EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement, effective as of January 1, 1999, is by
and between BMC Industries, Inc., a Minnesota corporation located at Xxx
Xxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxxxx, Xxxxxxxxx 00000 (the "COMPANY") and
Xxxx X. Xxxxx, an individual residing at 0000 Xxxxxxxx Xxxx, Xxxxxxx Xxxx,
Xxxxxxxxx 00000 (the "EXECUTIVE").
A. The Executive has been employed as President and Chief Executive
Officer of the Company and has been serving as Chairman of the Board of
Directors of the Company (the "Board").
B. The parties wish to provide for the continuation of the existing
relationship on the terms hereinafter provided.
In consideration of the actual promises hereinafter set forth, the Company
and the Executive each intending to be legally bound, agree as follows:
1. DEFINITIONS. Capitalized terms used herein shall have the meanings
assigned to them in the Company's 1994 Stock Incentive Plan as in effect on the
effective date hereof (the "PLAN"), unless otherwise specifically defined
herein.
2. EMPLOYMENT.
(a) EMPLOYMENT. Subject to all of the terms and conditions of this
Agreement, the Company agrees to employ the Executive as its President,
Chief Executive Officer, and Chairman of the Board, and the Executive
accepts such employment.
(b) DUTIES. The Executive will perform his duties and obligations
hereunder on a full-time basis and, make the best use of Executive's
energy, knowledge and training in advancing the Company's interests.
Executive shall perform those services for the Company normally associated
and consistent with the titles and positions specified in Section 2(a)
which shall include, but not be limited to, the following:
(i) general and active management of the business strategy
and affairs of the Company, subject to the direction and
supervision of the Board;
(ii) participation with other officers and directors of the
Company in the establishment of policies of the Company;
(iii) presiding at meetings of the Board;
(iv) supervision of the tasks and duties of all of the
officers of the Company; and
(v) supervision of the employment and termination of
employment of all of the executive employees of the Company.
(c) Notwithstanding anything to the contrary contained in this
Agreement, nothing herein shall preclude Executive from devoting reasonable
periods of time to: (i) serving as a director or member of a committee of
any organization which does not involve a material conflict of interest
with the interests of the Company; (ii) engaging in charitable and
community activities; or (iii) managing his personal investments; PROVIDED,
HOWEVER, that such activities do not materially interfere with the
performance of his duties and responsibilities hereunder.
3. COMPENSATION. In consideration for all services to be rendered to the
Company, the Company agrees to compensate the Executive as follows:
(a) SALARY. The Company agrees to pay Executive a salary at a rate
of Four Hundred Thousand U.S. Dollars (U.S.$400,000) per year, increased
from time to time as the Board, in its sole discretion, may determine (the
"SALARY"). Such Salary will be paid no less often than semi-monthly in
accordance with the standard payroll practices of the Company.
(b) ANNUAL BONUS. In addition to the Salary, Executive will be
entitled to an annual bonus of a percentage of Executive's Deemed Base
Salary (as defined below in Section 3(b)(i)) then in effect (the "ANNUAL
BONUS") in accordance with the Company's management incentive bonus plan
(the "BONUS PLAN") applied in accordance with this Section 3(b). The Bonus
Plan shall be maintained during the term of this Agreement. For purposes
of this Agreement, the Bonus Plan will be operated consistent with past
practice, except that as applied to the Executive under this Agreement:
(i) The Executive's base salary, for purposes of
determining the Executive's Annual Bonus only, will be deemed to
be Four Hundred Twenty Five Thousand U.S. Dollars (U.S.$425,000)
(the "DEEMED BASE SALARY"); provided, that, such Deemed Base
Salary will be increased by any amount by which the Salary is
increased; and
(ii) the Bonus Plan will be structured to provide the
opportunity to yield an Annual Bonus determined by that formula
set forth as Schedule A hereto (as amended each year to reflect
annual changes to the corporate performance target earnings
requirement).
(c) RESTRICTED STOCK AWARD. Executive shall receive a Restricted
Stock Award with a Fair Market Value of Fifty Thousand U.S. Dollars
(U.S.$50,000) on the date of such Award (the "STOCK AWARD"), effective upon
approval thereof by the Board. The Stock Award shall be subject to and
represented by an agreement in form and substance customarily entered into
upon the making of similar Restricted Stock Awards (the "AWARD AGREEMENT"),
which shall contain such restrictions as have customarily applied
previously to Restricted Stock Awards, but such restrictions shall lapse on
December 31, 2000. The parties agree to promptly enter into any such
agreement.
(d) STOCK OPTIONS. Executive will receive a Non-Statutory Stock
Option (the "OPTION") under the Plan to purchase Three Hundred Thousand
(300,000) shares of the
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Company's Common Stock, effective upon approval thereof by the Board. The
Option shall be subject to and represented by an agreement in form and
substance customarily entered into upon the making of Non-Statutory Stock
Options (the "OPTION AGREEMENT"). The parties agree to promptly enter into
any such agreement. Notwithstanding the foregoing, the Option (and
correspondingly, the Option Agreement) will have an exercise price equal to
100% of the Fair Market Value of the Common Stock on the date of the grant
as determined under the Plan and will provide that it becomes fully vested
and exercisable in whole or in part on December 31, 2000, subject to any
customarily applicable forfeiture/vesting provisions contained in the
Option Agreement and Change of Control Agreement (as defined in
Section 4(b)(iv) hereof).
(e) EXTENSION OF STOCK OPTION EXERCISE PERIOD. All Non-Statutory
Stock Options previously granted to Executive shall be amended to provide,
and the Option granted under Section 3(d) shall provide, effective upon
approval by the Board, that the period during which the Executive may
exercise all such Options shall continue for a period of 365 days from the
date of any termination of Executive's employment with the Company, to the
extent such Options by their terms are otherwise exercisable and would not
otherwise expire or lapse, prior to the end of such period. Any agreement
representing such Options shall be revised to reflect such amendment.
(f) REIMBURSEMENT OF BUSINESS EXPENSES. The Company agrees to
reimburse the Executive for all reasonable out-of-pocket business expenses
incurred by the Executive on behalf of the Company, provided that the
Executive appropriately accounts to the Company for all such expenses in
accordance with the rules and regulations of the Internal Revenue Service
under the Internal Revenue Code of 1986, as amended (the "CODE"), if
applicable, and in accordance with the standard policies of the Company
relating to reimbursement of business expenses.
(g) BENEFITS AND VACATION.
(i) The Executive is entitled to participate in all benefit
plans and policies now in effect or hereafter adopted by the
Company to the extent that the terms of such benefit plans permit
the Executive to participate therein, including without
limitation, the Company's: Executive Perk/Flex Plan, physical
examination plan, Stock Option Exercise Loan Program, 401(k)
savings plan, profit sharing plan, non-qualified benefit
equalization plan, Change of Control Agreement (as defined in
Section 4(b)(iv) hereof), and all existing grants or awards to
Executive under the Plan. The Executive's benefits under the
Perk/Flex Plan will be determined using the Deemed Base Salary.
(ii) The Executive is entitled to an amount of paid vacation
as is consistent with and does not otherwise interfere with
Executive's duties hereunder and to all legal holidays observed
by the Company, in each case, in accordance with the Company's
policies as in effect from time-to-time.
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4. TERM AND TERMINATION.
(a) TERM. Subject to earlier termination in accordance with Section
4(b) below, this Agreement will become effective as of January 1, 1999 and
will have an initial term of two (2) years, concluding on December 31,
2000. This Agreement will be automatically renewed for successive one (1)
year periods after such initial term, unless and until terminated by either
party effective as of the end of such initial term, or successive one-year
renewal period, on not less than sixty (60) days' written notice before the
end of such initial term or any such successive one-year renewal period.
(b) TERMINATION.
(i) The Company may terminate this Agreement immediately on
written notice to the Executive "for cause". For purposes of
this Agreement, "for cause" means: (A) an act or acts of personal
dishonesty taken by Executive and intended to result in
substantial personal enrichment of Executive at the expense of
the Company; (B) repeated violations by Executive of his
obligations under Section 2(b) which are demonstrably willful and
deliberate on Executive's part and which are not remedied within
a reasonable period after Executive's receipt of notice of such
violations from the Company or (C) the willful engaging by
Executive in illegal conduct that is materially and demonstrably
injurious to the Company. For purposes of this Section 4(b)(i),
no act, or failure to act, on Executive's part shall be
considered "dishonest," "willful" or "deliberate" unless done, or
omitted to be done, by Executive in bad faith and without
reasonable belief that Executive's action or omission was in, or
not opposed to, the best interest of the Company. Any act, or
failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or based upon the advice of
counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by Executive in good faith and in
the best interests of the Company;
(ii) This Agreement will terminate upon Executive's death or
upon written notice from the Company in the event of Executive's
"permanent disability" (defined as the unwillingness or inability
of the Executive to perform his duties hereunder because of
incapacity due to physical or mental illness, bodily injury or
disease for a period of (180) consecutive days);
(iii) The parties may at any time terminate this Agreement by
mutual agreement in writing; and
(iv) The Executive may terminate this Agreement as provided
for in the Change of Control Agreement between the Executive and
the Company dated as of May 9, 1991 (the "CHANGE OF CONTROL
AGREEMENT").
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The date this Agreement is terminated is hereinafter referred to as the
"TERMINATION DATE."
(c) COMPENSATION UPON TERMINATION.
(i) If the Company terminates this Agreement "for cause"
pursuant to Section 4(b)(i), the Company will be obligated to pay
the Executive only the Salary as may be due and owing through the
Termination Date, and all other non-contingent compensation
earned and accrued up through the Termination Date which will
specifically not include any Annual Bonus, or any part thereof.
Such Salary and other amounts will be paid in one lump sum within
ten (10) business days after the Termination Date. The
Executive's rights to the Stock Award, Option and all other
benefits available to Executive shall be as provided for in the
Plan, and the other agreements, plans and policies governing each
such right and benefit.
(ii) If this Agreement is terminated in accordance with
Section 4(a) or pursuant to Section 4(b)(ii), the Company will be
obligated to pay the Employee the Salary which may be due and
owing through the Termination Date, and all other non-contingent
compensation earned and accrued through the Termination Date.
Such Salary and other amounts will be paid in one lump sum within
ten (10) business days of the Termination Date. In addition, the
Executive shall be entitled to the Annual Bonus, if any, with
respect to the fiscal year in which such termination occurs;
provided, that, in the case of termination pursuant to Section
4(b)(ii), such Annual Bonus shall be pro-rated in an amount equal
to the total amount of the Annual Bonus which would have been
payable to the Executive had this Agreement not so terminated,
multiplied by a fraction, the numerator of which equals the
number of complete or partial calendar months from the beginning
of such fiscal year during which this Agreement terminates
through the Termination Date, and the denominator of which is
twelve (12). Such Annual Bonus (or pro-rata share thereof) shall
be paid as and when contemplated under the Bonus Plan
notwithstanding that the Termination Date may have previously
occurred. The Executive's rights to the Stock Award, Option and
all other benefits available to Executive shall be as provided
for in the Plan, and the other agreements, plans and policies
governing each such right and benefit.
(iii) If the Company terminates the Agreement in accordance
with Section 4(a), the Company will be obligated to pay the
Executive his base salary for one year after the Termination
Date. Such salary shall be paid in twelve (12) equal monthly
installments, with the first such payment due on the last day of
the month containing the Termination Date. This Payment is in
addition to the payments required by Section 4(c)(ii).
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(iv) If this Agreement terminates pursuant to Section
4(b)(iii), the Executive shall be entitled to payments as
provided in Section 4(c)(ii) above unless the parties otherwise
mutually agree in writing.
(v) If this Agreement is terminated in accordance with
Section 4(b)(iv), or the Executive's employment with the Company
is terminated under circumstances when the Change of Control
Agreement is applicable, the Executive shall be compensated
solely as provided for in the Change of Control Agreement, and
any conflict between this Agreement and the Change of Control
Agreement shall in such case be governed by the Change of Control
Agreement.
5. NON-COMPETITION; CONFIDENTIALITY.
(a) NON-COMPETITION. Executive agrees that during the term of this
Agreement and for a period of two (2) years following the Termination Date,
Executive will not directly or indirectly, alone or as a partner, officer,
director, shareholder, member, employee, independent contractor or in any
other capacity of or with respect to any other firm or entity, engage in
any commercial activity, in any location where the Company has operations,
sales, customers or otherwise does business, in competition with any part
of the Company's business as conducted during the term of this Agreement.
Such business includes, without limitation, the design, manufacture and
distribution of ophthalmic lenses, aperture masks and precision
photo-etched metal parts, specialty printed circuits, electroformed
components. Notwithstanding the foregoing, the competition restrictions in
this Section 5 shall not apply to any part of the Company's business that
represented less than five percent (5%) of its consolidated revenues during
the most recently completed fiscal year preceding the Termination Date.
For purposes of this Section 5(a) "shareholder" shall not include
beneficial ownership of five percent (5%) or less of the combined voting
power of all issued and outstanding voting securities of a publicly held
corporation whose stock is traded on a major stock exchange or quoted on
NASDAQ.
(b) CONFIDENTIALITY. The Executive agrees not to directly or
indirectly disclose or use at any time, either during or subsequent to his
employment by the Company and any of its subsidiaries or affiliates (which
obligation will survive indefinitely), any technology, trade secrets,
know-how, or other information, knowledge, or data possessed or used by the
Company or to which the Executive gains access in connection with his
employment and which the Company deems confidential or proprietary or which
the Executive has reason to believe is confidential or proprietary, except
as such disclosure or use may be required in connection with his work for
the Company or unless the Executive first secures the written consent of
the Company; provided, that the foregoing shall not prohibit the Executive
only from retaining and using documents and reports of the Company relating
to management, operational or strategic activities of the Company as
formats or templates for the creation of other documents or reports for
parties other than the Company for whom the Executive is then providing
services. The foregoing proviso shall in no event, however, be deemed to
permit the Executive (i) to retain any documentation relating to any
intellectual property or technological information of the
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Company or (ii) to disclose or make available to any other party actual (A)
identifying information (including name, position, age or gender) with
respect to any personnel or human resource information, or (B) detailed
information relating to the operational, strategic or financial condition,
plans or performance of the Company.
Subject to the foregoing, upon termination of his employment with the
Company, the Executive will promptly return to the Company all originals
and all copies of all property and assets of the Company created or
obtained by the Executive as a result of or in the course of or in
connection with his employment with the Company which are in the
Executive's possession or control, whether confidential or not. The
obligations under this Section 5 will not apply to any information that is
now or becomes generally available to the public through no fault of
Executive or to Executive's disclosure of any information required by law
or judicial or administrative process.
6. MISCELLANEOUS.
(a) NO ADEQUATE REMEDY. The Executive understands that if the
Executive fails to fulfill Executive's obligations under Section 5 of this
Agreement, the damages to the Company would be very difficult to determine.
Therefore, in addition to any rights or remedies available to the Company
at law, in equity, or by statute, the Executive hereby consents to the
specific enforcement of Section 5 of this Agreement by the Company through
an injunction or restraining order issued by an appropriate court.
(b) CONSENT TO USE OF NAME. The Executive consents to the use of
Executive's name in appropriate Company materials such as, but not limited
to, offering memoranda related to financing activities of the Company.
(c) NO CONFLICTS. Each party represents and warrants to the other
that neither the entering into of this Agreement nor the performance of any
obligations hereunder will conflict with or constitute a breach under any
obligation of such party, as the case may be, under any agreement or
contract to which such party is a party or any other obligation by which
such party is bound.
(d) SUCCESSORS AND ASSIGNS. Subject to provisions of the Change of
Control Agreement, this Agreement is binding on and inures to the benefit
of the Company's successors and assigns. This Agreement is also binding
on, and all rights of Executive hereunder shall inure to the benefit of and
be enforceable by, the Executive's heirs, successors, assigns and legal
representatives. If Executive should die while any amounts would still be
payable to Executive hereunder if Executive had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to Executive's devisee, legatee, or other
designee or, if there be no such designee, to Executive's estate.
Executive may not assign this Agreement, in whole or in any part, without
the prior written consent of the Company.
(e) MODIFICATION. This Agreement may be modified or amended only by
a writing signed by the Company and the Executive.
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(f) GOVERNING LAW. The laws of Minnesota will govern the validity,
remedies, interpretation, enforcement, construction, and performance of
this Agreement. Subject to Section 6(g), any legal proceeding related to
this Agreement will be brought in an appropriate Minnesota court or federal
court setting in Minnesota, and the Company and the Executive hereby
consent to the exclusive jurisdiction of that court for this purpose.
(g) DISPUTE RESOLUTION. Except for any proceeding brought pursuant
to Section 6(a) herein, the parties agree that any dispute arising out of
or relating to this Agreement or the formation, breach, termination or
validity thereof (a "DISPUTE"), will be resolved as follows. If the
Dispute cannot be settled through direct discussions, the parties will
first try to settle the Dispute in an amicable manner by mediation under
the Commercial Mediation Rules of the American Arbitration Association,
before resorting to arbitration. Any Dispute that has not been resolved
within sixty (60) days of the initiation of the mediation procedure (the
"MEDIATION DEADLINE") will be settled by binding arbitration by a panel of
three arbitrators in accordance with the commercial arbitration rules of
the American Arbitration Association. The arbitration and mediation
proceedings will be located in Minneapolis, Minnesota. The arbitrators are
not empowered to award damages in excess of compensatory damages and each
party hereby irrevocably waives any damage in excess of compensatory
damages. Judgment upon any arbitration award may be entered into any court
having jurisdiction thereof and the parties' consent to the jurisdiction of
the courts the state in which the arbitration occurred for this purpose.
(h) CONSTRUCTION. Whenever possible, each provision of this Agreement
will be interpreted so that it is valid under the applicable law. If any
provision of this Agreement is to any extent declared invalid by a court of
competent jurisdiction under the applicable law, that provision will remain
effective to the extent not declared invalid. The remainder of this
Agreement also will continue to be valid, and the entire Agreement will
continue to be valid in other jurisdictions.
(i) WAIVERS. No failure or delay by the Company or the Executive in
exercising any right or remedy under this Agreement will waive any
provision of the Agreement. Nor will any single or partial exercise by
either the Company or the Executive of any right or remedy under this
Agreement preclude either of them from otherwise or further exercising
these rights or remedies, or any other rights or remedies granted by any
law or any related document.
(j) ENTIRE AGREEMENT. This Agreement supersedes all previous and
contemporaneous oral negotiations, commitments, writings and understandings
between the parties concerning the matters in this Agreement, including
without limitation any policy or personnel manuals of the Company, except
to the extent this Agreement otherwise provides with respect to the Plan,
the Option Agreement, the Award Agreement, the Change of Control Agreement,
and the benefits described in Section 3(g).
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(k) NOTICES. All notices, requests, demands and other communications
required or permitted under this Agreement will be in writing and be
personally delivered or sent by registered first-class mail, postage
prepaid, and will be effective upon delivery, if personally delivered, and
five days after mailing to the addresses stated at the beginning of this
Agreement, if so mailed. These addresses may be changed at any time by
like notice.
(l) COUNTERPARTS. This Agreement may be executed in one (1) or more
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one (1) and the same instrument.
(m) SURVIVAL. The parties expressly acknowledge and agree that the
provisions of this Agreement which by their express or implied terms extend
beyond the termination of Executive's employment hereunder including,
without limitation, the provisions of Section 4(c) (relating to
compensation) or beyond the termination of this Agreement (including,
without limitation, the provisions of Section 5 (relating to
non-competition and confidential information), shall continue in full force
and effect notwithstanding Executive's termination of employment hereunder
or the termination of this Agreement, respectively.
(n) WITHHOLDING. To the extent required by any applicable law,
including, without limitation, any federal or state income tax or excise
tax law or laws, the Federal Insurance Contributions Act, the Federal
Unemployment Tax Act or any comparable federal, state or local laws, the
Company retains the right to withhold such required portion of any amount
or amounts payable to Executive under this Agreement as the Company (on the
written advice of outside counsel that is disclosed to Executive) deems
necessary.
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the date first above written.
BMC INDUSTRIES, INC. EXECUTIVE
By: /s/Xxxxxxx X. Xxxxxxx /s/Xxxx X. Xxxxx
------------------------- ---------------------------
Xxxxxxx X. Xxxxxxx Xxxx X. Xxxxx
Title: Vice President Finance and
Administration and CFO
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