EXHIBIT 10.26
MANAGEMENT AGREEMENT
This Management Agreement (this "Agreement") is entered into as
of August 14, 2002, by and between Fair, Xxxxx and Company, Incorporated, a
Delaware corporation (the "Company"), and _________ ("Executive").
WHEREAS, Executive is a key member of the management of the
Company and has heretofore devoted substantial skill and effort to the affairs
of the Company; and
WHEREAS, it is desirable and in the best interests of the Company
and its shareholders to continue to obtain the benefits of Executive's services
and attention to the affairs of the Company; and
WHEREAS, it is desirable and in the best interests of the Company
and its shareholders to provide inducement for Executive (A) to remain in the
service of the Company in the event of any proposed or anticipated change in
control of the Company and (B) to remain in the service of the Company in order
to facilitate an orderly transition in the event of a change in control of the
Company, without regard to the effect such change in control may have on
Executive's employment with the Company; and
WHEREAS, it is desirable and in the best interests of the Company
and its shareholders that Executive be in a position to make judgments and
advise the Company with respect to proposed changes in control of the Company;
and
WHEREAS, the Executive desires to be protected in the event of
certain changes in control of the Company; and
WHEREAS, for the reasons set forth above, the Company and
Executive desire to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, the Company and Executive agree as
follows:
1. EVENTS. No amounts or benefits shall be payable or provided for
pursuant to this Agreement unless an Event shall occur during the Term of this
Agreement.
(a) For purposes of this Agreement, an "Event" shall be
deemed to have occurred if any of the following occur:
(i) Any "person" (as defined in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as
amended, or any successor statute thereto (the
"Exchange Act")) acquires or becomes a
"beneficial owner" (as defined in Rule 13d-3 or
any successor rule under the Exchange Act),
directly or indirectly, of securities of the
Company representing 30% or more of the combined
voting power of the Company's securities
entitled to vote generally in the election of
directors ("Voting Securities") then outstanding
or 30% or more of the shares of common stock of
the Company ("Common Stock") outstanding,
provided, however, that the following shall not
constitute an Event pursuant to this Section
1(a)(i):
(A) any acquisition or beneficial ownership
by the Company or a subsidiary of the
Company;
(B) any acquisition or beneficial ownership
by any employee benefit plan (or related
trust) sponsored or maintained by the
Company or one or more of its
subsidiaries;
(C) any acquisition or beneficial ownership
by any corporation (including without
limitation an acquisition in a
transaction of the nature described in
Section 1(a)(ii)) with respect to which,
immediately following such acquisition,
more than 70%, respectively, of (x) the
combined voting power of the Company's
then outstanding Voting Securities and
(y) the Common Stock is then
beneficially owned, directly or
indirectly, by all or substantially all
of the persons who beneficially owned
Voting Securities and Common Stock,
respectively, of the Company immediately
prior to such acquisition in
substantially the same proportions as
their ownership of such Voting
Securities and Common Stock, as the case
may be, immediately prior to such
acquisition; or
(D) any acquisition of Voting Securities or
Common Stock directly from the Company;
and
Continuing Directors shall not constitute a majority of
the members of the Board of Directors of the Company.
For purposes of this Section 1(a)(i), "Continuing
Directors" shall mean: (A) individuals who, on the date
hereof, are directors of the Company, (B) individuals
elected as directors of the Company subsequent to the
date hereof for whose election proxies shall have been
solicited by the Board of Directors of the Company or
(C) any individual elected or appointed by the Board of
Directors of the Company to fill vacancies on the Board
of Directors of the Company caused by death or
resignation (but not by removal) or to fill
newly-created directorships, provided that a "Continuing
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Director" shall not include an individual whose initial
assumption of office occurs as a result of an actual or
threatened election contest with respect to the
threatened election or removal of directors (or other
actual or threatened solicitation of proxies or
consents) by or on behalf of any person other than the
Board of Directors of the Company; or
(ii) Consummation of a reorganization, merger or
consolidation of the Company or a statutory exchange of
outstanding Voting Securities of the Company (other than
a merger or consolidation with a subsidiary of the
Company), unless immediately following such
reorganization, merger, consolidation or exchange, all
or substantially all of the persons who were the
beneficial owners, respectively, of Voting Securities
and Common Stock immediately prior to such
reorganization, merger, consolidation or exchange
beneficially own, directly or indirectly, more than 70%
of, respectively, (x) the combined voting power of the
then outstanding voting securities entitled to vote
generally in the election of directors of the
corporation resulting from such reorganization, merger,
consolidation or exchange and (y) the then outstanding
shares of common stock of the corporation resulting from
such reorganization, merger, consolidation or exchange
in substantially the same proportions as their
ownership, immediately prior to such reorganization,
merger, consolidation or exchange, of the Voting
Securities and Common Stock, as the case may be; or
(iii) (x) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company or
(y) the sale or other disposition of all or
substantially all of the assets of the Company (in one
or a series of transactions), other than to a
corporation with respect to which, immediately following
such sale or other disposition, more than 70% of,
respectively, (1) the combined voting power of the then
outstanding voting securities of such corporation
entitled to vote generally in the election of directors
and (2) the then outstanding shares of common stock of
such corporation is then beneficially owned, directly or
indirectly, by all or substantially all of the persons
who were the beneficial owners, respectively, of the
Voting Securities and Common Stock immediately prior to
such sale or other disposition in substantially the same
proportions as their ownership, immediately prior to
such sale or other disposition, of the Voting Securities
and Common Stock, as the case may be; or
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(iv) A majority of the members of the Board of Directors of
the Company shall have declared that an Event has
occurred or that an Event will occur upon satisfaction
of specified conditions, in which case the Event shall
be deemed to occur upon satisfaction of such specified
conditions; or
(v) The Company enters into a letter of intent, an agreement
in principle or a definitive agreement relating to an
Event described in Section 1(a)(i), 1(a)(ii) or
1(a)(iii) hereof that ultimately results in such an
Event, or a tender or exchange offer or proxy contest is
commenced which ultimately results in an Event described
in Section 1(a)(i) hereof; or
(vi) There shall be an involuntary termination of employment
of the Executive or Termination for Good Reason (as
defined in Section 4(c)), and the Executive reasonably
demonstrates that such event (x) was requested by a
party other than the Board of Directors of the Company
that had previously taken other steps reasonably
calculated to result in an Event described in Section
1(a)(i), 1(a)(ii), 1(a)(iii) or 1(a)(iv) hereof and
which ultimately results in an Event described in
Section 1(a)(i), 1(a)(ii), 1(a)(iii) or 1(a)(iv) hereof,
or (y) otherwise arose in connection with or in
anticipation of an Event described in Section 1(a)(i),
1(a)(ii), 1(a)(iii) or 1(a)(iv) hereof that ultimately
occurs.
Notwithstanding anything stated in this Section 1(a), an Event shall not
be deemed to occur with respect to Executive if (x) the acquisition or
beneficial ownership of the 30% or greater interest referred to in
Section 1(a)(i) is by Executive or by a group, acting in concert, that
includes Executive or (y) a majority of the then combined voting power
of the then outstanding voting securities (or voting equity interests)
of the surviving corporation or of any corporation (or other entity)
acquiring all or substantially all of the assets of the Company shall,
immediately after a reorganization, merger, exchange, consolidation or
disposition of assets referred to in Section 1(a)(ii) or 1(a)(iii), be
beneficially owned, directly or indirectly, by Executive or by a group,
acting in concert, that includes Executive.
(b) For purposes of this Agreement, a "subsidiary" of the Company
shall mean any entity of which securities or other ownership interests
having general voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time
directly or indirectly owned by the Company.
2. PAYMENTS AND BENEFITS. If any Event shall occur during the Term
of this Agreement, then the Executive shall be entitled to receive from the
Company or its successor (which term as used herein shall include any person
acquiring all or substantially all of the assets of
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the Company) a cash payment and other benefits on the following basis (unless
the Executive's employment by the Company is terminated voluntarily or
involuntarily prior to the occurrence of the earliest Event to occur (the "First
Event"), in which case Executive shall be entitled to no payment or benefits
under this Section 2):
(a) If at the time of, or at any time after, the occurrence
of the First Event and prior to the end of the Transition Period, the
employment of Executive with the Company is voluntarily or involuntarily
terminated for any reason (unless such termination is a voluntary
termination by Executive other than for Good Reason, is on account of
the death or Disability of the Executive or is a termination by the
Company for Cause), subject to the limitations set forth in Sections
2(d) and 2(e), Executive shall be entitled to the following:
(i) The Company shall pay Executive's full base
salary through the Termination Date at the rate
then in effect.
(ii) The Company or its successor, within 90 days
after the Termination Date, shall make a cash
payment to Executive in an amount equal to one
(1) times the sum of (A) the annual base salary
of Executive in effect immediately prior to the
First Event plus (B) the cash bonus or cash
incentive compensation received by the Executive
from the Company for the fiscal year preceding
the First Event.
(iii) For a 12-month period after the Termination
Date, the Company shall allow Executive to
participate in any health, disability and life
insurance plan or program in which the Executive
was entitled to participate immediately prior to
the First Event as if Executive were an employee
of the Company during such 12-month period;
provided, however, that in the event that
Executive's participation in any such health,
disability or life insurance plan or program of
the Company is barred, the Company, at its sole
cost and expense, shall arrange to provide
Executive with benefits substantially similar to
those which Executive would be entitled to
receive under such plan or program if Executive
were not barred from participation. Benefits
otherwise receivable by Executive pursuant to
this section 2(a)(iii) shall be reduced to the
extent comparable benefits are received by
Executive from another employer or other third
party during such 12-month period, and Executive
shall promptly report receipt of any such
benefits to the Company.
(iv) Any outstanding and unvested stock options
granted to Executive shall be accelerated and
become immediately exercisable by Executive (and
shall remain exercisable for the terms specified
in the applicable stock option agreements) and
any restricted stock awarded
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to Executive and subject to forfeiture shall be
fully vested and shall no longer be subject to
forfeiture.
(b) The Company shall also pay to Executive all legal fees
and expenses incurred by the Executive as a result of such termination,
including, but not limited to, all such fees and expenses, if any,
incurred in contesting or disputing any such termination or in seeking
to obtain or enforce any right or benefit provided by this Agreement.
(c) In addition to all other amounts payable to Executive
under this Section 2, Executive shall be entitled to receive all
benefits payable to Executive under any other plan or agreement relating
to retirement benefits.
(d) Executive shall not be required to mitigate the amount
of any payment or other benefit provided for in Section 2 by seeking
other employment or otherwise, nor shall the amount of any payment or
other benefit provided for in Section 2 be reduced by any compensation
earned by Executive as the result of employment by another employer
after the Termination Date or otherwise, except as specifically provided
in this Agreement.
(e) Notwithstanding any other provision of this Agreement,
the Company will not pay to Executive, and Executive will not be
entitled to receive, any payment pursuant to Section 2(a)(ii) unless and
until:
(i) Executive executes, and there shall be effective
following any statutory period for revocation or
rescission, a release that irrevocably and
unconditionally releases the Company, any
company acquiring the Company or its assets, and
their past and current shareholders, directors,
officers, employees and agents from and against
any and all claims, liabilities, obligations,
covenants, rights and damages of any nature
whatsoever, whether known or unknown,
anticipated or unanticipated; provided, however,
that the release shall not adversely affect
Executive's rights to receive benefits to which
he is entitled under this Agreement or
Executive's rights to indemnification under
applicable law, the charter documents of the
Company, any insurance policy maintained by the
Company or any written agreement between the
Company and Executive; and
ii) Executive executes an agreement prohibiting
Executive for a period of one (1) year following
the Termination Date from soliciting, recruiting
or inducing, or attempting to solicit, recruit
or induce, any employee of the Company or of any
company acquiring the Company or its assets to
terminate the employee's employment.
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(f) The obligations of the Company under this Section 2
shall survive the termination of this Agreement.
3. CERTAIN REDUCTION OF PAYMENTS BY THE COMPANY.
(a) Notwithstanding anything contained herein to the
contrary, prior to the payment of any amounts pursuant to Section 2(a)
hereof, an independent national accounting firm designated by the
Company (the "Accounting Firm") shall compute whether there would be any
"excess parachute payments" payable to Executive, within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code"), taking into account the total "parachute payments," within the
meaning of Section 280G of the Code, payable to Executive by the Company
or any successor thereto under this Agreement and any other plan,
agreement or otherwise. If there would be any excess parachute payments,
the Accounting Firm will compute the net after-tax proceeds to
Executive, taking into account the excise tax imposed by Section 4999 of
the Code, if (i) the payments hereunder were reduced, but not below
zero, such that the total parachute payments payable to Executive would
not exceed three (3) times the "base amount" as defined in Section 280G
of the Code, less One Dollar ($1.00), or (ii) the payments hereunder
were not reduced. If reducing the payments hereunder would result in a
greater after-tax amount to Executive, such lesser amount shall be paid
to Executive. If not reducing the payments hereunder would result in a
greater after-tax amount to Executive, such payments shall not be
reduced. The determination by the Accounting Firm shall be binding upon
the Company and Executive subject to the application of Section 3(b)
hereof.
(b) As a result of uncertainty in the application of
Sections 280G of the Code, it is possible that excess parachute payments
will be paid when such payment would result in a lesser after-tax amount
to Executive; this is not the intent hereof. In such cases, the payment
of any excess parachute payments will be void ab initio as regards any
such excess. Any excess will be treated as an overpayment by the Company
to Executive. Executive will return the overpayment to the Company,
within fifteen (15) business days of any determination by the Accounting
Firm that excess parachute payments have been paid when not so intended,
with interest at an annual rate equal to the rate provided in Section
1274(d) of the Code (or 120% of such rate if the Accounting Firm
determines that such rate is necessary to avoid an excise tax under
Section 4999 of the Code) from the date Executive received the excess
until it is repaid to the Company.
(c) All fees, costs and expenses (including, but not limited
to, the cost of retaining experts) of the Accounting Firm shall be borne
by the Company and the Company shall pay such fees, costs, and expenses
as they become due. In performing the computations required hereunder,
the Accounting Firm shall assume that taxes will be paid for state and
federal purposes at the highest possible marginal tax rates which could
be applicable to Executive in the year of receipt of the payments,
unless Executive agrees otherwise.
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4. DEFINITION OF CERTAIN ADDITIONAL TERMS.
(a) "Cause" shall mean, and be limited to, (i) willful and
gross neglect of duties by the Executive or (ii) an act or acts
committed by the Executive constituting a felony and substantially
detrimental to the Company or its reputation.
(b) "Disability" shall mean Executive's absence from his
duties with the Company on a full time basis for 180 consecutive
business days, as a result of Executive's incapacity due to physical or
mental illness, unless within 30 days after written notice of intent to
terminate is given by the Company following such absence Executive shall
have returned to the full time performance of Executive's duties.
(c) "Good Reason" shall mean if, without Executive's express
written consent, any of the following shall occur:
(i) the assignment to Executive of any material
duties inconsistent with Executive's status or
position with the Company, or any other action
by the Company that results in a substantial
diminution in such status or position, excluding
any isolated, insubstantial, or inadvertent
action not taken in bad faith and which is
remedied by the Company promptly after receipt
of notice thereof from Executive;
notwithstanding the foregoing, a change in title
and/or reporting relationship alone shall not
constitute a substantial diminution in an
Executive's status or position.
(ii) a material reduction by the Company in
Executive's annual base salary or target
incentive in effect immediately prior to the
First Event;
(iii) the failure by the Company to continue to
provide Executive with benefits at least as
favorable in the aggregate to those enjoyed by
Executive under the Company's pension, life
insurance, medical, health and accident,
disability, deferred compensation, incentive
awards, employee stock options or savings plans
in which Executive was participating at the time
of the First Event, the taking of any action by
the Company that would directly or indirectly
materially reduce any of such benefits or
deprive Executive of any material fringe benefit
enjoyed at the time of the First Event, or the
failure by the Company to provide Executive with
the number of paid vacation days to which
Executive is entitled at the time of the First
Event, but excluding any failure or action by
the Company that is not taken in bad faith and
which is remedied by the Company promptly after
receipt of notice thereof from Executive; or
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(iv) the Company requiring Executive to relocate to
any place other than a location within forty
miles of the location at which Executive
performed his primary duties immediately prior
to the First Event or, if Executive is based at
the Company's principal executive offices, the
relocation of the Company's principal executive
offices to a location more than forty miles from
its location immediately prior to the First
Event, except for required travel on the
Company's business to an extent substantially
consistent with Executive's prior business
travel obligations;
(v) the failure of the Company to obtain agreement
from any successor to assume and agree to
perform this Agreement, as contemplated in
Section 5(b).
(d) As used herein, other than in Section 1(a) hereof, the
term "person" shall mean an individual, partnership, corporation,
estate, trust or other entity.
(e) "Termination Date" shall mean the date of termination of
Executive's employment, which in the case of termination for Disability
shall be the 30th day after notice is given as required in Section 4(b).
(f) "Transition Period" shall mean the one-year period
commencing on the date of the earliest to occur of an Event described in
Section 1(a)(i), 1(a)(ii), 1(a)(iii) or 1(a)(iv) hereof (the
"Commencement Date") and ending on the first anniversary of the
Commencement Date.
5. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and inure to the
benefit of the successors, legal representatives and assigns of the
parties hereto; provided, however, that the Executive shall not have any
right to assign, pledge or otherwise dispose of or transfer any interest
in this Agreement or any payments hereunder, whether directly or
indirectly or in whole or in part, without the written consent of the
Company or its successor.
(b) The Company will require any successor (whether direct
or indirect, by purchase of a majority of the outstanding voting stock
of the Company or all or substantially all of the assets of the Company,
or by merger, consolidation or otherwise), by agreement in form and
substance satisfactory to Executive, to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession had
taken place. Failure of the Company to obtain such agreement prior to
the effectiveness of any such succession (other than in the case of a
merger or consolidation) shall be a breach of this Agreement and shall
entitle Executive to compensation from the Company in the same amount
and on the same terms as Executive
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would be entitled hereunder in the event of termination by Executive for
Good Reason, except that for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the
Termination Date. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid that is required to execute and deliver the
agreement as provided for in this Section 5(b) or that otherwise becomes
bound by all the terms and provisions of this Agreement by operation of
law.
6. GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Minnesota.
7. NOTICES. All notices, requests and demands given to or made
pursuant to this Agreement shall be in writing and shall be deemed to have been
duly given when delivered or mailed by United States registered or certified
mail, return receipt requested, postage pre-paid, addressed to the last known
residence address of Executive or in the case of the Company, to its principal
executive office to the attention of each of the then directors of the Company
with a copy to its Secretary, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.
8. REMEDIES AND CLAIM PROCESS. If Executive disputes any
determination made by the Company regarding Executive's eligibility for any
benefits under this Agreement, the amount or terms of payment of any benefits
under this Agreement, or the Company's application of any provision of this
Agreement, then Executive shall, before pursuing any other remedies that may be
available to Executive, seek to resolve such dispute by submitting a written
claim notice to the Company. The notice by Executive shall explain the specific
reasons for Executive's claim and basis therefor. The Board of Directors shall
review such claim and the Company will notify Executive in writing of its
response within 60 days of the date on which Executive's notice of claim was
given. The notice responding to Executive's claim will explain the specific
reasons for the decision. Executive shall submit a written claim hereunder
before pursuing any other process for resolution of such claim. This Section 8
does not otherwise affect any rights that Executive or the Company may have in
law or equity to seek any right or benefit under this Agreement.
9. SEVERABILITY. In the event that any portion of this Agreement is
held to be invalid or unenforceable for any reason, it is hereby agreed that
such invalidity or unenforceability shall not affect the other portions of this
Agreement and that the remaining covenants, terms and conditions or portions
hereof shall remain in full force and effect.
10. INTEGRATION. The benefits provided to Executive under this
Agreement shall be in lieu of any other severance pay or benefits available to
Executive under any other agreement, plan or program of the Company. In the
event that any payments or benefits become payable to Executive pursuant to
Section 2 of this Agreement, then this Agreement will supersede and replace any
other agreement, plan or program applicable to Executive to the extent that such
other
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agreement, plan or program provides for payments or benefits to Executive
arising out of the involuntary termination of Executive's employment or
termination by Executive for Good Reason. In addition, the acceleration of stock
options and lapsing of forfeiture provisions of restricted stock provided
pursuant to Section 2(a)(iv) of this Agreement shall not be subject to the
provisions of Article 13 of the Company's 1992 Long-Term Incentive Plan (or
similar successor provision or plan).
11. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the parties. No waiver by either party hereto at any
time of any breach by the other party to this Agreement of, or compliance with,
any condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior to similar time.
12. TERM. This Agreement shall commence on the date of this
Agreement and shall terminate, and the Term of this Agreement shall end, on the
later of (A) December 31, 2007, provided that such period shall be automatically
extended for one year and from year to year thereafter until notice of
termination is given by the Company or Executive to the other party hereto at
least 60 days prior to December 31, 2007 or the one-year extension period then
in effect, as the case may be, or (B) if the Commencement Date occurs on or
prior to December 31, 2007 (or prior to the end of the extension year then in
effect as provided for in clause (A) hereof), the first anniversary of the
Commencement Date.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
FAIR, XXXXX AND COMPANY, INCORPORATED
By
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NAME OF EXECUTIVE
By
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