-----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, S2aokk+ze2AYDEfknSDJdDf9Ta9idpMXfRBPGAX4m+nQdUXQV/js0BkqGeYSydYA up0UBZMJ+mplcSJ9ixZoAg== 0000950123-96-004257.txt : 19960813 0000950123-96-004257.hdr.sgml : 19960813 ACCESSION NUMBER: 0000950123-96-004257 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPECTRAN CORP CENTRAL INDEX KEY: 0000718487 STANDARD INDUSTRIAL CLASSIFICATION: GLASS, GLASSWARE, PRESSED OR BLOWN [3220] IRS NUMBER: 042729372 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12489 FILM NUMBER: 96608163 BUSINESS ADDRESS: STREET 1: 50 HALL ROAD CITY: STURBRIDGE STATE: MA ZIP: 01566 BUSINESS PHONE: 5083472261 10-Q 1 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to __________________ Commission file number 0-12489 SPECTRAN CORPORATION (Exact name of registrant as specified in its charter) Delaware 04-2729372 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 50 Hall Road, Sturbridge, Massachusetts 01566 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (508) 347-2261 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 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. The number of shares of the registrant's Common Stock outstanding as of July 31, 1996, was 5,387,963. 1 2 PART I - FINANCIAL INFORMATION SPECTRAN CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Six Months Ended Three Months Ended June 30, June 30, 1996 1995 1996 1995 ------------ ------------ ------------ ------------ Net Sales $ 28,753,735 $ 17,064,463 $ 15,281,212 $ 9,099,384 Cost of Sales 18,679,936 11,329,407 9,963,632 6,257,904 ------------ ------------ ------------ ------------ Gross Profit 10,073,799 5,735,056 5,317,580 2,841,480 Selling and Administrative Expenses 6,267,479 4,165,695 3,448,363 2,128,046 Research and Development Costs 1,580,542 1,412,545 671,263 659,100 ------------ ------------ ------------ ------------ Income from Operations 2,225,778 156,816 1,197,954 54,334 Other Income (Expense): Interest Income 120,729 168,184 52,817 83,561 Interest Expense (319,391) (253,731) (133,193) (151,918) Other 63,045 84,099 29,267 27,953 ------------ ------------ ------------ ------------ (135,617) (1,448) (51,109) (40,404) ------------ ------------ ------------ ------------ Income before Taxes 2,090,161 155,368 1,146,845 13,930 Income Tax Provision 573,481 64,235 314,070 5,711 ------------ ------------ ------------ ------------ Net Income $ 1,516,680 $ 91,133 $ 832,775 $ 8,219 ============ ============ ============ ============ Weighted Average Number of Shares of Common Stock Outstanding 5,892,795 5,319,034 6,035,640 5,409,358 ========= ========= ========= ========= Net Income per Share of Common Stock $.26 $.02 $.14 $-- ==== ==== ==== ===
See accompanying notes to these condensed consolidated financial statements. 2 3 SPECTRAN CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 1996 December 31, 1995 ------------- ----------------- (unaudited) ASSETS Current Assets: Cash and Cash Equivalents $ 2,364,575 $ 1,624,515 Current Portion of Marketable Securities 957,025 4,088,316 Trade Accounts Receivable, net 8,804,735 7,798,517 Inventories 8,287,270 7,414,718 Current Deferred Income Taxes, net 588,000 588,000 Prepaid Expenses and Other Current Assets 690,226 513,356 ------------ ------------ Total Current Assets 21,691,831 22,027,422 Property, Plant and Equipment, net 13,463,662 10,290,048 Other Assets: Long-term Marketable Securities 1,382,642 1,132,682 License Agreements, net 903,975 1,004,417 Deferred Income Taxes, net 1,934,000 1,652,000 Goodwill, net 4,008,831 4,156,392 Other 183,005 101,751 ------------ ------------ Total Other Assets 8,412,453 8,047,242 ------------ ------------ Total Assets $ 43,567,946 $ 40,364,712 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 2,451,920 $ 2,762,265 Income Taxes Payable 512,248 224,576 Accrued Liabilities 3,614,820 3,082,431 ------------ ------------ Total Current Liabilities 6,578,988 6,069,272 Long-term Debt 11,000,000 10,000,000 Stockholders' Equity: Common Stock, voting, $.10 par value; authorized 20,000,000 shares; outstanding 5,380,397 shares and 5,353,686 shares in 1996 and 1995, respectively 538,040 535,369 Common Stock, non-voting, $.10 par value; authorized 250,000 shares; no shares outstanding -- -- Paid-in Capital 26,599,632 26,442,794 Net Unrealized Loss on Marketable Securities (4,935) (22,264) Retained Earnings (Deficit) (1,143,779) (2,660,459) ------------ ------------ Total Stockholders' Equity 25,988,958 24,295,440 ------------ ------------ Total Liabilities and Stockholders' Equity $ 43,567,946 $ 40,364,712 ============ ============
See accompanying notes to these condensed consolidated financial statements. 3 4 SPECTRAN CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30, 1996 1995 ----------- ----------- Cash Flows from Operating Activities: Net Income $ 1,516,680 $ 91,133 Reconciliation of Net Income to Net Cash Provided by (Used in) Operating Activities Add (Deduct) Items Not Affecting Cash: Depreciation and Amortization 1,467,450 1,035,307 Other Non-Cash Charges (286,019) (156,379) Changes in Other Components of Working Capital (1,649,365) (1,172,696) ----------- ----------- Net Cash Provided by (Used in) Operating Activities 1,048,746 (202,635) Cash Flows from Investing Activities: Acquisition of Business -- (4,182,051) Acquisition of Property, Plant and Equipment (4,361,360) (959,765) Purchase of Marketable Securities (7,192,908) (1,400,222) Proceeds from Maturity of Marketable Securities 2,953,765 -- Proceeds from Sale of Marketable Securities 7,132,308 2,491,181 ----------- ----------- Cash Used in Investing Activities (1,468,195) (4,050,857) Cash Flows from Financing Activities: Borrowings of Long-term Debt 1,000,000 3,851,942 Proceeds from Exercise of Stock Options and Warrants 159,509 -- Proceeds from Issuance of Stock -- 422,498 ----------- ----------- Cash Provided by Financing Activities 1,159,509 4,274,440 Increase in Cash and Cash Equivalents 740,060 20,948 Cash and Cash Equivalents at Beginning of Period 1,624,515 477,022 ----------- ----------- Cash and Cash Equivalents at End of Period $ 2,364,575 $ 497,970 =========== ===========
See accompanying notes to these condensed consolidated financial statements. 4 5 SPECTRAN CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The financial information for the six months ended June 30, 1996, is unaudited but reflects all adjustments (consisting solely of normal recurring adjustments) which the Company considers necessary for a fair statement of results for the interim period. The results of operations for the six months ended June 30, 1996, are not necessarily indicative of the results for the entire year. The consolidated results for the six months ended June 30, 1996, include the accounts of SpecTran Corporation (the Company) and all wholly owned subsidiaries: SpecTran Communication Fiber Technologies, Inc., SpecTran Specialty Optics Company and Applied Photonic Devices, Inc. All significant intercompany balances and transactions have been eliminated. These financial statements supplement, and should be read in conjunction with, the Company's audited financial statements for the year ended December 31, 1995, as contained in the Company's Form 10-K as filed with the United States Securities and Exchange Commission. 2. INVENTORIES Inventories consisted of:
June 30, 1996 December 31, 1995 ------------- ----------------- Raw Materials $ 3,848,729 $ 3,131,753 Work in Process 1,485,731 1,507,830 Finished Goods 2,952,810 2,775,135 --------------- --------------- $ 8,287,270 $ 7,414,718 =============== ===============
5 6 3. PROPERTY, PLANT AND EQUIPMENT
June 30, 1996 December 31, 1995 ------------- ----------------- Property, plant and equipment consisted of: Land and Land Improvements $ 407,705 $ 407,705 Buildings and Improvements 3,763,006 3,729,114 Machinery and Equipment 18,591,912 17,229,195 Construction in Progress 4,605,536 1,640,786 ----------- ----------- 27,368,159 23,006,800 Less Accumulated Depreciation and Amortization 13,904,497 12,716,752 ----------- ----------- $13,463,662 $10,290,048 =========== ===========
4. INCOME PER SHARE OF COMMON STOCK Income per share of common stock is based on the weighted average of the number of shares outstanding during the periods, including common stock equivalents of stock purchase warrants and stock options for both primary and fully diluted earnings per share. Fully diluted income per share approximates primary income per share. 6 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Three and Six Months Ended June 30, 1996 Versus Three and Six Months Ended June 30, 1995 Overview SpecTran's revenue increased 67.9% to $15,281,212 and the Company earned net income of $832,775, or $.14 per share in the second quarter of 1996 compared with revenues of $9,099,384 and net income of $8,219, or less than one cent per share in the second quarter of 1995. For the six month period ended June 30, 1996 revenue increased 68.5% to $28,753,735 and the Company earned net income of $1,516,680 or $.26 per share compared with revenues of $17,064,463 and net income of $91,133 or $.02 per share for the comparable period of 1995. The improved revenues and earnings in 1996 resulted from continued strong market demand and improved gross profit margin for the Company's standard products, the results of Applied Photonic Devices, Inc., acquired May 23, 1995 and increased sales volumes of the Company's specialty products. Net Sales Consolidated net sales of $15,281,212 and $28,753,735 for the three and six month periods ended June 30, 1996, were $6,181,828 (67.9%) and $11,689,272 (68.5%) higher than for the comparable periods of 1995. The increase in both periods was primarily due to increased sales volumes of the Company's standard multimode fiber products. Also contributing to the increase in the second quarter and first six months of 1996 were sales of Applied Photonic Devices, Inc., acquired by the Company May 23, 1995. Gross Profit SpecTran earned a consolidated gross profit of $5,317,580 and $10,073,799 for the three and six months ended June 30, 1996, respectively, which was $2,476,100 (87.1%) and $4,338,743 (75.7%) higher than the comparable periods of 1995, respectively. The increase in gross profit was primarily due to the higher sales level in the 1996 three and six month periods. The gross margin, as a percentage of sales, increased to 34.8% in the second quarter of 1996 from 31.2% in the second quarter of 1995. For the six month period ended June 30, 1996 the gross margin, as a percent of sales, increased to 35.0% from 33.6% in the comparable period of 1995. The increase in the margin was principally due to lower production costs of the Company's standard products resulting from manufacturing process improvements. This was offset in part by lower margins earned by the APD cabling operation which was acquired in May 1995. Royalties expense was 4.0% and 4.1% of SpecTran's sales for the three and six month periods, respectively, compared to 5.5% and 5.6% in the comparable period of 1995, with a higher level of sales in 1996 not subject to royalties. 7 8 Selling and Administration Consolidated selling and administrative expenses increased by $1,320,317 (62.0%) and $2,101,784 (50.5%) during the three and six month periods ended June 30, 1996. The increase was primarily due to expenses incurred by Applied Photonic Devices, Inc. in both periods of 1996. As a percentage of sales these expenses decreased during 1996 to 22.6% and 21.8% compared to 23.4% and 24.4% for the comparable three and six month periods. Research and Development Consolidated spending for internal research and development increased by $12,163 (1.8%) and $167,997 (11.9%) for the three and six month periods ended June 30, 1996. Consolidated research and development costs decreased as a percentage of sales to 4.4% and 5.5% in 1996 compared to 7.2% and 8.3% for the comparable three and six month periods of 1995. The Company's increased research and development spending is primarily in programs designed to improve manufacturing cost and product performance in both the multimode and single-mode product lines, to develop new special performance fiber products and to develop alternative process technologies. Other Income (Expense), net Net other expense increased $10,705 (26.5%) and $134,169 (9266%) during the three and six months ended June 30, 1996 compared to the same period of 1995. Interest income decreased by $30,744 (36.8%) and $47,455 (28.2%) during the three and six months of 1996, respectively, primarily as a result of lower investment balances than in the comparable periods of 1995. Interest expense decreased during the second quarter of 1996 $18,725 (12.3%) as a result of capitalization of interest expense on asset construction. Interest expense increased during the six month period of 1996 by $65,660 (25.9%) as a result of increased debt levels. Income Taxes A tax provision of 28% of pre-tax income was provided in the three and six month periods of 1996 compared to a tax provision of 41% of pre-tax income in the comparable periods of 1995. The estimated effective tax rate for 1996 of 28% is lower than the statutory tax rate due to an anticipated reduction in the valuation allowance for deferred tax assets due to the Company's belief that it is more likely than not that the additional deferred tax asset will be realized through the utilization of operating loss and tax credit carryforwards. Net Income Net income for the three and six months of 1996 was $832,775, or 5.4% of net sales, and $1,516,680, or 5.3% of net sales, respectively. Net income for the same periods in 1995 was $8,219, or .1% of net sales, and $91,133 or .5% of sales, respectively. 8 9 Liquidity and Capital Resources At June 30, 1996, the Company had net working capital of $15,112,905, a current ratio of 3.3 to 1, and an aggregate of $2,364,575 in cash and cash equivalents. In addition, the Company had total marketable securities of $2,339,667 including $1,382,642 classified at long-term which could be converted into cash if needed. First half 1996 capital expenditures of $4,361,360 were made to increase capacity and represented a $3,401,595 (354.4%) increase compared to capital expenditures in the first half of 1995. The Company is planning additional significant capital expenditures during the remainder of 1996 to further expand capacity. At June 30, 1996, the Company had outstanding an $11 million loan under a revolving credit agreement with Fleet National Bank, leaving $1 million of borrowing available under the agreement. The Company expects but can not assure that existing working capital, borrowings, and expected positive cash flow should be sufficient to meet the Company's cash needs in 1996. 9 10 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit 10.69 Supplemental Retirement Agreement between SpecTran Corporation and Raymond E. Jaeger dated May 8, 1996. Exhibit 10.70 Supplemental Retirement Agreement between SpecTran Corporation and Bruce A. Cannon dated May 8, 1996. Exhibit 10.71 Supplemental Retirement Agreement between SpecTran Corporation and Crawford L. Cutts dated May 8, 1996. Exhibit 10.72 Supplemental Retirement Agreement between SpecTran Corporation and William B. Beck dated May 8, 1996. Exhibit 10.73 Supplemental Retirement Agreement between SpecTran Corporation and John E. Chapman dated May 8, 1996. Exhibit 10.74 Lease between CRJ Realty Trust and SpecTran Communication Fiber Technologies, Inc. dated July 22, 1996. (b) Reports on Form 8-K No reports on Form 8-K were filed by the Registrant during the quarter which this report was filed. 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. SPECTRAN CORPORATION (Registrant) Date: August 9, 1996 BY: /s/ Glenn E. Moore ------------------------------------------------- Glenn E. Moore President and Chief Executive Officer Date: August 9, 1996 BY: /s/ Bruce A. Cannon ------------------------------------------------- Bruce A. Cannon Senior Vice President and Chief Financial Officer 10 EX-10.69 2 SUPPLEMENTAL RETIREMENT AGREEMENT 1 EXHIBIT 10.69 SUPPLEMENTAL RETIREMENT AGREEMENT THIS AGREEMENT is made and entered into this 8th day of May, 1996 by and between SpecTran Corporation ("SpecTran"), a Delaware corporation, and Raymond E. Jaeger (hereinafter called "Jaeger"). PURPOSE AND INTENT This agreement (the "Agreement") is designed to recognize Jaeger's contribution to the Corporation(1) as both a founder of the Corporation and as its President and Chief Executive Officer since inception and to encourage Jaeger to remain in the Corporation's employ by providing supplemental retirement benefits, keyed to a specified percentage of his compensation, so that Jaeger's percentage of spendable retirement income will approximate the percentage of spendable retirement income available to less compensated employees who also participate in the Corporation's retirement plans. Due to restrictions presently imposed by the Internal Revenue Code on benefits for highly compensated employees, the percentage of spendable retirement income Jaeger would receive under the Corporation's current benefit plans relative to his current compensation would be less than that of employees at lower salary levels. The benefits provided in this Agreement are designed to be entirely supplemental to the Corporation's other retirement benefits payable to Jaeger; if Jaeger receives the specified percentage of compensation through pension plans and other benefits (as described below) provided by the Corporation, no benefits will be paid out under this Agreement. While any benefits are paid under this Agreement Jaeger will be available to consult for the Corporation. Further, these benefits are subject to forfeiture if Jaeger is terminated for Cause (as defined herein) or, as described below, competes with the Corporation. - -------- (1) Initial capitalized words may be defined below under the heading "Certain Definitions". Page 1 2 EXHIBIT 10.69 Jaeger is a founder of the Corporation, has been employed by the Corporation since its inception in 1981, and served as President and Chief Executive Officer of the Corporation and its subsidiaries from its inception through December 31, 1995. The Board of Directors of SpecTran voted on May 8, 1996 to authorize the Corporation to enter into this Agreement with Jaeger. CERTAIN DEFINITIONS(a) "Accrued Benefit" shall have the meaning set forth in Section 2.01 of this Agreement. (b) "Affiliate" shall mean any person or entity which controls, is controlled by or is under common control with the Corporation. For the purpose of this Agreement, control shall mean ownership of fifty percent (50%) or more of the voting stock of any entity. (c) "Benefit Computation Base" shall mean the average of Jaeger's annual compensation (defined as base salary, bonus(2) and any salary reduction amounts pursuant to Sections 401(k) - ----------------------------- (2) To the extent that the average annual bonus paid to Jaeger during the 36 month period in which the Benefit Computation Base is calculated is greater than fifty percent (50%) of Jaeger's average base salary over such period, the excess bonus payments shall be considered ineligible for the purpose of calculating the Benefit Computation Base. For example, assume that Jaeger's base salary and bonuses over the 36 month period are as shown in the following two examples: 1.
Base Salary Bonus ----------------------------------------------------------------- Months 1-12 $200,000 $200,000 Months 13-24 $210,000 $100,000 Months 25-36 $220,000 $ 90,000 Average $210,000 $130,000
In this example, fifty percent (50%) of Jaeger's average annual base salary over the 36 month period is $105,000. Accordingly, of Jaeger's average annual bonus of $130,000 paid over that period, $25,000 will be deemed ineligible for the purpose of calculating the Benefit Computation Base, resulting in $105,000 of the average bonus being considered eligible. Page 2 3 EXHIBIT 10.69 or 125 of the Code) paid during the thirty-six (36) consecutive calendar months during Jaeger's period of employment by the Corporation in which such compensation is the highest.(d) "Change in Control" shall have the meaning set forth in Section 10.02 of this Agreement.(e) The "Corporation" shall mean SpecTran, its successors and assigns, including but not limited to any corporation, firm or person which is the survivor of a merger or consolidation with SpecTran or which acquires substantially all of the assets of SpecTran, and any of SpecTran's Affiliates.(f) "Normal Retirement Date" shall mean Jaeger's sixty-fifth birthday.(g) "Offsetting Benefits" shall have the meaning set forth in Section 2.03 of this Agreement.(h) "Supplemental Retirement Benefit" shall have the meaning set forth in Section 2.01 of this Agreement. ARTICLE ONE 1.01 EMPLOYMENT. The Corporation may employ Jaeger in such capacity as the Corporation may from time to time determine. Notwithstanding anything contained herein, this Agreement is not an agreement of employment, a guaranty of continuing employment or of employment in any particular position and nothing herein shall restrict the Corporation concerning the terms and conditions of Jaeger's employment. The benefits provided by this Agreement are not part of any salary reduction plan or an arrangement deferring a bonus or a salary increase. Jaeger has no option to take any current payment or bonus in lieu of these salary continuation benefits. 2. - --------------------------------------------------------------------------------
Base Salary Bonus ----------------------------------------------------------------- Months 1-12 $200,000 $200,000 Months 13-24 $210,000 $ 10,000 Months 25-36 $220,000 $ 30,000 Average $210,000 $ 80,000
In this example, fifty percent (50%) percent of Jaeger's average annual base salary over the 36 month period is $105,000. Jaeger's average annual bonus over that period of $80,000 is less than the average annual base salary, and accordingly the entire average annual bonus will be eligible in determining the Benefit Computation Base. Page 3 4 EXHIBIT 10.69 ARTICLE TWO 2.01 SUPPLEMENTAL RETIREMENT BENEFIT. Depending upon how many years Jaeger has been continuously in the employ of the Corporation, Jaeger will be entitled to a retirement benefit determined as of the effective date of his leaving the Corporation's employment for whatever reason except Cause (as defined below), including whether by (i) death, (ii) disability, (iii) termination of employment or (iv) early retirement. The retirement benefit (also known as the "Accrued Benefit") shall be an annual amount equal to Jaeger's Benefit Computation Base multiplied by the Annual Percentage Amount (as determined pursuant to Section 2.02, below). Jaeger will receive a supplemental retirement benefit (the "Supplemental Retirement Benefit") equal to (i) the amount of the Accrued Benefit reduced by (ii) the sum of the benefits described in Subsections (1), (2), (3) and (4) of Section 2.03, below (such benefits are referred to herein as the "Offsetting Benefits"). The Supplemental Retirement Benefit, if any, to be paid out under this Agreement, shall continue for fifteen (15) years, and be paid in equal monthly installments commencing on the first day of the month immediately following the later of Jaeger's actual retirement or the Normal Retirement Date (unless payment is accelerated in accordance with Sections 10.01 and 10.02 below). No payment will be made under this Agreement if the Offsetting Benefits are equal to or greater than the Accrued Benefit. Page 4 5 EXHIBIT 10.69 2.02 ANNUAL PERCENTAGE AMOUNT. (a) The Annual Percentage Amount shall be determined (subject to subsection (b), below) by the number of years Jaeger has been continuously employed by the Corporation as follows:
========================================================================================= YEARS OF CONTINUOUS SERVICE ANNUAL PERCENTAGE AMOUNT ========================================================================================= 25 or more 65% 20 -24 60% 15-19 40% less than 15 0% (No Supplemental Retirement Benefit) =========================================================================================
(b) Notwithstanding the provisions of Subsection (a) of this Section 2.02, in the event (a) Jaeger does not remain employed by the Corporation for any reason during the twelve (12) month period following a Change in Control (as defined in Section 10.01, below) or (b) an event described in Section 10.01 occurs and either such other corporation, firm or person (as described in Section 10.01) does not agree that Jaeger shall continue in the employ of the Corporation for any reason following such event or the Corporation's successor does not assume its obligations hereunder, Jaeger will be deemed eligible to receive a Supplemental Retirement Benefit under this Agreement if at the time of the termination of his employment he will have completed at least five full years of service to the Corporation. In this case, the Annual Percentage Amount shall be determined by the number of years Jaeger has been continuously employed by the Corporation as follows: Page 5 6 EXHIBIT 10.69
========================================================================================= YEARS OF SERVICE ANNUAL PERCENTAGE AMOUNT ========================================================================================= 25 or more 65% 20 -24 60% 15-19 40% 14 36% 13 32% 12 28% 11 24% 10 20% 9 16% 8 12% 7 8% 6 4% less than 6 0% (No Supplemental Retirement Benefit) =========================================================================================
c) Anything else to the contrary in this Agreement notwithstanding, in the event of either (a) Jaeger does not remain employed by the Corporation for any reason during the twelve month period following a Change in Control or (b) an event described in Section 10.01 occurs and either such other corporation, firm or person (as described in Section 10.01) does not agree that Jaeger shall continue in the employ of the Corporation for any reason following such event or the Corporation's successor does not assume its obligations hereunder, and (c) in either case, the payment of the Supplementary Retirement Benefit hereunder, is considered a Parachute Payment and when combined with all other payments considered to be Parachute Payments from the Corporation to Jaeger due to the events described in (a) and (b) above, result in an Excess Parachute Payment, as defined by Section 280G of the Internal Revenue Code of 1986, as amended, then the amount of the Supplementary Retirement Benefit shall be reduced so that the total Parachute Payments received by Jaeger from the Corporation do not constitute an Excess Parachute Payment; provided, however, that this Section 2.02(c) shall not apply if the total Parachute Payments from the Corporation to Jaeger due to the events described in (a) and (b) above exceed one hundred twenty percent (120%) of the amount of all Parachute Payments not including any amount that would be considered an Excess Parachute Page 6 7 EXHIBIT 10.69 Payment. Page 7 8 EXHIBIT 10.69 2.03 OFFSETTING BENEFITS. (a) The following are the Offsetting Benefits, which reduce the Accrued Benefit for the purpose of calculating the Supplemental Retirement Benefit: 1. Fifty percent (50%) of Jaeger's (actual or projected) annual primary social security retirement benefit projected as of Jaeger's social security normal retirement age based on his Benefit Computation Base in effect on the date of termination of Jaeger's employment with the Corporation; 2. The annual amount of benefits payable to Jaeger (or his beneficiaries) at the Normal Retirement Date calculated on a single life annuity basis from any qualified defined benefit pension plan maintained and funded by the Corporation as of the date of this Agreement, or their successors, as such plan or plans may be amended or modified from time to time; 3. The annual amount of benefits payable at the Normal Retirement Date on a single life annuity basis attributable to the portion of the account balances of Jaeger arising from employer contributions (but excluding the portion of such balances arising from employee salary reduction and elective contributions) at the date of determination from the Corporation's 401(k) and other defined contribution retirement plans maintained by the Corporation as of the date of this Agreement, or their successors, as such plan or plans may be modified from time to time; 4. The annual amount of benefits payable to Jaeger at the Normal Retirement Date calculated on a single life annuity basis from any other non-qualified supplemental retirement plan maintained and funded by the Corporation as of the date of this Agreement, or their successors, as such plan or plans may be amended or modified from time to time. (b) The Corporation's obligation to pay the Offsetting Benefits shall not be affected by the termination of this Agreement and the Supplemental Retirement Benefit payable hereunder for any reason whatsoever. (c) All calculations of the Supplemental Retirement Agreement payable to Jaeger under this Agreement will be made assuming that Jaeger participates in the Offsetting Benefits to the full extent permitted by law and the terms of those plans. (d) If Jaeger terminates his employment prior to his Normal Retirement Date, in calculating his Accrued Benefit, (i) the offset of primary social security retirement benefit shall be calculated on the basis of the amount projected to be payable at Jaeger's social security normal retirement age assuming continued earnings by Jaeger at the rate in effect at termination of employment until Jaeger's social security normal retirement age; (ii) the offset for any qualified defined benefit plan shall be calculated on the basis of Jaeger's accrued benefit in said plan upon termination of employment projected to be payable at Jaeger's Normal Retirement Date; (iii) the offset for any benefits arising from employer contributions attributable to the account balances of Jaeger arising from the Corporation's 401(k) plan or any other defined contribution retirement plan shall also be calculated on the basis of Jaeger's accrued benefit in such plan(s) upon termination of employment projected to be payable at Jaeger's Normal Retirement Date; and (iv) the offset for any non-qualified supplemental Page 8 9 EXHIBIT 10.69 retirement plan shall be calculated on the basis of Jaeger's accrued benefit in said plan upon termination of employment projected to be payable at Jaeger's Normal Retirement Date . 2.04 OPTIONAL FORMS OF PAYMENT. In lieu of the fifteen (15) year certain payments provided in Section 2.01 above, or whenever a Supplemental Retirement Benefit is payable under Section 4.01 or 5.01 of this Agreement, Jaeger may elect by written notice to the Corporation in the calendar year prior to the calendar year in which payments are to begin, an optional form of payment which shall be the actual equivalent (factors defined in SpecTran's qualified defined benefit pension plan) of the said fifteen (15) year certain payments. The optional form of payment shall be any optional form of payment which is provided to Jaeger under the terms of SpecTran's qualified defined benefit pension plan. 2.05 VESTING. Anything to the contrary in this Agreement notwithstanding, Jaeger shall be entitled to one hundred percent (100%) of any benefit payable under this Agreement under any one or more of Sections 2.01, 3.01, 4.01, 5.01, 10.01 or 10.02 at the date on which his entitlement to such benefit shall be determined commencing with his original date of hire by the Corporation, provided that such benefits are subject to forfeiture as described in Sections 5.03 and 5.04, below. ARTICLE THREE 3.01 DEATH OF JAEGER. (a) If Jaeger dies while employed by the Corporation but prior to the commencement of the payment of the Supplemental Retirement Benefit under Section 2.01, 4.01 or 5.01, SpecTran will pay to the designated beneficiaries of Jaeger, a total annual amount equal to the Supplemental Benefit earned by Jaeger as of the date of death, payable over a period of fifteen (15) years certain commencing on the first day of the month next following the delivery to the Corporation of a death certificate and on a monthly basis thereafter. (b) If Jaeger dies following the commencement of the payment of the Supplemental Retirement Benefit under Section 2.01, 4.01 or 5.01, such payments shall continue to the designated beneficiaries of Jaeger until all of the Supplemental Retirement Benefit has been paid. c) If Jaeger dies following the termination of his employment with the Corporation and prior to the commencement of the payment of the Supplemental Retirement Benefit under Section 2.01, 4.01 or 5.01, SpecTran shall pay to Jaeger's named beneficiaries an annual benefit which shall be Jaeger's Supplemental Retirement Benefit as of the date of the termination of his employment. Such benefits shall be payable monthly, commencing on the first day of the month following the Normal Retirement Date, or any date prior to the Normal Retirement Date approved by the Corporation, and continuing for fifteen (15) years; provided, however, that Jaeger's designated beneficiaries shall be entitled to accelerated payments of such benefits if and to the same extent Jaeger would have been entitled to an accelerated payment of the Supplemental Retirement Benefit had he survived. 3.02 BENEFICIARIES. Jaeger shall designate, in writing to the Corporation, on the form titled "Designation of Beneficiary" attached hereto as Schedule A, one or more beneficiaries. Jaeger Page 9 10 EXHIBIT 10.69 from time to time may change his designated beneficiaries by delivering to the Corporation a dated, revised Designation of Beneficiary form, revoking the prior designation. If no beneficiary is so named or if no named beneficiary is living at the time a payment is due, benefit payments shall be made, when due, to Jaeger's estate. If payments of benefits to a beneficiary commences and such beneficiary dies before all amounts to which such beneficiary is entitled have been paid, the remaining benefits shall be paid to the successive beneficiary or beneficiaries, if any, designated by Jaeger, or if none, to the beneficiary's estate. ARTICLE FOUR 4.01 DISABILITY PRIOR TO RETIREMENT. In the event Jaeger shall become disabled, mentally or physically, which disability prevents him from performing the material aspects of his duties, the Corporation will pay no disability benefits hereunder. Disability benefits (if any) will be paid to Jaeger through such insurance programs as may be sponsored by the Corporation. Upon the later of termination of such other disability benefits (if any), or Jaeger's attainment of the Normal Retirement Date, Jaeger shall commence receiving payment of his Accrued Benefit determined as of the date of the disability. The Supplemental Retirement Benefit shall be paid in equal monthly installments, for fifteen (15) years certain commencing on the first day of the month following the later of the termination of such benefits or the Normal Retirement Date, or in the manner provided in Section 2.04. 4.02 RE-EMPLOYMENT FOLLOWING DISABILITY. In the event Jaeger returns to work with the Corporation after terminating employment because of disability, this Agreement shall continue in full force and effect as though such disability had not occurred. Under such circumstances, Jaeger will receive credit towards determining the Annual Percentage Amount for service prior to terminating his employment because of disability and for service after resuming employment with the Corporation, but will not receive credit for the interim prior during which he was not employed by the Corporation. ARTICLE FIVE 5.01 EARLY RETIREMENT, TERMINATION OF SERVICE OR DISCHARGE. Except to the extent otherwise provided in Sections 5.03 and 5.04, in the event that Jaeger's employment with the Corporation is terminated, voluntarily or involuntarily, before Jaeger attains the Normal Retirement Date, for reasons other than death or disability, Jaeger shall be entitled to a Supplemental Retirement Benefit, determined as of the date of his termination of employment. Such benefit shall be payable in equal monthly installments, commencing on the first day of the month next following the later of the Normal Retirement Date or the date of Jaeger's actual retirement, and continuing for fifteen (15) years (except as set forth in Sections 10.01 and 10.02); provided, however, that Jaeger may elect by execution and delivery to the Corporation of the form attached hereto as Schedule B to have the monthly payments of the Supplemental Retirement Benefit commence prior to the Normal Retirement Date at any date between age 60 and the Normal Retirement Date. Jaeger understands that such election is being made prospectively and is irrevocable. Page 10 11 EXHIBIT 10.69 5.02 OPTIONAL FORMS OF PAYMENT. In lieu of the fifteen (15) years certain payments provided in Section 5.01, the Supplemental Retirement Benefit payable under such Section may be payable in the manner provided in Section 2.04. 5.03 EMPLOYMENT BY COMPETITION. In the event that during the two year period immediately following the termination of Jaeger's employment for any reason, Jaeger shall compete with the business of the Corporation, then the Supplemental Retirement Benefit which might otherwise be due and payable hereunder shall be immediately forfeited and all rights of Jaeger and his beneficiaries hereunder shall become void; provided, however, that if (a) Jaeger does not remain employed by the Corporation for any reason during the twelve (12) month period following a Change in Control or (b) an event described in Section 10.01 occurs and either such other corporation, firm or person (as described in Section 10.01) does not agree that Jaeger shall continue in the employ of the Corporation for any reason following such event or the Corporation's successor does not assume its obligations hereunder, the provisions of Section 5.03 shall not apply, but the provisions of Sections 10.01 and 10.02 shall govern. Jaeger will be deemed to have competed with the business of the Corporation if, during the two year period following termination of his employment with the Corporation, he either (a) engages, directly or indirectly, or by stock interest exceeding five percent (5%), or otherwise in any way, in any business in which the Corporation was engaged during the term of his employment or which the Corporation planned, during the term of his employment to enter, (b) solicits any past, present or future customers of the Corporation in any way relating to any business in which the Corporation was engaged during the term of his employment, or which the Corporation planned during the term of his employment, to enter, or (c) induces or actively attempt to influence any other employee or consultant of the Corporation to terminate his or her employment or consultancy with the Corporation. 5.04 FORFEITURE. Anything to the contrary in this Agreement notwithstanding (other than Sections 10.01 and 10.02), the Supplemental Retirement Benefits shall be immediately forfeited and all rights of Jaeger and his beneficiaries hereunder shall become null and void, if Jaeger's employment with the Corporation is terminated for Cause. For this purpose, a termination shall be a termination for "Cause" only if the termination if for one or more of the following: (i) the conviction of Jaeger for committing any felony, (ii) stealing from the Corporation, (iii) a willful breach by Jaeger of a material provision of this Agreement and (iv) if Jaeger engages in gross misconduct, such as fraud, dishonesty, gross negligence or insubordination. If (a) Jaeger does not remain employed by the Corporation for any reason within one year following a Change in Control or (b) an event described in Section 10.01 occurs and either such other corporation, firm or person (as described in Section 10.01) does not agree that Jaeger shall continue in the employ of the Corporation for any reason following such event or the Corporation's successor does not agree to assume its obligation hereunder, the provisions of this Section 5.04 shall not apply, but the provisions of Sections 10.01 and 10.02 shall govern. Page 11 12 EXHIBIT 10.69 5.05 AVAILABILITY TO CONSULT. For so long as Jaeger is receiving benefits pursuant to this Agreement, Jaeger will keep himself available to consult with, and respond to inquiries from, the Corporation relating to its business affairs, at reasonable time(s) and to reasonable extent. ARTICLE SIX 6.01 INTEREST. Any payment that is required to be made hereunder that is delayed beyond the date specified in this Agreement shall bear interest at a variable rate which shall be the rate of interest on one year U.S. Treasury Bills determined at the first auction of each calendar year or part thereof during the period of which interest is to be applied to any obligation hereunder. ARTICLE SEVEN 7.01 ALIENABILITY. Neither Jaeger, nor any beneficiary under this Agreement shall have any power or right to transfer, assign, anticipate, hypothecate, mortgage, commute, modify, or otherwise encumber in advance any of the benefits payable hereunder, and any attempt to do so shall be deemed null and void. The seizure of the benefits payable hereunder for the payment of any debts, judgments, alimony or separate maintenance, owed by Jaeger or his beneficiary or any of them, or the transfer of such benefit by operation of law in the event of bankruptcy, or otherwise, shall be deemed to be a transfer prohibited by this Agreement, and will result in the immediate termination of all benefits payable hereunder. ARTICLE EIGHT 8.01 PARTICIPATION IN OTHER PLANS. Nothing contained in this Agreement shall be construed to alter, abridge, or in any manner affect the rights and privileges of Jaeger to participate in and be covered by any pension, profit sharing, group insurance, bonus or any other employee plan or plans which the Corporation may have or hereafter have. ARTICLE NINE 9.01 FUNDING. (a) The Corporation reserves the right at its sole and exclusive discretion to insure or otherwise provide for the obligations of the Corporation undertaken by this Agreement or to refrain from same, and to determine the extent, nature and method thereof, including the establishment of one or more trusts. Should the Corporation elect to insure this Agreement, in whole or in part, through the medium of insurance or annuities, or both, the Corporation shall be the owner and beneficiary of the policy or annuity. At no time shall Jaeger be deemed to have any right, title or interest in or to any specified asset or assets of the Corporation, or any trust or escrow arrangement, including, but not by way of restriction, any insurance or annuity contracts or the proceeds therefrom. Page 12 13 EXHIBIT 10.69 (b) Any such policy, contract or asset shall not in any way be considered to be security for the performance of the obligations of this Agreement. c) If the Corporation purchases a life insurance or annuity policy on the life of Jaeger, Jaeger agrees to sign any papers that may be required for that purpose and to undergo any medical examination or tests (at the Corporation's expense) which may be necessary, and generally cooperate with the Corporation in securing such policy. d) To the extent Jaeger acquires a right to receive benefits under this Agreement, such right shall be equivalent to the right of an unsecured general creditor of the Corporation. ARTICLE TEN 10.01 REORGANIZATION. SpecTran shall not merge or consolidate into or with another corporation if such merger or consolidation shall result in the other corporation being the survivor corporation, nor shall it sell substantially all of its assets to another corporation, firm or person, unless and until Jaeger and such other corporation, firm or person agree that Jaeger shall continue in the employ of the succeeding, continuing or acquiring corporation, firm or person and such other corporation, firm or person agrees in writing without further qualification to assume and discharge the obligations of SpecTran under this Agreement. If Jaeger and such corporation, firm or person do not agree that Jaeger shall continue in the employ of such corporation, firm or person, or such corporation, firm or person does not so agree to assume and discharge such obligations, SpecTran shall pay to Jaeger, in one lump sum, his Supplemental Retirement Benefit as of the date of such merger, consolidation or sale. All calculations of the Supplemental Retirement Benefit, for purposes of this Section 10.01, shall be discounted to present value in accordance with the actuarial tables used in SpecTran's defined benefit pension plan.For the purpose of clarification, any transaction between SpecTran and any of its Affiliates is not intended to be covered by this Section 10.01. 10.02 CHANGE IN CONTROL. In the event that a Change in Control occurs prior to the Normal Retirement Date and either (a) Jaeger is dismissed without Cause from employment by the Corporation up to and including Page 13 14 EXHIBIT 10.69 twelve (12) months from such Change in Control or (b) Jaeger voluntarily leaves the employ of the Corporation up to and including twelve (12) months from such Change in Control, then in either case SpecTran shall pay to Jaeger, in one lump sum, his Supplemental Retirement Benefit as of the date of the termination of Jaeger's employment. All calculations of the Supplemental Retirement Benefit, for purposes of this Section 10.02, shall be discounted to present value in accordance with the actuarial tables used in SpecTran's defined benefit pension plan. For the purposes of this Agreement, "Change in Control" shall mean (a) the date of public announcement that a person has become, without the approval of SpecTran's Board of Directors, the beneficial owner of 20% or more of the voting power of all securities of SpecTran then outstanding; (b) the date of the commencement of a tender offer or tender exchange by any person, without the approval of SpecTran's Board of Directors, if upon the consummation thereof such person would be the beneficial owner of 20% or more of the voting power of all securities of SpecTran then outstanding; or (c) the date on which individuals who constituted the Board of Directors of SpecTran on the date this Agreement was adopted cease for any reason to constitute a majority thereof, provided that any person becoming a director subsequent to such date whose election or nomination was approved by at least three quarters of such incumbent Board of Directors shall be considered as though such person were an incumbent director. ARTICLE ELEVEN 11.01 BENEFITS AND BURDENS. This Agreement shall be binding upon and inure to the benefit of Jaeger and his personal representatives, the Corporation, and any successor organization which shall succeed to substantially all of the Corporation's assets and business without regard to the form of such succession. ARTICLE TWELVE 12.01 COMMUNICATIONS. Any notice or communication required of either party with respect to this Agreement shall be made in writing and may either be delivered personally or sent by certified mail, return receipt requested, as the case may be: To the Corporation: c/o President of the Corporation SpecTran Corporation 50 Hall Road Sturbridge, MA 01566 To Jaeger: Raymond E. Jaeger 25 Old Village Road Sturbridge, MA 01566 Page 14 15 EXHIBIT 10.69 Each party shall have the right by written notice to change the place to which any notice may be addressed. ARTICLE THIRTEEN 13.01 CLAIMS PROCEDURE. In the event that benefits under this Agreement are not paid to Jaeger (or his beneficiary in the case of Jaeger's death), and such person feels entitled to receive them, a claim shall be made in writing to the Corporation within sixty (60) days after written notice from the Corporation to Jaeger or his beneficiary or personal representative that payments are not being made or are not to be made under this Agreement. Such claim shall be reviewed by the Corporation. If the claim is approved or denied, in full or in part, the Corporation shall provide a written notice of approval or denial within sixty (60) days from the date of receipt of the claim setting forth the specific reason for denial, specific reference to the provision of this Agreement upon which the denial is based, and any additional material or information necessary to perfect the claim, if any. Also, such written notice shall indicate the steps to be taken if a review of the denial is desired. If a claim is denied (a claim shall be deemed denied if the Corporation does not take action within the aforesaid sixty (60) day period) and a review is desired, Jaeger (or beneficiary in the case of Jaeger's death), shall notify the Corporation in writing within twenty (20) days. In requesting a review, Jaeger or his beneficiary may review this Agreement or any document relating to it and submit any written issues and comments he or she may feel appropriate. In its sole discretion the Corporation shall then review the claim and provide a written decision within sixty (60) days. This decision likewise shall state the specific reasons for the decision and shall include reference to specific provisions of this Agreement on which the decision is based.Any decision of the Corporation shall not be binding on Jaeger, his personal representative, or any beneficiary without consent, nor shall it preclude further action by Jaeger, his personal representatives or beneficiary. 13.02 ARBITRATION. All claims, disputes and other matters in question between the parties hereto arising out of or relating to this Agreement or the breach thereof shall be decided by arbitration in accordance with the Rules of the American Arbitration Association then obtaining, subject to the limitations and restrictions stated below. Neither party will be permitted to submit a dispute to arbitration without first following the procedures set forth in Section 13.01. Notice of demand for arbitration must be filed in writing with the other party to this Agreement and with the American Arbitration Association. The demand must be made within a reasonable time after the claim, dispute or other matter in question has arisen. In no event may the demand for arbitration be made if the institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statute of limitations. Arbitrations hereunder will be held in the English language in Boston, Massachusetts or such other place as the parties may agree. The award rendered by the arbitrators will be final, not subject to appeal and judgment may be entered upon it in any court having jurisdiction thereof. Each party will bear all of his or its own costs and expenses Page 15 16 EXHIBIT 10.69 associated with the arbitration, and the parties shall equally share the administrative costs of the arbitration. ARTICLE FOURTEEN 14.01 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof, and supersedes all prior agreements, written or verbal, with respect to such subject matter. This instrument may be altered or amended only by written agreement signed by the parties hereto. 14.02 GENDER. Any reference in this Agreement to the masculine shall be deemed to include the feminine where the context so requires. 14.03 OPERATION OF LAW ON CORPORATION'S OBLIGATIONS. In the event that any governmental entity promulgates any statute, rule, regulation, policy or order which restricts or prohibits the Corporation from making payments to Jaeger under this Agreement, then the Corporation's obligations to make payments to Jaeger (or his beneficiary) hereunder shall terminate or be restricted or suspended (consistent with such law or binding regulation, policy or order) for so long as such restriction or prohibition applies to the Corporation. Nothing in this Agreement is intended to require or shall be construed as requiring the Corporation to do or fail to do any act in violation of any applicable law or binding regulation, policy or order. 14.04 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be considered an original, but together shall constitute one and the same document. 14.05 SEVERANCE. In the event any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement shall remain in full force and effect and will not be affected by such invalid or unenforceable provisions. 14.06 JURISDICTION, GOVERNING LAW. The parties, terms and conditions of this Agreement are subject to and shall be governed by the laws of the Commonwealth of Massachusetts without giving effect to the principles of conflicts of law. Page 16 17 EXHIBIT 10.69 IN WITNESS WHEREOF, the Corporation has caused this Agreement to be duly executed by its duly authorized officer and its Corporate Seal affixed at Sturbridge, Massachusetts the day and year first above written. SPECTRAN CORPORATION _________________________ By_____________________________________ Witness Name: Title: _________________________ _______________________________________ Witness Raymond E. Jaeger Page 17 18 EXHIBIT 10.69 SCHEDULE A DESIGNATION OF BENEFICIARY Gentlemen:In accordance with the provisions of the Supplemental Retirement Agreement dated May 8, 1996, between SpecTran Corporation and the undersigned, I hereby designate ____________________, residing at ________________________,* as my beneficiary to receive payments thereunder in the event of my death before payments in full thereunder have been made. In the event said beneficiary predeceases me, I hereby designate _________________, residing at ___________________________,* as beneficiary in his/her stead. Very truly yours, _________________________ *If more than one beneficiary is to be designated, add a page listing the beneficiaries and specify the percentage of each payment to be received by each beneficiary. Page 18 19 EXHIBIT 10.69 SCHEDULE B Gentlemen: In accordance with Section 5.01 of the Supplemental Retirement Agreement dated May 8, 1996, between SpecTran Corporation and the undersigned, I hereby prospectively and irrevocably make the election indicated below with respect to the payment of benefits: [CHECK ONE] ______ I elect to commence receiving benefits prior to age 65 if I retire before the Normal Retirement Age, with the benefits to commence at age ____ [Specify age between 60 and 65]. OR ______ I elect to commence receiving benefits after the Normal Retirement Date and forego my right to receive benefits prior to the Normal Retirement Age. Very truly yours, _______________________ Page 19 EX-10.70 3 SUPPLEMENTAL RETIREMENT AGREEMENT 1 EXHIBIT 10.70 SUPPLEMENTAL RETIREMENT AGREEMENT THIS AGREEMENT is made and entered into this 8th day of May, 1996 by and between SpecTran Corporation ("SpecTran"), a Delaware corporation, and Bruce A. Cannon (hereinafter called "Cannon"). PURPOSE AND INTENT This agreement (the "Agreement") is designed to recognize Cannon's contribution to the Corporation(1) and encourage Cannon to remain in the Corporation's employ by providing supplemental retirement benefits, keyed to a specified percentage of his compensation, so that Cannon's percentage of spendable retirement income will approximate the percentage of spendable retirement income available to less compensated employees who also participate in the Corporation's retirement plans. Due to restrictions presently imposed by the Internal Revenue Code on benefits for highly compensated employees, the percentage of spendable retirement income Cannon would receive under the Corporation's current benefit plans relative to his current compensation would be less than that of employees at lower salary levels. The benefits provided in this Agreement are designed to be entirely supplemental to the Corporation's other retirement benefits payable to Cannon; if Cannon receives the specified percentage of compensation through pension plans and other benefits (as described below) provided by the Corporation, no benefits will be paid out under this Agreement. While any benefits are paid under this Agreement Cannon will be available to consult for the Corporation. Further, these benefits are subject to forfeiture if Cannon is terminated for cause (as defined herein) or, as described below, competes with the Corporation. Cannon has been in the employ of the Corporation since 1983, is now serving SpecTran as its Chief Financial Officer, Senior Vice President, Secretary and Treasurer, and is - --------------------------- (1) Initial capitalized words may be defined below under the heading "Certain Definitions". Page 1 2 EXHIBIT 10.70 currently the Secretary and Treasurer of each of SpecTran's Affiliates, SpecTran Fiber Communications Technologies, Inc., SpecTran Specialty Optics Company and Applied Photonic Devices, Inc. The Board of Directors of SpecTran voted on May 8, 1996 to authorize the Corporation to enter into this Agreement with Cannon. CERTAIN DEFINITIONS(a) "Accrued Benefit" shall have the meaning set forth in Section 2.01 of this Agreement. (b) "Affiliate" shall mean any person or entity which controls, is controlled by or is under common control with the Corporation. For the purpose of this Agreement, control shall mean ownership of fifty percent (50%) or more of the voting stock of any entity. (c) "Benefit Computation Base" shall mean the average of Cannon's annual compensation (defined as base salary, bonus(2) and any salary reduction amounts pursuant to Sections 401(k) - ------------------- (2)To the extent that the average annual bonus paid to Cannon during the 36 month period in which the Benefit Computation Base is calculated is greater than fifty percent (50%) of Cannon's average base salary over such period, the excess bonus payments shall be considered ineligible for the purpose of calculating the Benefit Computation Base. For example, assume that Cannon's base salary and bonuses over the 36 month period are as shown in the following two examples: 1.
Base Salary Bonus --------------------------------------------- Months 1-12 $200,000 $200,000 Months 13-24 $210,000 $100,000 Months 25-36 $220,000 $ 90,000 Average $210,000 $130,000
In this example, fifty percent (50%) of Cannon's average annual base salary over the 36 month period is $105,000. Accordingly, of Cannon's average annual bonus of $130,000 paid over that period, $25,000 will be deemed ineligible for the purpose of calculating the Benefit Computation Base, resulting in $105,000 of the average bonus being considered eligible. Page 2 3 EXHIBIT 10.70 or 125 of the Code) paid during the thirty-six (36) consecutive calendar months during Cannon's period of employment by the Corporation in which such compensation is the highest. (d) "Change in Control" shall have the meaning set forth in Section 10.02 of this Agreement. (e) The "Corporation" shall mean SpecTran, its successors and assigns, including but not limited to any corporation, firm or person which is the survivor of a merger or consolidation with SpecTran or which acquires substantially all of the assets of SpecTran, and any of SpecTran's Affiliates. (f) "Normal Retirement Date" shall mean Cannon's sixty-fifth birthday. (g) "Offsetting Benefits" shall have the meaning set forth in Section 2.03 of this Agreement. (h) "Supplemental Retirement Benefit" shall have the meaning set forth in Section 2.01 of this Agreement. ARTICLE ONE - --------------------------------------------------------------------------------
2. Base Salary Bonus --------------------------------------------- Months 1-12 $200,000 $200,000 Months 13-24 $210,000 $ 10,000 Months 25-36 $220,000 $ 30,000 Average $210,000 $ 80,000
In this example, fifty percent (50%) percent of Cannon's average annual base salary over the 36 month period is $105,000. Cannon's average annual bonus over that period of $80,000 is less than the average annual base salary, and accordingly the entire average annual bonus will be eligible in determining the Benefit Computation Base. Page 3 4 EXHIBIT 10.70 1.01 EMPLOYMENT. The Corporation may employ Cannon in such capacity as the Corporation may from time to time determine. Notwithstanding anything contained herein, this Agreement is not an agreement of employment, a guaranty of continuing employment or of employment in any particular position and nothing herein shall restrict the Corporation concerning the terms and conditions of Cannon's employment. The benefits provided by this Agreement are not part of any salary reduction plan or an arrangement deferring a bonus or a salary increase. Cannon has no option to take any current payment or bonus in lieu of these salary continuation benefits. Page 4 5 EXHIBIT 10.70 ARTICLE TWO 2.01 SUPPLEMENTAL RETIREMENT BENEFIT. Depending upon how many years Cannon has been continuously in the employ of the Corporation, Cannon will be entitled to a retirement benefit determined as of the effective date of his leaving the Corporation's employment for whatever reason except Cause (as defined below), including whether by (i) death, (ii) disability, (iii) termination of employment or (iv) early retirement. The retirement benefit (also known as the "Accrued Benefit") shall be an annual amount equal to Cannon's Benefit Computation Base multiplied by the Annual Percentage Amount (as determined pursuant to Section 2.02, below). Cannon will receive a supplemental retirement benefit (the "Supplemental Retirement Benefit") equal to (i) the amount of the Accrued Benefit reduced by (ii) the sum of the benefits described in Subsections (1), (2), (3) and (4) of Section 2.03, below (such benefits are referred to herein as the "Offsetting Benefits"). The Supplemental Retirement Benefit, if any, to be paid out under this Agreement, shall continue for fifteen (15) years, and be paid in equal monthly installments commencing on the first day of the month immediately following the later of Cannon's actual retirement or the Normal Retirement Date (unless payment is accelerated in accordance with Sections 10.01 and 10.02 below). No payment will be made under this Agreement if the Offsetting Benefits are equal to or greater than the Accrued Benefit. Page 5 6 EXHIBIT 10.70 2.02 ANNUAL PERCENTAGE AMOUNT. (a) The Annual Percentage Amount shall be determined (subject to subsection (b), below) by the number of years Cannon has been continuously employed by the Corporation as follows:
===================================================================================== YEARS OF CONTINUOUS SERVICE ANNUAL PERCENTAGE AMOUNT - ------------------------------------------------------------------------------------- 25 or more 65% 20 -24 60% 15-19 40% less than 15 0% (No Supplemental Retirement Benefit) =====================================================================================
(b) Notwithstanding the provisions of Subsection (a) of this Section 2.02, in the event (a) Cannon does not remain employed by the Corporation for any reason during the twelve (12) month period following a Change in Control (as defined in Section 10.01, below) or (b) an event described in Section 10.01 occurs and either Cannon does not continue in the employ of the Corporation for any reason following such event or the Corporation's successor does not assume its obligations hereunder, Cannon will be deemed eligible to receive a Supplemental Retirement Benefit under this Agreement if at the time of the termination of his employment he will have completed at least five full years of service to the Corporation. In this case, the Annual Percentage Amount shall be determined by the number of years Cannon has been continuously employed by the Corporation as follows: Page 6 7 EXHIBIT 10.70
================================================================================ YEARS OF SERVICE ANNUAL PERCENTAGE AMOUNT - -------------------------------------------------------------------------------- 25 or more 65% 20 -24 60% 15-19 40% 14 36% 13 32% 12 28% 11 24% 10 20% 9 16% 8 12% 7 8% 6 4% less than 6 0% (No Supplemental Retirement Benefit) ================================================================================
(c) Anything else to the contrary in this Agreement notwithstanding, in the event of either (a) Cannon does not remain employed by the Corporation for any reason during the twelve month period following a Change in Control or (b) an event described in Section 10.01 occurs and either Cannon does not continue in the employ of the Corporation for any reason following such event or the Corporation's successor does not assume its obligations hereunder, and (c) in either case, the payment of the Supplementary Retirement Benefit hereunder, when combined with all other payments from the Corporation to Cannon due to Page 7 8 EXHIBIT 10.70 the events described in (a) and (b) above, results in an Excess Parachute Payment, as defined by Section 280G of the Internal Revenue Code of 1986, as amended, then the amount of the Supplementary Retirement Benefit shall be reduced so that the total payments received by Cannon from the Corporation do not constitute an Excess Parachute Payment; provided, however, that this Section 2.02(c) shall not apply if the total payments from the Corporation to Cannon exceed the minimum amount which would constitute an Excess Parachute Payment plus twenty percent (20%). 2.03 OFFSETTING BENEFITS. (a) The following are the Offsetting Benefits, which reduce the Accrued Benefit for the purpose of calculating the Supplemental Retirement Benefit: 1. Fifty percent (50%) of Cannon's (actual or projected) annual primary social security retirement benefit projected as of Cannon's social security normal retirement age based on his Benefit Computation Base in effect on the date of termination of Cannon's employment with the Corporation; 2. The annual amount of benefits payable to Cannon (or his beneficiaries) at the Normal Retirement Date calculated on a single life annuity basis from any qualified defined benefit pension plan maintained and funded by the Corporation as of the date of this Agreement, or their successors, as such plan or plans may be amended or modified from time to time; 3. The annual amount of benefits payable at the Normal Retirement Date on a single life annuity basis attributable to the portion of the account balances of Cannon arising from employer contributions Page 8 9 EXHIBIT 10.70 (but excluding the portion of such balances arising from employee salary reduction and elective contributions) at the date of determination from the Corporation's 401(k) and other defined contribution retirement plans maintained by the Corporation as of the date of this Agreement, or their successors, as such plan or plans may be modified from time to time; 4. The annual amount of benefits payable to Cannon at the Normal Retirement Date calculated on a single life annuity basis from any other non-qualified supplemental retirement plan maintained and funded by the Corporation as of the date of this Agreement, or their successors, as such plan or plans may be amended or modified from time to time. (b) The Corporation's obligation to pay the Offsetting Benefits shall not be affected by the termination of this Agreement and the Supplemental Retirement Benefit payable hereunder for any reason whatsoever. (c) All calculations of the Supplemental Retirement Agreement payable to Cannon under this Agreement will be made assuming that Cannon participates in the Offsetting Benefits to the full extent permitted by law and the terms of those plans. (d) If Cannon terminates his employment prior to his Normal Retirement Date, in calculating his Accrued Benefit, (i) the offset of primary social security retirement benefit shall be calculated on the basis of the amount projected to be payable at Cannon's social security normal retirement age assuming continued earnings by Cannon at the rate in effect at termination of employment until Cannon's social security normal retirement age; (ii) the offset for any qualified defined benefit plan shall be calculated on the basis of Cannon's accrued benefit Page 9 10 EXHIBIT 10.70 in said plan upon termination of employment projected to be payable at Cannon's Normal Retirement Date; (iii) the offset for any benefits arising from employer contributions attributable to the account balances of Cannon arising from the Corporation's 401(k) plan or any other defined contribution retirement plan shall also be calculated on the basis of Cannon's accrued benefit in such plan(s) upon termination of employment projected to be payable at Cannon's Normal Retirement Date; and (iv) the offset for any non-qualified supplemental retirement plan shall be calculated on the basis of Cannon's accrued benefit in said plan upon termination of employment projected to be payable at Cannon's Normal Retirement Date. 2.04 OPTIONAL FORMS OF PAYMENT. In lieu of the fifteen (15) year certain payments provided in Section 2.01 above, or whenever a Supplemental Retirement Benefit is payable under Section 4.01 or 5.01 of this Agreement, Cannon may elect by written notice to the Corporation in the calendar year prior to the calendar year in which payments are to begin, an optional form of payment which shall be the actual equivalent (factors defined in SpecTran's qualified defined benefit pension plan) of the said fifteen (15) year certain payments. The optional form of payment shall be any optional form of payment which is provided to Cannon under the terms of SpecTran's qualified defined benefit pension plan. 2.05 VESTING. Anything to the contrary in this Agreement notwithstanding, Cannon shall be entitled to one hundred percent (100%) of any benefit payable under this Agreement under any one or more of Sections 2.01, 3.01, 4.01, 5.01, 10.01 or 10.02 at the date on which his entitlement to such benefit shall be determined commencing with his original date of hire by the Corporation, provided that such benefits are subject to forfeiture as described in Sections 5.03 and 5.04, below. ARTICLE THREE Page 10 11 EXHIBIT 10.70 3.01 DEATH OF CANNON. (a) If Cannon dies while employed by the Corporation but prior to the commencement of the payment of the Supplemental Retirement Benefit under Section 2.01, 4.01 or 5.01, SpecTran will pay to the designated beneficiaries of Cannon, a total annual amount equal to the Supplemental Benefit earned by Cannon as of the date of death, payable over a period of fifteen (15) years certain commencing on the first day of the month next following the delivery to the Corporation of a death certificate and on a monthly basis thereafter. (b) If Cannon dies following the commencement of the payment of the Supplemental Retirement Benefit under Section 2.01, 4.01 or 5.01, such payments shall continue to the designated beneficiaries of Cannon until all of the Supplemental Retirement Benefit has been paid. (c) If Cannon dies following the termination of his employment with the Corporation and prior to the commencement of the payment of the Supplemental Retirement Benefit under Section 2.01, 4.01 or 5.01, SpecTran shall pay to Cannon's named beneficiaries an annual benefit which shall be Cannon's Supplemental Retirement Benefit as of the date of the termination of his employment. Such benefits shall be payable monthly, commencing on the first day of the month following the Normal Retirement Date, or any date prior to the Normal Retirement Date approved by the Corporation, and continuing for fifteen (15) years; provided, however, that Cannon's designated beneficiaries shall be entitled to accelerated payments of such benefits if and to the same extent Cannon would have been entitled to an accelerated payment of the Supplemental Retirement Benefit had he survived. 3.02 BENEFICIARIES. Cannon shall designate, in writing to the Corporation, on the form titled "Designation of Beneficiary" attached hereto as Schedule A, one or more beneficiaries. Page 11 12 EXHIBIT 10.70 Cannon from time to time may change his designated beneficiaries by delivering to the Corporation a dated, revised Designation of Beneficiary form, revoking the prior designation. If no beneficiary is so named or if no named beneficiary is living at the time a payment is due, benefit payments shall be made, when due, to Cannon's estate. If payments of benefits to a beneficiary commences and such beneficiary dies before all amounts to which such beneficiary is entitled have been paid, the remaining benefits shall be paid to the successive beneficiary or beneficiaries, if any, designated by Cannon, or if none, to the beneficiary's estate. ARTICLE FOUR 4.01 DISABILITY PRIOR TO RETIREMENT. In the event Cannon shall become disabled, mentally or physically, which disability prevents him from performing the material aspects of his duties, the Corporation will pay no disability benefits hereunder. Disability benefits (if any) will be paid to Cannon through such insurance programs as may be sponsored by the Corporation. Upon the later of termination of such other disability benefits (if any), or Cannon's attainment of the Normal Retirement Date, Cannon shall commence receiving payment of his Accrued Benefit determined as of the date of the disability. The Supplemental Retirement Benefit shall be paid in equal monthly installments, for fifteen (15) years certain commencing on the first day of the month following the later of the termination of such benefits or the Normal Retirement Date, or in the manner provided in Section 2.04. 4.02 RE-EMPLOYMENT FOLLOWING DISABILITY. In the event Cannon returns to work with the Corporation after terminating employment because of disability, this Agreement shall continue in full force and effect as though such disability had not occurred. Under such circumstances, Cannon will receive credit towards determining the Annual Percentage Amount for service prior to terminating his employment because of disability and for service after resuming employment with the Corporation, but will not receive credit for the interim prior during which he was not employed by the Corporation. Page 12 13 EXHIBIT 10.70 ARTICLE FIVE 5.01 EARLY RETIREMENT, TERMINATION OF SERVICE OR DISCHARGE. Except to the extent otherwise provided in Sections 5.03 and 5.04, in the event that Cannon's employment with the Corporation is terminated, voluntarily or involuntarily, before Cannon attains the Normal Retirement Date, for reasons other than death or disability, Cannon shall be entitled to a Supplemental Retirement Benefit, determined as of the date of his termination of employment. Such benefit shall be payable in equal monthly installments, commencing on the first day of the month next following the later of the Normal Retirement Date or the date of Cannon's actual retirement, and continuing for fifteen (15) years (except as set forth in Sections 10.01 and 10.02); provided, however, that Cannon may elect by execution and delivery to the Corporation of the form attached hereto as Schedule B to have the monthly payments of the Supplemental Retirement Benefit commence prior to the Normal Retirement Date at any date between age 60 and the Normal Retirement Date. Cannon understands that such election is being made prospectively and is irrevocable. 5.02 OPTIONAL FORMS OF PAYMENT. In lieu of the fifteen (15) years certain payments provided in Section 5.01, the Supplemental Retirement Benefit payable under such Section may be payable in the manner provided in Section 2.04. 5.03 EMPLOYMENT BY COMPETITION. In the event that during the two year period immediately following the termination of Cannon's employment for any reason, Cannon shall compete with the business of the Corporation, then the Supplemental Retirement Benefit which might otherwise be due and payable hereunder shall be immediately forfeited and all rights of Cannon and his beneficiaries hereunder shall become void; provided, however, that if (a) Cannon does not remain employed by the Corporation for any reason during the twelve (12) month period following a Change in Control or (b) an event described in Section 10.01 occurs Page 13 14 EXHIBIT 10.70 and either Cannon does not continue in the employ of the Corporation for any reason following such event or the Corporation's successor does not assume its obligations hereunder, the provisions of Section 5.03 shall not apply, but the provisions of Sections 10.01 and 10.02 shall govern. Cannon will be deemed to have competed with the business of the Corporation if, during the two year period following termination of his employment with the Corporation, he either (a) engages, directly or indirectly, or by stock interest exceeding five percent (5%), or otherwise in any way, in any business in which the Corporation was engaged during the term of his employment or which the Corporation planned, during the term of his employment to enter, (b) solicits any past, present or future customers of the Corporation in any way relating to any business in which the Corporation was engaged during the term of his employment, or which the Corporation planned during the term of his employment, to enter, or (c) induces or actively attempt to influence any other employee or consultant of the Corporation to terminate his or her employment or consultancy with the Corporation. 5.04 FORFEITURE. Anything to the contrary in this Agreement notwithstanding (other than Sections 10.01 and 10.02), the Supplemental Retirement Benefits shall be immediately forfeited and all rights of Cannon and his beneficiaries hereunder shall become null and void, if Cannon's employment with the Corporation is terminated for Cause. For this purpose, a termination shall be a termination for "Cause" only if the termination if for one or more of the following: (i) the conviction of Cannon for committing any felony, (ii) stealing from the Corporation, (iii) a willful breach by Cannon of a material provision of this Agreement and (iv) if Cannon engages in gross misconduct, such as fraud, dishonesty, gross negligence or insubordination. If (a) Cannon does not remain employed by the Corporation for any reason within one year following a Change in Control or (b) an event described in Section 10.01 occurs and either Cannon does not continue in the employ of the Corporation for any reason following such Page 14 15 EXHIBIT 10.70 event or the Corporation's successor does not agree to assume its obligation hereunder, the provisions of this Section 5.04 shall not apply, but the provisions of Sections 10.01 and 10.02 shall govern. 5.05 AVAILABILITY TO CONSULT. For so long as Cannon is receiving benefits pursuant to this Agreement, Cannon will keep himself available to consult with, and respond to inquiries from, the Corporation relating to its business affairs, at reasonable time(s) and to reasonable extent. Page 15 16 EXHIBIT 10.70 ARTICLE SIX 6.01 INTEREST. Any payment that is required to be made hereunder that is delayed beyond the date specified in this Agreement shall bear interest at a variable rate which shall be the rate of interest on one year U.S. Treasury Bills determined at the first auction of each calendar year or part thereof during the period of which interest is to be applied to any obligation hereunder. ARTICLE SEVEN 7.01 ALIENABILITY. Neither Cannon, nor any beneficiary under this Agreement shall have any power or right to transfer, assign, anticipate, hypothecate, mortgage, commute, modify, or otherwise encumber in advance any of the benefits payable hereunder, and any attempt to do so shall be deemed null and void. The seizure of the benefits payable hereunder for the payment of any debts, judgments, alimony or separate maintenance, owed by Cannon or his beneficiary or any of them, or the transfer of such benefit by operation of law in the event of bankruptcy, or otherwise, shall be deemed to be a transfer prohibited by this Agreement, and will result in the immediate termination of all benefits payable hereunder. ARTICLE EIGHT 8.01 PARTICIPATION IN OTHER PLANS. Nothing contained in this Agreement shall be construed to alter, abridge, or in any manner affect the rights and privileges of Cannon to participate in and be covered by any pension, profit sharing, group insurance, bonus or any other employee plan or plans which the Corporation may have or hereafter have. ARTICLE NINE 9.01 FUNDING. (a) The Corporation reserves the right at its sole and exclusive discretion to insure or otherwise provide for the obligations of the Corporation undertaken by this Agreement Page 16 17 EXHIBIT 10.70 or to refrain from same, and to determine the extent, nature and method thereof, including the establishment of one or more trusts. Should the Corporation elect to insure this Agreement, in whole or in part, through the medium of insurance or annuities, or both, the Corporation shall be the owner and beneficiary of the policy or annuity. At no time shall Cannon be deemed to have any right, title or interest in or to any specified asset or assets of the Corporation, or any trust or escrow arrangement, including, but not by way of restriction, any insurance or annuity contracts or the proceeds therefrom. (b) Any such policy, contract or asset shall not in any way be considered to be security for the performance of the obligations of this Agreement. (c) If the Corporation purchases a life insurance or annuity policy on the life of Cannon, Cannon agrees to sign any papers that may be required for that purpose and to undergo any medical examination or tests (at the Corporation's expense) which may be necessary, and generally cooperate with the Corporation in securing such policy. (d) To the extent Cannon acquires a right to receive benefits under this Agreement, such right shall be equivalent to the right of an unsecured general creditor of the Corporation. Page 17 18 EXHIBIT 10.70 ARTICLE TEN 10.01 REORGANIZATION. SpecTran shall not merge or consolidate into or with another corporation if such merger or consolidation shall result in the other corporation being the survivor corporation, nor shall it sell substantially all of its assets to another corporation, firm or person, unless and until Cannon and such other corporation, firm or person agree that Cannon shall continue in the employ of the succeeding, continuing or acquiring corporation, firm or person and such other corporation, firm or person agrees in writing without further qualification to assume and discharge the obligations of SpecTran under this Agreement. If Cannon and such corporation, firm or person do not agree that Cannon shall continue in the employ of such corporation, firm or person, or such corporation, firm or person does not so agree to assume and discharge such obligations, SpecTran shall pay to Cannon, in one lump sum, his Supplemental Retirement Benefit as of the date of such merger, consolidation or sale. All calculations of the Supplemental Retirement Benefit, for purposes of this Section 10.01, shall be discounted to present value in accordance with the actuarial tables used in SpecTran's defined benefit pension plan. For the purpose of clarification, any transaction between SpecTran and any of its Affiliates is not intended to be covered by this Section 10.01. 10.02 CHANGE IN CONTROL. In the event that a Change in Control occurs prior to the Normal Retirement Date and either (a) Cannon is dismissed without Cause from employment by the Corporation up to and including twelve (12) months from such Change in Control or (b) Cannon voluntarily leaves the employ of the Corporation up to and including twelve (12) months from such Change in Control, then in either case SpecTran shall pay to Cannon, in one lump sum, his Supplemental Retirement Benefit as of the date of the termination of Cannon's employment. All calculations of the Supplemental Retirement Benefit, for purposes of this Section 10.02, shall be discounted to present value in accordance with the actuarial tables used in SpecTran's defined benefit pension plan. For the purposes of this Agreement, "Change in Control" shall mean (a) the date of public announcement that a person has become, without the approval of SpecTran's Board of Directors, the beneficial owner of 20% or more of the voting power of all securities of SpecTran then outstanding; (b) the date of the commencement of a tender offer or tender Page 18 19 EXHIBIT 10.70 exchange by any person, without the approval of SpecTran's Board of Directors, if upon the consummation thereof such person would be the beneficial owner of 20% or more of the voting power of all securities of SpecTran then outstanding; or (c) the date on which individuals who constituted the Board of Directors of SpecTran on the date this Agreement was adopted cease for any reason to constitute a majority thereof, provided that any person becoming a director subsequent to such date whose election or nomination was approved by at least three quarters of such incumbent Board of Directors shall be considered as though such person were an incumbent director. ARTICLE ELEVEN 11.01 BENEFITS AND BURDENS. This Agreement shall be binding upon and inure to the benefit of Cannon and his personal representatives, the Corporation, and any successor organization which shall succeed to substantially all of the Corporation's assets and business without regard to the form of such succession. ARTICLE TWELVE 12.01 COMMUNICATIONS. Any notice or communication required of either party with respect to this Agreement shall be made in writing and may either be delivered personally or sent by certified mail, return receipt requested, as the case may be: To the Corporation: c/o President of the Corporation SpecTran Corporation 50 Hall Road Sturbridge, MA 01566 To Cannon: Bruce A. Cannon 135 Adam Street Holliston, MA 01746 Each party shall have the right by written notice to change the place to which any notice may be addressed. ARTICLE THIRTEEN 13.01 CLAIMS PROCEDURE. In the event that benefits under this Agreement are not paid to Cannon (or his beneficiary in the case of Cannon's death), and such person feels entitled to receive them, a claim shall be made in writing to the Corporation within sixty (60) days after written notice from the Corporation to Cannon or his beneficiary or personal representative that payments are not being made or are not to be made under this Agreement. Such claim shall be reviewed by the Corporation. If the claim is approved or denied, in full or in part, the Corporation shall provide a written notice of approval or denial within sixty (60) days from the date of receipt of the claim setting forth the specific reason for denial, specific reference to the provision of this Agreement upon which the denial is based, and any additional material or information necessary to perfect the claim, if any. Also, such written notice shall indicate the steps to be taken if a review of the denial is desired. If a claim is denied (a claim shall be deemed denied if the Corporation does not take action within the aforesaid sixty (60) day period) and a review is desired, Cannon (or beneficiary in the case of Cannon's death), shall notify the Corporation in writing within twenty (20) days. In requesting a review, Cannon or his beneficiary may review this Agreement or any document relating to it and submit any written issues and comments he or she may feel appropriate. In its sole discretion the Corporation shall then review the claim and provide a written decision within sixty (60) days. This decision likewise shall state the specific reasons for the decision and shall include reference to specific provisions of this Agreement on which the decision is based.Any decision of the Corporation shall not be binding on Cannon, his personal representative, or any beneficiary without consent, nor shall it preclude further action by Cannon, his personal representatives or beneficiary. 13.02 ARBITRATION. All claims, disputes and other matters in question between the parties hereto arising out of or relating to this Agreement or the breach thereof shall be decided by arbitration in accordance with the Rules of the American Arbitration Association then obtaining, subject to the limitations and Page 19 20 EXHIBIT 10.70 restrictions stated below. Neither party will be permitted to submit a dispute to arbitration without first following the procedures set forth in Section 13.01. Notice of demand for arbitration must be filed in writing with the other party to this Agreement and with the American Arbitration Association. The demand must be made within a reasonable time after the claim, dispute or other matter in question has arisen. In no event may the demand for arbitration be made if the institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statute of limitations. Arbitrations hereunder will be held in the English language in Boston, Massachusetts or such other place as the parties may agree. The award rendered by the arbitrators will be final, not subject to appeal and judgment may be entered upon it in any court having jurisdiction thereof.Each party will bear all of his or its own costs and expenses associated with the arbitration, and the parties shall equally share the administrative costs of the arbitration. ARTICLE FOURTEEN 14.01 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof, and supersedes all prior agreements, written or verbal, with respect to such subject matter. This instrument may be altered or amended only by written agreement signed by the parties hereto. 14.02 GENDER. Any reference in this Agreement to the masculine shall be deemed to include the feminine where the context so requires. 14.03 OPERATION OF LAW ON CORPORATION'S OBLIGATIONS. In the event that any governmental entity promulgates any statute, rule, regulation, policy or order which restricts or prohibits the Corporation from making payments to Cannon under this Agreement, then the Corporation's obligations to make payments to Cannon (or his beneficiary) hereunder shall terminate or be restricted or suspended (consistent with such law or binding regulation, policy or order) for so long as such restriction or prohibition applies to the Corporation. Nothing in this Agreement is intended to require or shall be construed as requiring the Corporation to do or fail to do any act in violation of any applicable law or binding regulation, policy or order. 14.04 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be considered an original, but together shall constitute one and the same document. 14.05 SEVERANCE. In the event any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement shall remain in full force and effect and will not be affected by such invalid or unenforceable provisions. 14.06 JURISDICTION, GOVERNING LAW. The parties, terms and conditions of this Agreement are subject to and shall be governed by the laws of the Commonwealth of Massachusetts without giving effect to the principles of conflicts of law. IN WITNESS WHEREOF, the Corporation has caused this Agreement to be duly executed by its duly authorized officer and its Corporate Seal affixed at Sturbridge, Massachusetts the day and year first above written. SPECTRAN CORPORATION _________________________________ By______________________________ Witness Chairman, Board of Directors _________________________ By______________________________ Witness Bruce A. Cannon, Chief Financial Officer Page 20 21 EXHIBIT 10.70 SCHEDULE A DESIGNATION OF BENEFICIARY Gentlemen: In accordance with the provisions of the Supplemental Retirement Agreement dated May 8, 1996, between SpecTran Corporation and the undersigned, I hereby designate ____________________ of ________________________* as my beneficiary to receive payments thereunder in the event of my death before payments in full thereunder have been made. In the event said beneficiary predeceases me, I hereby designate _________________ of ___________________________* as beneficiary in his/her stead. Very truly yours, _________________________ *If more than one beneficiary is to be designated, add a page listing the beneficiaries and specify the percentage of each payment to be received by each beneficiary. Page 21 22 EXHIBIT 10.70 SCHEDULE B Gentlemen: In accordance with Section 5.01 of the Supplemental Retirement Agreement dated May 8, 1996, between SpecTran Corporation and the undersigned, I hereby prospectively and irrevocably make the election indicated below with respect to the payment of benefits: [CHECK ONE] ______ I elect to commence receiving benefits prior to age 65 if I retire before the Normal Retirement Age, with the benefits to commence at age ____ [Specify age between 60 and 65]. OR ______ I elect to commence receiving benefits after the Normal Retirement Date and forego my right to receive benefits prior to the Normal Retirement Age. Very truly yours, _______________________ Page 22 EX-10.71 4 SUPPLEMENTAL RETIREMENT AGREEMENT 1 EXHIBIT 10.71 SUPPLEMENTAL RETIREMENT AGREEMENT THIS AGREEMENT is made and entered into this 8th day of May, 1996 by and between SpecTran Corporation ("SpecTran"), a Delaware corporation, and Crawford L. Cutts (hereinafter called "Cutts"). PURPOSE AND INTENT This agreement (the "Agreement") is designed to recognize Cutts' contribution to the Corporation(1) and encourage Cutts to remain in the Corporation's employ by providing supplemental retirement benefits, keyed to a specified percentage of his compensation, so that Cutts' percentage of spendable retirement income will approximate the percentage of spendable retirement income available to less compensated employees who also participate in the Corporation's retirement plans. Due to restrictions presently imposed by the Internal Revenue Code on benefits for highly compensated employees, the percentage of spendable retirement income Cutts would receive under the Corporation's current benefit plans relative to his current compensation would be less than that of employees at lower salary levels. The benefits provided in this Agreement are designed to be entirely supplemental to the Corporation's other retirement benefits payable to Cutts; if Cutts receives the specified percentage of compensation through pension plans and other benefits (as described below) provided by the Corporation, no benefits will be paid out under this Agreement. While any benefits are paid under this Agreement Cutts will be available to consult for the Corporation. Further, these benefits are subject to forfeiture if Cutts is terminated for Cause (as defined herein) or, as described below, competes with the Corporation. Cutts has been employed by the Corporation since 1991, and currently holds the position of President of Applied Photonic Devices, Inc., a wholly owned subsidiary of - ---------------------------- (1)Initial capitalized words may be defined below under the heading "Certain Definitions". Page 1 2 EXHIBIT 10.71 SpecTran. The Board of Directors of SpecTran voted on May 8, 1996 to authorize the Corporation to enter into this Agreement with Cutts. CERTAIN DEFINITIONS(a) "Accrued Benefit" shall have the meaning set forth in Section 2.01 of this Agreement. (b) "Affiliate" shall mean any person or entity which controls, is controlled by or is under common control with the Corporation. For the purpose of this Agreement, control shall mean ownership of fifty percent (50%) or more of the voting stock of any entity. (c) "Benefit Computation Base" shall mean the average of Cutts' annual compensation (defined as base salary, eligible bonus(2) and any salary reduction amounts pursuant to Sections - --------------------------- (2)To the extent that the average annual bonus paid to Cutts during the 36 month period in which the Benefit Computation Base is calculated is greater than fifty percent (50%) of Cutts' average base salary over such period, the excess bonus payments shall be considered ineligible for the purpose of calculating the Benefit Computation Base. For example, assume that Cutts' base salary and bonuses over the 36 month period are as shown in the following two examples: 1.
Base Salary Bonus ---------------------------------------------------- Months 1-12 $200,000 $200,000 Months 13-24 $210,000 $100,000 Months 25-36 $220,000 $ 90,000 Average $210,000 $130,000
In this example, fifty percent (50%) of Cutts' average annual base salary over the 36 month period is $105,000. Accordingly, of Cutts' average annual bonus of $130,000 paid over that period, $25,000 will be deemed ineligible for the purpose of calculating the Benefit Computation Base, resulting in $105,000 of the average bonus being considered eligible. 2.
Base Salary Bonus ------------------------------------------- Months 1-12 $200,000 $200,000 Months 13-24 $210,000 $ 10,000 Months 25-36 $220,000 $ 30,000
Page 2 3 EXHIBIT 10.71 401(k) or 125 of the Code) paid during the thirty-six (36) consecutive calendar months during Cutts' period of employment by the Corporation in which such compensation is the highest. (d) "Change in Control" shall have the meaning set forth in Section 10.02 of this Agreement. (e) The "Corporation" shall mean SpecTran, its successors and assigns, including but not limited to any corporation, firm or person which is the survivor of a merger or consolidation with SpecTran or which acquires substantially all of the assets of SpecTran, and any of SpecTran's Affiliates. (f) "Normal Retirement Date" shall mean Cutts's sixty-fifth birthday. (g) "Offsetting Benefits" shall have the meaning set forth in Section 2.03 of this Agreement. (h) "Supplemental Retirement Benefit" shall have the meaning set forth in Section 2.01 of this Agreement. ARTICLE ONE 1.01 EMPLOYMENT. The Corporation may employ Cutts in such capacity as the Corporation may from time to time determine. Notwithstanding anything contained herein, this Agreement is not an agreement of employment, a guaranty of continuing employment or of employment in - --------------------------------------------------------------------------------
Base Salary Bonus ------------------------------------------- Average $210,000 $ 80,000
In this example, fifty percent (50%) percent of Cutts' average annual base salary over the 36 month period is $105,000. Cutts' average annual bonus over that period of $80,000 is less than the average annual base salary, and accordingly the entire average annual bonus will be eligible in determining the Benefit Computation Base. Page 3 4 EXHIBIT 10.71 any particular position and nothing herein shall restrict the Corporation concerning the terms and conditions of Cutts's employment. The benefits provided by this Agreement are not part of any salary reduction plan or an arrangement deferring a bonus or a salary increase. Cutts has no option to take any current payment or bonus in lieu of these salary continuation benefits. ARTICLE TWO 2.01 SUPPLEMENTAL RETIREMENT BENEFIT. Depending upon how many years Cutts has been continuously in the employ of the Corporation, Cutts will be entitled to a retirement benefit determined as of the effective date of his leaving the Corporation's employment for whatever reason except Cause (as defined below), including whether by (i) death, (ii) disability, (iii) termination of employment or (iv) early retirement. The retirement benefit (also known as the "Accrued Benefit") shall be an annual amount equal to Cutts's Benefit Computation Base multiplied by the Annual Percentage Amount (as determined pursuant to Section 2.02, below). Cutts will receive a supplemental retirement benefit (the "Supplemental Retirement Benefit") equal to (i) the amount of the Accrued Benefit reduced by (ii) the sum of the benefits described in Subsections (1), (2), (3) and (4) of Section 2.03, below (such benefits are referred to herein as the "Offsetting Benefits"). The Supplemental Retirement Benefit, if any, to be paid out under this Agreement, shall continue for fifteen (15) years, and be paid in equal monthly installments commencing on the first day of the month immediately following the later of Cutts's actual retirement or the Normal Retirement Date (unless payment is accelerated in accordance with Sections 10.01 and 10.02 below). No payment will be made under this Agreement if the Offsetting Benefits are equal to or greater than the Accrued Benefit. 2.02 ANNUAL PERCENTAGE AMOUNT. Page 4 5 EXHIBIT 10.71 (a) The Annual Percentage Amount shall be determined (subject to subsection (b), below) by the number of years Cutts has been continuously employed by the Corporation as follows: Page 5 6 EXHIBIT 10.71
================================================================================ YEARS OF CONTINUOUS SERVICE ANNUAL PERCENTAGE AMOUNT 25 or more 65% 20 -24 60% 15-19 40% less than 15 0% (No Supplemental Retirement Benefit) ================================================================================
(b) Notwithstanding the provisions of Subsection (a) of this Section 2.02, in the event (a) Cutts does not remain employed by the Corporation for any reason during the twelve (12) month period following a Change in Control (as defined in Section 10.01, below) or (b) an event described in Section 10.01 occurs and either such other corporation, firm or person (as described in Section 10.01) does not agree that Cutts shall continue in the employ of the Corporation for any reason following such event or the Corporation's successor does not assume its obligations hereunder, Cutts will be deemed eligible to receive a Supplemental Retirement Benefit under this Agreement if at the time of the termination of his employment he will have completed at least five full years of service to the Corporation. In this case, the Annual Percentage Amount shall be determined by the number of years Cutts has been continuously employed by the Corporation as follows: Page 6 7 EXHIBIT 10.71
================================================================================ YEARS OF SERVICE ANNUAL PERCENTAGE AMOUNT 25 or more 65% 20 -24 60% 15-19 40% 14 36% 13 32% 12 28% 11 24% 10 20% 9 16% 8 12% 7 8% 6 4% less than 6 0% (No Supplemental Retirement Benefit) ================================================================================
(c) Anything else to the contrary in this Agreement notwithstanding, in the event of either (a) Cutts does not remain employed by the Corporation for any reason during the twelve month period following a Change in Control or (b) an event described in Section 10.01 occurs and either such other corporation, firm or person (as described in Section 10.01) does not agree that Cutts shall continue in the employ of the Corporation for any reason following such event or the Corporation's successor does not assume its obligations hereunder, and (c) in either case, the payment of the Supplementary Retirement Benefit hereunder, is considered a Parachute Payment and when combined with all other payments considered to be Parachute Payments from the Corporation to Page 7 8 EXHIBIT 10.71 Cutts due to the events described in (a) and (b) above, result in an Excess Parachute Payment, as defined by Section 280G of the Internal Revenue Code of 1986, as amended, then the amount of the Supplementary Retirement Benefit shall be reduced so that the total Parachute Payments received by Cutts from the Corporation do not constitute an Excess Parachute Payment; provided, however, that this Section 2.02(c) shall not apply if the total Parachute Payments from the Corporation to Cutts due to the events described in (a) and (b) above exceed one hundred twenty percent (120%) of the amount of all Parachute Payments, not including any amount that would be considered an Excess Parachute Payment. 2.03 OFFSETTING BENEFITS. (a) The following are the Offsetting Benefits, which reduce the Accrued Benefit for the purpose of calculating the Supplemental Retirement Benefit: 1. Fifty percent (50%) of Cutts's (actual or projected) annual primary social security retirement benefit projected as of Cutts's social security normal retirement age based on his Benefit Computation Base in effect on the date of termination of Cutts's employment with the Corporation; 2. The annual amount of benefits payable to Cutts (or his beneficiaries) at the Normal Retirement Date calculated on a single life annuity basis from any qualified defined benefit pension plan maintained and funded by the Corporation as of the date of this Agreement, or their successors, as such plan or plans may be amended or modified from time to time; 3. The annual amount of benefits payable at the Normal Retirement Date on a single life annuity basis attributable to the portion Page 8 9 EXHIBIT 10.71 of the account balances of Cutts arising from employer contributions (but excluding the portion of such balances arising from employee salary reduction and elective contributions) at the date of determination from the Corporation's 401(k) and other defined contribution retirement plans maintained by the Corporation as of the date of this Agreement, or their successors, as such plan or plans may be modified from time to time; 4. The annual amount of benefits payable to Cutts at the Normal Retirement Date calculated on a single life annuity basis from any other non-qualified supplemental retirement plan maintained and funded by the Corporation as of the date of this Agreement, or their successors, as such plan or plans may be amended or modified from time to time. (b) The Corporation's obligation to pay the Offsetting Benefits shall not be affected by the termination of this Agreement and the Supplemental Retirement Benefit payable hereunder for any reason whatsoever. (c) All calculations of the Supplemental Retirement Agreement payable to Cutts under this Agreement will be made assuming that Cutts participates in the Offsetting Benefits to the full extent permitted by law and the terms of those plans. (d) If Cutts terminates his employment prior to his Normal Retirement Date, in calculating his Accrued Benefit, (i) the offset of primary social security retirement benefit shall be calculated on the basis of the amount projected to be payable at Cutts's social security normal retirement age assuming continued earnings by Cutts at the rate in effect at termination of employment until Cutts's social security normal retirement age; (ii) the offset for any qualified defined Page 9 10 EXHIBIT 10.71 benefit plan shall be calculated on the basis of Cutts's accrued benefit in said plan upon termination of employment projected to be payable at Cutts's Normal Retirement Date; (iii) the offset for any benefits arising from employer contributions attributable to the account balances of Cutts arising from the Corporation's 401(k) plan or any other defined contribution retirement plan shall also be calculated on the basis of Cutts's accrued benefit in such plan(s) upon termination of employment projected to be payable at Cutts's Normal Retirement Date; and (iv) the offset for any non-qualified supplemental retirement plan shall be calculated on the basis of Cutts's accrued benefit in said plan upon termination of employment projected to be payable at Cutts's Normal Retirement Date. 2.04 OPTIONAL FORMS OF PAYMENT. In lieu of the fifteen (15) year certain payments provided in Section 2.01 above, or whenever a Supplemental Retirement Benefit is payable under Section 4.01 or 5.01 of this Agreement, Cutts may elect by written notice to the Corporation in the calendar year prior to the calendar year in which payments are to begin, an optional form of payment which shall be the actual equivalent (factors defined in SpecTran's qualified defined benefit pension plan) of the said fifteen (15) year certain payments. The optional form of payment shall be any optional form of payment which is provided to Cutts under the terms of SpecTran's qualified defined benefit pension plan. 2.05 VESTING. Anything to the contrary in this Agreement notwithstanding, Cutts shall be entitled to one hundred percent (100%) of any benefit payable under this Agreement under any one or more of Sections 2.01, 3.01, 4.01, 5.01, 10.01 or 10.02 at the date on which his entitlement to such benefit shall be determined commencing with his original date of hire by the Corporation, provided that such benefits are subject to forfeiture as described in Sections 5.03 and 5.04, below. Page 10 11 EXHIBIT 10.71 ARTICLE THREE 3.01 DEATH OF CUTTS. (a) If Cutts dies while employed by the Corporation but prior to the commencement of the payment of the Supplemental Retirement Benefit under Section 2.01, 4.01 or 5.01, SpecTran will pay to the designated beneficiaries of Cutts, a total annual amount equal to the Supplemental Benefit earned by Cutts as of the date of death, payable over a period of fifteen (15) years certain commencing on the first day of the month next following the delivery to the Corporation of a death certificate and on a monthly basis thereafter. (b) If Cutts dies following the commencement of the payment of the Supplemental Retirement Benefit under Section 2.01, 4.01 or 5.01, such payments shall continue to the designated beneficiaries of Cutts until all of the Supplemental Retirement Benefit has been paid. (c) If Cutts dies following the termination of his employment with the Corporation and prior to the commencement of the payment of the Supplemental Retirement Benefit under Section 2.01, 4.01 or 5.01, SpecTran shall pay to Cutts's named beneficiaries an annual benefit which shall be Cutts's Supplemental Retirement Benefit as of the date of the termination of his employment. Such benefits shall be payable monthly, commencing on the first day of the month following the Normal Retirement Date, or any date prior to the Normal Retirement Date approved by the Corporation, and continuing for fifteen (15) years; provided, however, that Cutts's designated beneficiaries shall be entitled to accelerated payments of such benefits if and to the same extent Cutts would have been entitled to an accelerated payment of the Supplemental Retirement Benefit had he survived. Page 11 12 EXHIBIT 10.71 3.02 BENEFICIARIES. Cutts shall designate, in writing to the Corporation, on the form titled "Designation of Beneficiary" attached hereto as Schedule A, one or more beneficiaries. Cutts from time to time may change his designated beneficiaries by delivering to the Corporation a dated, revised Designation of Beneficiary form, revoking the prior designation. If no beneficiary is so named or if no named beneficiary is living at the time a payment is due, benefit payments shall be made, when due, to Cutts's estate. If payments of benefits to a beneficiary commences and such beneficiary dies before all amounts to which such beneficiary is entitled have been paid, the remaining benefits shall be paid to the successive beneficiary or beneficiaries, if any, designated by Cutts, or if none, to the beneficiary's estate. ARTICLE FOUR 4.01 DISABILITY PRIOR TO RETIREMENT. In the event Cutts shall become disabled, mentally or physically, which disability prevents him from performing the material aspects of his duties, the Corporation will pay no disability benefits hereunder. Disability benefits (if any) will be paid to Cutts through such insurance programs as may be sponsored by the Corporation. Upon the later of termination of such other disability benefits (if any), or Cutts's attainment of the Normal Retirement Date, Cutts shall commence receiving payment of his Accrued Benefit determined as of the date of the disability. The Supplemental Retirement Benefit shall be paid in equal monthly installments, for fifteen (15) years certain commencing on the first day of the month following the later of the termination of such benefits or the Normal Retirement Date, or in the manner provided in Section 2.04. 4.02 RE-EMPLOYMENT FOLLOWING DISABILITY. In the event Cutts returns to work with the Corporation after terminating employment because of disability, this Agreement shall continue in full force and effect as though such disability had not occurred. Under such circumstances, Cutts will receive credit towards determining the Annual Percentage Amount for service prior to terminating his employment because of disability and for service after resuming employment Page 12 13 EXHIBIT 10.71 with the Corporation, but will not receive credit for the interim prior during which he was not employed by the Corporation. ARTICLE FIVE 5.01 EARLY RETIREMENT, TERMINATION OF SERVICE OR DISCHARGE. Except to the extent otherwise provided in Sections 5.03 and 5.04, in the event that Cutts's employment with the Corporation is terminated, voluntarily or involuntarily, before Cutts attains the Normal Retirement Date, for reasons other than death or disability, Cutts shall be entitled to a Supplemental Retirement Benefit, determined as of the date of his termination of employment. Such benefit shall be payable in equal monthly installments, commencing on the first day of the month next following the later of the Normal Retirement Date or the date of Cutts's actual retirement, and continuing for fifteen (15) years (except as set forth in Sections 10.01 and 10.02); provided, however, that Cutts may elect by execution and delivery to the Corporation of the form attached hereto as Schedule B to have the monthly payments of the Supplemental Retirement Benefit commence prior to the Normal Retirement Date at any date between age 60 and the Normal Retirement Date. Cutts understands that such election is being made prospectively and is irrevocable. 5.02 OPTIONAL FORMS OF PAYMENT. In lieu of the fifteen (15) years certain payments provided in Section 5.01, the Supplemental Retirement Benefit payable under such Section may be payable in the manner provided in Section 2.04. 5.03 EMPLOYMENT BY COMPETITION. In the event that during the two year period immediately following the termination of Cutts's employment for any reason, Cutts shall compete with the business of the Corporation, then the Supplemental Retirement Benefit which might otherwise be due and payable hereunder shall be immediately forfeited and all rights of Cutts and his beneficiaries hereunder shall become void; provided, however, that if (a) Cutts Page 13 14 EXHIBIT 10.71 does not remain employed by the Corporation for any reason during the twelve (12) month period following a Change in Control or (b) an event described in Section 10.01 occurs and either such other corporation, firm or person (as described in Section 10.01) does not agree that Cutts shall continue in the employ of the Corporation for any reason following such event or the Corporation's successor does not assume its obligations hereunder, the provisions of Section 5.03 shall not apply, but the provisions of Sections 10.01 and 10.02 shall govern. Cutts will be deemed to have competed with the business of the Corporation if, during the two year period following termination of his employment with the Corporation, he either (a) engages, directly or indirectly, or by stock interest exceeding five percent (5%), or otherwise in any way, in any business in which the Corporation was engaged during the term of his employment or which the Corporation planned, during the term of his employment to enter, (b) solicits any past, present or future customers of the Corporation in any way relating to any business in which the Corporation was engaged during the term of his employment, or which the Corporation planned during the term of his employment, to enter, or (c) induces or actively attempt to influence any other employee or consultant of the Corporation to terminate his or her employment or consultancy with the Corporation. 5.04 FORFEITURE. Anything to the contrary in this Agreement notwithstanding (other than Sections 10.01 and 10.02), the Supplemental Retirement Benefits shall be immediately forfeited and all rights of Cutts and his beneficiaries hereunder shall become null and void, if Cutts's employment with the Corporation is terminated for Cause. For this purpose, a termination shall be a termination for "Cause" only if the termination if for one or more of the following: (i) the conviction of Cutts for committing any felony, (ii) stealing from the Corporation, (iii) a willful breach by Cutts of a material provision of this Agreement and (iv) if Cutts engages in gross misconduct, such as fraud, dishonesty, gross negligence or insubordination. Page 14 15 EXHIBIT 10.71 If (a) Cutts does not remain employed by the Corporation for any reason within one year following a Change in Control or (b) an event described in Section 10.01 occurs and either such other corporation, firm or person (as described in Section 10.01) does not agree that Cutts does not continue in the employ of the Corporation for any reason following such event or the Corporation's successor does not agree to assume its obligation hereunder, the provisions of this Section 5.04 shall not apply, but the provisions of Sections 10.01 and 10.02 shall govern. 5.05 AVAILABILITY TO CONSULT. For so long as Cutts is receiving benefits pursuant to this Agreement, Cutts will keep himself available to consult with, and respond to inquiries from, the Corporation relating to its business affairs, at reasonable time(s) and to reasonable extent. ARTICLE SIX 6.01 INTEREST. Any payment that is required to be made hereunder that is delayed beyond the date specified in this Agreement shall bear interest at a variable rate which shall be the rate of interest on one year U.S. Treasury Bills determined at the first auction of each calendar year or part thereof during the period of which interest is to be applied to any obligation hereunder. ARTICLE SEVEN 7.01 ALIENABILITY. Neither Cutts, nor any beneficiary under this Agreement shall have any power or right to transfer, assign, anticipate, hypothecate, mortgage, commute, modify, or otherwise encumber in advance any of the benefits payable hereunder, and any attempt to do so shall be deemed null and void. The seizure of the benefits payable hereunder for the payment of any debts, judgments, alimony or separate maintenance, owed by Cutts or his beneficiary or any of them, or the transfer of such benefit by operation of law in the event of bankruptcy, or otherwise, shall be deemed to be a transfer prohibited by this Agreement, and will result in the immediate termination of all benefits payable hereunder. Page 15 16 EXHIBIT 10.71 ARTICLE EIGHT 8.01 PARTICIPATION IN OTHER PLANS. Nothing contained in this Agreement shall be construed to alter, abridge, or in any manner affect the rights and privileges of Cutts to participate in and be covered by any pension, profit sharing, group insurance, bonus or any other employee plan or plans which the Corporation may have or hereafter have. ARTICLE NINE 9.01 FUNDING. (a) The Corporation reserves the right at its sole and exclusive discretion to insure or otherwise provide for the obligations of the Corporation undertaken by this Agreement or to refrain from same, and to determine the extent, nature and method thereof, including the establishment of one or more trusts. Should the Corporation elect to insure this Agreement, in whole or in part, through the medium of insurance or annuities, or both, the Corporation shall be the owner and beneficiary of the policy or annuity. At no time shall Cutts be deemed to have any right, title or interest in or to any specified asset or assets of the Corporation, or any trust or escrow arrangement, including, but not by way of restriction, any insurance or annuity contracts or the proceeds therefrom. (b) Any such policy, contract or asset shall not in any way be considered to be security for the performance of the obligations of this Agreement. (c) If the Corporation purchases a life insurance or annuity policy on the life of Cutts, Cutts agrees to sign any papers that may be required for that purpose and to undergo any medical examination or tests (at the Corporation's expense) which may be necessary, and generally cooperate with the Corporation in securing such policy. Page 16 17 EXHIBIT 10.71 (d) To the extent Cutts acquires a right to receive benefits under this Agreement, such right shall be equivalent to the right of an unsecured general creditor of the Corporation. Page 17 18 EXHIBIT 10.71 ARTICLE TEN 10.01 REORGANIZATION. SpecTran shall not merge or consolidate into or with another corporation if such merger or consolidation shall result in the other corporation being the survivor corporation, nor shall it sell substantially all of its assets to another corporation, firm or person, unless and until Cutts and such other corporation, firm or person agree that Cutts shall continue in the employ of the succeeding, continuing or acquiring corporation, firm or person and such other corporation, firm or person agrees in writing without further qualification to assume and discharge the obligations of SpecTran under this Agreement. If Cutts and such corporation, firm or person do not agree that Cutts shall continue in the employ of such corporation, firm or person, or such corporation, firm or person does not so agree to assume and discharge such obligations, SpecTran shall pay to Cutts, in one lump sum, his Supplemental Retirement Benefit as of the date of such merger, consolidation or sale. All calculations of the Supplemental Retirement Benefit, for purposes of this Section 10.01, shall be discounted to present value in accordance with the actuarial tables used in SpecTran's defined benefit pension plan. For the purpose of clarification, any transaction between SpecTran and any of its Affiliates is not intended to be covered by this Section 10.01. 10.02 CHANGE IN CONTROL. In the event that a Change in Control occurs prior to the Normal Retirement Date and either (a) Cutts is dismissed without Cause from employment by the Corporation up to and including twelve (12) months from such Change in Control or (b) Cutts voluntarily leaves the employ of the Corporation up to and including twelve (12) months from such Change in Control, then in either case SpecTran shall pay to Cutts, in one lump sum, his Supplemental Retirement Benefit as of the date of the termination of Cutts's employment. All calculations of the Supplemental Retirement Benefit, for purposes of this Section 10.02, shall be discounted to present value in Page 18 19 EXHIBIT 10.71 accordance with the actuarial tables used in SpecTran's defined benefit pension plan. For the purposes of this Agreement, "Change in Control" shall mean (a) the date of public announcement that a person has become, without the approval of SpecTran's Board of Directors, the beneficial owner of 20% or more of the voting power of all securities of SpecTran then outstanding; (b) the date of the commencement of a tender offer or tender exchange by any person, without the approval of SpecTran's Board of Directors, if upon the consummation thereof such person would be the beneficial owner of 20% or more of the voting power of all securities of SpecTran then outstanding; or (c) the date on which individuals who constituted the Board of Directors of SpecTran on the date this Agreement was adopted cease for any reason to constitute a majority thereof, provided that any person becoming a director subsequent to such date whose election or nomination was approved by at least three quarters of such incumbent Board of Directors shall be considered as though such person were an incumbent director. ARTICLE ELEVEN 11.01 BENEFITS AND BURDENS. This Agreement shall be binding upon and inure to the benefit of Cutts and his personal representatives, the Corporation, and any successor organization which shall succeed to substantially all of the Corporation's assets and business without regard to the form of such succession. ARTICLE TWELVE 12.01 COMMUNICATIONS. Any notice or communication required of either party with respect to this Agreement shall be made in writing and may either be delivered personally or sent by certified mail, return receipt requested, as the case may be: To the Corporation: c/o President of the Corporation SpecTran Corporation 50 Hall Road Page 19 20 EXHIBIT 10.71 Sturbridge, MA 01566 To Cutts: Crawford L. Cutts 1 High Street Southborough, MA 01772-1423 Each party shall have the right by written notice to change the place to which any notice may be addressed. ARTICLE THIRTEEN 13.01 CLAIMS PROCEDURE. In the event that benefits under this Agreement are not paid to Cutts (or his beneficiary in the case of Cutts's death), and such person feels entitled to receive them, a claim shall be made in writing to the Corporation within sixty (60) days after written notice from the Corporation to Cutts or his beneficiary or personal representative that payments are not being made or are not to be made under this Agreement. Such claim shall be reviewed by the Corporation. If the claim is approved or denied, in full or in part, the Corporation shall provide a written notice of approval or denial within sixty (60) days from the date of receipt of the claim setting forth the specific reason for denial, specific reference to the provision of this Agreement upon which the denial is based, and any additional material or information necessary to perfect the claim, if any. Also, such written notice shall indicate the steps to be taken if a review of the denial is desired. If a claim is denied (a claim shall be deemed denied if the Corporation does not take action within the aforesaid sixty (60) day period) and a review is desired, Cutts (or beneficiary in the case of Cutts's death), shall notify the Corporation in writing within twenty (20) days. In requesting a review, Cutts or his beneficiary may review this Agreement or any document relating to it and submit any written issues and comments he or she may feel appropriate. In its sole discretion the Corporation shall then review the claim and provide a written decision within sixty (60) days. This Page 20 21 EXHIBIT 10.71 decision likewise shall state the specific reasons for the decision and shall include reference to specific provisions of this Agreement on which the decision is based. Any decision of the Corporation shall not be binding on Cutts, his personal representative, or any beneficiary without consent, nor shall it preclude further action by Cutts, his personal representatives or beneficiary. 13.02 ARBITRATION. All claims, disputes and other matters in question between the parties hereto arising out of or relating to this Agreement or the breach thereof shall be decided by arbitration in accordance with the Rules of the American Arbitration Association then obtaining, subject to the limitations and restrictions stated below. Neither party will be permitted to submit a dispute to arbitration without first following the procedures set forth in Section 13.01. Notice of demand for arbitration must be filed in writing with the other party to this Agreement and with the American Arbitration Association. The demand must be made within a reasonable time after the claim, dispute or other matter in question has arisen. In no event may the demand for arbitration be made if the institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statute of limitations. Arbitrations hereunder will be held in the English language in Boston, Massachusetts or such other place as the parties may agree. The award rendered by the arbitrators will be final, not subject to appeal and judgment may be entered upon it in any court having jurisdiction thereof. Each party will bear all of his or its own costs and expenses associated with the arbitration, and the parties shall equally share the administrative costs of the arbitration. ARTICLE FOURTEEN Page 21 22 EXHIBIT 10.71 14.01 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof, and supersedes all prior agreements, written or verbal, with respect to such subject matter. This instrument may be altered or amended only by written agreement signed by the parties hereto. 14.02 GENDER. Any reference in this Agreement to the masculine shall be deemed to include the feminine where the context so requires. 14.03 OPERATION OF LAW ON CORPORATION'S OBLIGATIONS. In the event that any governmental entity promulgates any statute, rule, regulation, policy or order which restricts or prohibits the Corporation from making payments to Cutts under this Agreement, then the Corporation's obligations to make payments to Cutts (or his beneficiary) hereunder shall terminate or be restricted or suspended (consistent with such law or binding regulation, policy or order) for so long as such restriction or prohibition applies to the Corporation. Nothing in this Agreement is intended to require or shall be construed as requiring the Corporation to do or fail to do any act in violation of any applicable law or binding regulation, policy or order. 14.04 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be considered an original, but together shall constitute one and the same document. 14.05 SEVERANCE. In the event any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement shall remain in full force and effect and will not be affected by such invalid or unenforceable provisions. Page 22 23 EXHIBIT 10.71 14.06 JURISDICTION, GOVERNING LAW. The parties, terms and conditions of this Agreement are subject to and shall be governed by the laws of the Commonwealth of Massachusetts without giving effect to the principles of conflicts of law. IN WITNESS WHEREOF, the Corporation has caused this Agreement to be duly executed by its duly authorized officer and its Corporate Seal affixed at Sturbridge, Massachusetts the day and year first above written. SPECTRAN CORPORATION By - -------------------------- ----------------------------------- Witness Name: Title: - -------------------------- ------------------------------------- Witness Crawford L. Cutts Page 23 24 EXHIBIT 10.71 SCHEDULE A DESIGNATION OF BENEFICIARY Gentlemen: In accordance with the provisions of the Supplemental Retirement Agreement dated May 8, 1996, between SpecTran Corporation and the undersigned, I hereby designate ____________________, residing at ________________________,* as my beneficiary to receive payments thereunder in the event of my death before payments in full thereunder have been made. In the event said beneficiary predeceases me, I hereby designate _________________, residing at ___________________________,* as beneficiary in his/her stead. Very truly yours, _________________________ *If more than one beneficiary is to be designated, add a page listing the beneficiaries and specify the percentage of each payment to be received by each beneficiary. Page 24 25 EXHIBIT 10.71 SCHEDULE B Gentlemen: In accordance with Section 5.01 of the Supplemental Retirement Agreement dated May 8, 1996, between SpecTran Corporation and the undersigned, I hereby prospectively and irrevocably make the election indicated below with respect to the payment of benefits: [CHECK ONE] ______ I elect to commence receiving benefits prior to age 65 if I retire before the Normal Retirement Age, with the benefits to commence at age ____ [Specify age between 60 and 65]. OR ______ I elect to commence receiving benefits after the Normal Retirement Date and forego my right to receive benefits prior to the Normal Retirement Age. Very truly yours, _______________________ Page 25 EX-10.72 5 SUPPLEMENTAL RETIREMENT AGREEMENT 1 EXHIBIT 10.72 SUPPLEMENTAL RETIREMENT AGREEMENT THIS AGREEMENT is made and entered into this 8th day of May, 1996 by and between SpecTran Corporation ("SpecTran"), a Delaware corporation, and William B. Beck (hereinafter called "Beck"). PURPOSE AND INTENT This agreement (the "Agreement") is designed to recognize Beck's contribution to the Corporation(1) and encourage Beck to remain in the Corporation's employ by providing supplemental retirement benefits, keyed to a specified percentage of his compensation, so that Beck's percentage of spendable retirement income will approximate the percentage of spendable retirement income available to less compensated employees who also participate in the Corporation's retirement plans. Due to restrictions presently imposed by the Internal Revenue Code on benefits for highly compensated employees, the percentage of spendable retirement income Beck would receive under the Corporation's current benefit plans relative to his current compensation would be less than that of employees at lower salary levels. The benefits provided in this Agreement are designed to be entirely supplemental to the Corporation's other retirement benefits payable to Beck; if Beck receives the specified percentage of compensation through pension plans and other benefits (as described below) provided by the Corporation, no benefits will be paid out under this Agreement. While any benefits are paid under this Agreement Beck will be available to consult for the Corporation. Further, these benefits are subject to forfeiture if Beck is terminated for Cause (as defined herein) or, as described below, competes with the Corporation. Beck has been employed by the Corporation since 1994, and currently holds the position of President of SpecTran Specialty Optics Company, Inc., a wholly owned subsidiary - ------------------------ (1) Initial capitalized words may be defined below under the heading "Certain Definitions". Page 1 2 EXHIBIT 10.72 of SpecTran. The Board of Directors of SpecTran voted on May 8, 1996 to authorize the Corporation to enter into this Agreement with Beck. CERTAIN DEFINITIONS (a) "Accrued Benefit" shall have the meaning set forth in Section 2.01 of this Agreement. (b) "Affiliate" shall mean any person or entity which controls, is controlled by or is under common control with the Corporation. For the purpose of this Agreement, control shall mean ownership of fifty percent (50%) or more of the voting stock of any entity. (c) "Benefit Computation Base" shall mean the average of Beck's annual compensation (defined as base salary, eligible bonus(2) and any salary reduction amounts pursuant to Sections - ----------------------- (2) To the extent that the average annual bonus paid to Beck during the 36 month period in which the Benefit Computation Base is calculated is greater than fifty percent (50%) of Beck's average base salary over such period, the excess bonus payments shall be considered ineligible for the purpose of calculating the Benefit Computation Base. For example, assume that Beck's base salary and bonuses over the 36 month period are as shown in the following two examples: 1.
Base Salary Bonus ----------- ----- Months 1-12 $200,000 $200,000 Months 13-24 $210,000 $100,000 Months 25-36 $220,000 $ 90,000 Average $210,000 $130,000
In this example, fifty percent (50%) of Beck's average annual base salary over the 36 month period is $105,000. Accordingly, of Beck's average annual bonus of $130,000 paid over that period, $25,000 will be deemed ineligible for the purpose of calculating the Benefit Computation Base, resulting in $105,000 of the average bonus being considered eligible. 2.
Base Salary Bonus ----------- ----- Months 1-12 $200,000 $200,000 Months 13-24 $210,000 $ 10,000 Months 25-36 $220,000 $ 30,000 Average $210,000 $ 80,000
In this example, fifty percent (50%) percent of Beck's average annual base salary over the 36 month period is $105,000. Beck's average annual bonus over that period of $80,000 is less than the average annual base salary, and accordingly the entire average annual bonus will be eligible in determining the Benefit Computation Base. Page 2 3 EXHIBIT 10.72 401(k) or 125 of the Code) paid during the thirty-six (36) consecutive calendar months during Beck's period of employment by the Corporation in which such compensation is the highest. (d) "Change in Control" shall have the meaning set forth in Section 10.02 of this Agreement. (e) The "Corporation" shall mean SpecTran, its successors and assigns, including but not limited to any corporation, firm or person which is the survivor of a merger or consolidation with SpecTran or which acquires substantially all of the assets of SpecTran, and any of SpecTran's Affiliates. (f) "Normal Retirement Date" shall mean Beck's sixty-fifth birthday. (g) "Offsetting Benefits" shall have the meaning set forth in Section 2.03 of this Agreement. (h) "Supplemental Retirement Benefit" shall have the meaning set forth in Section 2.01 of this Agreement. ARTICLE ONE 1.01 EMPLOYMENT. The Corporation may employ Beck in such capacity as the Corporation may from time to time determine. Notwithstanding anything contained herein, this Agreement Page 3 4 EXHIBIT 10.72 is not an agreement of employment, a guaranty of continuing employment or of employment in any particular position and nothing herein shall restrict the Corporation concerning the terms and conditions of Beck's employment. The benefits provided by this Agreement are not part of any salary reduction plan or an arrangement deferring a bonus or a salary increase. Beck has no option to take any current payment or bonus in lieu of these salary continuation benefits. Page 4 5 ARTICLE TWO 2.01 SUPPLEMENTAL RETIREMENT BENEFIT. Depending upon how many years Beck has been continuously in the employ of the Corporation, Beck will be entitled to a retirement benefit determined as of the effective date of his leaving the Corporation's employment for whatever reason except Cause (as defined below), including whether by (i) death, (ii) disability, (iii) termination of employment or (iv) early retirement. The retirement benefit (also known as the "Accrued Benefit") shall be an annual amount equal to Beck's Benefit Computation Base multiplied by the Annual Percentage Amount (as determined pursuant to Section 2.02, below). Beck will receive a supplemental retirement benefit (the "Supplemental Retirement Benefit") equal to (i) the amount of the Accrued Benefit reduced by (ii) the sum of the benefits described in Subsections (1), (2), (3) and (4) of Section 2.03, below (such benefits are referred to herein as the "Offsetting Benefits"). The Supplemental Retirement Benefit, if any, to be paid out under this Agreement, shall continue for fifteen (15) years, and be paid in equal monthly installments commencing on the first day of the month immediately following the later of Beck's actual retirement or the Normal Retirement Date (unless payment is accelerated in accordance with Sections 10.01 and 10.02 below). No payment will be made under this Agreement if the Offsetting Benefits are equal to or greater than the Accrued Benefit. Page 5 6 EXHIBIT 10.72 2.02 ANNUAL PERCENTAGE AMOUNT. (a) The Annual Percentage Amount shall be determined (subject to subsection (b), below) by the number of years Beck has been continuously employed by the Corporation as follows:
================================================================================ YEARS OF CONTINUOUS SERVICE ANNUAL PERCENTAGE AMOUNT - -------------------------------------------------------------------------------- 25 or more 65% 20-24 60% 15-19 40% less than 15 0% (No Supplemental Retirement Benefit) ================================================================================
(b) Notwithstanding the provisions of Subsection (a) of this Section 2.02, in the event (a) Beck does not remain employed by the Corporation for any reason during the twelve (12) month period following a Change in Control (as defined in Section 10.01, below) or (b) an event described in Section 10.01 occurs and either such other corporation, firm or person (as described in Section 10.01) does not agree that Beck shall continue in the employ of the Corporation for any reason following such event or the Corporation's successor does not assume its obligations hereunder, Beck will be deemed eligible to receive a Supplemental Retirement Benefit under this Agreement if at the time of the termination of his employment he will have completed at least five full years of service to the Corporation. In this case, the Annual Percentage Amount shall be determined by the number of years Beck has been continuously employed by the Corporation as follows: Page 6 7 EXHIBIT 10.72
================================================================================ YEARS OF SERVICE ANNUAL PERCENTAGE AMOUNT - -------------------------------------------------------------------------------- 25 or more 65% 20-24 60% 15-19 40% 14 36% 13 32% 12 28% 11 24% 10 20% 9 16% 8 12% 7 8% 6 4% less than 6 0% (No Supplemental Retirement Benefit) ================================================================================
(c) Anything else to the contrary in this Agreement notwithstanding, in the event of either (a) Beck does not remain employed by the Corporation for any reason during the twelve month period following a Change in Control or (b) an event described in Section 10.01 occurs and either such other corporation, firm or person (as described in Section 10.01) does not agree that Beck shall continue in the employ of the Corporation for any reason following such event or the Corporation's successor does not assume its obligations hereunder, and (c) in either case, the payment of the Supplementary Retirement Benefit Page 7 8 EXHIBIT 10.72 hereunder is considered a Parachute Payment and when combined with all other payments considered to be Parachute Payments from the Corporation to Beck due to the events described in (a) and (b) above, result in an Excess Parachute Payment, as defined by Section 280G of the Internal Revenue Code of 1986, as amended, then the amount of the Supplementary Retirement Benefit shall be reduced so that the total Parachute Payments received by Beck from the Corporation do not constitute an Excess Parachute Payment; provided, however, that this Section 2.02(c) shall not apply if the total Parachute Payments from the Corporation to Beck due to the events described in (a) and (b) above exceed one hundred twenty percent (120%) of the amount of all Parachute Payments, not including any amount that would be considered an Excess Parachute Payment. 2.03 OFFSETTING BENEFITS. (a) The following are the Offsetting Benefits, which reduce the Accrued Benefit for the purpose of calculating the Supplemental Retirement Benefit: 1. Fifty percent (50%) of Beck's (actual or projected) annual primary social security retirement benefit projected as of Beck's social security normal retirement age based on his Benefit Computation Base in effect on the date of termination of Beck's employment with the Corporation; 2. The annual amount of benefits payable to Beck (or his beneficiaries) at the Normal Retirement Date calculated on a single life annuity basis from any qualified defined benefit pension plan maintained and funded by the Corporation as of the date of this Agreement, or their successors, as such plan or plans may be amended or modified from time to time; Page 8 9 EXHIBIT 10.72 3. The annual amount of benefits payable at the Normal Retirement Date on a single life annuity basis attributable to the portion of the account balances of Beck arising from employer contributions (but excluding the portion of such balances arising from employee salary reduction and elective contributions) at the date of determination from the Corporation's 401(k) and other defined contribution retirement plans maintained by the Corporation as of the date of this Agreement, or their successors, as such plan or plans may be modified from time to time; 4. The annual amount of benefits payable to Beck at the Normal Retirement Date calculated on a single life annuity basis from any other non-qualified supplemental retirement plan maintained and funded by the Corporation as of the date of this Agreement, or their successors, as such plan or plans may be amended or modified from time to time. (b) The Corporation's obligation to pay the Offsetting Benefits shall not be affected by the termination of this Agreement and the Supplemental Retirement Benefit payable hereunder for any reason whatsoever. (c) All calculations of the Supplemental Retirement Agreement payable to Beck under this Agreement will be made assuming that Beck participates in the Offsetting Benefits to the full extent permitted by law and the terms of those plans. (d) If Beck terminates his employment prior to his Normal Retirement Date, in calculating his Accrued Benefit, (i) the offset of primary social security retirement benefit shall be calculated on the basis of the amount projected to be payable at Beck's social security normal retirement age assuming continued Page 9 10 earnings by Beck at the rate in effect at termination of employment until Beck's social security normal retirement age; (ii) the offset for any qualified defined benefit plan shall be calculated on the basis of Beck's accrued benefit in said plan upon termination of employment projected to be payable at Beck's Normal Retirement Date; (iii) the offset for any benefits arising from employer contributions attributable to the account balances of Beck arising from the Corporation's 401(k) plan or any other defined contribution retirement plan shall also be calculated on the basis of Beck's accrued benefit in such plan(s) upon termination of employment projected to be payable at Beck's Normal Retirement Date; and (iv) the offset for any non-qualified supplemental retirement plan shall be calculated on the basis of Beck's accrued benefit in said plan upon termination of employment projected to be payable at Beck's Normal Retirement Date. 2.04 OPTIONAL FORMS OF PAYMENT. In lieu of the fifteen (15) year certain payments provided in Section 2.01 above, or whenever a Supplemental Retirement Benefit is payable under Section 4.01 or 5.01 of this Agreement, Beck may elect by written notice to the Corporation in the calendar year prior to the calendar year in which payments are to begin, an optional form of payment which shall be the actual equivalent (factors defined in SpecTran's qualified defined benefit pension plan) of the said fifteen (15) year certain payments. The optional form of payment shall be any optional form of payment which is provided to Beck under the terms of SpecTran's qualified defined benefit pension plan. 2.05 VESTING. Anything to the contrary in this Agreement notwithstanding, Beck shall be entitled to one hundred percent (100%) of any benefit payable under this Agreement under any one or more of Sections 2.01, 3.01, 4.01, 5.01, 10.01 or 10.02 at the date on which his entitlement to such benefit shall be determined commencing with his original date of hire by Page 10 11 EXHIBIT 10.72 the Corporation, provided that such benefits are subject to forfeiture as described in Sections 5.03 and 5.04, below. Page 11 12 EXHIBIT 10.72 ARTICLE THREE 3.01 DEATH OF BECK. (a) If Beck dies while employed by the Corporation but prior to the commencement of the payment of the Supplemental Retirement Benefit under Section 2.01, 4.01 or 5.01, SpecTran will pay to the designated beneficiaries of Beck, a total annual amount equal to the Supplemental Benefit earned by Beck as of the date of death, payable over a period of fifteen (15) years certain commencing on the first day of the month next following the delivery to the Corporation of a death certificate and on a monthly basis thereafter. (b) If Beck dies following the commencement of the payment of the Supplemental Retirement Benefit under Section 2.01, 4.01 or 5.01, such payments shall continue to the designated beneficiaries of Beck until all of the Supplemental Retirement Benefit has been paid. (c) If Beck dies following the termination of his employment with the Corporation and prior to the commencement of the payment of the Supplemental Retirement Benefit under Section 2.01, 4.01 or 5.01, SpecTran shall pay to Beck's named beneficiaries an annual benefit which shall be Beck's Supplemental Retirement Benefit as of the date of the termination of his employment. Such benefits shall be payable monthly, commencing on the first day of the month following the Normal Retirement Date, or any date prior to the Normal Retirement Date approved by the Corporation, and continuing for fifteen (15) years; provided, however, that Beck's designated beneficiaries shall be entitled to accelerated payments of such benefits if and to the same extent Beck would have been entitled to an accelerated payment of the Supplemental Retirement Benefit had he survived. Page 12 13 EXHIBIT 10.72 3.02 BENEFICIARIES. Beck shall designate, in writing to the Corporation, on the form titled "Designation of Beneficiary" attached hereto as Schedule A, one or more beneficiaries. Beck from time to time may change his designated beneficiaries by delivering to the Corporation a dated, revised Designation of Beneficiary form, revoking the prior designation. If no beneficiary is so named or if no named beneficiary is living at the time a payment is due, benefit payments shall be made, when due, to Beck's estate. If payments of benefits to a beneficiary commences and such beneficiary dies before all amounts to which such beneficiary is entitled have been paid, the remaining benefits shall be paid to the successive beneficiary or beneficiaries, if any, designated by Beck, or if none, to the beneficiary's estate. ARTICLE FOUR 4.01 DISABILITY PRIOR TO RETIREMENT. In the event Beck shall become disabled, mentally or physically, which disability prevents him from performing the material aspects of his duties, the Corporation will pay no disability benefits hereunder. Disability benefits (if any) will be paid to Beck through such insurance programs as may be sponsored by the Corporation. Upon the later of termination of such other disability benefits (if any), or Beck's attainment of the Normal Retirement Date, Beck shall commence receiving payment of his Accrued Benefit determined as of the date of the disability. The Supplemental Retirement Benefit shall be paid in equal monthly installments, for fifteen (15) years certain commencing on the first day of the month following the later of the termination of such benefits or the Normal Retirement Date, or in the manner provided in Section 2.04. 4.02 RE-EMPLOYMENT FOLLOWING DISABILITY. In the event Beck returns to work with the Corporation after terminating employment because of disability, this Agreement shall continue in full force and effect as though such disability had not occurred. Under such circumstances, Beck will receive credit towards determining the Annual Percentage Amount for service prior to terminating his employment because of disability and for service after resuming employment Page 13 14 EXHIBIT 10.72 with the Corporation, but will not receive credit for the interim prior during which he was not employed by the Corporation. ARTICLE FIVE 5.01 EARLY RETIREMENT, TERMINATION OF SERVICE OR DISCHARGE. Except to the extent otherwise provided in Sections 5.03 and 5.04, in the event that Beck's employment with the Corporation is terminated, voluntarily or involuntarily, before Beck attains the Normal Retirement Date, for reasons other than death or disability, Beck shall be entitled to a Supplemental Retirement Benefit, determined as of the date of his termination of employment. Such benefit shall be payable in equal monthly installments, commencing on the first day of the month next following the later of the Normal Retirement Date or the date of Beck's actual retirement, and continuing for fifteen (15) years (except as set forth in Sections 10.01 and 10.02); provided, however, that Beck may elect by execution and delivery to the Corporation of the form attached hereto as Schedule B to have the monthly payments of the Supplemental Retirement Benefit commence prior to the Normal Retirement Date at any date between age 60 and the Normal Retirement Date. Beck understands that such election is being made prospectively and is irrevocable. 5.02 OPTIONAL FORMS OF PAYMENT. In lieu of the fifteen (15) years certain payments provided in Section 5.01, the Supplemental Retirement Benefit payable under such Section may be payable in the manner provided in Section 2.04. 5.03 EMPLOYMENT BY COMPETITION. In the event that during the two year period immediately following the termination of Beck's employment for any reason, Beck shall compete with the business of the Corporation, then the Supplemental Retirement Benefit which might otherwise be due and payable hereunder shall be immediately forfeited and all rights of Beck and his beneficiaries hereunder shall become void; provided, however, that if (a) Beck Page 14 15 EXHIBIT 10.72 does not remain employed by the Corporation for any reason during the twelve (12) month period following a Change in Control or (b) an event described in Section 10.01 occurs and either such other corporation, firm or person (as described in Section 10.01) does not agree that Beck shall continue in the employ of the Corporation for any reason following such event or the Corporation's successor does not assume its obligations hereunder, the provisions of Section 5.03 shall not apply, but the provisions of Sections 10.01 and 10.02 shall govern. Beck will be deemed to have competed with the business of the Corporation if, during the two year period following termination of his employment with the Corporation, he either (a) engages, directly or indirectly, or by stock interest exceeding five percent (5%), or otherwise in any way, in any business in which the Corporation was engaged during the term of his employment or which the Corporation planned, during the term of his employment to enter, (b) solicits any past, present or future customers of the Corporation in any way relating to any business in which the Corporation was engaged during the term of his employment, or which the Corporation planned during the term of his employment, to enter, or (c) induces or actively attempt to influence any other employee or consultant of the Corporation to terminate his or her employment or consultancy with the Corporation. 5.04 FORFEITURE. Anything to the contrary in this Agreement notwithstanding (other than Sections 10.01 and 10.02), the Supplemental Retirement Benefits shall be immediately forfeited and all rights of Beck and his beneficiaries hereunder shall become null and void, if Beck's employment with the Corporation is terminated for Cause. For this purpose, a termination shall be a termination for "Cause" only if the termination if for one or more of the following: (i) the conviction of Beck for committing any felony, (ii) stealing from the Corporation, (iii) a willful breach by Beck of a material provision of this Agreement and (iv) if Beck engages in gross misconduct, such as fraud, dishonesty, gross negligence or insubordination. Page 15 16 EXHIBIT 10.72 If (a) Beck does not remain employed by the Corporation for any reason within one year following a Change in Control or (b) an event described in Section 10.01 occurs and either such other corporation, firm or person (as described in Section 10.01) does not agree that Beck shall continue in the employ of the Corporation for any reason following such event or the Corporation's successor does not agree to assume its obligation hereunder, the provisions of this Section 5.04 shall not apply, but the provisions of Sections 10.01 and 10.02 shall govern. 5.05 AVAILABILITY TO CONSULT. For so long as Beck is receiving benefits pursuant to this Agreement, Beck will keep himself available to consult with, and respond to inquiries from, the Corporation relating to its business affairs, at reasonable time(s) and to reasonable extent. ARTICLE SIX 6.01 INTEREST. Any payment that is required to be made hereunder that is delayed beyond the date specified in this Agreement shall bear interest at a variable rate which shall be the rate of interest on one year U.S. Treasury Bills determined at the first auction of each calendar year or part thereof during the period of which interest is to be applied to any obligation hereunder. ARTICLE SEVEN 7.01 ALIENABILITY. Neither Beck, nor any beneficiary under this Agreement shall have any power or right to transfer, assign, anticipate, hypothecate, mortgage, commute, modify, or otherwise encumber in advance any of the benefits payable hereunder, and any attempt to do so shall be deemed null and void. The seizure of the benefits payable hereunder for the payment of any debts, judgments, alimony or separate maintenance, owed by Beck or his beneficiary or any of them, or the transfer of such benefit by operation of law in the event of bankruptcy, or otherwise, shall be deemed to be a transfer prohibited by this Agreement, and will result in the immediate termination of all benefits payable hereunder. Page 16 17 EXHIBIT 10.72 ARTICLE EIGHT 8.01 PARTICIPATION IN OTHER PLANS. Nothing contained in this Agreement shall be construed to alter, abridge, or in any manner affect the rights and privileges of Beck to participate in and be covered by any pension, profit sharing, group insurance, bonus or any other employee plan or plans which the Corporation may have or hereafter have. ARTICLE NINE 9.01 FUNDING. (a) The Corporation reserves the right at its sole and exclusive discretion to insure or otherwise provide for the obligations of the Corporation undertaken by this Agreement or to refrain from same, and to determine the extent, nature and method thereof, including the establishment of one or more trusts. Should the Corporation elect to insure this Agreement, in whole or in part, through the medium of insurance or annuities, or both, the Corporation shall be the owner and beneficiary of the policy or annuity. At no time shall Beck be deemed to have any right, title or interest in or to any specified asset or assets of the Corporation, or any trust or escrow arrangement, including, but not by way of restriction, any insurance or annuity contracts or the proceeds therefrom. (b) Any such policy, contract or asset shall not in any way be considered to be security for the performance of the obligations of this Agreement. (c) If the Corporation purchases a life insurance or annuity policy on the life of Beck, Beck agrees to sign any papers that may be required for that purpose and to undergo any medical examination or tests (at the Corporation's expense) which may be necessary, and generally cooperate with the Corporation in securing such policy. (d) To the extent Beck acquires a right to receive benefits under this Agreement, such right shall be equivalent to the right of an unsecured general creditor of the Corporation. Page 17 18 EXHIBIT 10.72 ARTICLE TEN 10.01 REORGANIZATION. SpecTran shall not merge or consolidate into or with another corporation if such merger or consolidation shall result in the other corporation being the survivor corporation, nor shall it sell substantially all of its assets to another corporation, firm or person, unless and until Beck and such other corporation, firm or person agree that Beck shall continue in the employ of the succeeding, continuing or acquiring corporation, firm or person and such other corporation, firm or person agrees in writing without further qualification to assume and discharge the obligations of SpecTran under this Agreement. If Beck and such corporation, firm or person do not agree that Beck shall continue in the employ of such corporation, firm or person, or such corporation, firm or person does not so agree to assume and discharge such obligations, SpecTran shall pay to Beck, in one lump sum, his Supplemental Retirement Benefit as of the date of such merger, consolidation or sale. All calculations of the Supplemental Retirement Benefit, for purposes of this Section 10.01, shall be discounted to present value in accordance with the actuarial tables used in SpecTran's defined benefit pension plan. For the purpose of clarification, any transaction between SpecTran and any of its Affiliates is not intended to be covered by this Section 10.01. 10.02 CHANGE IN CONTROL. In the event that a Change in Control occurs prior to the Normal Retirement Date and either (a) Beck is dismissed without Cause from employment by the Corporation up to and including twelve (12) months from such Change in Control or (b) Beck voluntarily leaves the employ of the Corporation up to and including twelve (12) months from such Change in Control, then in either case SpecTran shall pay to Beck, in one lump sum, his Supplemental Retirement Benefit as of the date of the termination of Beck's employment. All calculations of the Supplemental Retirement Benefit, for purposes of this Section 10.02, shall be discounted to present value in accordance with the actuarial tables used in SpecTran's defined benefit pension plan. For the purposes of this Agreement, "Change in Control" shall mean (a) the date of public announcement that a person has become, without the approval of SpecTran's Board of Directors, the beneficial owner of 20% or more of the voting power of all securities of SpecTran then outstanding; (b) the date of the commencement of a tender offer or tender Page 18 19 EXHIBIT 10.72 exchange by any person, without the approval of SpecTran's Board of Directors, if upon the consummation thereof such person would be the beneficial owner of 20% or more of the voting power of all securities of SpecTran then outstanding; or (c) the date on which individuals who constituted the Board of Directors of SpecTran on the date this Agreement was adopted cease for any reason to constitute a majority thereof, provided that any person becoming a director subsequent to such date whose election or nomination was approved by at least three quarters of such incumbent Board of Directors shall be considered as though such person were an incumbent director. ARTICLE ELEVEN 11.01 BENEFITS AND BURDENS. This Agreement shall be binding upon and inure to the benefit of Beck and his personal representatives, the Corporation, and any successor organization which shall succeed to substantially all of the Corporation's assets and business without regard to the form of such succession. ARTICLE TWELVE 12.01 COMMUNICATIONS. Any notice or communication required of either party with respect to this Agreement shall be made in writing and may either be delivered personally or sent by certified mail, return receipt requested, as the case may be: To the Corporation: c/o President of the Corporation SpecTran Corporation 50 Hall Road Sturbridge, MA 01566 To Beck: William B. Beck 33 Loveland Road North Granby, CT 06060 Each party shall have the right by written notice to change the place to which any notice may be addressed. ARTICLE THIRTEEN 13.01 CLAIMS PROCEDURE. In the event that benefits under this Agreement are not paid to Beck (or his beneficiary in the case of Beck's death), and such person feels entitled to receive them, a claim shall be made in writing to the Corporation within sixty (60) days after written notice from the Corporation to Beck or his beneficiary or personal representative that payments are not being made or are not to be made under this Agreement. Such claim shall be reviewed by the Corporation. If the claim is approved or denied, in full or in part, the Corporation shall provide a written notice of approval or denial within sixty (60) days from the date of receipt of the claim setting forth the specific reason for denial, specific reference to the provision of this Agreement upon which the denial is based, and any additional material or information necessary to perfect the claim, if any. Also, such written notice shall indicate the steps to be taken if a review of the denial is desired. If a claim is denied (a claim shall be deemed denied if the Corporation does not take action within the aforesaid sixty (60) day period) and a review is desired, Beck (or beneficiary in the case of Beck's death), shall notify the Corporation in writing within twenty (20) days. In requesting a review, Beck or his beneficiary may review this Agreement or any document relating to it and submit any written issues and comments he or she may feel appropriate. In its sole discretion the Corporation shall then review the claim and provide a written decision within sixty (60) days. This decision likewise shall state the specific reasons for the decision and shall include reference to specific provisions of this Agreement on which the decision is based. Any decision of the Corporation shall not be binding on Beck, his personal representative, or any beneficiary without consent, nor shall it preclude further action by Beck, his personal representatives or beneficiary. 13.02 ARBITRATION. All claims, disputes and other matters in question between the parties hereto arising out of or relating to this Agreement or the breach thereof shall be decided by arbitration in accordance with the Rules of the American Arbitration Association then obtaining, subject to the limitations and restrictions stated below. Page 19 20 EXHIBIT 10.72 Neither party will be permitted to submit a dispute to arbitration without first following the procedures set forth in Section 13.01. Notice of demand for arbitration must be filed in writing with the other party to this Agreement and with the American Arbitration Association. The demand must be made within a reasonable time after the claim, dispute or other matter in question has arisen. In no event may the demand for arbitration be made if the institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statute of limitations. Arbitrations hereunder will be held in the English language in Boston, Massachusetts or such other place as the parties may agree. The award rendered by the arbitrators will be final, not subject to appeal and judgment may be entered upon it in any court having jurisdiction thereof. Each party will bear all of his or its own costs and expenses associated with the arbitration, and the parties shall equally share the administrative costs of the arbitration. ARTICLE FOURTEEN 14.01 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof, and supersedes all prior agreements, written or verbal, with respect to such subject matter. This instrument may be altered or amended only by written agreement signed by the parties hereto. 14.02 GENDER. Any reference in this Agreement to the masculine shall be deemed to include the feminine where the context so requires. 14.03 OPERATION OF LAW ON CORPORATION'S OBLIGATIONS. In the event that any governmental entity promulgates any statute, rule, regulation, policy or order which restricts or prohibits the Corporation from making payments to Beck under this Agreement, then the Corporation's obligations to make payments to Beck (or his beneficiary) hereunder shall terminate or be restricted or suspended (consistent with such law or binding regulation, policy or order) for so long as such restriction or prohibition applies to the Corporation. Nothing in this Agreement is intended to require or shall be construed as requiring the Corporation to do or fail to do any act in violation of any applicable law or binding regulation, policy or order. 14.04 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be considered an original, but together shall constitute one and the same document. 14.05 SEVERANCE. In the event any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement shall remain in full force and effect and will not be affected by such invalid or unenforceable provisions. 14.06 JURISDICTION, GOVERNING LAW. The parties, terms and conditions of this Agreement are subject to and shall be governed by the laws of the Commonwealth of Massachusetts without giving effect to the principles of conflicts of law. IN WITNESS WHEREOF, the Corporation has caused this Agreement to be duly executed by its duly authorized officer and its Corporate Seal affixed at Sturbridge, Massachusetts the day and year first above written. SPECTRAN CORPORATION By - ----------------------------- ------------------------------------- Witness Name: Title: - ----------------------------- --------------------------------------- Witness William B. Beck Page 20 21 EXHIBIT 10.72 SCHEDULE A DESIGNATION OF BENEFICIARY Gentlemen: In accordance with the provisions of the Supplemental Retirement Agreement dated May 8, 1996, between SpecTran Corporation and the undersigned, I hereby designate ____________________, residing at ________________________,* as my beneficiary to receive payments thereunder in the event of my death before payments in full thereunder have been made. In the event said beneficiary predeceases me, I hereby designate _________________, residing at ___________________________,* as beneficiary in his/her stead. Very truly yours, _________________________ *If more than one beneficiary is to be designated, add a page listing the beneficiaries and specify the percentage of each payment to be received by each beneficiary. Page 21 22 EXHIBIT 10.72 SCHEDULE B Gentlemen: In accordance with Section 5.01 of the Supplemental Retirement Agreement dated May 8, 1996, between SpecTran Corporation and the undersigned, I hereby prospectively and irrevocably make the election indicated below with respect to the payment of benefits: [CHECK ONE] ______ I elect to commence receiving benefits prior to age 65 if I retire before the Normal Retirement Age, with the benefits to commence at age ____ [Specify age between 60 and 65]. OR ______ I elect to commence receiving benefits after the Normal Retirement Date and forego my right to receive benefits prior to the Normal Retirement Age. Very truly yours, _________________________ Page 22 EX-10.73 6 SUPPLEMENTAL RETIREMENT AGREEMENT 1 EXHIBIT 10.73 SUPPLEMENTAL RETIREMENT AGREEMENT THIS AGREEMENT is made and entered into this 8th day of May, 1996 by and between SpecTran Corporation ("SpecTran"), a Delaware corporation, and John E. Chapman (hereinafter called "Chapman"). PURPOSE AND INTENT This agreement (the "Agreement") is designed to recognize Chapman's contribution to the Corporation(1) and encourage Chapman to remain in the Corporation's employ by providing supplemental retirement benefits, keyed to a specified percentage of his compensation, so that Chapman's percentage of spendable retirement income will approximate the percentage of spendable retirement income available to less compensated employees who also participate in the Corporation's retirement plans. Due to restrictions presently imposed by the Internal Revenue Code on benefits for highly compensated employees, the percentage of spendable retirement income Chapman would receive under the Corporation's current benefit plans relative to his current compensation would be less than that of employees at lower salary levels. The benefits provided in this Agreement are designed to be entirely supplemental to the Corporation's other retirement benefits payable to Chapman; if Chapman receives the specified percentage of compensation through pension plans and other benefits (as described below) provided by the Corporation, no benefits will be paid out under this Agreement. While any benefits are paid under this Agreement Chapman will be available to consult for the Corporation. Further, these benefits are subject to forfeiture if Chapman is terminated for Cause (as defined herein) or, as described below, competes with the Corporation. Chapman has been employed by the Corporation since 1983, is now serving SpecTran as its Senior Vice President-Technology and currently holds the position of President of - ------------------------ (1) Initial capitalized words may be defined below under the heading "Certain Definitions". Page 1 2 SpecTran Communication Fiber Technologies, Inc., a wholly owned subsidiary of SpecTran. The Board of Directors of SpecTran voted on May 8, 1996 to authorize the Corporation to enter into this Agreement with Chapman. CERTAIN DEFINITIONS(a) "Accrued Benefit" shall have the meaning set forth in Section 2.01 of this Agreement. (b) "Affiliate" shall mean any person or entity which controls, is controlled by or is under common control with the Corporation. For the purpose of this Agreement, control shall mean ownership of fifty percent (50%) or more of the voting stock of any entity. (c) "Benefit Computation Base" shall mean the average of Chapman's annual compensation (defined as base salary, eligible bonus(2) and any salary reduction amounts pursuant to Sections - ------------------------------ (2) To the extent that the average annual bonus paid to Chapman during the 36 month period in which the Benefit Computation Base is calculated is greater than fifty percent (50%) of Chapman's average base salary over such period, the excess bonus payments shall be considered ineligible for the purpose of calculating the Benefit Computation Base. For example, assume that Chapman's base salary and bonuses over the 36 month period are as shown in the following two examples: 1.
Base Salary Bonus ----------- ----- Months 1-12 $200,000 $200,000 Months 13-24 $210,000 $100,000 Months 25-36 $220,000 $ 90,000 Average $210,000 $130,000
In this example, fifty percent (50%) of Chapman's average annual base salary over the 36 month period is $105,000. Accordingly, of Chapman's average annual bonus of $130,000 paid over that period, $25,000 will be deemed ineligible for the purpose of calculating the Benefit Computation Base, resulting in $105,000 of the average bonus being considered eligible. 2.
Base Salary Bonus ----------- ----- Months 1-12 $200,000 $200,000 Months 13-24 $210,000 $ 10,000 Months 25-36 $220,000 $ 30,000 Average $210,000 $ 80,000
In this example, fifty percent (50%) percent of Chapman's average annual base salary over the 36 month period is $105,000. Chapman's average annual bonus over that period of $80,000 is less than the average annual base salary, and accordingly the entire average annual bonus will be eligible in determining the Benefit Computation Base. Page 2 3 401(k) or 125 of the Code) paid during the thirty-six (36) consecutive calendar months during Chapman's period of employment by the Corporation in which such compensation is the highest. (d) "Change in Control" shall have the meaning set forth in Section 10.02 of this Agreement. (e) The "Corporation" shall mean SpecTran, its successors and assigns, including but not limited to any corporation, firm or person which is the survivor of a merger or consolidation with SpecTran or which acquires substantially all of the assets of SpecTran, and any of SpecTran's Affiliates. (f) "Normal Retirement Date" shall mean Chapman's sixty-fifth birthday. (g) "Offsetting Benefits" shall have the meaning set forth in Section 2.03 of this Agreement. (h) "Supplemental Retirement Benefit" shall have the meaning set forth in Section 2.01 of this Agreement. Page 3 4 ARTICLE ONE 1.01 EMPLOYMENT. The Corporation may employ Chapman in such capacity as the Corporation may from time to time determine. Notwithstanding anything contained herein, this Agreement is not an agreement of employment, a guaranty of continuing employment or of employment in any particular position and nothing herein shall restrict the Corporation concerning the terms and conditions of Chapman's employment. The benefits provided by this Agreement are not part of any salary reduction plan or an arrangement deferring a bonus or a salary increase. Chapman has no option to take any current payment or bonus in lieu of these salary continuation benefits. ARTICLE TWO 2.01 SUPPLEMENTAL RETIREMENT BENEFIT. Depending upon how many years Chapman has been continuously in the employ of the Corporation, Chapman will be entitled to a retirement benefit determined as of the effective date of his leaving the Corporation's employment for whatever reason except Cause (as defined below), including whether by (i) death, (ii) disability, (iii) termination of employment or (iv) early retirement. The retirement benefit (also known as the "Accrued Benefit") shall be an annual amount equal to Chapman's Benefit Computation Base multiplied by the Annual Percentage Amount (as determined pursuant to Section 2.02, below). Chapman will receive a supplemental retirement benefit (the "Supplemental Retirement Benefit") equal to (i) the amount of the Accrued Benefit reduced by (ii) the sum of the benefits described in Subsections (1), (2), (3) and (4) of Section 2.03, below (such benefits are referred to herein as the "Offsetting Benefits"). The Supplemental Retirement Benefit, if any, to be paid out under this Agreement, shall continue for fifteen (15) years, and be paid in equal monthly installments commencing on the first day of the month immediately following the later of Chapman's actual retirement or the Normal Retirement Date (unless payment is accelerated in accordance with Sections 10.01 and 10.02 below). No Page 4 5 payment will be made under this Agreement if the Offsetting Benefits are equal to or greater than the Accrued Benefit. Page 5 6 2.02 ANNUAL PERCENTAGE AMOUNT. (a) The Annual Percentage Amount shall be determined (subject to subsection (b), below) by the number of years Chapman has been continuously employed by the Corporation as follows:
================================================================================ YEARS OF CONTINUOUS SERVICE ANNUAL PERCENTAGE AMOUNT - -------------------------------------------------------------------------------- 25 or more 65% 20-24 60% 15-19 40% less than 15 0% (No Supplemental Retirement Benefit) ================================================================================
(b) Notwithstanding the provisions of Subsection (a) of this Section 2.02, in the event (a) Chapman does not remain employed by the Corporation for any reason during the twelve (12) month period following a Change in Control (as defined in Section 10.01, below) or (b) an event described in Section 10.01 occurs and either such other corporation, firm or person (as described in Section 10.01) does not agree that Chapman shall continue in the employ of the Corporation for any reason following such event or the Corporation's successor does not assume its obligations hereunder, Chapman will be deemed eligible to receive a Supplemental Retirement Benefit under this Agreement if at the time of the termination of his employment he will have completed at least five full years of service to the Corporation. In this case, the Annual Percentage Amount shall be determined by the number of years Chapman has been continuously employed by the Corporation as follows: Page 6 7
================================================================================ YEARS OF SERVICE ANNUAL PERCENTAGE AMOUNT - -------------------------------------------------------------------------------- 25 or more 65% 20 -24 60% 15-19 40% 14 36% 13 32% 12 28% 11 24% 10 20% 9 16% 8 12% 7 8% 6 4% less than 6 0% (No Supplemental Retirement Benefit) ================================================================================
(c) Anything else to the contrary in this Agreement notwithstanding, in the event of either (a) Chapman does not remain employed by the Corporation for any reason during the twelve month period following a Change in Control or (b) an event described in Section 10.01 occurs and either such other corporation, firm or person (as described in Section 10.01) does not agree that Chapman shall continue in the employ of the Corporation for any reason following such event or the Corporation's successor does not assume its obligations hereunder, and (c) in either case, the payment of the Supplementary Retirement Benefit Page 7 8 hereunder is considered a Parachute Payment and when combined with all other payments considered to be Parachute Payments from the Corporation to Chapman due to the events described in (a) and (b) above, result in an Excess Parachute Payment, as defined by Section 280G of the Internal Revenue Code of 1986, as amended, then the amount of the Supplementary Retirement Benefit shall be reduced so that the total Parachute Payments received by Chapman from the Corporation do not constitute an Excess Parachute Payment; provided, however, that this Section 2.02(c) shall not apply if the total Parachute Payments from the Corporation to Chapman due to the events described in (a) and (b) above exceed one hundred twenty percent (120%) of the amount of all Parachute Payments, not including any amount that would be considered an Excess Parachute Payment. 2.03 OFFSETTING BENEFITS. (a) The following are the Offsetting Benefits, which reduce the Accrued Benefit for the purpose of calculating the Supplemental Retirement Benefit: 1. Fifty percent (50%) of Chapman's (actual or projected) annual primary social security retirement benefit projected as of Chapman's social security normal retirement age based on his Benefit Computation Base in effect on the date of termination of Chapman's employment with the Corporation; 2. The annual amount of benefits payable to Chapman (or his beneficiaries) at the Normal Retirement Date calculated on a single life annuity basis from any qualified defined benefit pension plan maintained and funded by the Corporation as of the date of this Agreement, or their successors, as such plan or plans may be amended or modified from time to time; Page 8 9 3. The annual amount of benefits payable at the Normal Retirement Date on a single life annuity basis attributable to the portion of the account balances of Chapman arising from employer contributions (but excluding the portion of such balances arising from employee salary reduction and elective contributions) at the date of determination from the Corporation's 401(k) and other defined contribution retirement plans maintained by the Corporation as of the date of this Agreement, or their successors, as such plan or plans may be modified from time to time; 4. The annual amount of benefits payable to Chapman at the Normal Retirement Date calculated on a single life annuity basis from any other non-qualified supplemental retirement plan maintained and funded by the Corporation as of the date of this Agreement, or their successors, as such plan or plans may be amended or modified from time to time. (b) The Corporation's obligation to pay the Offsetting Benefits shall not be affected by the termination of this Agreement and the Supplemental Retirement Benefit payable hereunder for any reason whatsoever. (c) All calculations of the Supplemental Retirement Agreement payable to Chapman under this Agreement will be made assuming that Chapman participates in the Offsetting Benefits to the full extent permitted by law and the terms of those plans. (d) If Chapman terminates his employment prior to his Normal Retirement Date, in calculating his Accrued Benefit, (i) the offset of primary social security retirement benefit shall be calculated on the basis of the amount projected to be payable at Chapman's social security normal retirement age assuming continued Page 9 10 earnings by Chapman at the rate in effect at termination of employment until Chapman's social security normal retirement age; (ii) the offset for any qualified defined benefit plan shall be calculated on the basis of Chapman's accrued benefit in said plan upon termination of employment projected to be payable at Chapman's Normal Retirement Date; (iii) the offset for any benefits arising from employer contributions attributable to the account balances of Chapman arising from the Corporation's 401(k) plan or any other defined contribution retirement plan shall also be calculated on the basis of Chapman's accrued benefit in such plan(s) upon termination of employment projected to be payable at Chapman's Normal Retirement Date; and (iv) the offset for any non-qualified supplemental retirement plan shall be calculated on the basis of Chapman's accrued benefit in said plan upon termination of employment projected to be payable at Chapman's Normal Retirement Date. 2.04 OPTIONAL FORMS OF PAYMENT. In lieu of the fifteen (15) year certain payments provided in Section 2.01 above, or whenever a Supplemental Retirement Benefit is payable under Section 4.01 or 5.01 of this Agreement, Chapman may elect by written notice to the Corporation in the calendar year prior to the calendar year in which payments are to begin, an optional form of payment which shall be the actual equivalent (factors defined in SpecTran's qualified defined benefit pension plan) of the said fifteen (15) year certain payments. The optional form of payment shall be any optional form of payment which is provided to Chapman under the terms of SpecTran's qualified defined benefit pension plan. 2.05 VESTING. Anything to the contrary in this Agreement notwithstanding, Chapman shall be entitled to one hundred percent (100%) of any benefit payable under this Agreement under any one or more of Sections 2.01, 3.01, 4.01, 5.01, 10.01 or 10.02 at the date on which his entitlement to such benefit shall be determined commencing with his original date of hire by Page 10 11 the Corporation, provided that such benefits are subject to forfeiture as described in Sections 5.03 and 5.04, below. Page 11 12 ARTICLE THREE 3.01 DEATH OF CHAPMAN. (a) If Chapman dies while employed by the Corporation but prior to the commencement of the payment of the Supplemental Retirement Benefit under Section 2.01, 4.01 or 5.01, SpecTran will pay to the designated beneficiaries of Chapman, a total annual amount equal to the Supplemental Benefit earned by Chapman as of the date of death, payable over a period of fifteen (15) years certain commencing on the first day of the month next following the delivery to the Corporation of a death certificate and on a monthly basis thereafter. (b) If Chapman dies following the commencement of the payment of the Supplemental Retirement Benefit under Section 2.01, 4.01 or 5.01, such payments shall continue to the designated beneficiaries of Chapman until all of the Supplemental Retirement Benefit has been paid. (c) If Chapman dies following the termination of his employment with the Corporation and prior to the commencement of the payment of the Supplemental Retirement Benefit under Section 2.01, 4.01 or 5.01, SpecTran shall pay to Chapman's named beneficiaries an annual benefit which shall be Chapman's Supplemental Retirement Benefit as of the date of the termination of his employment. Such benefits shall be payable monthly, commencing on the first day of the month following the Normal Retirement Date, or any date prior to the Normal Retirement Date approved by the Corporation, and continuing for fifteen (15) years; provided, however, that Chapman's designated beneficiaries shall be entitled to accelerated payments of such benefits if and to the same extent Chapman would have been entitled to an accelerated payment of the Supplemental Retirement Benefit had he survived. Page 12 13 3.02 BENEFICIARIES. Chapman shall designate, in writing to the Corporation, on the form titled "Designation of Beneficiary" attached hereto as Schedule A, one or more beneficiaries. Chapman from time to time may change his designated beneficiaries by delivering to the Corporation a dated, revised Designation of Beneficiary form, revoking the prior designation. If no beneficiary is so named or if no named beneficiary is living at the time a payment is due, benefit payments shall be made, when due, to Chapman's estate. If payments of benefits to a beneficiary commences and such beneficiary dies before all amounts to which such beneficiary is entitled have been paid, the remaining benefits shall be paid to the successive beneficiary or beneficiaries, if any, designated by Chapman, or if none, to the beneficiary's estate. ARTICLE FOUR 4.01 DISABILITY PRIOR TO RETIREMENT. In the event Chapman shall become disabled, mentally or physically, which disability prevents him from performing the material aspects of his duties, the Corporation will pay no disability benefits hereunder. Disability benefits (if any) will be paid to Chapman through such insurance programs as may be sponsored by the Corporation. Upon the later of termination of such other disability benefits (if any), or Chapman's attainment of the Normal Retirement Date, Chapman shall commence receiving payment of his Accrued Benefit determined as of the date of the disability. The Supplemental Retirement Benefit shall be paid in equal monthly installments, for fifteen (15) years certain commencing on the first day of the month following the later of the termination of such benefits or the Normal Retirement Date, or in the manner provided in Section 2.04. 4.02 RE-EMPLOYMENT FOLLOWING DISABILITY. In the event Chapman returns to work with the Corporation after terminating employment because of disability, this Agreement shall continue in full force and effect as though such disability had not occurred. Under such circumstances, Chapman will receive credit towards determining the Annual Percentage Amount for service prior to terminating his employment because of disability and for service after resuming Page 13 14 employment with the Corporation, but will not receive credit for the interim prior during which he was not employed by the Corporation. ARTICLE FIVE 5.01 EARLY RETIREMENT, TERMINATION OF SERVICE OR DISCHARGE. Except to the extent otherwise provided in Sections 5.03 and 5.04, in the event that Chapman's employment with the Corporation is terminated, voluntarily or involuntarily, before Chapman attains the Normal Retirement Date, for reasons other than death or disability, Chapman shall be entitled to a Supplemental Retirement Benefit, determined as of the date of his termination of employment. Such benefit shall be payable in equal monthly installments, commencing on the first day of the month next following the later of the Normal Retirement Date or the date of Chapman's actual retirement, and continuing for fifteen (15) years (except as set forth in Sections 10.01 and 10.02); provided, however, that Chapman may elect by execution and delivery to the Corporation of the form attached hereto as Schedule B to have the monthly payments of the Supplemental Retirement Benefit commence prior to the Normal Retirement Date at any date between age 60 and the Normal Retirement Date. Chapman understands that such election is being made prospectively and is irrevocable. [add -election only applies to future services] 5.02 OPTIONAL FORMS OF PAYMENT. In lieu of the fifteen (15) years certain payments provided in Section 5.01, the Supplemental Retirement Benefit payable under such Section may be payable in the manner provided in Section 2.04. 5.03 EMPLOYMENT BY COMPETITION. In the event that during the two year period immediately following the termination of Chapman's employment for any reason, Chapman shall compete with the business of the Corporation, then the Supplemental Retirement Benefit which might otherwise be due and payable hereunder shall be immediately forfeited and all rights of Chapman and his beneficiaries hereunder shall become void; provided, however, that Page 14 15 if (a) Chapman does not remain employed by the Corporation for any reason during the twelve (12) month period following a Change in Control or (b) an event described in Section 10.01 occurs and either such other corporation, firm or person (as described in Section 10.01) does not agree that Chapman shall continue in the employ of the Corporation for any reason following such event or the Corporation's successor does not assume its obligations hereunder, the provisions of Section 5.03 shall not apply, but the provisions of Sections 10.01 and 10.02 shall govern. Chapman will be deemed to have competed with the business of the Corporation if, during the two year period following termination of his employment with the Corporation, he either (a) engages, directly or indirectly, or by stock interest exceeding five percent (5%), or otherwise in any way, in any business in which the Corporation was engaged during the term of his employment or which the Corporation planned, during the term of his employment to enter, (b) solicits any past, present or future customers of the Corporation in any way relating to any business in which the Corporation was engaged during the term of his employment, or which the Corporation planned during the term of his employment, to enter, or (c) induces or actively attempt to influence any other employee or consultant of the Corporation to terminate his or her employment or consultancy with the Corporation. 5.04 FORFEITURE. Anything to the contrary in this Agreement notwithstanding (other than Sections 10.01 and 10.02), the Supplemental Retirement Benefits shall be immediately forfeited and all rights of Chapman and his beneficiaries hereunder shall become null and void, if Chapman's employment with the Corporation is terminated for Cause. For this purpose, a termination shall be a termination for "Cause" only if the termination if for one or more of the following: (i) the conviction of Chapman for committing any felony, (ii) stealing from the Corporation, (iii) a willful breach by Chapman of a material provision of this Agreement and (iv) if Chapman engages in gross misconduct, such as fraud, dishonesty, gross negligence or insubordination. Page 15 16 If (a) Chapman does not remain employed by the Corporation for any reason within one year following a Change in Control or (b) an event described in Section 10.01 occurs and either such other corporation, firm or person (as described in Section 10.01) does not agree that Chapman shall continue in the employ of the Corporation for any reason following such event or the Corporation's successor does not agree to assume its obligation hereunder, the provisions of this Section 5.04 shall not apply, but the provisions of Sections 10.01 and 10.02 shall govern. 5.05 AVAILABILITY TO CONSULT. For so long as Chapman is receiving benefits pursuant to this Agreement, Chapman will keep himself available to consult with, and respond to inquiries from, the Corporation relating to its business affairs, at reasonable time(s) and to reasonable extent. ARTICLE SIX 6.01 INTEREST. Any payment that is required to be made hereunder that is delayed beyond the date specified in this Agreement shall bear interest at a variable rate which shall be the rate of interest on one year U.S. Treasury Bills determined at the first auction of each calendar year or part thereof during the period of which interest is to be applied to any obligation hereunder. ARTICLE SEVEN 7.01 ALIENABILITY. Neither Chapman, nor any beneficiary under this Agreement shall have any power or right to transfer, assign, anticipate, hypothecate, mortgage, commute, modify, or otherwise encumber in advance any of the benefits payable hereunder, and any attempt to do so shall be deemed null and void. The seizure of the benefits payable hereunder for the payment of any debts, judgments, alimony or separate maintenance, owed by Chapman or his beneficiary or any of them, or the transfer of such benefit by operation of law in the event of Page 16 17 bankruptcy, or otherwise, shall be deemed to be a transfer prohibited by this Agreement, and will result in the immediate termination of all benefits payable hereunder. ARTICLE EIGHT 8.01 PARTICIPATION IN OTHER PLANS. Nothing contained in this Agreement shall be construed to alter, abridge, or in any manner affect the rights and privileges of Chapman to participate in and be covered by any pension, profit sharing, group insurance, bonus or any other employee plan or plans which the Corporation may have or hereafter have. ARTICLE NINE 9.01 FUNDING. (a) The Corporation reserves the right at its sole and exclusive discretion to insure or otherwise provide for the obligations of the Corporation undertaken by this Agreement or to refrain from same, and to determine the extent, nature and method thereof, including the establishment of one or more trusts. Should the Corporation elect to insure this Agreement, in whole or in part, through the medium of insurance or annuities, or both, the Corporation shall be the owner and beneficiary of the policy or annuity. At no time shall Chapman be deemed to have any right, title or interest in or to any specified asset or assets of the Corporation, or any trust or escrow arrangement, including, but not by way of restriction, any insurance or annuity contracts or the proceeds therefrom. (b) Any such policy, contract or asset shall not in any way be considered to be security for the performance of the obligations of this Agreement. (c) If the Corporation purchases a life insurance or annuity policy on the life of Chapman, Chapman agrees to sign any papers that may be required for that purpose and to undergo any medical examination or tests (at the Corporation's expense) which may be necessary, and generally cooperate with the Corporation in securing such policy. Page 17 18 (d) To the extent Chapman acquires a right to receive benefits under this Agreement, such right shall be equivalent to the right of an unsecured general creditor of the Corporation. ARTICLE TEN 10.01 REORGANIZATION. SpecTran shall not merge or consolidate into or with another corporation if such merger or consolidation shall result in the other corporation being the survivor corporation, nor shall it sell substantially all of its assets to another corporation, firm or person, unless and until Chapman and such other corporation, firm or person agree that Chapman shall continue in the employ of the succeeding, continuing or acquiring corporation, firm or person and such other corporation, firm or person agrees in writing without further qualification to assume and discharge the obligations of SpecTran under this Agreement. If Chapman and such corporation, firm or person do not agree that Chapman shall continue in the employ of such corporation, firm or person, or such corporation, firm or person does not so agree to assume and discharge such obligations, SpecTran shall pay to Chapman, in one lump sum, his Supplemental Retirement Benefit as of the date of such merger, consolidation or sale. All calculations of the Supplemental Retirement Benefit, for purposes of this Section 10.01, shall be discounted to present value in accordance with the actuarial tables used in SpecTran's defined benefit pension plan. For the purpose of clarification, any transaction between SpecTran and any of its Affiliates is not intended to be covered by this Section 10.01. 10.02 CHANGE IN CONTROL. In the event that a Change in Control occurs prior to the Normal Retirement Date and either (a) Chapman is dismissed without Cause from employment by the Corporation up to and including Page 18 19 twelve (12) months from such Change in Control or (b) Chapman voluntarily leaves the employ of the Corporation up to and including twelve (12) months from such Change in Control, then in either case SpecTran shall pay to Chapman, in one lump sum, his Supplemental Retirement Benefit as of the date of the termination of Chapman's employment. All calculations of the Supplemental Retirement Benefit, for purposes of this Section 10.02, shall be discounted to present value in accordance with the actuarial tables used in SpecTran's defined benefit pension plan. For the purposes of this Agreement, "Change in Control" shall mean (a) the date of public announcement that a person has become, without the approval of SpecTran's Board of Directors, the beneficial owner of 20% or more of the voting power of all securities of SpecTran then outstanding; (b) the date of the commencement of a tender offer or tender exchange by any person, without the approval of SpecTran's Board of Directors, if upon the consummation thereof such person would be the beneficial owner of 20% or more of the voting power of all securities of SpecTran then outstanding; or (c) the date on which individuals who constituted the Board of Directors of SpecTran on the date this Agreement was adopted cease for any reason to constitute a majority thereof, provided that any person becoming a director subsequent to such date whose election or nomination was approved by at least three quarters of such incumbent Board of Directors shall be considered as though such person were an incumbent director. ARTICLE ELEVEN 11.01 BENEFITS AND BURDENS. This Agreement shall be binding upon and inure to the benefit of Chapman and his personal representatives, the Corporation, and any successor organization which shall succeed to substantially all of the Corporation's assets and business without regard to the form of such succession. ARTICLE TWELVE Page 19 20 12.01 COMMUNICATIONS. Any notice or communication required of either party with respect to this Agreement shall be made in writing and may either be delivered personally or sent by certified mail, return receipt requested, as the case may be: To the Corporation: c/o President of the Corporation SpecTran Corporation 50 Hall Road Sturbridge, MA 01566 To Chapman: John E. Chapman 11 Valley Forge Drive Shrewsbury, MA 01545 Each party shall have the right by written notice to change the place to which any notice may be addressed. ARTICLE THIRTEEN 13.01 CLAIMS PROCEDURE. In the event that benefits under this Agreement are not paid to Chapman (or his beneficiary in the case of Chapman's death), and such person feels entitled to receive them, a claim shall be made in writing to the Corporation within sixty (60) days after written notice from the Corporation to Chapman or his beneficiary or personal representative that payments are not being made or are not to be made under this Agreement. Such claim shall be reviewed by the Corporation. If the claim is approved or denied, in full or in part, the Corporation shall provide a written notice of approval or denial within sixty (60) days from the date of receipt of the claim setting forth the specific reason for denial, specific reference to the provision of this Agreement upon which the denial is based, and any additional material or information necessary to perfect the claim, if any. Also, such written notice shall indicate the steps to be taken if a review of the denial is desired. If a claim is denied (a claim shall be deemed denied if the Corporation does not take action within the Page 20 21 aforesaid sixty (60) day period) and a review is desired, Chapman (or beneficiary in the case of Chapman's death), shall notify the Corporation in writing within twenty (20) days. In requesting a review, Chapman or his beneficiary may review this Agreement or any document relating to it and submit any written issues and comments he or she may feel appropriate. In its sole discretion the Corporation shall then review the claim and provide a written decision within sixty (60) days. This decision likewise shall state the specific reasons for the decision and shall include reference to specific provisions of this Agreement on which the decision is based. Any decision of the Corporation shall not be binding on Chapman, his personal representative, or any beneficiary without consent, nor shall it preclude further action by Chapman, his personal representatives or beneficiary. 13.02 ARBITRATION. All claims, disputes and other matters in question between the parties hereto arising out of or relating to this Agreement or the breach thereof shall be decided by arbitration in accordance with the Rules of the American Arbitration Association then obtaining, subject to the limitations and restrictions stated below. Neither party will be permitted to submit a dispute to arbitration without first following the procedures set forth in Section 13.01. Notice of demand for arbitration must be filed in writing with the other party to this Agreement and with the American Arbitration Association. The demand must be made within a reasonable time after the claim, dispute or other matter in question has arisen. In no event may the demand for arbitration be made if the institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statute of limitations. Page 21 22 Arbitrations hereunder will be held in the English language in Boston, Massachusetts or such other place as the parties may agree. The award rendered by the arbitrators will be final, not subject to appeal and judgment may be entered upon it in any court having jurisdiction thereof. Each party will bear all of his or its own costs and expenses associated with the arbitration, and the parties shall equally share the administrative costs of the arbitration. ARTICLE FOURTEEN 14.01 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof, and supersedes all prior agreements, written or verbal, with respect to such subject matter. This instrument may be altered or amended only by written agreement signed by the parties hereto. 14.02 GENDER. Any reference in this Agreement to the masculine shall be deemed to include the feminine where the context so requires. 14.03 OPERATION OF LAW ON CORPORATION'S OBLIGATIONS. In the event that any governmental entity promulgates any statute, rule, regulation, policy or order which restricts or prohibits the Corporation from making payments to Chapman under this Agreement, then the Corporation's obligations to make payments to Chapman (or his beneficiary) hereunder shall terminate or be restricted or suspended (consistent with such law or binding regulation, policy or order) for so long as such restriction or prohibition applies to the Corporation. Nothing in this Agreement is intended to require or shall be construed as requiring the Corporation to do or fail to do any act in violation of any applicable law or binding regulation, policy or order. 14.04 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be considered an original, but together shall constitute one and the same document. Page 22 23 14.05 SEVERANCE. In the event any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement shall remain in full force and effect and will not be affected by such invalid or unenforceable provisions. 14.06 JURISDICTION, GOVERNING LAW. The parties, terms and conditions of this Agreement are subject to and shall be governed by the laws of the Commonwealth of Massachusetts without giving effect to the principles of conflicts of law. IN WITNESS WHEREOF, the Corporation has caused this Agreement to be duly executed by its duly authorized officer and its Corporate Seal affixed at Sturbridge, Massachusetts the day and year first above written. SPECTRAN CORPORATION By - ------------------------- ------------------------------------- Witness Name: Title: - ------------------------- -------------------------------------- Witness John E. Chapman Page 23 24 SCHEDULE A DESIGNATION OF BENEFICIARY Gentlemen: In accordance with the provisions of the Supplemental Retirement Agreement dated May 8, 1996, between SpecTran Corporation and the undersigned, I hereby designate ____________________, residing at ________________________,* as my beneficiary to receive payments thereunder in the event of my death before payments in full thereunder have been made. In the event said beneficiary predeceases me, I hereby designate _________________, residing at ___________________________,* as beneficiary in his/her stead. Very truly yours, _________________________ *If more than one beneficiary is to be designated, add a page listing the beneficiaries and specify the percentage of each payment to be received by each beneficiary. Page 24 25 SCHEDULE B Gentlemen: In accordance with Section 5.01 of the Supplemental Retirement Agreement dated May 8, 1996, between SpecTran Corporation and the undersigned, I hereby prospectively and irrevocably make the election indicated below with respect to the payment of benefits: [CHECK ONE] ______ I elect to commence receiving benefits prior to age 65 if I retire before the Normal Retirement Age, with the benefits to commence at age ____ [Specify age between 60 and 65]. OR ______ I elect to commence receiving benefits after the Normal Retirement Date and forego my right to receive benefits prior to the Normal Retirement Age. Very truly yours, _______________________ Page 25 EX-10.74 7 LEASE 1 EXHIBIT 10.74 LEASE THIS AGREEMENT made and entered into this day of June, 1996, by and between JEFFREY M. CHASSE, LARRY A. JOHNSON and MICHAEL W. ROCHE, AS TRUSTEES OF CRJ REALTY TRUST of 69 Hall Road, Sturbridge, MA 01 566 (hereinafter ter referred to as "Lessor") and SPECTRAN COMMUNICATION FIBER TECHNOLOGIES, INC., of 50 Hall Road, Sturbridge, Massachusetts, 01566, (hereinafter referred to as "Lessee"). WITNESSETH: In consideration of the mutual promises and premises hereinafter referenced, it is agreed by and between the parties hereto as follows: FIRST The LESSOR hereby agrees to lease and LESSEE hereby agrees to rent from the LESSOR for office space incidental to Lessee's business, and for no other purpose without the written consent of the LESSOR, that certain property described as follows: The "LOWER SUITE B" of floor space in the building known as "Hall Road Professional Center" located at 69 Hall Road, Sturbridge, Massachusetts, consisting of approximately 950 square feet, as set out in floor plans designed by LESSEE and incorporated herein by reference; together with the right to use bathrooms and hallways within the common areas of the lower level of said building in common with others. SECOND LESSOR and LESSEE agree to pay for the costs incurred to complete "Lower Suite B" in accordance with Exhibit "A", herewith incorporated in this Lease. THIRD This Lease shall be for a term commencing JULY 1, 1996, and ending JUNE 30, 1997. Since LESSOR is obligated to perform construction pursuant to Exhibit "A" and LESSOR agrees to use its best efforts to have the premises ready for occupancy on or before the scheduled term commencement date, should the LESSOR not have performed the construction pursuant to Exhibit "A" on or before the commencement date, except in such delay occurred as a result of damages which may happen by fire, lightning, earthquakes, or other acts of God, or by abandonment of work by the employees during a general strike, then the commencement date shall be on the date upon which the premises are ready for occupancy. This date shall be no later than August 1, 1996. Should the commencement date be other than the first day of the month, the LESSEE shall pay on the first rent payment day the pro rata share of rent for that portion of the month to the f first day of the following month, as the case may be. Page 1 FOURTH 2 The LESSEE shall pay LESSOR total annual rent of $12,000.00, payable in equal monthly installments of $1,000.00, on the first day of each and every calendar month during said term. A. The LESSEE shall have the right and option to extend the term of this lease beyond June 30, 1997 as a month-to-month tenant, provided however, such right to extend shall be subject to the following terms and conditions: 1) No default by LESSEE shall exist or occur for the period from the date of giving notice to the date of commencement of the extended term. 2) This Lease shall be in full force and effect at the date of notice, and LESSEE shall not then be in default of any obligation under this Lease. 3) Such right of extension shall be exercised by written notice from the LESSEE to the LESSOR within not more than ninety (90) days nor less than thirty (30) days prior to the expiration of the then existing term. 4) If a notice is given pursuant to the preceding sub-paragraph, no further instrument shall be required to be executed and the term of this Lease shall thereupon be extended, except that said tenancy shall then be deemed to be a month-to-month tenancy under Massachusetts law. FIFTH The LESSEE shall pay all charges for electricity, heat, telephone and other utility services furnished to the leased premises. LESSEE agrees to utilize electric power exclusively from Massachusetts Electric Company. LESSEE acknowledges that electrical metering for the premises will be billed to LESSOR. Electric bills generated by Massachusetts Electric will include charges for space occupied by both Dr. Doctor and LESSEE. LESSEE shall pay only their pro-rata share of the electric bill for usage of LESSEE's space. Prior to execution of this lease, LESSOR shall furnish to LESSEE copies of the last twelve (12) months of electric bills incurred by Dr. Doctor. LESSEE agrees that Dr. Doctor's share of future electric bills shall be determined by taking the average of said past twelve months of bills incurred by Dr. Doctor and LESSEE agrees to pay the additional amount over said average as LESSEE's share of future electric bills. LESSOR shall provide copies of all future electric bills to LESSEE prior to requesting payment from LESSEE for said additional amount representing LESSEE's allocable share of usage, which LESSEE agrees to pay as additional rent under the terms of this Lease. LESSEE agrees that LESSEE's share of fuel charges for heating from Tasse Fuel will be determined in similar fashion as the electric bills, as stated above. Page 2 SIXTH 3 The LESSEE agrees to utilize no more than six parking spaces on the premises as designated by LESSOR. On days when Dr. Larry Johnson's office and/or Dr. David Doctor's office are not being utilized, LESSEE may utilize no more than ten (10) of said parking spaces on the premises. The LESSOR reserves the right to alter or vary the size and location of the parking area or spaces, to increase the parking area, to change the flow of traffic and the arrangement of the parking area, to mortgage all or any part of the parking and common areas free and clear of all right, privileges and easements to the LESSEE, provided only, however, that the LESSOR shall not unreasonably alter or vary the present method of access to the LESSEE's premises from the street without the written consent of the LESSEE. LESSOR agrees that it shall not reduce the size of the parking area by more than ten percent (10%). SEVENTH The LESSEE shall pay and be responsible for all of the normal day-to-day repair and maintenance within the demised premises (excluding structural repairs) during the term of this Lease and shall maintain the same in good order and repair as the same is at the commencement of the original term, ordinary wear and tear excepted. LESSOR will be responsible for maintenance of the common areas, snow and ice removal, and trash collection on the premises from the dumpster located thereon. The LESSOR will be responsible for maintaining in good condition all common areas, building exteriors and the structural integrity of the demised premises. All signs placed on the premises by LESSEE shall be paid for by LESSEE and with the consent of LESSOR. EIGHTH Subject to the approval of the LESSOR, which approval shall not be unreasonably withheld, the LESSEE may make such improvements to the interior and exterior of the building as the LESSEE deems advisable at LESSEE's sole cost and expense, provided, however, that LESSEE shall obtain all necessary permits and licenses therefor, will effect such improvements in a good and workmanlike manner, and all such improvements affixed to or made a part of the realty shall become the property of the LESSOR at the expiration of the Lease term, provided, however, at the written request of the LESSOR, the LESSEE shall, at the expiration of the term, remove such improvements and restore the premises to their former condition, all at the sole cost and expense of the LESSEE. NINTH The LESSEE shall provide and maintain in full force from the date upon which the LESSEE first enters the premises for any reason, throughout the term of this Lease, and thereafter so long as LESSEE is in occupancy of any part of the premises, a policy of public liability and property damage insurance under which LESSOR (and such other persons as are in privity of estate with LESSOR as may be set out in notice from time to time) and LESSEE are named as insured and under which the insurer agrees to indemnify and hold LESSOR and those in privity of estate with LESSOR, harmless from and against all costs, expense and/or liability arising out of or based upon any and Page 3 4 all claims, accidents, injuries and damages arising from any act, omission or negligence of LESSEE, or LESSEE's contractors, licensees, agents, servants or employees, or arising from any accident, injury or damage occurring outside of the premises but within the building complex, where such accident, damage or injury results from any act or omission on the part of the LESSEE or LESSEE's agents or employees or independent contractors. The minimum limits of liability of such insurance shall be Five Hundred Thousand Dollars ($500,000.00) for bodily injury (or death) to any one person and One Million Dollars ($1,000,000.00) for bodily injury (or death) to more than one person and Three Hundred Thousand Dollars ($300,000.00) with respect to damage to property. LESSEE shall furnish LESSOR with a certificate of insurance evidencing such coverage at the time of execution of this Lease. TENTH The LESSEE shall not sublet or assign its rights to the leased premises or any part thereof without first obtaining the written consent of the LESSOR. The LESSEE shall, in the event of subletting or assigning its right to the leased premises, remain primarily liable on this Lease. ELEVENTH In the event that the LESSEE shall file a voluntary petition in bankruptcy or make an assignment for the benefit of creditors or in the event that a receiver shall be appointed for the LESSEE, any one of such acts will constitute a breach of this Lease by the LESSEE and in that occurrence or any such occurrence, the Lease shall immediately terminate. TWELFTH The LESSEE shall not be deemed to be in default hereof in the payment of any other monies as required by this Agreement unless the LESSOR shall first give to the LESSEE written notice of such default and the LESSEE fails to cure such default within the thirty (30) day period following receipt of notice of such default. In any event, upon such notice as described, and the failure by LESSEE to cure such default within the prescribed period, the LESSEE shall be deemed to be in default and shall be subject to the following: 1) The LESSOR shall have the right to immediately terminate this Lease and relet the premises or any part thereof under any terms and conditions as the LESSOR shall deem fit, and shall use reasonable efforts to relet. 2) The LESSEE shall be immediately liable to pay LESSOR, in addition to any indebtedness for rent hereunder and any other monies due hereunder, the expense of reletting the premises occupied by the LESSEE as well as the reasonable cost of any attorney's fees as a result of any breach hereof. Page 4 5 THIRTEENTH In the event of the failure on the part of the LESSEE to perform or observe any of the covenants, terms or conditions imposed upon the LESSEE by this Lease and the failure to remove and/or cure any breach within thirty (30) days of the receipt of written notice thereof from the LESSOR pursuant to the terms and conditions contained herein, then in such event, upon the LESSEE's failure to cure such breach the LESSEE shall be deemed to be in default and shall be subject to the provisions of the previous paragraph hereinabove. FOURTEENTH A. If the interest of the LESSOR is transferred by conveyance, or should be taken or repossessed or foreclosed, LESSEE agrees to be bound to the LESSOR's successor in interest under all of the terms, covenants and conditions of this Lease for the balance of the term remaining and any extensions or renewals thereof and LESSEE's attornment hereunder is to be effective and self-operative without the execution of any further instruments on the part of any parties, provided however, that LESSEE shall be under no obligation to pay rent to such successor until the LESSEE has received notice in writing from the LESSOR that another party has succeeded to the interest of the LESSOR. B. This Lease shall be subject and subordinate to any and all mortgages, deeds of trust and other instruments in the nature of mortgages, now or at any time hereafter placed upon the property of which the leased premises are a part and LESSEE shall, when requested, promptly execute and deliver such written instruments as shall be necessary to show subordination of this Lease to said mortgage, deeds of trust, or other such instruments in the nature of a mortgage. C. The LESSEE does hereby covenant with the mortgagee in consideration of the foregoing that, in the event of a foreclosure, the LESSEE will recognize the mortgagee as its Lessor, for the remainder of the unexpired term of the Lease, upon the covenants and conditions hereof to be performed and observed by the LESSEE. D. As used herein, wherever the context so requires or admits, the word "mortgagee" shall include any person claiming through or under the mortgagee or the mortgage, including but not limited to, any purchase at foreclosure sale, and the word "LESSEE" shall include the LESSEE's successors and assigns. E. The LESSEE agrees that they will, upon the request of the LESSOR, execute, acknowledge and deliver any and all instruments which LESSOR may from time to time desire in order to effect such subordination. As used herein, the term "mortgage" shall include any modification, consolidation, extension, renewals, replacement or substitution of any existing or subsequent mortgage on the property. Page 5 6 F. The LESSEE acknowledges and agrees that the assignment by the LESSOR of the LESSOR's interest in this Lease, or in the rent payable under the provisions of this Lease, whether conditional or otherwise made to the holder of a mortgage which include the demised premises, shall not be treated as an assumption by such mortgagee of the obligations and duties of the LESSOR hereunder unless the mortgagee shall specifically agree with the LESSEE hereunder, and the same shall not be treated as an assumption by said mortgagee of the LESSOR's obligations hereunder except under foreclosure and the taking of possession of the demised premises by the said mortgagee and upon notice by said mortgagee of its assumption of the duties of such assumption. FIFTEENTH A. If the whole or any part of the demised premises shall be taken or condemned by competent authority for any public or quasi public use, then, and in that event, the term of this Lease shall cease and terminate from the date when possession of the portion so taken is required for such use, and without apportionment of the award to made. The current rental, however, shall be pro-rated and abated in such case. B. If the leased premises, or any part thereof, or the whole or any part of the building of which they are a part, shall be taken by exercise of the power of eminent domain for any purpose, or shall be destroyed or damaged by fire or other unavoidable casualty, or shall receive any direct or consequential damage for which the LESSOR or LESSEE shall be entitled to compensation by reason of anything lawfully done in pursuance of any public authority, after the execution hereof and during said term, or any extension or renewal thereof, then this Lease and said term shall terminate at the option of the LESSOR, and such option may be exercised in case of any such taking, notwithstanding that the entire interest of the LESSOR may have been divested by such taking. If this Lease and said term are not so terminated, then in case of any such taking or destruction of or damage to the Leased premises, rendering the same or any part thereof unfit for use and occupancy, a just proportion of the rent hereinbefore reserved, according to the nature and extent of the injury sustained by the leased premises, shall be suspended or abated until the leased premises, or in the case of such taking, what may remain thereof, shall have been put in proper condition for use and occupancy. The LESSEE hereby assigns to the LESSOR any and all claims and demands for damages on account of any such taking or for compensation for anything lawfully done in pursuance of any public authority, and covenants with the LESSOR that the LESSEE will from time to time execute and deliver to the LESSOR such further instruments of assignment of any such claims and demands as the LESSOR shall request. Page 6 7 SIXTEENTH Concurrently with the execution of this Lease, the LESSEE shall deposit with the LESSOR as a security deposit for the faithful performance of the terms and conditions of this Lease the sum of $1,000.00. Similarly, LESSEE shall deposit with LESSOR a like sum of $1, 00.00 as last month's rent under this Lease, The LESSOR shall not be obligated to pay interest on said amounts so deposited or to apply the deposit on arrears of rent or other charges, but application thereof for arrears of rent or other damages shall be at the option of the LESSOR. LESSOR's right to possession for breach of this Lease shall not be affected by this security deposit. The security deposit shall be returned to the LESSEE when this Lease is terminated according to its terms, if not applied to the payment of rent in arrears or other damages suffered by LESSOR as a result of the LESSEE's breach of the terms and conditions of this Lease. SEVENTEENTH This Lease may be modified only by written agreement signed by the LESSOR and LESSEE. EIGHTEENTH This Lease and the covenants, terms and conditions thereof, shall be binding upon and inure to the benefit of the heirs, executors, administrators, successors and assigns of the parties hereto. NINETEENTH If any of the terms or provisions of this Lease or the application thereof to any person or circumstance shall to any extent be invalid or unenforceable, the remainder of this Lease, or the application of such term or provisions to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term and provision of this Lease shall be valid and enforceable to the fullest extent permitted by law. TWENTIETH The LESSOR covenants that LESSEE, on paying the rent reserved herein and performing the covenants and agreements hereof, shall peaceably and quietly have, hold and enjoy the premises and all rights, easements, appurtenances and privileges thereunto belonging or in anywise appertaining, during the full term of this Lease, and any extension or renewal, without hindrance from LESSOR or any other person. TWENTY-FIRST Any notice from LESSOR to LESSEE relating to the leased premises or to the occupancy thereof shall be deemed duly served if mailed to LESSEE at 50 Hall Road, Sturbridge, MA 01566, registered or certified mail, return receipt requested, postage prepaid, addressed to the LESSEE, or to such other address which LESSEE may from time to time give to LESSOR. Page 7 8 Any notice from LESSEE to LESSOR relating to the leased premises or to the occupancy thereof, shall be deemed duly served if mailed to LESSOR by registered or certified mail, return receipt requested, postage prepaid, addressed to LESSOR at 69 Hall Road, Sturbridge, MA 01566, or such other address which LESSOR may from time to time give to LESSEE. IN WITNESS WHEREOF the parties hereto have caused this instrument to be executed and their corporate seals, if applicable, to be affixed hereto on the month, day and year first above written. Executed in multiple duplicated originals as a sealed instrument, each of which executed copies shall be deemed to be an original hereof. Witness: /s/ Jeffrey M. Chasse ----------------------------- Jeffrey M. Chasse, Trustee /s/ Larry A. Johnson ----------------------------- Larry A. Johnson, Trustee /s/ Michael W. Roche ----------------------------- Michael W. Roche, Trustee SPECTRAN COMMUNICATION FIBER TECHNOLOGIES, INC. By: /s/ John E. Chapman ----------------------------- Page 8 9 EXHIBIT "A" LESSOR and LESSEE AGREE THAT substantial completion and responsibility of payment for "Lower Suite B" will be apportioned as follows: LESSOR shall pay for construction and completion of: 1) Providing a second means of egress into the LESSEE's rental space, including all door fixtures and necessary walkways; 2) Floor coverings (to be mid-grade category) LESSEE shall pay for construction and completion of: 1) Electrical wiring and installation of lighting fixtures as required by LESSEE for its business. LESSEE agrees that at the conclusion of its tenancy, all fixtures will be removed at LESSEE's option and LESSEE agrees to repair/restore the premises to their former condition prior to modifications by LESSEE. LESSEE shall be required to utilize a contractor approved by LESSOR for the completion of all work that is the responsibility of LESSEE. The parties agree that, at the conclusion of this tenancy, LESSOR may purchase from LESSEE all telephone fixtures installed by Nynex for LESSEE at LESSEE's expense, at a price to be then determined by the parties. If no agreement is reached, LESSEE agrees to remove said fixtures at LESSEE's cost and restore the premises to their prior condition. EX-27 8 FINANCIAL DATA SCHEDULE
5 1 US DOLLARS 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 1 2,364,575 2,339,667 9,078,460 273,725 8,287,270 21,691,831 27,368,159 13,904,497 43,567,946 6,578,988 0 0 0 538,040 0 43,567,946 28,753,735 28,753,735 18,679,936 26,527,957 0 0 319,391 2,090,161 573,481 1,516,680 0 0 0 1,516,680 .26 .26
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