Exhibit 10.1
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "AGREEMENT") is effective this 20th day
of November, 2000, (the "EFFECTIVE DATE") by and between INFINITE GRAPHICS
INCORPORATED, a Minnesota corporation (the "CORPORATION"), and XXXXXXXX X.
XXXXXXX, XX., a Minnesota resident (the "EMPLOYEE").
RECITALS
WHEREAS, the Employee has served as the Corporation's Chief Executive
Officer since 1970, and as a director of the Corporation since 1970; and
WHEREAS, the Employee beneficially owns approximately 30% of the issued
and outstanding shares of Common Stock of the Corporation; and
WHEREAS, the Corporation and the Employee recognize the importance to
the Corporation of obtaining the Employee's loyalty and protecting the
Corporation's rights with respect to its customers, business information and
Inventions; and
WHEREAS, the parties acknowledge that the present market for the
Corporation's Common Stock may not provide sufficient liquidity for the orderly
disposition of the shares of the Corporation's Common Stock held by the
Employee; and
WHEREAS, in entering into this Agreement, the Corporation seeks to
induce the Employee's continued employment and his contributions to the
Corporation, and to provide for an orderly disposition of shares of
Corporation's Common Stock held by the Employee upon the occurrence of certain
events; and
WHEREAS, the Corporation believes that the achievement of the foregoing
will be in the best interests of the Corporation and its shareholders.
AGREEMENT
In consideration of the above recitals and the promises set forth in
this Agreement, the parties agree as follows:
1) Nature and Capacity of Employment. The Corporation hereby agrees to
continue to employ the Employee as its Chief Executive Officer, pursuant to the
terms of this Agreement, and shall have all the duties, power, status and
authority of a Chief Executive Officer. The Employee agrees to perform, or be
available to perform, on a full-time basis, the functions of this position,
pursuant to the terms of this Agreement. The Employee shall continue to report
to the Corporation's Board of Directors and to be nominated for election as a
director of the Corporation.
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2) Term of Employment. The Employee understands that his employment
with the Corporation is at will and may be terminated at any time by the
Corporation, with or without Cause, upon ninety (90) days written notice to the
Employee by the Corporation. The Employee also agrees to give the same number of
days written notice to the Corporation prior to his resignation becoming
effective. The Employee's last date of employment is referred to herein as the
"TERMINATION DATE." This Agreement shall automatically terminate 12 years from
the Effective Date (the "EMPLOYMENT TERM") if the Employee remains employed by
the Corporation as of that date.
3) Annual Base Salary. On the Effective Date, and on each anniversary
thereof, the Board of Directors of the Corporation shall establish the
Employee's annual base salary, which shall never be less than $175,000 per year
(the "BASE SALARY"). The Base Salary shall be payable in accordance with the
Corporation's normal payroll practices for executive employees.
4) Discretionary Annual Bonus. Employee shall be eligible for an annual
bonus in addition to the Base Salary (the "BONUS") which will provide the
Employee with compensation equal to 50% of the Base Salary, as currently in
effect at the time the Bonus is determined, upon achievement of target
performance goals (and a lesser or greater amount for under or overachievement
of such targets), which shall be based primarily on the Corporation's financial
performance, as established annually by the Board of Directors, after
consultation with the Employee.
5) Stock Options. Employee shall be entitled to participate in the
Corporation's stock option plan(s) pursuant to the terms and conditions thereof
and on terms at least as favorable as those provided to the Corporation's
executives generally and in accordance with the Corporation's normal schedule
for granting options. Such options shall be exercisable for a period of not less
than one year after the Employee's employment ends pursuant to a termination
without Cause or resignation for Good Reason, unless further extended by the
Board of Directors. The Employee acknowledges and understands that the foregoing
requirements may restrict his ability to receive incentive stock options.
6) Employee Benefits; Vacation. The Employee shall be entitled to
participate in all retirement plans and all other employee benefits and policies
made available by the Corporation to its executive officers so long as employed
by the Corporation, and all payments or other benefits paid or payable to the
Employee under any such employee benefit plan or program of the Corporation
shall not be affected or modified by this Agreement and shall be in addition to
the Base Salary and Bonus payable by the Corporation to the Employee under this
Agreement. Notwithstanding the foregoing, the Corporation shall provide to
Employee disability insurance providing benefits during disability of not less
than 75% of Base Salary and shall provide life insurance on the life of the
Employee (and payable to the Employee's named beneficiary) in an amount of not
less than $1,500,000. The Corporation shall, as soon as practicable, establish a
supplemental retirement plan for the Employee upon terms mutually agreed upon by
the Employee and the Board. In addition, Employee shall be entitled to other
benefits as determined by the Board of Directors.
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The Employee shall be entitled to vacation time in an amount which will
not reasonably interfere with the Employee's duties as Chief Executive Officer,
but not less than six weeks during each fiscal year. Any such vacation shall not
result in a reduction of the annual Base Salary or Bonus, if any, payable to
Employee pursuant to this Agreement.
In addition to the foregoing, the Employee shall be entitled to receive
during the term of this Agreement each of the following benefits or perquisites:
(a) Use of leased or owned automobile at the sole expense of
the Corporation, which shall be new every four years, and payment or
reimbursement of all expenses associated therewith;
(b) An annual discretionary business spending allowance of
$6,000;
(c) Payment or reimbursement of estate and financial planning
expenses up to $2,500 per year;
(d) Payment or reimbursement of travel expenses (including
airfare, ground transportation, meals and lodging) for Employee's
spouse on any business trip for the Corporation; and
(e) Payment or reimbursement for the premium cost of a general
liability umbrella policy covering the Employee during and for a
reasonable period after employment in an amount not less that
$2,000,000.
7) Business Expenses. The Corporation will pay or reimburse Employee
for all reasonable and necessary out-of-pocket expenses incurred by Employee in
the performance of Employee's duties under this Agreement, subject to compliance
by Employee with the Corporation's policies for such expense reimbursements. If
any business expense reimbursement or spending allowance is later determined to
be not deductible as such by the Corporation, the Corporation may treat such
disallowed amount as additional compensation to the Employee, subject to federal
and state withholding to the extent required by law.
8) Undertakings of the Employee. The Employee agrees to spend his full
working time and effort in performance of the duties as Chief Executive Officer
so long as employed by the Corporation; and he shall not, during his employment
with the Corporation, without prior written approval of the Board of Directors
of the Corporation, become an employee, director, officer, agent, partner of or
consultant to, or a stockholder of (except a stockholder of a public company in
which the Employee owns less than 5% of the issued and outstanding capital stock
of such corporation) any corporation or other business entity which is a
significant competitor, supplier or customer of the Corporation. Notwithstanding
the foregoing, the Employee may serve on such corporate and civic boards and
attend to personal and family business matters during the Employment Term,
provided that any such service on a corporate board shall be approved in advance
by the Board of Directors of the Corporation.
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9) Employee's employment under this Agreement will terminate prior to
the expiration of the Employment Term upon the occurrence of any of the
following events
(a) The Employee dies or becomes Disabled.
(b) The Corporation elects to terminate Employee's employment
under this Agreement for Cause.
(c) Employee elects to terminate his employment under this
Agreement (other than for Good Reason).
(d) The Corporation elects to terminate Employee's employment
under this Agreement without Cause.
(e) Employee elects to terminate his employment under this
Agreement for Good Reason (as defined below).
(f) For purposes of this Agreement, the following definitions
shall apply:
"Disabled" shall mean any mental or physical condition that
has continued for a period of twelve months and that renders Employee
unable to perform the essential functions of his position, with
reasonable accommodation, as defined by various state and federal
disability laws.
"Cause" shall mean:
(i) any fraud, theft, or embezzlement by the Employee
in connection with the business of the Corporation; or
(ii) the Employee's conviction of a felony or
entrance of a plea of guilty or nolo contendre to a felony.
The Board shall, by a majority affirmative vote, determine
that Cause has occurred, and the Corporation shall give to the Employee
written notice which specifically identifies the facts which the Board
believes constitute Cause.
"Good Reason" shall mean:
(i) any reduction in either the Employee's rate of
Base Salary described in Section 3 above, eligibility to
receive the Bonus described in Section 4 above, stock options
described in Section 5 above and/or any employee benefits
described in Section 6 above;
(ii) the Corporation materially diminishes or
interferes with the Employee's duties, power, authority or
responsibilities;
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(iii) any material adverse change in the Employee's
status as an executive of the Corporation;
(iv) the breach by the Corporation of a material term
of this Agreement;
(v) the relocation of the Employee's principal place
of employment to a location outside the metropolitan
Minneapolis, Minnesota area;
(vi) the Corporation's failure to obtain an
assignment of this Agreement to a successor under Section
17(d); or
(vii) there occurs a Change in Control of the
Corporation (as defined below) and the Employee has continued
in the employment of the Corporation under the terms of this
Agreement for the ninety day period after the Change in
Control, provided that the Employee gives notice of
termination pursuant to this item (vii) prior to the 180th day
following the Change in Control.
Provided that, in the case of items (i)-(iv), the Employee has
given the Corporation written notice that sets forth the facts he
believes constitute Good Reason, and the Corporation has not cured such
breach within thirty days of such notice.
(g) For purposes of this Agreement, a "CHANGE IN CONTROL" of
the Corporation shall mean a change in control after March 1, 2001
which would be required to be reported in response to Item 1 of Form
8-K promulgated under the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), whether or not the Corporation is then subject to
such reporting requirements including, without limitation, if:
(i) any "person" (as such term is used in Section
13(d) and 14(d) of the Exchange Act, but not including the
Employee) becomes a "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of
securities of the Corporation representing 20% or more of the
combined voting power of the Corporation's then outstanding
securities.
(ii) a majority of the Corporation's directors were
not nominated for election, or appointed as directors, by the
Board of Directors;
(iii) the stockholders of the Corporation approve a
merger or consolidation of the Corporation with any other
person which would result in the combined voting and equity
interest of the shareholders immediately prior to such merger
or consolidation representing (either by remaining outstanding
or by being converted into voting securities or other equity
interest of the merged or consolidated entity) 50% or less of
the combined equity interest of such merged or consolidated
entity outstanding immediately after such merger or
consolidation;
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(iv) the stockholders of the Corporation approve (i)
a plan of complete liquidation of the Corporation or (ii) the
sale or disposition, in a transaction or a series of related
transactions, of more that 65% of the assets of the
Corporation, including the assets of any direct of indirect
subsidiary of the Corporation, to any person that is not
owned, directly or indirectly, in substantially the same
percentage by the shareholders of the Corporation immediately
prior to such sale or other disposition; or
(v) the Corporation ceases to be subject to the
reporting requirements of the Exchange Act.
10) Benefits Upon Termination. If Employee's employment under this
Agreement is terminated during the Employment Term, as provided in Section 9
above, Employee shall be entitled to the following benefits:
(a) If Employee's employment under this Agreement is
terminated pursuant to Section 9(a), (b) or (c), such termination is
effective on the Termination Date and the Corporation will continue to
pay Employee's Base Salary and any Bonus earned through the Termination
Date and will pay on the Termination Date any amounts then payable to
the Employee, including but not limited to accrued vacation. In the
event Employee is Disabled, the Corporation may offset any payments of
Base Salary prior to termination of Employee's employment by the amount
of any disability income insurance payments received by the Employee
under a policy that the Corporation maintains for the Employee's
benefit. If the Employee's employment under this Agreement is
terminated pursuant to Section 9(a), the Corporation shall continue at
its own expense the health and life insurance benefits described in
Section 6 to Employee and the Employee's family until the Employee
attains age 65 (in the case of Disability) and shall continue (or in
the case of the Employee's death, shall provide) continued health
insurance benefits to the Employee's spouse until the Employee's spouse
attains age 65; provided, however, that the Corporation's aggregate
annual cost for the premiums for such health benefits shall not exceed
$10,000. The Employee shall be eligible for any other benefits to which
he is entitled under any benefit plan or program at the time of
termination or as otherwise required by law.
(b) If Employee's employment under this Agreement is
terminated pursuant to Section 9(d) or 9(e), such termination shall be
effective as of the Termination Date and the Corporation will continue
to pay Employee's Base Salary and any Bonus earned through the
Termination Date and will pay on the Termination Date any amounts then
payable to the Employee, including but not limited to accrued vacation.
Thereafter, the Employee shall receive a severance payment (the
"SEVERANCE PAYMENT") equal to 2.99 times the average of the annual Base
Salary plus annual Bonus actually paid to the Employee during the five
fiscal years prior to the year in which the termination occurs, which
amount shall be payable in a single lump sum within 30 days of the
Termination Date, less state and federal taxes and any other required
withholding. Such Severance Payment shall be in addition to any other
payments to be made to the Employee after the Termination date
(including but not limited to the amount payable under Section 13).
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The Corporation shall continue at its own expense the health, life and
disability benefits described in Section 6 to Employee and/or
Employee's family until the Employee attains age 65 and shall continue
health insurance thereafter until the Employee's spouse attains age 65;
provided, however, that the Employee's participation in the
Corporation's health, life and disability benefit plans described in
Section 6 shall cease on any earlier date that the Employee becomes
eligible for benefits from a subsequent employer which are comparable
in coverage and cost as the similar benefit plan maintained by the
Corporation; provided, however, that the Corporation's aggregate annual
cost for the premiums for such health benefits shall not exceed
$25,000. In the event that the Corporation is prevented by law or by
the terms of any insurance policy from including the Employee in an
employee benefit plan or program, the Corporation shall pay the
Employee the cost of obtaining comparable or alternative or individual
coverage elsewhere; provided, however, that such cost, when combined
with the cost of other health, life and disability benefits described
herein, shall not exceed $25,000 on an annual basis. In addition, the
Employee, or the estate of the Employee, shall be 100% vested with
respect to any stock options referenced in Section 5 hereof.
(c) If, in the opinion of tax counsel selected by the
Corporation and acceptable to the Employee, the Severance Payment plus
all other payments or benefits pursuant to this subsection 10(b) which
constitute "parachute payments" within the meaning of Code Section
280G(b)(2) exceeds the amount that is deductible by the Corporation by
reason of Section 280G, and in the opinion of such tax counsel, the
Severance Payment (in its full amount or as partially reduced, as the
case may be) plus all other payments or benefits pursuant to this
subsection 10(b) which constitute "parachute payments" within the
meaning of Section 280G(b)(2) and do not constitute reasonable
compensation for services actually rendered or to be rendered, within
the meaning of Section 280G(b)(4), the Severance Payment shall be
reduced by the excess of the aggregate "parachute payments" that would
be paid to or for the Employee without any portion of such "parachute
payments" not being deductible by reason of Code Section 280G. The
value of any non-cash benefit or any deferred cash payments pursuant to
subsection 10(b) shall be determined by the Corporation in accordance
with the principles of Code Sections 280G(d)(3) and (4). Nothing in
this subsection shall limit the payments required to be made to the
Employee pursuant to Section 13 below.
If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding that, notwithstanding
the good faith of the Employee and the Corporation in applying the
terms of this subsection, the aggregate "parachute payments" paid to or
for the Employee's benefit pursuant to this subsection 10(b) are in an
amount that would result in any portion of such "parachute payments"
not being deductible by the Corporation by reason of Code Section 280G,
then the Employee shall have an obligation to pay the Corporation upon
demand an amount equal to the sum of (A) the excess of the aggregate
"parachute payments" paid to or for the Employee's benefit over the
aggregate "parachute payments" that would have been paid to or for the
Employee's benefit without any portion of such "parachute payments" not
being deductible by reason of Code Section 280G; and (B) interest on
the amount set forth in clause (A) of this sentence at
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the applicable Federal rate (as defined in Code Section 1274(d)) from
the date of the Employee's receipt of such excess until the date of
such payment.
(d) After application of the limitations set forth in
subsection 10(c) above, should any payments under Section 13 (either
with regard to such payments only or when aggregated with any other
payments hereunder or contemplated hereby) be subject to excise tax
pursuant to Section 4999 of the Internal Revenue Code of 1986, as may
be amended, or any successor or similar provision thereto, or
comparable state or local tax laws, the Corporation shall pay to
Employee such additional compensation (including any income and excise
taxes payable by Employee with respect to such additional income) to
place the Employee in the same after-tax position he would have been in
had no such excise tax (and any interest or penalties thereon) been
paid or incurred. The Corporation shall pay such additional
compensation upon the earlier of the (i) the time at which the
Corporation withholds such excise tax from any payments to Employee; or
(ii) 30 days after Employee notifies the Corporation that Employee has
paid such excise tax pursuant to a tax return filed by Employee which
takes the position that such excise tax is due and payable in reliance
on a written opinion of the Corporation's tax counsel acceptable to the
Employee that it is more likely than not that such excise tax is due
and payable, or, if later, the date the IRS notifies Employee that such
amount is due and payable.
Without limiting the obligation of the Corporation hereunder,
Employee agrees, in the event Employee makes any payment pursuant to
the preceding sentence, to negotiate with the Corporation in good faith
with respect to procedures reasonably requested by the Corporation
which would afford the Corporation the ability to contest the
imposition of such excise tax; provided, however, that Employee will
not be required to afford the Corporation any right to contest the
applicability of any such excise tax to the extent that Employee
reasonably determines that such contest is inconsistent with the
overall tax interests of Employee.
The Corporation agrees to hold in confidence and not to
disclose, without Employee's prior written consent, any information
with regard to Employee's tax position which the Corporation obtains
pursuant to this subsection, except to the extent ordered to do so
pursuant to a lawful subpoena or pursuant to any federal or state
securities laws and regulations.
If the Corporation fails to make timely payment of any amount due to
the Employee under this Agreement within 30 days of the due date thereof, (other
than as a result of the Employee's prior material breach of the provision of
this Agreement) then, in addition to any other remedies for a breach of this
Agreement, the Employee shall no longer be restrained from competing against the
Corporation pursuant to Section 13.
11) Confidential Information. "CONFIDENTIAL INFORMATION" means any
information that the Employee learns or develops during the course of employment
that derives independent economic value from being not generally known or
readily ascertainable by other persons who could obtain economic value from its
disclosure or use, and includes, but is not limited to, trade
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secrets, and may relate to such matters as research and development,
manufacturing processes, management systems and techniques, or sales and
marketing.
The Employee agrees not to directly or indirectly use or disclose any
Confidential Information for the benefit of anyone other than the Corporation
either during his employment with the Corporation or thereafter. For purposes
hereof, Confidential Information shall also include any information beneficial
to the Corporation or its subsidiaries which is not generally known and for
which the Corporation has taken reasonable steps to protect and shall include,
but is not limited to, the methods of research and testing, customer lists,
vendor lists and financial information. The Employee recognizes that the
Confidential Information constitutes a valuable asset of the Corporation and
hereby agrees to act in such a manner as to prevent its disclosure and use by
any person unless such uses for the benefit of the Corporation. The Employee's
obligations under this Section 11 are unconditional and shall not be excused by
any conduct on the part of the Corporation, except prior voluntary disclosure by
the Corporation. Information shall cease to be Confidential Information from and
after the date it becomes public information (other than as a result of the
Employee's acts or in violation of this Agreement).
12) Inventions. The Employee agrees to promptly disclose to the
Corporation in writing any invention, improvement, work of authorship, discovery
or idea (whether patentable or not and including those which may be subject to
copyright protection) generated, conceived or reduced to practice by the
Employee alone or in conjunction with others, during or after working hours,
while an employee of the Corporation ("INVENTIONS"); and all such Inventions
shall be the exclusive property of the Corporation and are hereby assigned to
the Corporation, except if the Inventions does not relate to the existing or
reasonably foreseeable business interests of the Corporation, the Corporation
may, in its sole discretion, release or license that Invention to the Employee
upon written request.
Further, the Employee shall, at the Corporation's expense, give the
Corporation all assistance it reasonably requires to perfect, protect and use
its rights to Inventions. In particular, but without limitation, the Employee
shall sign all documents, do all things and supply all information that the
Corporation may deem necessary or desirable to;
(a) Transfer or record the transfer of the Employee's entire
right, title and interest in Inventions; and
(b) Enable the Corporation to obtain patent, copyright or
trademark protection for Inventions anywhere in the world.
The obligations of the Employee under this Section 12 shall continue
beyond the Termination Date with respect to Inventions conceived or made by the
Employee during his employment with the Corporation and shall be binding upon
assigns, executors, administrators and other legal representatives of the
Employee. For purposes of this Agreement, any Invention relating to the business
of the Corporation for which the Employee markets a new competitive product,
files a patent application or seeks copyright protection within six months after
the Termination Date shall be presumed to be an Invention conceived by the
Employee during his employment with the Corporation, subject to proof to the
contrary by good faith, written and
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duly corroborated records establishing that such Invention was conceived and
made following Termination Date.
NOTICE: Pursuant to Minnesota Statutes, Section 181.78, the Employee is
hereby notified that this Section 12 does not apply to any Invention for which
no equipment, supplies, facility or trade secret information of the Corporation
was used and which was developed entirely on the Employee's own time, and which
does not relate directly to the business of the Corporation or to its actual or
demonstrably anticipated research or development, or which does not result from
any work performed by the Employee for the Corporation.
13) Non-Competition. "CORPORATE PRODUCT" means any product or service,
(including any component thereof and any research to develop information useful
in connection with a product or service) that is being designed, developed,
manufactured, marketed or sold by the Corporation or with respect to which the
Corporation has acquired Confidential Information which it has devoted
substantial effort and expense to use in the design, development, manufacture,
marketing or sale of a product or service.
"COMPETITIVE PRODUCT" means any product or service (including any
components thereof and any research to develop information useful in connection
with the product or service) that is being designed, developed, manufactured,
marketed or sold by anyone other than the Corporation, and is of the same
general type, performs similar functions or is used for the same purposes as a
Corporate Product which the Employee worked on or assisted the Corporation in
marketing during the last four years of employment or about which the Employee
received or had knowledge of Confidential Information.
The Employee agrees that, during his employment with the Corporation
and for a period of five years following the Termination Date (the "POST
TERMINATION NON-COMPETE PERIOD"), the Employee shall not, directly or
indirectly, render services to any person or entity in connection with the
design, development, manufacture, marketing or sale of a Competitive Product
that is sold or intended for use or sale in any geographic area in which the
Corporation actively markets a Corporate Product, or intends to actively market
a Corporate Product of the same general type or function. It is expressly
understood that the Employee is free to work for a competitor of the Corporation
provided that such employment does not include any responsibilities for or in
connection with a Competitive Product.
During such Post Termination Non-Compete Period, the Employee shall
continue to receive an annual payment equal to 75% of the average of the annual
Base Salary plus the annual Bonus actually paid to the Employee for the three
fiscal years prior to the Termination Date, which shall continue to be paid at
the same time as the Corporation's standard payroll for its executive officers.
However, payments made to Employee for obligations under this paragraph 13 shall
not exceed the sum of $150,000 per year, gross income. If the Employee dies
during a Post Termination Non-Compete Period, then the Corporation shall be
obligated only to make payments hereunder up and through the month of the
Employee's death. Notwithstanding Section 10(c), the Employee's entitlement to
receive payments pursuant to this Section 13 during the Post Termination
Non-Compete Period shall be absolute (subject to relief as described below), and
the Corporation shall be obligated to make payments pursuant to this Section 13
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even though the Employee may be in breach of this Section 13, in which case, the
Corporation's sole remedy shall be to enjoin the Employee from violating the
provisions of this Section 13, subject, however, to a court order following a
full adjudication of the issues by a court of competent jurisdiction which may
provide for remedies in addition to injunctive relief, such as ordering,
following such full adjudication, that the Corporation may be relieved of its
obligation to make payments pursuant to this Section 13 if the Employee is found
in breach hereof.
In the event of the Corporation's failure to timely pay any amounts
provided for in this Section 13 within five days of the due date thereof (other
than as a result of the Employee's prior breach of the Section 13), the
Corporation shall pay interest on such unpaid amounts at an annual rate equal to
the highest interest rate charged to the Corporation by any of its commercial
lenders from time to time. If the Corporation fails to make timely payment of
any amount due to the Employee under this Agreement, then, in addition to any
other remedies for a breach of this Agreement, the Employee shall no longer be
restrained from competing against the Corporation pursuant to this Section 13,
but the Employee shall remain entitled to the payments provided above during the
remaining Non-Competition Period.
The Employee understands and acknowledges that, as of the Effective
Date: (i) Corporate Products include film, glass or quartz substrate phototools
that are used primarily in the manufacture of intricate, precise electronic
circuits used for circuit boards, semiconductors or flat panel displays; and
(ii) the geographic market in which the Corporation is actively marketing its
Corporate Products is the United States of America. The Employee understands and
acknowledges that the foregoing description of Corporate Products and the
geographic market may change, and the provisions of this Section 13 shall apply
to the Corporate Products and the geographic market of the Corporation in effect
upon the Termination Date.
14) Registration Rights. The Corporation agrees to grant to the
Employee, beginning on the Termination Date, those registration rights set forth
in this Section 14 with respect to all shares of the Corporation's Common Stock
beneficially owned by the Employee on the Termination Date (the "REGISTRABLE
STOCK"). All registration rights shall terminate and be of no further force and
effect five years after the Termination Date.
(a) At any time after the Termination Date, the Employee may
by notice in writing to the Corporation request the Corporation to
register under the Securities Act of 1933, as amended (the "SECURITIES
ACT"), all or any portion of shares of Registrable Stock held by the
Employee for sale in the manner specified in such notice.
Notwithstanding the foregoing, the Corporation will not be required to
seek to cause a registration statement to become effective pursuant to
this Section 14: (i) within a period of 90 days after the effective
date of a registration statement filed by the Corporation; PROVIDED,
HOWEVER, that the Corporation shall use its best efforts to cause a
registration requested hereunder to be declared effective promptly
following such period if such request is made during such period; or
(ii) if the Corporation furnishes to the Employee a certificate signed
by the President of the Corporation stating that in the good faith
judgment of the Board of Directors it would be materially detrimental
to the Corporation or its stockholders for a registration statement to
be filed at such time, or that it would require disclosure of material
nonpublic information relating to the Corporation which, in
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the reasonable opinion of the Board of Directors, should not be
disclosed, then the Corporation's obligation to use all reasonable
efforts to register, qualify or comply under this Section 14(a) shall
be deferred for a period not to exceed 90 days from the date of receipt
of written request from the Employee.
Following receipt of any notice given under this Section
14(a), the Corporation shall use its best efforts to register under the
Securities Act the number of shares of Registrable Stock specified in
such notice from the Employee. If and to the extent that such
Registrable Stock may be registered on Form S-3 (or its equivalent),
the Corporation shall use its best efforts to register such shares, but
the Corporation shall not be obligated to register such shares pursuant
to this sentence on more than three occasions. If and to the extent
Form S-3 is not available on which to register such Registrable Stock,
the Corporation shall be obligated to register the Employee's
Registrable Stock under this Section 14(a) on one occasion only;
PROVIDED, HOWEVER, that such obligation will be deemed satisfied only
when a registration statement covering all shares of Registrable Stock
specified in the Employee's notice (and which have not been registered
on Form S-3 or withdrawn for sale under the method of disposition
specified by the Employee), becomes effective.
(b) Whenever the Corporation proposes to file a registration
statement in connection with the proposed offer and sale of any of its
securities after the Termination Date, the Corporation shall give
written notice thereof to the Employee. Upon the Employee's written
request given within twenty (20) days after receipt of the
Corporation's notice, the Corporation shall use its best efforts to
cause all such shares of Registrable Stock as the Employee requests, to
the extent the registration form to be used may be used for the
registration of the Employee's Registrable Stock then owned, to be
included in such registration. Notwithstanding the foregoing, the
Corporation need not include the Registrable Stock in any registration
statement if the underwriter or managing underwriter with respect to
such proposed public offering determines, and has a reasonable basis
for determining, that such inclusion would be inadvisable or
detrimental to the success of that offering.
(c) If the Corporation is required under Section 14(a) or
14(b) hereof to effect the registration of Registrable Stock under the
Securities Act, the Corporation shall, at its expense, as expeditiously
as possible:
(i) Pursuant to the Securities Act, prepare and file
with the Securities and Exchange Commission (the "COMMISSION")
a registration statement respecting the Registrable Stock and
use its best efforts, including preparing and filing all
reasonably necessary amendments and supplements to cause such
registration statement to become and remain effective until
the Registrable Stock covered by such registration statement
has been sold, but for no longer than two years following the
effective date of such registration; provided, however, that
if Form S-3 is not available for such amendments or
supplements, then the cost of such amendments or supplements
required more than one year after the date such registration
statement first became effective shall be shared equally
between the
12
Corporation and the Employee; FURTHER, PROVIDED, before filing
the registration statement or any amendments or supplements
thereto relating to the registration under this Section 14
above, the Corporation shall furnish to counsel for the
Employee copies of all such documents proposed to be filed,
which documents shall be subject to review and comment of such
counsel;
(ii) Enter into such customary agreements (including
underwriting agreements in customary form) and take all such
other actions as the Employee or the underwriters, if any,
reasonably request to expedite or facilitate the disposition
of the Registrable Stock (including effecting a stock split or
a combination of shares);
(iii) Furnish to the Employee such reasonable number
of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as the
Employee may reasonably request to facilitate the public
offering of such securities;
(iv) Register or qualify, at its sole expense, the
Registrable Stock under Minnesota securities laws. The
Corporation shall cooperate reasonably with the Employee to
register or qualify the Registrable Stock under such state
securities or blue sky laws of such jurisdictions other than
Minnesota: (A) as are reasonably appropriate for distributing
the Registrable Stock; or (B) as the Employee may reasonably
request within ten (10) days following the original filing of
such registration statement; PROVIDED, HOWEVER, that the
Corporation shall not for any purpose be required to execute a
general consent to service of process, to subject itself to
taxation, or to qualify to do business as a foreign
corporation in any jurisdiction where it is not so qualified;
and FURTHER, PROVIDED, that the Corporation shall not be
responsible for, or bear any costs or expenses with respect
to, the Employee's compliance with the securities laws of any
state other than Minnesota in the sale of all or any part of
the Registrable Stock, but may assist the Employee, at his
cost, with respect to such compliance. The Corporation may
require that the Employee advance amounts to the Corporation
which the Corporation determines is sufficient to cover
expenses which would otherwise be payable by the Employee
hereunder, as a condition to the Corporation's fulfillment of
any of its conditions under this Section 14.
(v) Notify the Employee, at any time when a
prospectus relating to the Registrable Stock must be delivered
under the Securities Act, that an event has occurred as the
result of which the prospectus included in the registration
statement contains an untrue statement of a material fact or
omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading;
and, at the Employee's request, prepare a supplement or
amendment to such prospectus as may be necessary to correct
any such statements or omissions;
13
(vi) If the Commission or any state securities
commission or agency issues a stop order suspending the
effectiveness of such registration statement or suspending or
preventing the use of any related prospectus or suspending the
qualification of any Registrable Stock included in the
registration statement for sale in any jurisdiction, the
Corporation shall use its best efforts to prevent the issuance
of any stop order or to obtain its withdrawal if such stop
order is issued;
(vii) Make available for inspection by the Employee
any underwriter participating in any disposition under such
registration statement and any attorney, accountant or other
agent retained by the Employee or any underwriter, all
financial and other records, pertinent corporate documents and
properties of the Corporation, and cause the Corporation's
officers, directors, employees and independent accountants to
supply all information reasonably requested by any such
investor, underwriter, attorney, accountant or agent in
connection with such registration statement; and
(viii) Otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and
make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at
least twelve (12) months beginning with the first day of the
Corporation's first full calendar quarter after the effective
date of the Registration Statement, which earnings statement
will satisfy the provisions of Section 14(a) of the Securities
Act and Rule 158 thereunder.
(d) The Corporation shall not, directly or indirectly, enter
into any merger, consolidation or reorganization in which the
Corporation will not be the surviving corporation unless the proposed
surviving corporation, before such merger, consolidation or
reorganization agrees in writing to assume the Corporation's
registration obligations under this Section 14, and for that purpose
references hereunder to "REGISTRABLE STOCK" will be deemed to be
references to the securities which Employee would be entitled to
receive in exchange for shares of the Corporation's Common Stock under
any such merger, consolidation or reorganization; PROVIDED, HOWEVER,
that the provisions of this Section 14(d) will not apply in the event
of any merger, consolidation or reorganization in which the Corporation
is not the surviving corporation if all shareholders are entitled to
receive in exchange for their Common Stock consideration consisting
solely of: (i) cash; (ii) securities of the acquiring corporation which
may be immediately sold to the public without registration under the
Securities Act; or (iii) securities of the acquiring Corporation which
the acquiring corporation has agreed to file a registration statement
within ninety (90) days of completion of the transaction for resale to
the public pursuant to the Securities Act.
(e) Except as is otherwise provided herein, the Corporation
shall bear, respecting each registration effected pursuant to this
Section 14, all fees, costs and expenses reasonably relating to such
registration and the public offering; PROVIDED, HOWEVER: (i) that the
Employee and other holders of the Corporation's stock participating in
any such registration shall bear their pro rata share of the
underwriting discounts and
14
selling commissions; and (ii) the Employee shall bear any such fee,
cost or expense which is not customary in such a registration and which
is attributable solely to the Employee.
(f) The Corporation and the Employee agree to the following
indemnification obligations in connection with the registration rights
set forth herein:
(i) Except as otherwise stated in an underwriting agreement,
the Corporation shall indemnify and hold harmless the
Employee, and each of his successors, from and against, and
shall reimburse the Employee for any and all claims, actions,
demands, losses, damages, liabilities, costs and expenses
arising out of or based upon: (A) any untrue statement or
allegedly untrue statement of any material fact contained in a
registration statement, any prospectus contained therein or
any amendment or supplement thereto; or (B) the omission or
alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not
misleading; PROVIDED, HOWEVER, that the Corporation shall not
be liable to the extent that any such claim, action, demand,
loss, damage, liability, cost or expense arises out of or is
based upon an untrue statement or alleged untrue statement or
omission or alleged omission so made in reliance upon
information furnished by the Employee.
(ii) The Employee shall indemnify and hold harmless
the Corporation, each of its directors and officers, each
underwriter, if any, of the Corporation's securities covered
by such registration, each person who controls the Corporation
or such underwriter within the meaning of the Securities Act,
from and against, and shall reimburse such parties respecting
any and all losses, damages, liabilities, costs or expenses
arising out of or based upon: (A) any untrue or alleged untrue
statement of any material fact contained in a Registration
Statement or any amendment or supplement thereto; or (B) any
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, to the extent that such
untrue statement or alleged untrue statement or omission or
alleged omission was so made in reliance upon written
information furnished by the Employee for use in the
preparation thereof. In no event shall any indemnity under
this Section 14(f) exceed the net proceeds received by the
Employee from the sale of Registrable Stock.
(iii) A party to be indemnified under this Section 14
(an "INDEMNIFIED PARTY") shall promptly notify the
indemnifying party of the commencement of any action involving
the subject matter of the foregoing indemnity provision. The
indemnifying party will have the right to participate in and,
to the extent that it may wish, to assume the defense thereof,
with counsel reasonably satisfactory to the Indemnified Party.
Notwithstanding the foregoing, the Indemnified Party may
retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of the
Indemnified Party by the counsel retained by the indemnifying
party would be inappropriate due to actual or potential
differing interests, as reasonably determined by either party,
between such Indemnified
15
Party and any other party represented by such counsel in such
proceeding. No indemnifying party shall be liable to an
Indemnified Party for any settlement of any action or claim
without the consent of the indemnifying party, which consent
shall not be unreasonably withheld. An indemnifying party
cannot consent to entry of any judgment or enter into any
settlement which does not include an unconditional release of
the Indemnified Party.
15) Indemnification. The Corporation will indemnify the Employee (and
his legal representative or other successors) to the fullest extent permitted
(including payment of expenses in advance of final disposition of the
proceeding) by the laws of the State of Minnesota, as in effect a the time of
the subject act or omission, or the Articles of Incorporation and By-Laws of the
Corporation as in effect at such time or on the date of this Agreement,
whichever affords or afforded greater protection to the Employee; and the
Employee shall be entitled to the protection of any insurance policies the
Corporation may elect to maintain generally for the benefit of its directors and
officers, against all costs, charges and expenses whatsoever incurred or
sustained by him or his legal representatives in connection with any action,
suit or proceeding to which he (or his legal representative or other successors)
may be made a party by reason of his being or having been a director, officer or
employee of the Corporation or any of its subsidiaries of his serving of having
served any other enterprise as a director, officer or employee at the request of
the Corporation. The Corporation shall, promptly following its receipt of a
written request delivered by the Employee pursuant to Section 15 hereof, advance
to the Employee amounts in respect of attorneys' fees and other costs and
expenses incurred by him in connection with any such legal proceeding; provided,
however, that as a condition to such indemnification, the Employee shall be
required to execute an undertaking to repay the amount of any advances made by
the Company pursuant to this Section 15 if it is ultimately determined that he
is not entitled to be indemnified against such costs and expenses.
16) Miscellaneous.
(a) This Agreement embodies the entire agreement and
understanding among the parties relative to subject matter hereof and
supersedes all prior agreements and understandings relating to such
subject matter.
(b) This Agreement and the rights of the parties shall be
governed by and construed and enforced in accordance with the laws of
the State of Minnesota. The venue for any action hereunder shall be in
the State of Minnesota, whether or not such venue is convenient, and
the parties consent to the jurisdiction of the courts of the state of
Minnesota, County of Hennepin, and the United States District Court,
District of Minnesota.
(c) This Agreement may be in several counterparts and as so
executed shall constitute one agreement binding on the parties hereto.
(d) Except as herein or otherwise provided herein to the
contrary, this Agreement shall be binding upon and inure to the benefit
of the parties and their respective heirs, successors, assigns and
personal representatives, PROVIDED, HOWEVER, that
16
neither party may assign any of its rights or obligations hereunder
without the prior written consent of the other party; and FURTHER,
PROVIDED, that, upon the death of the Employee, the Registration Rights
provided for in Section 14 herein shall inure to the benefit of those
persons who become holders of Registrable Stock due to a transfer,
without consideration, of such Registrable Stock, to a trust
established by the Employee or due to the testamentary will or the laws
of descent and distribution.
(e) All notices, requests and other communications hereunder
shall be given in writing and deemed to have been duly given or served
if personally delivered, or sent by first class, certified mail, return
receipt requested, postage prepaid, to the party at the address as
provided below, or to such other address as such party may hereafter
designate by written notice to the other party:
(i) If to the Corporation, to the address of its then
principal executive offices.
(ii) If to Employee, to the address last shown in the
records of the Corporation.
(f) This Agreement shall not be modified or amended except by
a written instrument signed by the parties.
(g) The invalidity or partial invalidity of any portion of
this Agreement shall not invalidate the remainder thereof, and said
remainder shall remain in full force and effect. Moreover, if one or
more of the provisions contained in this Agreement shall, for any
reason, be held to be excessively broad as to scope, activity, subject
or otherwise, so as to be unenforceable at law, such provision or
provisions shall be construed by the appropriate judicial body by
limiting or reducing it or them, so as to be enforceable to the maximum
extent compatible with then applicable law.
(h) The section headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
THE CORPORATION: THE EMPLOYEE:
Infinite Graphics Incorporated
By: /s/ Xxxxxx X. Xxxxxx /s/ Xxxxxxxx X. Xxxxxxx, Xx.
---------------------------- -----------------------------
Its: Secretary Xxxxxxxx X. Xxxxxxx, Xx.
