EMPLOYMENT AGREEMENT
This Agreement is made effective as of this 15th day of May, 1995 between
Xxxxxxx Electronics, Inc., a Minnesota corporation (the "Corporation"), and
Xxxxx X. Xxxxxxx ("Employee").
R E C I T A L S:
A. Employee is presently employed by the Corporation as Senior Vice
President of Operations of the Corporation.
B. The Corporation believes Employee is valuable to the future growth of
the Corporation and its business.
C. Employee and the Corporation desire to enter into an agreement to set
forth the relationship between the parties.
D. The Corporation has agreed to grant to Employee a stock option for the
purchase of 10,000 shares of the Corporation's Common Stock as consideration for
entering into this Agreement and in particular the noncompetition provisions of
Article 5.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE 1
EMPLOYMENT; TERM OF EMPLOYMENT
1.1) Employment. The Corporation hereby employs Employee and Employee
hereby accepts employment upon the terms and conditions hereinafter set forth.
1.2) Term. The term (the "Initial Term") of Employee's employment under
this Agreement shall commence on May 15, 1995, and continue thereafter until
December 31, 1997, unless sooner terminated in accordance with the provisions of
this Agreement. Either party may terminate this Agreement at the end of the
Initial Term (or any Additional Term) by giving to the other party sixty (60)
days written notice (the "Nonrenewal Notice"). If the Nonrenewal Notice is not
given, the Term shall be extended for an additional period of one (l) year (an
"Additional Term"), upon the terms and conditions provided herein. "Term" shall
mean the Initial Term and any Additional Terms.
ARTICLE 2
DUTIES; EXTENT OF SERVICES
2.1) Duties. During the Initial Term, Employee shall be employed as Senior
Vice President of Operations of the Corporation and/or such other positions to
which the Board of Directors of the Corporation may appoint Employee. During the
Additional Terms, Employee agrees to be employed in such position(s) determined
by mutual agreement between Employee and the Board of Directors of the
Corporation for each Additional Term. Employee shall have such responsibilities
as the Bylaws of the Corporation may assign to the person serving in such
position subject to the authority of the Board of Directors of the Corporation
or such other person(s) as such Boards of Directors may designate from time to
time. Employee further agrees to abide by reasonable rules, regulations,
policies and programs established by the Board of Directors of the Corporation
in performance of his duties.
2.2) Extent of Service. Employee shall devote his full time and attention
and energies to the business of the Corporation and its subsidiaries, perform
such services as shall be from time to time designated by the Board of Directors
and use his best efforts to promote the interests of the Corporation and its
subsidiaries.
ARTICLE 3
COMPENSATION
3.1) Base Salary. For each fiscal year of the Corporation during the
Initial Term, the Corporation shall pay Employee an annual base salary ("Base
Salary") in the amount set forth below opposite the applicable fiscal year or
such greater amount as may be determined by the Compensation Committee of the
Corporation's Board of Directors:
Fiscal Year Base Salary
May 15, 1995 - December 31, 1995 $48,750
January 1, 1996 - December 31, 1996 $84,240
January 1, 1997 - December 31, 1997 $90,979
The Base Salary to be paid to Employee during any Additional Term shall be
an amount mutually agreed upon between the parties and shall be set forth on an
exhibit to this Agreement which shall be signed by both parties. The Base Salary
shall be payable in accordance with the Corporation's normal payroll schedule
and shall be less any applicable withholding taxes and FICA contributions.
3.2) Bonus. During the Initial Term, the Corporation may, but is not
obligated to, pay Employee an annual bonus (the "Annual Bonus") consisting of
stock options or a cash payment or both the amounts of which shall be determined
by the Compensation Committee of the Board of Directors, based in part on the
extent to which the Company's financial results meet, exceed or fall short of
various goals established for each fiscal year by the Compensation Committee of
the Board of Directors. Any Annual Bonus earned by Employee shall be paid within
ninety (90) days after the end of the Corporation's fiscal year, less applicable
withholding taxes and FICA contributions. The Annual Bonus to be paid to
Employee during any Additional Term shall be an amount mutually agreed upon
between the parties and shall be set forth on an exhibit to this Agreement which
shall be signed by both parties.
3.3) Benefits. During the Term, Employee shall be eligible, at the
Corporation's expense, to participate in and to be covered by, each life
insurance, accident insurance, health insurance, disability insurance,
hospitalization or other plan, effective with respect to other officers of the
Corporation when Employee is eligible under the terms of any such plan, on the
same basis as shall be available to other officers of the Corporation. The
Corporation shall have the right to change the terms of any such plan in its
discretion from time to time. The Corporation shall provide Employee with such
increases to such benefits as are given to other officers of the Corporation.
Prior to termination of this Agreement, Employee shall have the right to
purchase at fair market value all policies of insurance which insure his life
and are owned by the Corporation or any subsidiary of the Corporation.
3.4) Vacation. During the Term, Employee shall be entitled to such
vacations as the Corporation and Employee may determine from time to time.
Employee shall not be compensated for unused vacation time, and any unused
vacation time shall be considered unearned and forfeited. For the purpose of
computing vacation time, the number of working days in a week shall be deemed to
be five (5) days and shall exclude Saturday and Sunday and any legal holiday on
which the offices of the Corporation are closed.
3.5) Business Expenses. During the Term, the Corporation shall reimburse
Employee for all ordinary and necessary business expenses incurred by Employee
in connection with the business of the Corporation and its subsidiaries and
consistent with the Corporation's policies in effect from time to time with
respect to travel, entertainment and other business expenses. Payment or
reimbursement to Employee shall be made upon submission by Employee of vouchers,
receipts or other evidence of such expense in a form reasonably satisfactory to
the Corporation and in compliance with applicable requirements of taxing
authorities. In the event the Board of Directors of the Corporation requests the
services of Employee outside the Mankato area, the Corporation shall reimburse
Employee for his reasonable transportation, lodging, and meal expense incurred
in compliance with such request.
3.6) Sick Pay. If Employee shall fail to render all of the services to the
Corporation or its subsidiaries provided for, or contemplated by, this Agreement
due to illness, physical or mental disability or incapacity ("Sick Leave"), the
Corporation shall pay Employee his Base Salary as provided in Section 3.1 ("Sick
Pay") for not more than twenty-six (26) weeks of Sick Leave. For the purpose of
computing Sick Leave and Sick Pay, the number of working days in a week for
Employee shall be deemed to be five (5) days and shall exclude Saturday and
Sunday. Employee shall not be compensated for unused Sick Pay or Sick Leave.
ARTICLE 4
TERMINATION
4.1) Termination. Subject to the provisions of Article 6, Employee's
employment under this Agreement may be terminated:
(a) By mutual written agreement of the parties;
(b) Upon the death of Employee;
(c) By the Corporation upon fifteen (15) days written notice to
Employee in the event that Employee, with reasonable
accommodation, cannot perform the essential functions of his job
as a result of a physical or mental disability. Nothing herein
shall limit the right of either party to terminate Employee's
employment under one of the other sections of Article 4 of this
Agreement. For purposes of this Agreement, "disability" shall
mean (i) Sick Leave for a period or periods aggregating
twenty-six (26) weeks, or (ii) permanent and total disability
whether physical or mental, to such extent that Employee is, and
will permanently be, incapable of performing the essential and
normal duties required to fulfill his obligations to the
Corporation. Disability for purposes of Section 4.1(c) (ii) shall
be determined by a physician designated by the Corporation's
Board of Directors. In the event of a dispute as to disability
pursuant to Section 4.1(c)(ii), Employee's designated physician
and the Corporation's designated physician shall select a third
physician who will make an independent judgment, which shall be
binding upon the parties.
(d) By Employee, upon sixty (60) days prior written notice to the
Corporation.
(e) By the Corporation, upon ten (10) days written notice to Employee
and a determination to terminate this Agreement "for cause." The
term "for cause" shall mean gross neglect of Employee's duties,
conduct demonstrably and materially detrimental to the business
reputation or goodwill of the Corporation or its subsidiaries,
dishonesty in any dealings between Employee and the Corporation
or between Employee and vendors or customers of the Corporation
or any of its subsidiaries, conviction of any crime punishable as
a felony involving moral turpitude or immoral conduct, being
under the influence of alcohol or illegal drugs while on the job,
refusal or failure to comply with directives, rules, regulations
or policies of the Corporation or its Board of Directors, or
violation of any term of this Agreement.
(f) By either party upon delivery of the Nonrenewal Notice as
provided in Section 1.2.
4.2) Continuation of Insurance Benefits. The insurance benefits provided to
Employee by the Corporation pursuant to Section 3.3 shall continue for (1) the
period of time during which the law requires continuation coverage, if
applicable, or (2) ninety (90) days after the termination date or for the period
of time required by the policy, whichever is less.
4.3) Delivery of Documents. Upon the end of the Term, whether voluntary or
involuntary, Employee agrees to promptly return to the Corporation all originals
and copies of business records, documents, other tangible property or
information relating in any way to the business of the Corporation or its
subsidiaries which have been received or generated by Employee or which came
into his possession during his employment by the Corporation.
ARTICLE 5
RESTRICTION AGAINST COMPETITION; CONFIDENTIALITY
5.1) Restriction Against Competition. Employee acknowledges that he is
being employed in a position of trust and confidence and will have access to and
become familiar with the unique methods, services and procedures used by the
Corporation and that as part of Employee's duties, he will develop and maintain
close working relationships with vendors, customers and employees of the
Corporation and its subsidiaries. Employee further acknowledges that the
Corporation and its subsidiaries, over the years, through goodwill, advertising,
honest business methods and aggressive promotion, have built a lucrative
business and obtained loyal vendors and customers. Employee further acknowledges
that disclosure of any of the Corporation's confidential or proprietary
information, trade secrets or other information relating to the operation of the
business of the Corporation or its subsidiaries or use of or access to such
information by the Corporation's competitors, could have a serious detrimental
effect upon the Corporation, the monetary loss from which would be difficult, if
not impossible, to measure. In consequence of the foregoing, Employee agrees:
(a) Noncompetition. During Employee's employment and for a period of
two (2) years after termination of Employee's employment, except
if such termination is pursuant to Article 6, Employee agrees to
not directly or indirectly plan, organize, participate in or
engage in any business competitive with any product or service
marketed by the Corporation or any of its subsidiaries, or
conspire with others to do so, in the State of Minnesota or any
other state in which the Corporation or its subsidiaries are
located or have plans on the termination date to open a location.
Employee acknowledges that he shall be prevented from engaging in
the business as an individual, shareholder, owner, partner,
director, officer, employee, agent, or salesman for any person,
corporation, partnership or other entity and agrees that he will
not finance, facilitate, promote or encourage any person to
initiate or continue in the prohibited business for the period
provided.
(b) Nonsolicitation of Customers. Employee agrees he will not, during
a two-year period after termination of his employment hereunder,
except if such termination is pursuant to Article 6, attempt to
divert any business of the Corporation or its subsidiaries by
soliciting, contacting, or communicating with any customers of
the Corporation or its subsidiaries with whom Employee, or
employees under his supervision, had contacts during the year
preceding termination of his employment or any persons or
entities who might reasonably be considered within the class of
customers actively solicited by the Corporation or its
subsidiaries.
(c) Nonsolicitation of Employees. Employee agrees he will not, during
a two-year period after termination of his employment, except if
such termination is pursuant to Article 6, solicit any present or
future employee of the Corporation or its subsidiaries for any
purpose of hiring or attempting to hire such employee, nor will
Employee in any manner attempt to persuade or encourage any of
the employees of the Corporation or its subsidiaries to
discontinue their employment with the Corporation or its
subsidiaries.
(d) Specific Performance and Injunctive Relief. Employee acknowledges
that the restrictions and covenants contained in this Article 5
are reasonable and necessary to protect the legitimate interests
of the Corporation. Employee understands and agrees that the
remedies at law for any violation of the restrictions or
covenants by this Article may be inadequate, that such violations
may cause irreparable injury within a short period of time and
that the Corporation shall be entitled to preliminary injunctive
relief and other injunctive relief against such violation without
the necessity of proving actual damages. Such injunctive relief
shall be in addition to and not in limitation of any and all
other remedies the Corporation shall have in law and at equity
for the enforcement of such restrictions and covenants. Nothing
herein provided shall be construed as prohibiting the Corporation
or Employee from pursuing any other remedies available in the
event of breach or threatened breach, including the recovery of
damages. And, in that regard, in the event that either the
Corporation or Employee shall violate any of the foregoing
provisions of this Article, the successful party shall have the
right to collect a reasonable attorney's fee for bringing such
legal or equitable action or otherwise enforcing the terms and
conditions of this Article.
(e) Confidential Information. Employee will not, during or after the
Term of this Agreement, directly or indirectly, disclose any of
the Corporation's confidential or proprietary information, trade
secrets or other information relating to the operation of the
business of the Corporation or its subsidiaries to any person,
firm, corporation, association, or other entity for any reason or
purpose whatsoever except the furtherance of the interests of the
Corporation or its subsidiaries, provided such information is,
through no fault of Employee, not otherwise in the public domain
or otherwise made known by the Corporation.
ARTICLE 6
CHANGE IN CONTROL
6.1) Change of Control Right. For a period of two (2) years following a
Change in Control, as defined in Section 6.6(b), Employee shall have the right,
at any time and within Employee's sole discretion, to terminate employment with
the Corporation for Good Reason, as defined in Section 6.6(d). Such termination
shall be accomplished by, and effective upon, Employee giving written notice to
the Corporation of Employee's decision to terminate. Except as otherwise
expressly provided in this Agreement, upon exercise of said right, all
obligations and duties of Employee under this Agreement shall be of no further
force and effect.
6.2) Change of Control Termination Payment. In the event of a Change in
Control Termination, as defined in Section 6.6(c), then, and without further
action by the Board of Directors, the Compensation Committee of the Board of
Directors, if any, or otherwise, the Corporation shall pay to Employee an amount
equal to Employee's cash compensation (including salary and bonuses paid,but
excluding cash or non-cash fringe benefits such as car allowances) for the two
fiscal years preceding such termination, which amount shall be paid by the
Company in 24 equal monthly installments beginning on the first day of the month
following the month in which such termination occurs with the remaining payments
made on the first day of each of the succeeding 23 months.
6.3) Waiver of Non-Competition and Non-Recruitment Provisions.
Notwithstanding any other provision or language in this Agreement or any other
agreement or undertaking by Employee, in the event of a Change of Control
Termination, there shall be no prohibition or restriction with respect to
Employee's subsequent activities and Employee shall be free to pursue any
commercial activity, including any which is directly or indirectly competitive
with, or involves any recruitment with respect to, any part of the Corporation's
business, including but not limited to the Corporation's customers, vendors,
suppliers and employees.
6.4) Interest. In the event the Corporation does not make timely payment of
the Change of Control Termination amounts described in Section 6.2, Employee
shall be entitled to receive interest on any unpaid amount at the prime rate of
interest (or such comparable index as may be adopted) established from time to
time by the Norwest Bank Minnesota, N.A., Minneapolis, Minnesota.
6.5) Attorneys' Fees. In the event Employee incurs any legal expense to
enforce or defend his rights under Article 6 of this Agreement, or to recover
damages for breach thereof, Employee shall be entitled to recover from the
Corporation any reasonable expenses for attorneys' fees and disbursements
incurred.
6.6) Definitions. For purposes of this Article 6, the following definitions
shall be applied:
(a) "Continuing Directors" shall mean the directors of the
Corporation as of the date of execution of this Agreement and any
new director whose election to the Board of Directors or
nomination for election to the Board of Directors is approved by
a vote of at least two-thirds (2/3) of the directors as of the
date of execution of this Agreement who are then still in office.
(b) "Change of Control" shall mean any of the following events unless
approved in advance by a majority of the Continuing Directors:
(i) the acquisition of direct or indirect beneficial ownership
(as defined in Rule 13d-3 under the Securities Exchange Act
of 1934) in the aggregate of securities of the Corporation
representing twenty percent (20%) or more of the total
combined voting power of the Corporation's then issued and
outstanding securities by any person or entity, or group of
associated persons or entities acting in concert, except for
the officers and directors of the Company as of the date
this agreement is executed; or
(ii) a merger or consolidation to which the Corporation is a
party if the individuals and entities who were shareholders
of the Corporation immediately prior to the effective date
of such merger or consolidation have beneficial ownership
(as defined in Rule 13d-3 under the Securities Exchange Act
of 1934) of less than fifty percent (50%) of the total
combined voting power for election of directors of the
surviving corporation following the effective date of such
merger or consolidation; or
(iii) the sale of the properties and assets of the Corporation,
substantially as an entirety, to any person or entity which
is not a wholly-owned subsidiary of the Corporation; or
(iv) the consummation of a plan of complete liquidation of the
Corporation or of an agreement for the sale or disposition
by the Corporation of all or substantially all of the
Corporation's business or assets; or
(v) a change in the composition of the Corporation's Board of
Directors at any time after the execution of this Agreement
such that the Continuing Directors cease for any reason to
constitute at least a seventy percent (70%) majority of the
Board.
(c) "Change of Control Termination" shall mean with respect to
Employee, any of the following events occurring within two (2)
years after a Change of Control:
(i) Termination of Employee's employment by the Corporation for
any reason, other than pursuant to Section 4.1(a) or (c),
except for conduct by Employee constituting a felony; or
(ii) Termination of employment with the Corporation by Employee
pursuant to Section 6.1. A Change of Control Termination by
Employee shall not include termination by reason of death.
(d) "Good Reason" shall mean a good faith determination by Employee,
in Employee's sole and absolute judgment, that one or more of the
following events has occurred, without Employee's express written
consent, after a Change of Control:
(i) A change in Employee's reporting responsibilities, titles or
offices as in effect immediately prior to the Change of
Control, or any removal of Employee from, or any failure to
re-elect Employee to, any of such positions, which has the
effect of diminishing Employee's responsibility or
authority;
(ii) A reduction by the Corporation in Employee's Base Salary or
Annual Bonus as in effect immediately prior to the Change of
Control or as the same may be increased from time to time;
(iii) The Corporation requiring Employee to be based anywhere
other than within twenty-five (25) miles of Employee's job
location at the time of the Change of Control;
(iv) Without replacement by a plan, program, or arrangement
providing benefits to Employee of the Corporation and its
subsidiaries equal to or greater than those discontinued or
adversely affected, the failure by the Corporation to
continue in effect, within its maximum stated term, any
pension, bonus, incentive, stock ownership, purchase,
option, life insurance, health, accident, disability, or any
other employee compensation or benefit plan, program or
arrangement, in which Employee is participating immediately
prior to a Change of Control or the taking of any action by
the Corporation that would adversely affect Employee's
participation or materially reduce Employee's benefits under
any of such plans, programs or arrangements;
(v) The taking of any action by the Corporation that would
materially or adversely affect the physical conditions
existing at the time of the Change of Control in or under
which Employee performs his employment duties;
(vi) The taking of any action by the Corporation that would
materially change the Corporation's business strategies or
practices existing at the time of the Change of Control,
including but not limited to changes in the types and brands
of products offered, advertising and promotion programs,
employment policies, and the segment to which the
Corporation markets its products; or
(vii) Termination of employment by the Corporation of any of the
officers or administrative support staff of the Corporation
or any of its subsidiaries who held such positions at the
time of the Change of Control.
ARTICLE 7
MISCELLANEOUS
7.1) Severability. If any term or provision of this Agreement shall be held
to be invalid or unenforceable for any reason, such term or provision shall be
ineffective to the extent of such invalidity or unenforceability without
invalidating the remaining terms or provisions of this Agreement. Without in any
way limiting the generality of the foregoing, if any provision of Article 5
shall be determined by any court of competent jurisdiction to be unenforceable
by reason of its extending for too long a period of time or over too great a
geographical area, such provision shall be interpreted to extend over only the
maximum period of time during which it may be enforced and to apply only to the
maximum geographical area in which it may be enforced, as the case may be.
7.2) Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient, if given in person or if in writing, sent by
certified mail, return receipt requested, to the last known residence address in
the case of Employee or to its principal office in the case of the Corporation.
7.3) Waiver of Breach. The waiver by either party hereto of the breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach by any party.
7.4) Entire Agreement. This Agreement contains the entire agreement of the
parties concerning the employment of Employee by the Corporation. This Agreement
may not be changed orally, but only by an agreement in writing signed by the
parties against whom enforcement of any waiver, change, modification, extension
or discharge is sought.
7.5) Governing Law. This Agreement shall be construed and interpreted
according to the laws of the State of Minnesota.
7.6) Headings. The captions set forth in this Agreement are for convenience
only and shall not be considered a part of this Agreement or in any way limiting
or amplifying the terms or provisions hereof.
7.7) Obligations Which Survive Termination. The obligations and remedies of
Sections 4.2, 4.3, 6.2 and Article 5 of this Agreement shall survive the
execution and termination of this Agreement, except as expressly otherwise
provided for in this Agreement.
7.8) Assignment. The Corporation may assign its rights and delegate its
responsibilities under this Agreement to any person or entity which acquires all
or substantially all of the operating assets of the Corporation by merger,
consolidation, dissolution, liquidation, combination, sale or transfer of assets
or otherwise. Employee may not assign any of his rights or obligations under
this Agreement.
7.9) Counterparts. This Agreement may be executed simultaneously into two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
XXXXXXX ELECTRONICS, INC.
By /s/ S. Xxxxxx Xxxxxxxx
Its Director
/s/ Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxx
