exercise price equal to 100% of the fair market value of the option shares on the December 16, 1998 grant date. The options have a maximum term of 7 years measured from such grant date, subject to earlier termination upon the optionee's cessation of employment with the Company. The options will become exercisable for the option shares in three equal and successive annual installments upon the optionee's continued period of employment with the Company measured from the grant date. The options will become immediately exercisable for all the option shares upon acquisition of substantially all the Company's outstanding stock or assets, unless the options are assumed by the acquiring entity. (2) The exercise price may be paid in cash, in shares of Common Stock valued at fair market value on the exercise date or through a cashless exercise procedure involving a same-day sale of the purchased shares. The Company may also finance the option exercise by loaning the optionee sufficient funds to pay the exercise price for the purchased shares and the federal and state tax liability incurred in connection with the exercise. The Plan Administrator also has the authority to reprice outstanding options if the fair market value falls below the exercise price through the cancellation of those options and the grant of replacement options with a exercise price equal to the lower fair market value of the option shares on the regrant date. (3) The potential realizable value is reported net of the option price, but before any income taxes associated with exercise. These amounts represent assumed annual compounded rates of appreciation at 5% and 10% only from the date of grant to the expiration of the option. There is no assurance provided to any executive officer or any other holder of the Company's securities that the actual stock price appreciation over the option term will be at the assumed 5% and 10% levels or at any other defined level. Unless the market price of the Common Stock does in fact appreciate over the exercise price over the option term, no value will be realized from the option grants made to the named individual. OPTION/SAR EXERCISES AND HOLDINGS The following table provides information with respect to the Named Officers concerning the unexercised options held by such individuals at the end of the 2000 fiscal year. There were any SARs outstanding at the end of such fiscal year. AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR AND FY-END OPTION/SAR VALUE
Shares Number of Unexercised Value of Unexercised In-the-Money Acquired on Value Options/SARs at FY-End (#) Options/SARs at FY-End (1) Name Exercise (#) Realized Exercisable/Unexercisable Exercisable/Unexercisable - ---- ------------ -------- ------------------------- ------------------------- John W. Ballard III 30,000 $79,750 44,167/43,333 $210,315/$203,748 Slobodan Tkalcevic 20,000 $45,000 56,667/33,333 $226,252/$203,748 Mary Ann W. Alcon 10,000 $22,500 3,334/11,666 $22,505/$68,121 Mansour Moussavian 12,000 $31,380 39,167/20,833 $177,815/124,685 Gordon Sinclair 12,000 $27,000 20,334/37,666 $88,630/$144,621
- ----------------- (1) Value based upon the closing selling price of the Company's Common Stock on September 30, 2000 on the Nasdaq National Market ($8.875 per share) less the exercise price payable per share. EMPLOYMENT CONTRACT AND CHANGE OF CONTROL AGREEMENTS Each of the Company's executive officers, including the Named Officers, has entered into a Change of Control Agreement with the Company. The Change of Control Agreement provides for severance payments to the executive officer in the event his or her employment with the Company is terminated involuntarily without Cause (as defined in the Change of Control Agreement), or the executive officer terminated his or her employment for Good Reason (as defined in the Change of Control Agreement) following a Change of Control (as defined in the Change of Control Agreement). If the executive officer is terminated or terminates his or her employment prior to the first anniversary of a Change of Control, he or she shall be entitled to a lump sum payment equal to two times his or her annual Base Compensation (as defined in the Change of Control Agreement). If the executive officer is terminated or terminates his or her employment following the first anniversary, but before the third anniversary of a Change of Control, he or she shall be entitled to a lump sum payment equal to his or her annual Base Compensation. The shares subject to outstanding option grants under the Company's 1981 Stock Option Plan will immediately vest upon an acquisition of the Company, unless the options are assumed by the acquiring entity. DIRECTOR REMUNERATION Each non-employee member of the Board of Directors was paid an annual retainer fee of $10,800 in fiscal 2000 (prorated quarterly for those directors serving a portion of the year) and was reimbursed for all out-of-pocket costs incurred in connection with their attendance at Board meetings. Mr. Hall received an additional annual retainer fee of $2,700 for his service as Chairman of the Audit Committee. The Company also pays each non-employee Director $675 for each Board meeting attended, $450 for each committee meeting attended that is not held in conjunction with a Board meeting and $225 for each committee meeting attended that is held in conjunction with a Board meeting. In addition, each non-employee Board member will receive, over his or her continued period of Board service, a series of option grants under the 1995 Non-Employee Director Stock Option Plan (the "Director Plan"). Each individual who is first appointed or elected to serve as a non-employee Board member will automatically receive on the date of his or her initial election or appointment an option to purchase 10,000 shares of Common Stock, provided such individual has not previously been in the employ of the Company. Furthermore, each individual who continues to serve as a non-employee Board member will receive an option to purchase 6,000 shares of Common Stock at (i) the Annual Stockholders Meeting held in the calendar year in which occurs the third anniversary of the grant date of the initial automatic option grant, and (ii) every third Annual Stockholders Meeting following the Annual Meeting at which the non-employee Board member received his or her first 6,000-share option grant. Messrs. Budge, Cox, Hall and Peyser each received a 6,000-share option grant at the 1998 Annual Meeting of Stockholders. Mr. John Anderson received an option grant for 10,000 shares in connection with his appointment to the Board of Directors on December 16, 1998. Each option granted under the Director Plan has an exercise price per share equal to the closing selling price per share of the Company's common stock on the grant date, as reported on the Nasdaq National Market, and the shares subject to each option will vest as follows: one-third immediately upon grant, an additional one-third upon the optionee's completion of one year of Board service measured from the grant date and the remaining one-third upon the optionee's completion of two years of Board service measured from the grant date. Each option granted under the Director Plan expires 10 years after issuance. COMPENSATION COMMITTEE AND BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION The Compensation Committee of the Board of Directors is composed entirely of independent, outside Directors. The Committee is responsible for reviewing and approving the compensation policies for all employees, including all officers, whose annual compensation is in excess of $100,000. The objective of the Compensation Committee is to establish a comprehensive program for the Company's executive officers which will (i) allow the Company to attract and retain the services of highly qualified individuals, (ii) tie executive compensation directly to the Company's business and performance objectives and (iii) reward outstanding individual performance that contributes to the Company's growth and long term success. In general, the compensation package for executive officers is comprised of three elements: (i) base salary which reflects individual performance and is designed primarily to be marginally competitive with salary levels of similarly sized companies both within and without the industry that compete with the Company for executive talent, (ii) annual variable performance awards payable in cash and tied to the achievement of performance targets and (iii) long term stock based incentive awards which create common interests for the executive officers and the Company's stockholders. The Compensation Committee annually evaluates the executive officers' base compensation and bonus eligibility compared with surveyed executive compensation for similar sized companies and divisions published by the American Electronics Association. Eligibility for bonuses is generally based on a weighted evaluation taking into account the overall performance of the Company, the Compensation Committee's evaluation of each participant's contribution to such performance, and progress made towards the attainment of long term growth objectives. The Compensation Committee meets with the Chief Executive Officer to review his evaluation of the executive officers' performance and eligibility for bonuses, and then reconvenes without the CEO's presence to evaluate his performance. The Committee gives a report on its meeting to the full Board of Directors. For purposes of the stock price performance graph which appears latter in this 10K/A, the Company has selected the S&P Aerospace/Defense Index as the industry index. However, in selecting companies to survey for compensation purposes, the Compensation Committee considered many factors including geographic location, growth rate, annual revenue and profitability, and market capitalization. The Compensation Committee also considered companies outside the industry which may compete with the Company in recruiting executive talent. For this reason, there was no meaningful correlation between companies surveyed for compensation data and the companies included in the S&P Aerospace Index. The base salary level for the Company's executive officers for fiscal 2000 ranged from the 15th to 90th percentile of the base salary paid by companies in the peer group survey taken into consideration for comparative compensation purposes. In November 2000, Mr. John W. Ballard III, received an increase of 10% over salary paid in fiscal 2000. Dr. Slobodan Tkalcevic received an increase of 8%, Mr. Mansour Moussavian received an increase of 7.5%, Mr. Gordon Sinclair received an increase of 7.5% and Ms. Mary Ann W. Alcon received an increase of 6%. For fiscal 2000, the Compensation Committee established a bonus pool to be distributed on a discretionary basis among executives and managers of the Company and its subsidiaries provided certain financial, marketing and product development milestones were attained. For fiscal 2000, the Compensation Committee recommended to the full Board of Directors that Messrs. John W. Ballard, III, Slobodan Tkalcevic, Gordon Sinclair and Mansour Moussavian and Ms. Mary Ann W. Alcon receive a bonus of $40,000, $35,000, $16,375, 16,375 and $10,500, respectively. For fiscal 2001, the Compensation Committee has again established a bonus pool to be distributed on a discretionary basis among executives and managers of the Company and its subsidiaries. The basis for distribution of this pool will be subjective, but is generally tied to the achievement of corporate and divisional goals as detailed in the Company's most recent strategic plan. More specifically, these goals relate to progress on new product introduction efforts and achievement of certain profitability and other financial milestones. Stock options are considered a component of the total compensation of officers. All stock option grants made under the 1981 Stock Option Plan to the Company's executive officers are authorized by the Board of Directors and are intended to align the interests of each officer-optionee with those of the stockholders and provide them with a significant incentive to manage the Company from the prospective of an owner with an equity interest in the success of the business. The size of the option grant made to each executive officer under the 1981 Plan is based upon that individual's current position with the Company, internal comparability with option grants made to other Company executives and the individual's potential for future responsibility and promotion over the option term. The Board of Directors also takes into account the existing equity holdings, whether in shares or in vested or unvested stock options, of the executive officer in determining the appropriate level of equity incentive to provide for each officer. However, the Board of Directors does not adhere to any specific guidelines as to the relative option holdings of the Company's executive officers. CEO COMPENSATION. In setting the compensation payable to Mr. John W. Ballard, III, the Company's CEO, for the 2000 fiscal year, the Compensation Committee has sought to achieve two objectives: (i) establish a level of base salary competitive with that paid by companies within the industry which are of comparable size to the Company and by companies outside of the industry with which the Company competes for executive talent and (ii) make a significant percentage of the total compensation package contingent upon performance. The base salary established for Mr. Ballard, III on the basis of the foregoing criteria is intended to provide him with a level of stability and certainty each year. However, this element of compensation historically has been affected to some degree by the Company's profitability. In fiscal 2000, Mr. Ballard III's salary component of compensation was at the 39th percentile of the base salary in effect for chief executive officers of the same peer group companies which were included in the survey reviewed by the Compensation Committee for comparative compensation purposes. DEDUCTION LIMIT FOR EXECUTIVE COMPENSATION. Section 162(m) of the Internal Revenue Code, enacted in 1993, generally disallows a tax deduction to publicly held corporations for compensation exceeding $1 million paid to certain executive officers. It is not expected that the compensation to be paid to the Company's executive officers for fiscal 2000 will exceed the $1 million limit per officer. Accordingly, the Compensation Committee has not at this time instituted any changes to its compensation policies to take into account the $1 million limitation. The Compensation Committee The Board of Directors Donald C. Cox John W. Ballard III Asaph H. Hall John L. Anderson John L. Anderson Donald C. Cox Asaph H. Hall E.M.T. Jones Alan C. Peyser Slobodan Tkalcevic PERFORMANCE GRAPH COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG COMPANY, S&P 500 INDEX And S&P AEROSPACE/DEFENSE INDEX [PERFORMANCE GRAPH] Notwithstanding anything to the contrary set forth in any of the Company's previous filings under the Securities Act of 1933 or the Securities Exchange Act of 1934 that might incorporate future filings of the Company, including this Proxy Statement in whole or in part, the preceding Performance Graph and Report of Compensation Committee and Board of Directors shall not be incorporated by reference into any such filings, nor shall such graph or report be incorporated by reference into any future filings. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION No member of the Compensation Committee is a former or current officer or employee of the Company or any of its subsidiaries. However, three members of the Board of Directors, Messrs. Ballard, III, Tkalcevic and Jones, are executive officers of the Company. No executive officer of the Company serves as a member of the Board of Directors or Compensation Committee of any entity which has an executive officer serving as a member of the Company's Board of Directors or Compensation Committee. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information regarding the beneficial ownership of the Company's Common Stock as of January 19, 2001 by (i) each person who is known to the Company to own beneficially more than 5% of the outstanding shares of the Common Stock of the Company, (ii) each director, (iii) each of the Named Officers and (iv) all directors and executive officers as a group. All shares are subject to the named person's sole voting and investment power except where otherwise indicated.
Shares Percent More Than 5% Beneficial Owners Beneficially Owned Of Class - ------------------------------ ------------------ -------- ROI Capital Management, Inc. 672,600(3) 19.3% 17 E. Sir Francis Drake Blvd, Ste 225 Larkspur, Ca. 94939 John W. Ballard 304,913 8.8% c/o TCI International, Inc. 47300 Kato Road, Fremont, Ca. 94538 Athena Capital Management, Inc. 216,950(4) 6.2% 621 East Germantown Pike, Ste 105 Plymouth Valley, Ca. 19401 TCI International Inc. Employee Stock Ownership Plan 192,224(1) 5.5% c/o Charles Schwab Trust Company, Trustee 1 Montgomery Street, 7th Floor., San Francisco, California 94104
Shares Percent Beneficial Ownership of Executive Officers and Directors Beneficially Owned Of Class - -------------------------------------------------------- ------------------ -------- E.M.T. Jones 132,861(2) 3.8% Slobodan Tkalcevic 81,682(5) 2.4% John W. Ballard III 66,192 (5) 1.9% Mansour Moussavian 39,570(2)(5) 1.1% Gordon Sinclair 33,361(2)(5) 1.0% Asaph H. Hall 23,250(5) * John L. Anderson 10,000(5) * Donald C. Cox 18,500(5) * C. Alan Peyser 18,500(5) * Mary Ann W. Alcon 8,371(2)(5) * All directors and executive officers as a group (10 persons) (2)(5) 432,287 12.4%
1) Each of the approximately 143 participants in the Company's Employee Stock Ownership Plan has sole voting power over all shares allocated to his or her account. The Administrative Committee for the Employee Stock Ownership Plan has investment power over the assets of the Employee Stock Ownership Plan, subject to the terms and limitations of such Plan. The Charles Schwab Trust Company serves as trustee in accordance with the terms of the Employee Stock Ownership Plan. 2) Includes shares allocated under the Employee Stock Ownership Plan to the participant's account through September 30, 2000. The shares allocated to officers and directors under the Employee Stock Ownership Plan totaled 68,065. Such shares are included in the aggregate holdings of the Employee Stock Ownership Plan (see footnote (1)). 3) ROI Capital Management, Inc., an investment advisor registered under Section 203 of the Investment Advisors Act of 1940, owns 672,600 shares as of January 25, 2001. 4) Athena Capital Management, Inc., an investment advisor registered under Section 203 of the Investment Advisors Act of 1940, owns 216,950 shares according to information contained in its Schedule 13G filed on January 27, 2000. 5) Includes shares subject to options which are currently exercisable or will become exercisable prior to April 30, 2001. The exercisable stock option shares for officers and directors totaled 266,170. * Percentage of shares beneficially owned does not exceed 1% of the class so owned. ITEM 13. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS There has not been nor is there currently proposed transaction to which the Company was or is to be a party in which any director, executive officer, holder of more than 5% of the common stock of the Company or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest other than (1) compensation agreements and other arrangements, which are described where required in "Change of Control Agreements" and (2) the transaction described below. OFFICER LOAN In December 1997, the Company loaned Mr. Mansour Moussavian, the General Manager of the Broadcast & Communications Division, $200,000 to assist him in the purchase of a new primary residence. The loan bears interest at the rate of 6.02% per annum, compounded annually, and is currently secured by his former residence. At such time as Mr. Moussavian sells that former residence, he will be obligated to secure the loan with a deed of trust on his new residence. Accrued interest on the loan is payable annually, up to an amount not to exceed the greater of $10,000 or 50% of the annual bonus paid to Mr. Moussavian for each year the loan remains outstanding. The entire principal balance, together with all accrued and unpaid interest, will become payable in full upon the earlier of (i) December 19, 2002 or (ii) Mr. Moussavian's termination of employment with the Company. The largest amount outstanding on this loan during the 2000 fiscal year was $214,012, and as of January 19, 2001, the outstanding unpaid balance was $217,795. ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K A. FINANCIAL STATEMENTS AND SCHEDULE 1. Consolidated Financial Statements as identified in the Index on Page F-1 of this report. 2. Financial Statement Schedule. In accordance with Regulation S-X, individual financial statements of the Registrant and its subsidiaries and other financial statement schedule are not included herewith because (a) they are not applicable to or required of the Registrant or (b) the information required to be set forth therein is included in the financial statements or other schedules. B. REPORTS ON FORM 8-K Not applicable. C. EXHIBITS 3.1 Restated Certificate of Incorporation of TCI International, Inc. (Incorporated by reference to Exhibit 3.1 to the Company's Form 10-K for fiscal year ended September 30, 1990; commission file number 0-10877) 3.2 Bylaws of Technology for Communications International, Inc. (Incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-4 No. 33-11265) 3.3 Amendments to the Bylaws of TCI International, Inc. (Incorporated by reference to Exhibit 3.3 to the Company's Form 10-K for fiscal year ended September 30, 1988; commission file number 0-10877) 3.4 Amendment to Restated Certificate of Incorporation of TCI International, Inc. (Incorporated by reference to Exhibit 3.4 to the Company's Form 10-Q for the quarter ended March 31, 1992; commission file number 0-10877) 4.1 Rights Agreement between the Company and Bank of America, NT&SA, dated December 15, 1989 (Incorporated by reference to Exhibit 1 to the Company's Form 8-K dated January 5, 1990; commission file number 0-10877) 4.2 First Amendment to Rights Agreement between the Company and Bank of America, NT&SA. (Incorporated by reference to Exhibit 2 to the Company's Form 8, Amendment No. 1 dated October 7, 1991; commission file number 0-10877) 10.1 The Company's Stock Option Plan (1981) as amended. (Incorporated by reference to Exhibit 28(a) to the Company's Registration Statement on Form S-8 No. 33-11339 filed on December 29, 1988.) 10.2 Form of Incentive Stock Option Agreement under the Company's Stock Option Plan (1981). (Incorporated by reference to Exhibit 28(b) to the Company's Registration Statement on Form S-8 No. 33-11339 filed on December 29, 1988.) 10.3 Form of Non-Qualified Stock Option Agreement under the Company's Stock Option Plan (1981). (Incorporated by reference to Exhibit 28(c) to the Company's Registration Statement on Form S-8 No. 33-11339 filed on December 29, 1988.) 10.4 1995 Non-employee Director Stock Option Plan under the Company's Stock Option Plan (1981). (Incorporated by reference to Exhibit 99.1, 99.2 and 99.3 to the Company's Registration Statement on form S-8 No. 33-11339 filed on December 29, 1988.) 10.5 The Company's Employee Stock Ownership Plan (Incorporated by reference to Exhibit 99 to the Company's Registration Statement on Form S-8 No. 33-73484 filed on December 27, 1993.) 10.6 Amendment No. 1 to the Company's Employee Stock Ownership Plan dated as of October 1, 1992. (Incorporated by reference to Exhibit 10.6 to the Company's Form 10-K for fiscal year ended September 30, 1996; commission file number 0-10877) 10.7 Plan Amendment to the Company's Employee Stock Ownership Plan dated as of January 1, 1994. (Incorporated by reference to Exhibit 10.7 to the Company's Form 10-K for fiscal year ended September 30, 1996; commission file number 0-10877) 10.8 TCI's 401(k) Plan. (Incorporated by reference to Exhibit 10.21 to TCI's Form 10-K for the fiscal year ended September 30, 1986; commission file number 0-10877) 10.9 Amendments la, 1b, and 2 to the TCI International, Inc. 401(k) Plan. (Incorporated by reference to Exhibit 10.15 to the Company's Form 10-K for fiscal year ended September 30, 1988; commission file number 0-10877)
10.10 Directors' Indemnification Agreements and Addendum's dated November 29, 1990. (Incorporated by reference to Exhibit 10.21 to the Company's Form 10-K for fiscal year ended September 30, 1990; commission file number 0-10877) 10.11 Sublease between Technology for Communications International and Fairchild Technologies, dated May 1, 2000 (Incorporated by reference to Exhibit 10.11 to the Company's Form 10-K fiscal year ended September 30, 2000; commission file number 0-10877) 10.12 Change of Control Agreement with Mr. John Ballard, III 10.13 Form of Change of Control Agreement entered into with executive officers 22* List of subsidiaries of TCI International, Inc. 23* Consent of KPMG LLP
- ---------- * Previously filed on December 28, 2000 Pursuant to the requirements to Section 13 or 15(d) 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. TCI International, Inc. Date: JANUARY 29, 2001 By: /s/ MARY ANN ALCON ----------------------- -------------- MARY ANN ALCON Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE /s/ JOHN W. BALLARD, III President and Director JANUARY 29, 2001 - ----------------------------- (Principal Executive Officer) -------------------- (John W. Ballard) /s/ MARY ANN W. ALCON Chief Financial Officer JANUARY 29, 2001 - ----------------------------- (Principal Financial & -------------------- (Mary Ann W. Alcon) Accounting Officer) /s/ E.M.T. JONES Director JANUARY 29, 2001 - ----------------------------- -------------------- (E.M.T. Jones) /s/ JOHN L. ANDERSON Director JANUARY 29, 2001 - ----------------------------- -------------------- (John L. Anderson) /s/ ASAPH H. HALL Director JANUARY 29, 2001 - ----------------------------- -------------------- (Asaph H. Hall) /s/ C. ALAN PEYSER Director JANUARY 29, 2001 - ----------------------------- -------------------- (C. Alan Peyser) /s/ DONALD C. COX Director JANUARY 29, 2001 - ----------------------------- -------------------- (Donald C. Cox) /s/ SLOBODAN TKALCEVIC Director JANUARY 29, 2001 - ----------------------------- -------------------- (Slobodan Tkalcevic)
EX-10.12 2 a2036440zex-10_12.txt EXHIBIT 10.12 EXHIBIT 10.12 TCI INTERNATIONAL, INC. CHANGE OF CONTROL AGREEMENT This AGREEMENT, dated as of the 2nd day of May, 2000, by and between TCI INTERNATIONAL, INC. (the "Company") and JOHN W. BALLARD III (the "Executive"). WHEREAS, the Board of Directors considers the Executive a key officer the Company, and needs the Executive's best efforts, skills and dedication in the event of a threat of a major change in the control of the Company to assure that the best interests of all shareholders are protected, as determined by the Board of Directors. WHEREAS, the Board of Directors recognizes that the course of action which it decides upon and which the Executive will be responsible to implement may be contrary to his own personal interests and needs. WHEREAS, in order to assure the availability of the Executive's best efforts, skills and dedication which would be required in such difficult circumstances to obtain the most beneficial outcome for the shareholders, the Company is willing to provide the Executive with income protection in the event of a change in control of the Company. NOW, THEREFORE, the Company shall be bound, in consideration of the Executive's services, as follows: 1. If during the term of this Agreement, the Executive's employment with the Company terminates due to involuntary termination by the Company without Cause or a Voluntary Resignation for Good Reason then the Executive shall be entitled to receive severance benefits as follows: (a) If the Executive's employment terminates as a result of involuntary termination by the Company without Cause or Voluntary Resignation for Good Reason prior to the first anniversary of a Change of Control, then the Company shall pay the Executive within ten (10) business days after the Termination Date a lump sum amount in cash equal to two (2) times the Executive's annual Base Compensation (based on annualizing the rate at which Executive most recently was accruing Base Compensation). (b) If the Executive's employment terminates as a result of involuntary termination by the Company without Cause or Voluntary Resignation for Good Reason on or after the first anniversary of a Change of Control but before the third anniversary of a Change of Control, then the Company shall pay the Executive within ten (10) business days after the Termination Date a lump sum amount in cash equal to one (1) times the Executive's annual Base Compensation (based on annualizing the rate at which Executive most recently was accruing Base Compensation). (c) The Executive's "Base Compensation" means the Executive's current annual rate of salary, determined in accordance with the Company's employment practices, excluding bonuses, incentive compensation, stock option gains or other benefits and special allowances for which the Executive is eligible. The Executive shall also receive such other benefits as may be payable to the Executive under the Company's then-existing benefit plans, including the Company's stock option plan, in accordance with the terms of such plans. 2. Notwithstanding any other provisions of this Agreement or of any Other Agreement or Benefit Plan, if any Change of Control payment would be considered a "parachute payment" within the meaning of Section 280G(b)(2) of the Code and if, after reduction for any excise tax and federal income tax imposed by the Code, the Executive's net proceeds of such Change of Control payment would be less than the amount of the Executive's net proceeds resulting from the payment of the Reduced Amount after reduction for federal income taxes, then the Change of Control payment payable to the Executive shall be limited to the Reduced Amount. The "Reduced Amount" means the largest amount that could be received by the Executive as a Change of Control payment such that no portion of such Change of Control payment would be subject to the excise tax. The determinations required by the preceding sentence shall be made by a firm of independent certified public accountants serving as the outside auditor of TCI International, Inc. as of the date of the applicable Change of Control, and such determinations shall be binding upon the Executive and TCI International, Inc. 3. Definition of Terms. The following terms referred to in this Agreement shall have the following meanings: (a) "Cause" shall mean (i) a willful act of personal dishonesty knowingly taken by the Executive in connection with his responsibilities as an employee and intended to result in his substantial personal enrichment, (ii) a willful and knowing act by the Executive which constitutes gross misconduct, (iii) any refusal by the Executive to comply with a reasonable written directive of the Board, (iv) a willful breach by the Executive of a material provision of this Agreement, or (v) a material and willful violation of a federal or state law or regulation applicable to the business of the Company. No act, or failure to act, by the Executive shall be considered "willful" unless committed without good faith and without a reasonable belief that the act or omission was in the Company's best interest. Termination for Cause shall not be deemed to have occurred unless, by the affirmative vote of all of the members of the Board (excluding the Executive, if applicable), at a meeting called and held for that purpose (after reasonable notice to the Executive and his counsel and after allowing the Executive and his counsel to be heard before the Board), a resolution is adopted finding that in the good faith opinion of such Board members the Executive was guilty of conduct set forth in (i), (ii), (iii), (iv) or (v), specifying the particulars thereof; provided that in the case of conduct set forth in (iii), (iv) or (v), the Executive shall have the opportunity to cure same within 30 days following the Executive's receipt of written notice thereof. (b) "Change in Control" shall mean the occurrence of any of the following events: (i) Any "person" or "group" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, but excluding any person or group as such term is used in Rule 13d-1(b) under the Exchange Act)) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities; or (ii) a sale, exchange or transfer of all or substantially all of the Company's assets; or (iii) a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets (other than to a subsidiary or subsidiaries). (c) "Voluntary Resignation for Good Reason" shall mean: (i) the continued assignment to the Executive of any duties or the continued significant change in the Executive's responsibilities, position or authority which is substantially inconsistent with his responsibilities, position or authority in effect immediately prior to the Change in Control, or constitutes a material reduction in the Executive's duties, responsibilities, position or authority immediately prior to such assignment or change for a period of 30 days after notice thereof from the Executive to the Board setting forth in reasonable detail the respects in which Executive believes such assignments or duties are significantly inconsistent with or a material reduction of the Executive's prior duties, responsibilities, position or authority; (ii) a reduction in the Executive's Base Compensation, other than any such reduction which is part of, and generally consistent with, a general reduction of officer salaries; (iii) a material reduction by the Company in the kind or level of employee benefits (other than salary) to which the Executive is entitled immediately prior to such reduction with the result that the Executive's overall benefits package (other than salary) is substantially reduced (other than any such reduction applicable to officers of the Company generally); (iv) the relocation of the Company's principal executive office to a location more than fifty (50) miles from its present location; or (v) any purported termination of the Executive's employment by the Company other than for Cause. (d) "Effective Date" shall mean the date of the Change of Control. (e) "Termination Date" shall mean the last day of the Executive's employment. 4. This Agreement shall commence on the date hereof and shall continue in effect through December 31 2003; provided, however, that commencing on January 1, 2004 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than June 30 of the preceding year, the Company or the Executive shall have given notice that it does not wish to extend this Agreement. Notwithstanding any such notice by the Company not to extend, if a Change in Control shall have occurred during the original or any extended term of this Agreement, or within three months thereafter, this Agreement shall continue in effect. In any event, the term of this Agreement shall expire on the third (3rd) anniversary of the date of a Change in Control. This Agreement shall terminate if your employment is terminated by you or the Corporation prior to a Change in Control of the Corporation. 5. (a) The Executive shall not be required to mitigate the amount of any Change of Control payment paid to the Executive by seeking other employment or otherwise, nor shall the amount of any Change of Control payment be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. (b) After the Executive has the right to receive the Change of Control payment, as provided for in Section 1 above, the Company shall also pay to the Executive, within thirty (30) days after incurred by the Executive, an amount equal to all legal fees and expenses incurred by the Executive as a result in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Internal Revenue Code of 1986, as amended from time to time, to any payment or benefit provided hereunder. 6. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. 7. If a court or arbitrator holds any provision of this Agreement to be invalid, unenforceable, or void, the remainder of the Agreement shall remain in full force and effect. 8. Except as provided herein, neither party may assign any right or delegate any obligation under this Agreement without the other party's written consent and any purported assignment or delegation by a party without the other party's written consent is void. The Company shall require any successor to expressly assume and agree in writing 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. 9. This Agreement may not be amended except in written form signed by each of the parties. IN WITNESS WHEREOF, the Company and the Executive have caused this Agreement to be duly executed as of the date first set forth above. TCI INTERNATIONAL, INC. EXECUTIVE By By --------------------------------- --------------------------------- Mary Ann W. Alcon John W. Ballard III Chief Financial Officer Chief Executive Officer TCI International, Inc. TCI International, Inc. EX-10.13 3 a2036440zex-10_13.txt EXHIBIT 10.13 EXHIBIT 10.13 TCI INTERNATIONAL, INC. CHANGE OF CONTROL AGREEMENT This AGREEMENT, dated as of the 2nd day of May, 2000, by and between TCI INTERNATIONAL, INC. (the "Company") and (the "Executive"). WHEREAS, the Board of Directors considers the Executive a key officer the Company, and needs the Executive's best efforts, skills and dedication in the event of a threat of a major change in the control of the Company to assure that the best interests of all shareholders are protected, as determined by the Board of Directors. WHEREAS, the Board of Directors recognizes that the course of action which it decides upon and which the Executive will be responsible to implement may be contrary to his own personal interests and needs. WHEREAS, in order to assure the availability of the Executive's best efforts, skills and dedication which would be required in such difficult circumstances to obtain the most beneficial outcome for the shareholders, the Company is willing to provide the Executive with income protection in the event of a change in control of the Company. NOW, THEREFORE, the Company shall be bound, in consideration of the Executive's services, as follows: 1. If during the term of this Agreement, the Executive's employment with the Company terminates due to involuntary termination by the Company without Cause or a Voluntary Resignation for Good Reason then the Executive shall be entitled to receive severance benefits as follows: (a) If the Executive's employment terminates as a result of involuntary termination by the Company without Cause or Voluntary Resignation for Good Reason prior to the first anniversary of a Change of Control, then the Company shall pay the Executive within ten (10) business days after the Termination Date a lump sum amount in cash equal to two (2) times the Executive's annual Base Compensation (based on annualizing the rate at which Executive most recently was accruing Base Compensation). (b) If the Executive's employment terminates as a result of involuntary termination by the Company without Cause or Voluntary Resignation for Good Reason on or after the first anniversary of a Change of Control but before the third anniversary of a Change of Control, then the Company shall pay the Executive within ten (10) business days after the Termination Date a lump sum amount in cash equal to one (1) times the Executive's annual Base Compensation (based on annualizing the rate at which Executive most recently was accruing Base Compensation). (c) The Executive's "Base Compensation" means the Executive's current annual rate of salary, determined in accordance with the Company's employment practices, excluding bonuses, incentive compensation, stock option gains or other benefits and special allowances for which the Executive is eligible. The Executive shall also receive such other benefits as may be payable to the Executive under the Company's then-existing benefit plans, including the Company's stock option plan, in accordance with the terms of such plans. 2. Notwithstanding any other provisions of this Agreement or of any Other Agreement or Benefit Plan, if any Change of Control payment would be considered a "parachute payment" within the meaning of Section 280G(b)(2) of the Code and if, after reduction for any excise tax and federal income tax imposed by the Code, the Executive's net proceeds of such Change of Control payment would be less than the amount of the Executive's net proceeds resulting from the payment of the Reduced Amount after reduction for federal income taxes, then the Change of Control payment payable to the Executive shall be limited to the Reduced Amount. The "Reduced Amount" means the largest amount that could be received by the Executive as a Change of Control payment such that no portion of such Change of Control payment would be subject to the excise tax. The determinations required by the preceding sentence shall be made by a firm of independent certified public accountants serving as the outside auditor of TCI International, Inc. as of the date of the applicable Change of Control, and such determinations shall be binding upon the Executive and TCI International, Inc. 3. Definition of Terms. The following terms referred to in this Agreement shall have the following meanings: (a) "Cause" shall mean (i) a willful act of personal dishonesty knowingly taken by the Executive in connection with his responsibilities as an employee and intended to result in his substantial personal enrichment, (ii) a willful and knowing act by the Executive which constitutes gross misconduct, (iii) any refusal by the Executive to comply with a reasonable written directive of the Chief Executive Officer, (iv) a willful breach by the Executive of a material provision of this Agreement, or (v) a material and willful violation of a federal or state law or regulation applicable to the business of the Company. No act, or failure to act, by the Executive shall be considered "willful" unless committed without good faith and without a reasonable belief that the act or omission was in the Company's best interest. Termination for Cause shall not be deemed to have occurred unless, by the affirmative vote of all of the members of the Board (excluding the Executive, if applicable), at a meeting called and held for that purpose (after reasonable notice to the Executive and his counsel and after allowing the Executive and his counsel to be heard before the Board), a resolution is adopted finding that in the good faith opinion of such Board members the Executive was guilty of conduct set forth in (i), (ii), (iii), (iv) or (v), specifying the particulars thereof; provided that in the case of conduct set forth in (iii), (iv) or (v), the Executive shall have the opportunity to cure same within 30 days following the Executive's receipt of written notice thereof. (b) "Change in Control" shall mean the occurrence of any of the following events: (i) Any "person" or "group" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, but excluding any person or group as such term is used in Rule 13d-1(b) under the Exchange Act)) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities; or (ii) a sale, exchange or transfer of all or substantially all of the Company's assets; or (iii) a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets (other than to a subsidiary or subsidiaries). (c) "Voluntary Resignation for Good Reason" shall mean: (i) the continued assignment to the Executive of any duties or the continued significant change in the Executive's duties, either of which is substantially inconsistent with or constitutes a material reduction in the Executive's duties immediately prior to such assignment or change for a period of 30 days after notice thereof from the Executive to the Board setting forth in reasonable detail the respects in which Executive believes such assignments or duties are significantly inconsistent with or a material reduction of the Executive's prior duties; (ii) a reduction in the Executive's Base Compensation, other than any such reduction which is part of, and generally consistent with, a general reduction of officer salaries; (iii) a material reduction by the Company in the kind or level of employee benefits (other than salary) to which the Executive is entitled immediately prior to such reduction with the result that the Executive's overall benefits package (other than salary) is substantially reduced (other than any such reduction applicable to officers of the Company generally); (iv) the relocation of the Company's principal executive office to a location more than fifty (50) miles from its present location; or (v) any purported termination of the Executive's employment by the Company other than for Cause. (d) "Effective Date" shall mean the date of the Change of Control. (e) "Termination Date" shall mean the last day of the Executive's employment. 4. This Agreement shall commence on the date hereof and shall continue in effect through December 31 2003; provided, however, that commencing on January 1, 2004 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than June 30 of the preceding year, the Company or the Executive shall have given notice that it does not wish to extend this Agreement. Notwithstanding any such notice by the Company not to extend, if a Change in Control shall have occurred during the original or any extended term of this Agreement, or within three months thereafter, this Agreement shall continue in effect. In any event, the term of this Agreement shall expire on the third (3rd) anniversary of the date of a Change in Control. This Agreement shall terminate if your employment is terminated by you or the Corporation prior to a Change in Control of the Corporation. 5. (a) The Executive shall not be required to mitigate the amount of any Change of Control payment paid to the Executive by seeking other employment or otherwise, nor shall the amount of any Change of Control payment be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise. (b) After the Executive has the right to receive the Change of Control payment, as provided for in Section 1 above, the Company shall also pay to the Executive, within thirty (30) days after incurred by the Executive, an amount equal to all legal fees and expenses incurred by the Executive as a result in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Internal Revenue Code of 1986, as amended from time to time, to any payment or benefit provided hereunder. 6. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. 7. If a court or arbitrator holds any provision of this Agreement to be invalid, unenforceable, or void, the remainder of the Agreement shall remain in full force and effect. 8. Except as provided herein, neither party may assign any right or delegate any obligation under this Agreement without the other party's written consent and any purported assignment or delegation by a party without the other party's written consent is void. The Company shall require any successor to expressly assume and agree in writing 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. 9. This Agreement may not be amended except in written form signed by each of the parties. IN WITNESS WHEREOF, the Company and the Executive have caused this Agreement to be duly executed as of the date first set forth above. TCI INTERNATIONAL, INC. EXECUTIVE By By -------------------------------- ------------------------------ John W. Ballard III Chief Executive Officer -----END PRIVACY-ENHANCED MESSAGE-----