EXECUTIVE SEVERANCE AGREEMENT
EXHIBIT 10.4
THIS EXECUTIVE SEVERANCE AGREEMENT (the “Agreement”), dated as of the 20th day of
March, 2008 (the “Effective Date”), is entered into by and between NAVARRE CORPORATION, a Minnesota
corporation, (the “Company”), and XXXX XXXXXX, an individual residing in the State of Minnesota
(the “Executive”).
WHEREAS, Executive holds the key position of Senior Vice President Global Logistics and is
considered an integral part of Company’s management;
WHEREAS, the Company and Executive previously entered into a certain Termination Agreement
dated November 1, 2001, in order to secure Executive’s continued services in the event of any
actual or threatened change in control (the “Original Agreement”);
WHEREAS, the Company desires to further promote the stability of the Company by providing the
Executive with appropriate assurances with respect to certain events that result in the Executive’s
involuntary termination as described more fully herein;
WHEREAS, the Company and Executive mutually desire to replace the Original Agreement with this
Executive Severance Agreement; and
WHEREAS, the Board of Directors of the Company (the “Board”) has determined that this
Agreement is in the best interests of the Company and its shareholders in order to secure
Executive’s continued services.
NOW, THEREFORE, in consideration of the above recitals and the mutual promises contained in
the Agreement, it hereby agreed by and between the parties as follows:
| 1. | DEFINITIONS. For purposes of this Agreement the following definitions apply: |
a. “Base Salary” means the Executive’s annualized base salary as adjusted from time to time.
b. “Cause” means a termination of Executive’s employment by the Company or its successor due
to any of the following:
(i) Executive’s conviction of, or the entering by Executive of a plea of nolo
contendere to, any felony charge or to any non-felony crime involving
misrepresentation, fraud or moral turpitude;
(ii) Executive’s gross neglect, willful malfeasance or willful misconduct in
connection with his employment hereunder which has had or could have a material
adverse effect on the business or reputation of the Company and its subsidiaries,
unless Executive reasonably believed in good faith that such act or non-act was in
the best interests of the Company;
(iii) A substantial and continual refusal by Executive to perform Executive’s
assigned duties, responsibilities or obligations (provided that such duties,
responsibilities or obligations are lawful and further provided that the failure to
perform is not due to incapacity caused by a disability) that continues for thirty
(30) days after receipt by Executive of written notice from the Company identifying
the duties, responsibilities or obligations not being performed;
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(iv) A violation by Executive of any policy of the Company or its successor that is
generally applicable to all employees or all officers of the Company or its successor
including, but not limited to, policies concerning xxxxxxx xxxxxxx or sexual
harassment, or the Company’s code of conduct, that Executive knows or reasonably
should know could reasonably be expected to result in a material adverse effect on
the Company or its successor, unless such violation is capable of being cured and is
not cured within thirty (30) days after receipt of notice thereof from the Company;
(v) Any fraudulent or dishonest action, or failure to act, with respect to the
business or affairs of the Company or its successor or breach of the duty of loyalty
toward the Company or its successor, including, without limitation, providing false
or misleading information to the Company or its successor;
(vi) Executive’s failure to cooperate, if requested by the Board, with any
investigation or inquiry into his or the Company’s (or its successor’s) business
practices, whether internal or external, including, but not limited to Executive’s
refusal to be deposed or to provide testimony at any trial or inquiry; or
(vii) Any material breach by Executive of the provisions of Paragraphs 5, 6, or 7 of
this Agreement, unless such violation is capable of being cured and is not cured
within thirty (30) days after receipt of notice thereof from the Company.
c. “Code” means the Internal Revenue Code of 1986, as amended.
d. “Good Reason” means a termination of Executive’s employment by the
Executive for any of the following events, provided that Executive
shall have delivered a written notice to the Company or its successor
within thirty (30) days of his having actual knowledge of the
occurrence of one of such events, stating that he intends to terminate
his employment for Good Reason and specifying the factual basis for
such termination, and such event shall not have been cured by the
Company or its successor within thirty (30) days of the receipt of
such notice, and further provided that the termination of Executive’s
employment occurs no later than six months (6) months following the
initial existence of one of such events:
(i) A material diminution in Executive’s Base Salary from that in effect as of the
Effective Date;
(ii) A material diminution in Executive’s duties, responsibilities or authority from
that in effect as of the Effective Date; or
(iii) A material change in the geographic location of Executive’s principal place of
employment from that in effect as of the Effective Date.
e. “Severance Event” means either: (i) the effective date of the termination of Executive’s
employment by the Company for any reason other than for Cause, or (ii) the effective date of
the termination of Executive’s employment for Good Reason. A Severance Event shall not
include a termination of Executive’s employment as a result of Executive’s death. The term
“termination of employment” and other similar terms used in this Agreement shall be
construed to have the same meaning as is given to the term “separation from service” in
Section 409A of the Code.
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| 2. | TERM OF AGREEMENT. This Agreement shall be effective as of the Effective Date and shall continue through December 31, 2010. As of December 31, 2010, and on each December 31 thereafter, the Agreement shall automatically be extended for one additional year unless, not later than the preceding June 30, either party shall have given notice that such party does not wish to extend the Agreement term. |
| 3. | TERMINATION OF ORIGINAL AGREEMENT. As of the Effective Date of this Agreement, the Original Agreement is hereby terminated and of no further force or effect. |
4. SEVERANCE PAYMENTS.
a. Upon the occurrence of a Severance Event, and in consideration of and contingent upon the
execution and delivery by Executive of a mutually agreeable general release of all claims
and expiration of any applicable revocation period in connection therewith, Executive shall
be entitled to a severance payment as follows:
(i) Subject to Xxxxxxxxx 0x xxxxx, an amount equal to Executive’s then current Base
Salary; and
(ii) In full substitution for Executive’s rights under the Company’s annual incentive
bonus plan, a substitute incentive award equal to the average amount of the annual
incentive award earned and paid to the Executive with respect to the preceding three
(3) fiscal years.
| b. | The severance payment shall be made in a lump sum within thirty (30) days after the effective date of the termination of employment. | ||
| c. | If applicable, the severance amount provided for in Paragraph 4a(i) above will be offset by any income protection benefits payable to Executive during the first twelve months of a qualifying disability under the Company’s group short-term and long-term disability insurance plans. |
d.
Notwithstanding the foregoing to the
contrary, in no event shall the amount due and
payable hereunder constitute a “Parachute Payment”
within the meaning of the Section 280G(b)(2) of the
Code. In the event that any portion of the severance
payment would be deemed a Parachute Payment, the
amount of the severance payment shall be reduced only
to the extent necessary to eliminate any such
treatment or characterization.
e.
It is the intent of the parties that
payments under this Agreement comply with Section
409A of the Code, and, accordingly, to interpret, to
the maximum extent permitted, this Agreement to be in
compliance therewith. If the Executive notifies the
Company in writing (with specificity as to the
reason therefore) that the Executive believes that
any provision of this Agreement (or of any payment of
compensation under this Agreement) would cause the
Executive to incur any additional tax or interest
under Section 409A of the Code, and the Company
concurs with such belief or the Company (without any
obligation whatsoever to do so) independently makes
such determination, the parties shall, in good faith,
reform such provision to try to comply with Section
409A through good faith modifications to the minimum
extent reasonably appropriate to conform with Section
409A. To the extent that any provision hereof is
modified by the parties to try to comply with Section
409Aof the Code, such modification shall be made in
good faith and shall, to the maximum extent
reasonably possible, maintain the original intent of
the applicable provision without violating the
provisions of Section 409A. Notwithstanding the
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foregoing, the Company shall not be required to assume any economic burden in
connection with compliance or noncompliance with Section 409A of the Code.
| 5. | CONFIDENTIALITY. |
a. Executive acknowledges that his position with Company will bring Executive in close
contact with many confidential affairs of the Company and its subsidiaries, including, but
not limited to, information about costs, profits, financial data, markets, trade secrets,
sales, products, key personnel, pricing policies, customer lists, development projects,
operational methods, technical processes, plans for future development, business affairs and
methods and other information not readily available to the public. In recognition of the
foregoing, Executive covenants and agrees that:
(i) Executive will keep secret all material confidential matters of the Company which
are not otherwise in the public domain and will not disclose them to anyone outside
of the Company, either during or after the termination of his Employment, except with
the Company’s written consent and except for such disclosure as is necessary in the
performance of Executive’s duties or to the extent required by an order of a court
having competent jurisdiction or under subpoena from an appropriate government
agency; and
(ii) Executive will deliver promptly to the Company on termination of his employment
with the Company, or at any other time the Company may so request, all memoranda,
notes, records, reports and other documents (and all copies thereof)containing
confidential material relating to the Company, which Executive may then possess or
have under his control.
| 6. | INTELLECTUAL PROPERTY. |
a. All right, title, and interest in and to all inventions, patent applications, patents
thereon, know-how and trade secret information, and all copyrightable material, copyrights,
and copyright applications (collectively, “Intellectual Property”) that Executive conceives
or originates, either individually or jointly with others, and which relate to the business
of the Company, will be the sole and exclusive property of the Company, and Executive
hereby irrevocably assigns and conveys the sole and exclusive right, title and interest
therein, free and clear of any liens or other encumbrances. Such Intellectual Property shall
include, but not be limited to, Intellectual Property that:
(i) Is based on any confidential or proprietary information of the Company or of any
vendor, supplier or customer of the Company;
(ii) Is related to the actual business of or research and development of the Company;
(iii) Was developed with use of materials, employees, supplies or facilities of the
Company; or
(iv) Was funded by the Company.
b. Executive agrees to execute promptly any papers and perform promptly any other reasonable
acts necessary to assist the Company to perfect all rights, including all Intellectual
Property rights, reserved or conveyed thereto hereunder. Executive agrees to render promptly
aid and assistance to the Company in any interference or litigation pertaining to such
Intellectual Property, and all reasonable expenses therefor incurred by Executive at the
request of the Company will be borne by the Company.
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c. Executive will promptly disclose to the Company all Intellectual Property conceived or
originated pursuant to his employment.
d. Executive warrants that in the event that Executive creates any original materials or
uses any proprietary information in rendering services, none of such material shall infringe
any copyrights, trade secrets, rights of privacy, or any other rights of others.
| 7. | NONSOLICITATION. Executive covenants and agrees that during his employment with the Company and for a period of two (2) years thereafter he will not, directly or indirectly, as a principal, officer, director, shareholder, partner, member, employee, consultant, independent contractor, agent or executive or in any other capacity whatsoever, without the prior written consent of the Company, solicit or attempt to solicit or encourage any person, who is then, or was within the then most recent 12-month period, to the knowledge of Executive, an employee, agent, consultant or representative of the Company, to become an employee, agent, representative or consultant of or to Executive or any other individual or entity. |
| 8. | ASSIGNMENT. This Agreement and all of the provisions hereof will be binding upon and inure to the benefit of the Company’s successors and assigns. Neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned by Executive. |
| 9. | SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or unenforceable or invalid under applicable law, such provision will 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. In furtherance and not in limitation of the foregoing, should the duration or geographical extent of, or business activities covered by, any provision of this Agreement be in excess of that which is valid and enforceable under applicable law, then such provision shall be construed to cover only that duration, extent or activities which may validly and enforceably be covered. Executive acknowledges the uncertainty of the law in this respect and expressly stipulates that this Agreement be given the construction which renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law. |
| 10. | COMPLETE AGREEMENT. This Agreement contains the complete agreement between the parties with respect to the subject matter hereof and supersedes any prior understandings, agreements or representations by or between the parties, written or oral, which may have related to the subject matter hereof in any way. No person, whether or not an officer, agent, employee or representative of any party, has made or has any authority to make for or on behalf of that party any agreement, representation, warranty, statement, promise, arrangement or understanding not expressly set forth in this Agreement (“Parole Agreements”). The parties acknowledge that in entering into this Agreement, they have not relied and will not in any way rely upon any Parole Agreements. |
| 11. | COUNTERPARTS. This Agreement may be executed in one or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together, when delivered, will constitute one and the same instrument. |
| 12. | GOVERNING LAW; CHOICE OF FORUM; ENFORCEMENT. The internal law, without regard to conflicts of laws principles, of the State of Minnesota will govern all questions concerning the construction, validity and interpretation of this Agreement and the performance of the obligations imposed by this Agreement. Any and every legal proceeding arising out of or in connection with this |
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| Agreement shall be brought in the appropriate courts of the State of Minnesota, and each of the parties hereto consents to the exclusive jurisdiction of such courts. |
| 13. | INJUNCTIVE RELIEF. Executive agrees that it would be difficult to compensate the Company fully for damages for any violation of the provisions of Paragraphs 3, 4 and 5 of this Agreement. Accordingly, Executive specifically agrees that the Company shall be entitled to injunctive relief to enforce the provisions of such Paragraphs. |
| 14. | NO WAIVER. No term or condition of this Agreement shall be deemed to have been waived, nor shall there by any estoppel to enforce any provisions of this Agreement, except by a statement in writing signed by the party against whom enforcement of the waiver or estoppel is sought. Any written waiver shall not be deemed a continuing waiver unless specifically stated, shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. |
| 15. | MODIFICATION. This Agreement may not be altered, modified or amended except by an instrument in writing signed by Executive and the Company. |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day
and year first above written.
| NAVARRE CORPORATION | EXECUTIVE | |||||
By: |
||||||
| Xxxx X. Xxxxxx | Xxxx Xxxxxx | |||||
Its:
|
President and CEO | |||||
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