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Exhibit 11
CHANGE OF CONTROL TERMINATION AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into this 13th day of
November 1997, by and between ULTRA PAC, INC., a Minnesota corporation
("Ultra Pac"), and XXXXXX X. XXXXXXX, an individual residing in the State of
Minnesota (the "Executive").
RECITALS
A. The parties recognize that the Executive's contribution to the growth
and success of Ultra Pac has been substantial. The Board of Directors of Ultra
Pac (the "Board") desires to provide for the continued employment of the
Executive and to make certain changes in the Executive's employment
arrangements with Ultra Pac which the Board has determined will reinforce and
encourage the continued attention and dedication of the Executive as a member
of the management of Ultra Pac.
B. It is expressly recognized by the parties that the Executive's
employment with Ultra Pac and agreement to be bound by the terms of this
Agreement represent a substantial commitment to Ultra Pac in terms of the
Executive's personal and professional career and a foregoing of present and
future career options by the Executive, for all of which Ultra Pac receives
substantial value.
C. The parties recognize that a Change of Control, as defined herein, is
likely to result in material alteration or diminishment of the Executive's
position and responsibilities and substantially frustrate the purpose of the
Executive's commitment to Ultra Pac and forbearance of other career options.
D. The parties recognize that in light of the above-described commitment
and forbearance of other career options, it is essential that, for the benefit
of Ultra Pac and its stockholders, provision be made for a Change in Control
Termination, as defined herein, in order to enable the Executive to effectively
continue in the Executive's position in the face of inherently disruptive
circumstances arising from the possibility of a Change of Control of Ultra Pac,
although no such change is now contemplated or foreseen.
E. The parties have previously entered into agreements and undertakings
with respect to the Executive's employment and compensation, and the parties
wish to supplement such previous agreements and undertakings.
NOW, THEREFORE, in consideration of the foregoing recitals, the
Executive's continued employment with and by Ultra Pac, and the mutual benefits
to be gained by the performance hereof, the parties hereto agree as follows:
1.) Definitions. For purposes of this Agreement, the following definitions
shall be applied:
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(a) "Base Salary" shall mean regular cash compensation paid on a periodic
basis exclusive of benefits, bonuses or incentive payments, if any.
(b) "Board" or "Board of Directors" shall mean the board of directors of
Ultra Pac.
(c) "Change of Control" shall mean any merger, combination, sale,
transfer, exchange, reorganization, or other transaction whereby:
(1) any "person" (as such term is defined in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934), entity, or group
of associated persons or entities acting in concert becomes the
"beneficial owner" (as defined in Rule 13d-3 under such Act),
directly or indirectly, of securities of Ultra Pac representing
fifty percent (50%) or more of the voting control of Ultra Pac's
then issued and outstanding securities, which person, entity or
group is not affiliated (within the meaning of the Securities
Act of 1933) with Ultra Pac as of the date of this Agreement; or
(2) any "person" (as such term is defined in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934), entity, or group
of associated persons or entities acting in concert becomes the
"beneficial owner" (as defined in Rule 13d-3 under such Act),
directly or indirectly, of securities of Ultra Pac representing
thirty percent (30%) or more of the voting control of Ultra
Pac's then issued and outstanding securities, which person,
entity or group is not affiliated (within the meaning of the
Securities Act of 1933) with Ultra Pac as of the date of this
Agreement, coupled with a change in the composition of the Board
of fifty percent (50%) or more of the membership of the Board.
(d) "Change of Control Payments" shall mean any payment (including any
benefit or transfer of property) in the nature of compensation, to or for the
benefit of the Executive under any arrangement which is partially or entirely
contingent on a Change of Control, or is deemed to be contingent on a change of
control or ownership of Ultra Pac for purposes of Section 280G of the Code. As
used in this definition, the term "arrangement" includes any agreement between
the Executive and Ultra Pac and any and all of Ultra Pac's salary, bonus,
incentive, compensation or benefit plans, programs or arrangements, and shall
include this Agreement.
(e) "Change of Control Termination" shall mean, with respect to the
Executive, any of the following events occurring within one (1) year after a
Change of Control.
(1) Termination of the Executive's employment by Ultra Pac or its
successors; or
(2) Termination of employment with Ultra Pac by the Executive
pursuant to Section 2. A Change of Control Termination by the
Executive shall not, however, include termination by reason of
death, disability or retirement.
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(f) "Code" shall mean the Internal Revenue Code of 1986, as amended, and any
reference to a section of the Code shall mean that section of the Internal
Revenue Code of 1986, as amended, or the corresponding section of such Code as
hereafter amended.
(g) "Good Reason" shall mean a good faith determination by the Executive, in
the Executive's sole and absolute judgment, that any one or more of the
following events has occurred, without the Executive's express written
consent, after a Change of Control:
(1) A change in the Executive's reporting responsibilities, titles or
offices as in effect immediately prior to the Change of Control, or
any removal of the Executive from, or any failure to reselect the
Executive to, any position which has the effect of diminishing
Executive's responsibility or authority;
(2) A reduction by Ultra Pac in the Executive's Base Salary as in effect
immediately prior to the Change of Control or as the same may be
increased from time to time, or a change in the eligibility
requirements or performance criteria under any bonus, incentive or
compensation plan, program or arrangement under which the Executive
is covered immediately prior to the Change of Control, which
adversely affects the Executive;
(3) Without replacement by a plan providing benefits to the Executive
equal to or greater than those discontinued, the failure by Ultra
Pac to continue in effect, within its maximum stated term, any
pension, bonus, incentive, stock ownership, purchase, option, life
insurance, health insurance, accident and disability insurance, or
any other employee benefit plan, program, or arrangement in which the
Executive is participating at the time of the Change of Control, or
the taking of any action by Ultra Pac that would adversely affect the
Executive's participation or materially reduce the Executive's
benefits under any of such plans or benefits as such participation or
benefits may exist at the time of the Change of Control;
(4) The talking of any action by Ultra Pac that would materially adversely
affect the physical conditions existing at the time of the Change of
Control in or under which the Executive performs his or her
employment duties;
(5) The failure by Ultra Pac to obtain a binding and enforceable
agreement, signed by any successor to Ultra Pac, providing for the
assumption by such successor of the obligations of Ultra Pac under
this Agreement, and the agreement of such successor to perform all
obligations of Ultra Pac under this Agreement; or
(6) Any purported termination by Ultra Pac of this Agreement or the
employment of the Executive by Ultra Pac which is not expressly
authorized by this Agreement or any breach of this Agreement by Ultra
Pac
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2.) Change of Control Termination Right and Compensation. For a period of
one (1) year following a Change of Control, the Executive shall have the
right, at any time and within the Executive's sole discretion, to terminate
employment with Ultra Pac for Good Reason. Such termination shall be
accomplished by, and effective upon, the Executive giving written notice to
Ultra Pac of the Executive's decision to terminate such employment. In the
event of a Change of Control Termination, and subject to the "Limitation on
Change of Control Compensation" contained in Section 3 herein, then, and
without further action by the Board or otherwise, Ultra Pac shall, within the
thirty (30) days of such termination, make a lump sum payment to the Executive
in an amount equal to two times the Executive's "annualized includible
compensation for the base period," as defined in Section 280G(d)(1) of the
Code.
3.) Limitation on Change of Control Compensation. In the event that the
Executive is a "disqualified individual" within the meaning of Section 280G of
the Code, the parties hereto expressly agree that the payments described in
Section 2 above shall be considered together with all other Change of Control
Payments so that, with respect to the Executive, all Change of Control
Payments are collectively subject to an overall maximum limit. Such maximum
limit shall be One Dollar ($1.00) less than the largest amount under which no
portion of the Change of Control Payments is considered a "parachute payment"
within the meaning of Section 280G of the Code. Accordingly, to the extent
that the Change of Control Payments would be considered a "parachute payment"
with respect to the Executive, the portions of such Change of Control Payments
shall be reduced or eliminated in the following order until the remaining
Change of Control Payments with respect to the Executive is One Dollar ($
1.00) less than the maximum allowable which would not be considered a
"parachute payment" under Section 280G of the Code:
(a) First, any cash payment to the Executive;
(b) Second, any Change of Control Payments not described herein; and
(c) Third, any forgiveness of indebtedness of the Executive to Ultra Pac.
The Executive expressly and irrevocably waives any and all rights to receive
any Change of Control Payments which would be considered a "parachute payment"
under the Code.
4.) Attorneys' Fees. In the event the Executive incurs any legal expense
to enforce or defend his or her rights under this Agreement, or to recover
damages for breach thereof, the Executive shall be entitled to recover from
Ultra Pac any actual expenses attorneys' fees and disbursements incurred.
5.) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of Ultra Pac, whether by
way of merger, consolidation, operation of law, assignment, purchase or other
acquisition of substantially all of the assets or business of Ultra Pac, and
any such successors or assigns shall absolutely and unconditionally assume all
of Ultra Pac's obligations hereunder.
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6.) Notices. All notices, requests and demands given to or made pursuant
hereto shall, except as otherwise specified herein, be in writing and be
delivered personally or mailed by certified mail, return receipt requested, to
any such party at its address which:
(a) In the case of Ultra Pac shall be:
Ultra Pac. Inc.
00000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxx, Xxxxxxxxx 00000
With a copy to:
Larkin, Hoffman, Xxxx & Xxxxxxxx, Ltd.
1500 Norwest Financial Center
0000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx, Esq.
(b) In the case of the Executive shall be:
Xxxxxx X. Xxxxxxx
000 00xx Xxxxxx
Xxx Xxxxxx, Xxxx 00000
Either party may, by notice hereunder, designate a changed address. Any notice,
if delivered or mailed properly, shall be deemed dispatched on the registered
date or that stamped on the certified mail receipt, and shall be deemed
received within the second business day thereafter or when it is actually
received, whichever is sooner.
7.) Captions. The various headings or captions in this Agreement are for
convenience only and shall not affect the meaning or interpretation of this
Agreement.
8.) Governing Law. The validity, construction and performance of this
Agreement shall be governed by the laws of the State of Minnesota, and any and
every legal proceeding arising out of or in connection with this Agreement
shall be brought in the appropriate courts of the State of Minnesota. Each of
the parties hereby consenting to the exclusive jurisdiction of said courts for
this purpose.
9.) Construction. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law. If any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
10.) Waivers. No failure on the part of either party to exercise, and no
delay in exercising, any right or remedy hereunder shall operate as a waiver
thereof; nor shall any single
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or partial exercise of any right or remedy hereunder preclude any other or
fiercer exercise thereof or the exercise of any other right or remedy granted
hereby or by any related document or by law.
11.) Modification. This Agreement may not be and shall not be modified
or amended except by written instrument signed by the parties hereto.
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.
EXECUTIVE ULTRA PAC, INC.
/s/ Xxxxxxx X. Xxxxx, Xx. By: /s/ Xxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx, Xx. Xxxxxx X. Xxxxx
Its: President
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