EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of the
8th day of November, by and between Xxxxxxxx'x, Inc. ("Company"), and
Xxxx X. Xxxxxxxx ("Executive").
Company and Executive agree as follows:
1. Employment. At the Effective Time as set forth in the
Agreement and Plan of Merger dated November 8, 1996 (the "Effective
Time"), Company will employ Executive as a senior executive of X.X.
Xxxxxxxxx'x, Inc. with such title and duties as determined by the
Company's Board of Directors or Chief Executive Officer.
2. Duties. During his employment, Executive shall devote
substantially all of his working time, energies, and skills to the
benefit of Company's business. Executive agrees to serve Company
diligently and to the best of his ability and to use his best efforts to
follow the policies and directions of Company's Board of Directors.
3. Compensation. Executive's compensation and benefits under
this Agreement shall be as follows:
(a) Initial Bonus. Immediately following the Effective Time,
the Company shall pay Executive $50,000 as an incentive to continue his
employment with the Company.
(b) Base Salary. Company shall pay Executive a base salary
("Base Salary") at a rate of no less than $200,000 per year beginning at
the Effective Time through fiscal year 1997, then at a minimum rate of
$250,000 per year through fiscal year 1998, and then at a minimum rate
of $260,000 per year through the balance of the term of this Agreement.
Executive's Base Salary shall be paid in installments in accordance with
Company's normal payment schedule for its senior management. All
payments shall be subject to the deduction of payroll taxes and similar
assessments as required by law.
(c) Bonus. In addition to the Base Salary, Executive shall
be eligible, as long as he holds the position stated in paragraph 1, for
a yearly cash bonus of up to 50% of Base Salary based upon his
performance in accordance with specific annual objectives, set in
advance, all as approved by the Board of Directors; provided, however,
Executive's minimum bonus for fiscal year 1997 shall be $50,000 in the
event Executive continues to be employed by Company at the end of fiscal
year 1997.
(d) Incentive Compensation. Executive shall be and hereby is
granted a non-qualified option as of the Effective Time ("Option") to
purchase twenty thousand (20,000) shares of Company common stock at an
option price equal to the closing price of the stock on the next day the
market is open after the Effective Time, as reported in the Wall Street
Journal. The Option is granted pursuant to Company's 1994 Long-Term
Incentive Plan ("1994 LTIP"), and shall be subject to the terms and
conditions thereof. The Option shall be exercisable on or after the
next day the market is open after the Effective Time (the "Grant Date")
to the extent of 20% of the shares covered thereby; exercisable to the
extent of an additional 20% of the shares covered thereby on and after
the first anniversary of the Grant Date; exercisable to the extent of an
additional 20% of the shares covered thereby on and after the second
anniversary of the Grant Date; exercisable to the extent of an
additional 20% of the shares covered thereby on an after the third
anniversary of the Grant Date; and exercisable to the extent of any
remaining shares on and after the fourth anniversary of the Grant Date;
provided, however, that no portion of the Option shall be exercisable
any earlier than six months from the Grant Date. The Option may be
exercised (as provided in the 1994 LTIP) up to ten (10) years from the
Grant Date. Any portion of the Option not exercised within said ten
(10) year period shall expire.
(e) Effect of Change of Control on Options. In the event of
a Change of Control (as defined in the Company's 1994 Long-Term
Incentive Plan), any Options granted to Executive prior to such Change
of Control shall immediately vest and become exercisable.
(f) Forgiveness of Loan. Company shall also cause X.X.
Xxxxxxxxx'x, Inc. to forgive over three years the $102,500 loan
previously made to Executive. The forgiveness of such loan shall become
effective over the stated three years in all instances (including
Executive's death, disability, demotion or reassignment at lower level
within Company, or termination of employment), except that the Company
may cease the continued forgiveness of any balance owed on the loan if
Executive is terminated for "cause" in accordance with clause (1) or
(ii) in Section 6(a).
(g) Location Within St. Cloud Area. During the Term of
Executive's Employment, he will continue to be located within the St.
Cloud metropolitan area. In the event Executive decides to consent to
relocation, such relocation will be made pursuant to Company's
relocation policy.
4. Insurance and Benefits. Company shall allow Executive to
participate in each employee benefit plan and to receive each executive
benefit that Company provides for senior executives at the level of
Executive's position, including, but not limited to, use of a Company
automobile consistent with past practices. Executive shall have the
right to participate in the Company's health and dental plans for the
entire three years in all instances (including Executive's disability,
demotion or reassignment at lower level within Company, or termination
of employment), provided that Executive pays the normal employee's share
of such benefits; provided further, however, that the Company may
terminate such benefits if Executive is terminated for "cause" in
accordance with clause (i) or (ii) in Section 6(a).
5. Term. The term of this Agreement shall be for three (3) years,
beginning at the Effective Time (the "Term"), provided, however, that
Company may terminate this Agreement at any time upon thirty (30) days'
prior written notice ("Discretionary Termination"). Upon such a
Discretionary Termination, (i) Executive shall be entitled to receive
his Base Salary thereafter in regular payroll installments through the
remaining Term in accordance with Section 3(b); (ii) the balance of
Executive's loan shall become immediately forgiven, (iii) the Executive
shall continue to be eligible to participate in Company's health and
dental plans in accordance with Section 4 for the balance of the Term;
and (iv) Executive shall continue to be subject to the restrictive
covenants set forth in Section 9.
In addition, this Agreement shall terminate upon the death of
Executive, except as to: (a) Executive's estate's right to exercise any
unexercised stock options pursuant to Company's stock option plan then
in effect, (b) other entitlements under this contract that expressly
survive death, and (c) any rights which Executive's estate or dependents
may have under COBRA or any other federal or state law or which are
derived independent of this Agreement by reason of his participation in
any plan maintained by Company.
This Agreement may be terminated for Good Reason (as hereinafter
defined) upon 30 days prior written notice from Executive to Company.
In the event this Agreement is terminated by Executive for Good Reason,
the Executive shall continue to be paid his Base Salary and realize the
other benefits which would be available if he had been subject to a
Discretionary Termination by the Company. As used in the Agreement, the
term "Good Reason" shall mean only (i) a significant reduction or
demotion in the position, duties, and responsibilities of Executive, or
a reduction in Base Salary, unless such reduction or demotion or
reduction in Base Salary is the result of Executive's failure to perform
satisfactorily the duties assigned to him; provided that Executive shall
have received written notice and an opportunity to cure his
non-performance within 30 days of receipt of such notice; (ii) failure
to pay any installment of the Base Salary within thirty (30) days of its
due date; (iii) a mandatory relocation of Executive outside of the St.
Cloud, Minnesota area; or (iv) any material breach by the Company of its
duties and obligations to Executive, provided, that the Company shall
first have received written notice from Executive which sets forth in
reasonabledetail the breach by the Company and the Company shall have a
period of thirty (30) days after receipt of such notice to cure such
breach, unless the same cannot be reasonably cured within said thirty
(30) day period, in which event, the Company shall have up to an
additional ninety (90) days to cure the same."
6. Termination by Company for Cause. (a) Company shall have the
right to terminate Executive's employment under this Agreement for
cause, in which event no salary or bonus shall be paid after termination
for cause. Termination for cause shall be effective immediately upon
notice sent or given to Executive. For purposes of this Agreement, the
term "cause" shall mean and be strictly limited to: (i) conviction of
Executive, after all applicable rights of appeal have been exhausted or
waived, for any crime that materially discredits Company or is
materially detrimental to the reputation or goodwill of Company; (ii)
commission of any material act of fraud or dishonesty by Executive
against Company or commission of an immoral or unethical act that
materially reflects negatively on Company, provided that Executive shall
first be provided with written notice of the claim and with an
opportunity to contest said claim before the Board of Directors; or
(iii) Executive's material breach of his obligations under paragraph 2
of the Agreement.
(b) In the event that Executive's employment is terminated,
Executive agrees to resign as an officer and/or director of Company (or
any of its subsidiaries or affiliates), effective as of the date of such
termination, and Executive agrees to return to Company upon such
termination any of the following which contain confidential information:
all documents, instruments, papers, facsimiles, and computerized
information which are the property of Company or such subsidiary or
affiliate.
7. Change in Control. If Executive's employment is terminated
primarily as a result of a Change in Control of Company or a Potential
Change in Control of Company, as defined below, Executive shall receive
his Base Salary (at the rate in accordance with Section 3(b)) for a
period of two years or through the end of the Term of this Agreement,
whichever is longer.
As used herein, the term "Change in Control" means the happening of
any of the following:
(a) Any person or entity, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended,
other than Company, a subsidiary of Company, or any employee benefit
plan of Company or its subsidiaries, becomes the beneficial owner of
Company's securities having 25 percent or more of the combined voting
power of the then outstanding securities of Company that may be cast for
the election for directors of Company (other than as a result of an
issuance of securities initiated by Company in the ordinary course of
business); or
(b) As the result of, or in connection with, any cash tender
or exchange offer, merger or other business combination, sale of assets
or contested election, or any combination of the foregoing transactions,
less than a majority of the combined voting power of the then
outstanding securities of Company or any successor corporation or entity
entitled to vote generally in the election of directors of Company or
such other corporation or entity after such transaction, are held in the
aggregate by holders of Company's securities entitled to vote generally
in the election of directors of Company immediately prior to such
transactions; or
(c) During any period of two consecutive years, individuals
who at the beginning of any such period constitute the Board of
Directors of Company cease for any reason to constitute at least a
majority thereof, unless the election, or the nomination for election by
Company's stockholders, of each director of Company first elected during
such period was approved by a vote of at least two-thirds of the
directors of Company then still in office who were directors of Company
at the beginning of any such period.
As used herein, the term "Potential Change in Control" means the
happening of any of the following:
(a) The approval by stockholders of an agreement by Company,
the consummation of which would result in a Change of Control of
Company; or
(b) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than Company, a
wholly-owned subsidiary thereof or any employee benefit plan of Company
or its subsidiaries (including any trustee of such plan acting as
trustee)) of securities of Company representing 5 percent or more of the
combined voting power of Company's outstanding securities and the
adoption by the Board of Directors of Company of a resolution to the
effect that a Potential Change in Control of Company has occurred for
purposes of this Agreement.
8. Disability. If Executive becomes disabled at any time during
the Term of this Agreement, he shall after he becomes disabled continue
to receive all payments and benefits provided under the terms of this
Agreement for a period of twelve consecutive months, or for the
remaining Term of this Agreement, whichever period is shorter. In the
event that Executive is disabled for more than twelve consecutive months
during the Term of this Agreement, Executive shall, at the expiration of
the initial twelve consecutive month period, be entitled to receive
under this Agreement 50% of his Base Salary plus the insurance and
benefits described in Section 4 of this Agreement for the remaining Term
of this Agreement. For purposes of this Agreement, the term "disabled"
shall mean the inability of Executive (as the result of a physical or
mental condition) to perform the duties of his position under this
Agreement with reasonable accommodation and which inability is
reasonably expected to last at least one (1) full year.
9. Non-competition; Unauthorized Disclosure.
(a) Non-competition. During the period Executive is
employed under this Agreement, and for a period of one year thereafter,
Executive:
(i) shall not engage in any activities, whether as
employer, proprietor, partner, stockholder (other than the holder of
less than 5% of the stock of a corporation the securities of which are
traded on a national securities exchange or in the over-the-counter
market), director, officer, employee or otherwise, in competition with
(i) the businesses conducted at the date hereof by Company or any
subsidiary or affiliate, or (ii) any business in which Company or any
subsidiary or affiliate is substantially engaged at any time during the
employment period;
(ii) shall not solicit, in competition with Company, any
person who is a customer of the businesses conducted by Company at the
date hereof or of any business in which Company is substantially engaged
at any time during the term of this Agreement; and
(iii) shall not induce or attempt to persuade any
employee of Company or any of its divisions, subsidiaries or then
present affiliates to terminate his or her employment relationship in
order to enter into competitive employment.
(b) Unauthorized Disclosure. During the period Executive is
employed under this Agreement, and for a further period of two years
thereafter, Executive shall not, except as required by any court or
administrative agency, without the written consent of the Board of
Directors, or a person authorized thereby, disclose to any person, other
than an employee of Company or a person to whom disclosure is reasonably
necessary or appropriate in connection with the performance by Executive
of his duties as an executive for Company, any confidential information
obtained by him while in the employ of Company; provided, however, that
confidential information shall not include any information now known or
which becomes known generally to the public (other than as a result of
unauthorized disclosure by Executive).
(c) Scope of Covenants; Remedies. The following provisions
shall apply to the covenants of Executive contained in this Section 9:
(i) the covenants contained in paragraph (i) and (ii) of
Section 9(a) shall apply within all the territories in which Company is
actively engaged in the conduct of business while Executive is employed
under this Agreement, including, without limitation, the territories in
which customers are then being solicited;
(ii) without limiting the right of Company to pursue all
other legal and equitable remedies available for violation by Executive
of the covenants contained in this Section 9, it is expressly agreed by
Executive and Company that such other remedies cannot fully compensate
Company for any such violation and that Company shall be entitled to
injunctive relief to prevent any such violation or any continuing
violation thereof;
(iii) each party intends and agrees that if, in any
action before any court or agency legally empowered to enforce the
covenants contained in this Section 9, any term, restriction, covenant
or promise contained therein is found to be unreasonable and accordingly
unenforceable, then such term, restriction, covenant or promise shall be
deemed modified to the extent necessary to make it enforceable by such
court or agency; and
(iv) the covenants contained in this Section 9 shall
survive the conclusion of Executive's employment by Company.
10. General Provisions.
(a) Notices. Any notice to be given hereunder by either
party to the other may be effected by personal delivery, in writing or
by mail, registered or certified, postage prepaid with return receipt
requested. Mailed notices shall be addressed to the parties at the
addresses set forth below, but each party may change his or its address
by written notice in accordance with this Section 10 (a). Notices shall
be deemed communicated as of the actual receipt or refusal of receipt.
If to Executive: Xxxx X. Xxxxxxxx
X.X. Xxxxxxxxx'x, Inc.
000 Xxxx Xxxxxxx
Xx. Xxxxx, XX 00000
If to Company: Xxxxxxxx'x, Inc.
Xxxx Xxxxxx Xxx 0000
Xxxxx, XX 00000
(b) Partial Invalidity. If any provision in this Agreement
is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions shall, nevertheless, continue in
full force and without being impaired or invalidated in any way.
(c) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Tennessee.
(d) Entire Agreement. This Agreement supersedes any and all
other agreements, either oral or in writing, between the parties hereto
with respect to employment of Executive by Company and contains all of
the covenants and agreements between the parties with respect to such
employment. Each party to this Agreement acknowledges that no
representations, inducements or agreements, oral or otherwise, that have
not been embodied herein, and no other agreement, statement or promise
not contained in this Agreement, shall be valid or binding. Any
modification of this Agreement will be effective only if it is in
writing signed by the party to be charged.
(e) No Conflicting Agreement. By signing this Agreement,
Executive warrants that he is not a party to any restrictive covenant,
agreement or contract which limits the performance of his duties and
responsibilities under this Agreement or under which such performance
would constitute a breach.
(f) Headings. The Section, paragraph, and subparagraph
headings are for convenience or reference only and shall not define or
limit the provisions hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
XXXXXXXX'X, INC.
BY: _____________________
Xxxxx X. Xxxxxx
President
_____________________
Xxxx X. Xxxxxxxx
Executive
